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Note 11 - Stock-based Compensation Plan | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
(11) | STOCK-BASED COMPENSATION PLAN
As of September 30, 2024, we had unvested restricted stock awards and stock options granted under stock-based compensation plans that are described more fully in Note 13 to the consolidated financial statements in our 2023 Form 10-K. Our unvested restricted stock awards and stock options are accounted for based on their grant date fair value. As of September 30, 2024, total compensation expense to be recognized in future periods was $3,560. The weighted average period over which this expense is expected to be recognized was 2.3 years. The following table summarizes the compensation expense we recorded during the three and nine months ended September 30, 2024 and 2023 related to unvested shares of restricted stock and stock options:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Cost of revenues |  | $ | 39 |  |  | $ | 28 |  |  | $ | 107 |  |  | $ | 76 |
Selling expense |  |  | 12 |  |  |  | 9 |  |  |  | 37 |  |  |  | 30 |
Engineering and product development expense |  |  | 9 |  |  |  | (1 | ) |  |  | 21 |  |  |  | 18 |
General and administrative expense |  |  | 477 |  |  |  | 508 |  |  |  | 1,285 |  |  |  | 1,499 |
|  | $ | 537 |  |  | $ | 544 |  |  | $ | 1,450 |  |  | $ | 1,623 |
There was no compensation expense capitalized in the three and nine months ended September 30, 2024 or 2023. 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 the nine months ended September 30, 2024 and 2023 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
|  | 2024 |  |  | 2023 |
Risk-free interest rate |  |  | 3.98 | % |  |  | 3.93 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected common stock market price volatility factor |  |  | .57 |  |  |  | .57 |
Weighted average expected life of stock options (years) |  |  | 6.25 |  |  |  | 6.25 |
The per share weighted average fair value of stock options issued during the nine months ended September 30, 2024 and 2023 was $6.55 and $9.43, respectively. The following table summarizes the activity related to stock options for the nine months ended September 30, 2024:
|  | Number of Shares |  |  | Weighted Average Exercise Price |
Options outstanding, January 1, 2024 (171,735 exercisable) |  |  | 505,006 |  |  | $ | 10.46 |
Granted |  |  | 165,364 |  |  |  | 11.33 |
Exercised |  |  | (30,080 | ) |  |  | 5.41 |
Canceled |  |  | (36,240 | ) |  |  | 8.57 |
Options outstanding, September 30, 2024 (262,310 exercisable) |  |  | 604,050 |  |  |  | 10.93 |
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. On March 10, 2021, we issued restricted stock awards totaling 18,000 shares to members of senior management within our operating segments. During the first quarter of 2023, 6,000 of these shares were forfeited when the individual to whom they had been granted resigned from his position with us. The remaining 12,000 shares vested on the third anniversary of the grant date at vesting percentages of 75% for 6,000 of the shares and 100% for the remaining 6,000 shares. The final vesting percentages were based on the achievement of certain performance metrics related to the operating results of the business units for which these members of management are responsible. On October 1, 2021, we issued restricted stock awards totaling 5,000 shares to a member of senior management. 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 related to our consolidated operating results. At December 31, 2023, we reduced the estimate of the final vesting percentage to 50%. At September 30, 2024, this estimate has been further reduced to 0% based on our current assessment of the probable achievement against the relevant performance metrics. On March 9, 2022, our CEO and CFO received restricted stock awards totaling 20,493 shares 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 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, 2023, we reduced the estimate of the final vesting percentage to 50%. At September 30, 2024, this estimate has been further reduced to 0% based on our current assessment of the probable achievement against the relevant performance metrics. On March 8, 2023, our CEO, CFO and the Division Presidents of two of our operating segments received 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 awarded on March 8, 2023. The final vesting percentage will be based on the achievement of certain performance metrics related to revenue for the year ending December 31, 2025 as determined by the Compensation Committee of our Board of Directors. At September 30, 2024, we have estimated that these shares will vest at 100% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. 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 September 30, 2024, we have estimated that these shares will vest at 100% of the original amount. On January 16, 2024 the newly appointed president of our Process Technologies segment received performance-based restricted stock awards totaling 8,231 shares valued at $100 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 January 16, 2024. 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 September 30, 2024, we have estimated that these shares will vest at 100% of the original amount. On March 6, 2024, our CEO, CFO and the Division Presidents of our three operating segments received restricted stock awards totaling 33,539 shares valued at $380 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 6, 2024. The final vesting percentage will be based on the achievement of certain performance metrics related to adjusted EBITDA for the year ended December 31, 2026 as determined by the Compensation Committee of our Board of Directors. At September 30, 2024, we have estimated that these shares will vest at 100% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. The following table summarizes the activity related to unvested restricted stock awards for the nine months ended September 30, 2024:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested shares outstanding, January 1, 2024 |  |  | 189,784 |  |  | $ | 11.51 |
Granted |  |  | 138,838 |  |  |  | 11.38 |
Vested |  |  | (94,666 | ) |  |  | 9.72 |
Forfeited |  |  | (16,174 | ) |  |  | 12.35 |
Unvested shares outstanding, September 30, 2024 |  |  | 217,782 |  |  |  | 12.14 |
The total fair value of the restricted stock awards that vested during the nine months ended September 30, 2024 and 2023 was $761 and $1,688, respectively, as of the vesting dates of these awards.

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