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Note 13 - Stock-based Compensation Plan | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
(13) | STOCK-BASED COMPENSATION PLAN
As of December 31, 2023, we had unvested restricted stock awards and stock options granted under stock-based compensation plans. On June 21, 2023, our stockholders approved the inTEST Corporation 2023 Stock Incentive Plan (the “2023 Plan”) which replaced the Fourth Amended and Restated 2014 Stock Plan (the “2014 Plan”). No further awards can be granted under the 2014 Plan. The maximum number of shares of common stock available for grant and issuance under the 2023 Plan is (a) 350,000, plus (b) the number of shares of common stock available for issuance under the 2014 Plan on the date the 2023 Plan was approved by stockholders, plus (c) any shares of common stock that are subject to awards granted under the 2014 Plan that expire, are forfeited or canceled or terminate for any other reason on or after the date the 2023 Plan was approved by stockholders, without the issuance of shares. The number of shares available to be issued under the 2023 Plan as of the date of its approval was 1,117,942. Our unvested restricted stock awards and stock options are accounted for based on their grant date fair value. At December 31, 2023, total compensation expense to be recognized in future periods is $2,957. The weighted average period over which this expense is expected to be recognized is 2.0 years. The following table summarizes the compensation expense we recorded during 2023 and 2022 related to unvested shares of restricted stock and stock options:
|  | Years Ended December 31, |
|  | 2023 |  |  | 2022 |
Cost of revenues |  | $ | 104 |  |  | $ | 62 |
Selling expense |  |  | 41 |  |  |  | 32 |
Engineering and product development expense |  |  | 19 |  |  |  | 51 |
General and administrative expense |  |  | 1,883 |  |  |  | 1,642 |
|  | $ | 2,047 |  |  | $ | 1,787 |
There was no compensation expense capitalized in 2023 or 2022. Stock Options We record compensation expense for stock options based on the fair market value of the options as of the grant date. No option may be granted with an exercise period in excess of ten years from the date of grant. Generally, stock options will be granted with an exercise price equal to the fair market value of our stock on the date of grant and will vest over four years. The fair value for stock options granted during 2023 and 2022 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
|  | 2023 |  |  | 2022 |
Risk-free interest rate |  |  | 3.93 | % |  |  | 2.05 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected common stock market price volatility factor |  |  | .57 |  |  |  | .55 |
Weighted average expected life of stock options (years) |  |  | 6.25 |  |  |  | 6.25 |
The per share weighted average fair value of stock options issued during 2023 and 2022 was $9.43 and $4.53, respectively. The following table summarizes the activity related to stock options for the two years ended December 31, 2023:
|  | Number of Shares |  |  | Weighted Average Exercise Price |
Options outstanding, January 1, 2022 |  |  | 408,869 |  |  | $ | 9.07 |
Granted |  |  | 202,540 |  |  |  | 8.45 |
Exercised |  |  | (8,060 | ) |  |  | 4.74 |
Canceled |  |  | (22,930 | ) |  |  | 9.10 |
Options outstanding, December 31, 2022 (167,886 exercisable) |  |  | 580,419 |  |  |  | 8.91 |
Granted |  |  | 93,860 |  |  |  | 16.25 |
Exercised |  |  | (124,550 | ) |  |  | 7.85 |
Canceled |  |  | (44,723 | ) |  |  | 9.77 |
Options outstanding, December 31, 2023 (171,735 exercisable) |  |  | 505,006 |  |  |  | 10.46 |
Restricted Stock Awards We record compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and amortize the expense over the vesting period. Restricted stock awards generally vest over four years for employees and over one year for our independent directors (25% at each of March 31, June 30, September 30, and December 31 of the year in which they were granted). Since August 2020, we have increasingly granted performance-based restricted stock awards where the ultimate number of shares that vest can vary between 0% and 150% of the amount of the original award and is based on the achievement of specified performance metrics. Vesting for these awards is generally cliff vesting at the end of the period over which the performance metrics are measured. Compensation expense for these awards is recorded on a straight-line basis over the vesting period and is based on the expected final vesting percentage, which is re-assessed at the end of each reporting period and adjusted with a catch-up adjustment, as needed. Our initial assumption at the grant date of these awards is that the award will vest at the 100% level. Additional information on specific performance-based awards that have been issued is discussed below under “Performance-Based Awards.” The following table summarizes the activity related to unvested restricted stock awards for the two years ended December 31, 2023:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested shares outstanding, January 1, 2022 |  |  | 262,533 |  |  | $ | 7.16 |
Granted |  |  | 123,533 |  |  |  | 9.21 |
Vested |  |  | (91,672 | ) |  |  | 8.04 |
Forfeited |  |  | (5,944 | ) |  |  | 9.16 |
Unvested shares outstanding, December 31, 2022 |  |  | 288,450 |  |  |  | 7.80 |
Granted |  |  | 97,461 |  |  |  | 16.43 |
Vested |  |  | (178,636 | ) |  |  | 8.21 |
Forfeited |  |  | (17,491 | ) |  |  | 10.08 |
Unvested shares outstanding, December 31, 2023 |  |  | 189,784 |  |  |  | 11.51 |
The total fair value of the restricted stock awards that vested during the years ended December 31, 2023 and 2022 was $3,132 and $643, respectively, as of the vesting dates of these awards. Performance-Based Awards On August 24, 2020, our new President and Chief Executive Officer ("CEO") received a performance-based restricted stock award totaling 75,162 shares with a vesting date of August 24, 2023. These shares were valued at $345 as of the date of grant. Per the terms of the award, the final vesting percentage could range from 0% to 150% of the number of shares awarded on August 24, 2020. On June 14, 2021, our new Chief Financial Officer ("CFO") received a performance-based restricted stock award totaling 5,953 shares. These shares were valued at $100 as of the date of grant. The vesting provisions of this award are the same as the performance-based award granted to our CEO on August 24, 2020. The final vesting percentage is based on the achievement of certain performance metrics, including revenue compound annual growth rate and diluted earnings per share excluding amortization of intangibles, for specified time periods as determined by the Compensation Committee of our Board of Directors. At December 31, 2022, we had estimated that these awards would vest at 150% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. These awards vested at the 150% level on August 24, 2023. As a result, 40,557 additional shares of common stock were issued. At the original grant dates of these awards, shares totaling 100% of the respective awards were issued. These additional shares issued on August 24, 2023 represented the additional 50% that vested. On March 10, 2021, we issued performance-based restricted stock awards totaling 18,000 shares to members of the senior management within our operating segments. These shares were valued at $191 as of the date of grant. These shares will vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares awarded on March 10, 2021. The final vesting percentage will be based on the achievement of certain performance metrics for the year ended December 31, 2023 related to the operating results of the business units for which these members of management are responsible. During the fourth quarter of 2022, we reduced the expected final vesting percentage for 6,000 of these shares to 0% based on the projected operating results for the related business unit for the relevant measurement period for the performance metrics. During the fourth quarter of 2023, we reduced the expected final vesting percentage for the remaining 12,000 shares from 100% to 88% based on actual operating results through December 31, 2023 for the related business units. As a result of the adjustment in the expected final vesting percentage, we recorded a catch-up adjustment to reduce expense by $14. This adjustment was recorded in general and administrative expense in our statement of operations. The 6,000 shares for which the vesting percentage had been reduced to 0% were forfeited in the first quarter of 2023 when the individual to whom they were granted terminated their employment with us. On March 9, 2022, our CEO and CFO received performance-based restricted stock awards totaling 20,493 shares. These shares were valued at $200 as of the date of grant. These shares vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares awarded on March 9, 2022. The final vesting percentage will be based on the achievement of certain performance metrics, including revenue compound annual growth rate, for specified time periods as determined by the Compensation Committee of our Board of Directors. During the fourth quarter of 2023, we reduced the expected final vesting percentage for these shares from 100% to 50% based on our current projection for the performance metrics for the relevant measurement period. As a result of the adjustment in the expected final vesting percentage, we recorded a catch-up adjustment to reduce expense by $60. This adjustment was recorded in general and administrative expense in our statement of operations. On October 1, 2021, we issued performance-based restricted stock awards totaling 5,000 shares to a member of senior management. These shares were valued at $59 as of the date of grant. These shares will vest on January 1, 2025 at a vesting percentage that could range from 0% to 150% of the number of shares awarded on October 1, 2021. The final vesting percentage will be based on the achievement of certain performance metrics, including revenue compound annual growth rate and diluted earnings per share excluding amortization of intangibles, for specified time periods. During the fourth quarter of 2023, we reduced the expected final vesting percentage for these shares from 100% to 50% based on our current projection for the performance metrics for the relevant measurement period. As a result of the adjustment in the expected final vesting percentage, we recorded a catch-up adjustment to reduce expense by $20. This adjustment was recorded in general and administrative expense in our statement of operations. On March 8, 2023, our CEO, CFO and certain other members of our senior management received performance-based restricted stock awards totaling 18,888 shares valued at $303 as of the date of grant. These shares vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares of restricted stock awarded on March 8, 2023. The final vesting percentage will be based on the achievement of certain performance metrics related to consolidated revenue for specified time periods as determined by the Compensation Committee of our Board of Directors. As of December 31, 2023, we have estimated that these shares will vest at 100% of the original amount. On May 8, 2023 the newly appointed president of our Environmental Technologies segment received performance-based restricted stock awards totaling 5,081 shares valued at $108 as of the date of grant. These shares vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares of restricted stock awarded on May 8, 2023. The final vesting percentage will be based on the achievement of certain performance metrics including revenue and income from operations for specified time periods. As of December 31, 2023, we have estimated that these shares will vest at 100% of the original amount.

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