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Note 8 - Stock-based Compensation | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | 8. STOCK-BASED COMPENSATION Under our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2014 Long-Term Incentive Plan (Incentive Plan), awards may be granted to participants in the form of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, RSUs, Performance Awards, Bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plan may be our directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of our business. There are a maximum of 5,600,676 shares that may be issued or reserved for awards to participants under the Incentive Plan. At December 31, 2022, we had 1,899,250 equity awards available for issuance under the Incentive Plan. We did not record any excess tax benefits within income tax expense for the years ended December 31, 2022 and 2021. Given the Company has a full valuation allowance on its deferred tax assets, there were no excess tax benefits to record. In addition, we account for forfeitures of awards based on an estimate of the number of awards expected to be forfeited and adjusting the estimate when it is no longer probable that the employee will fulfill the service condition. Stock-based compensation is included in selling, general and administrative costs in our consolidated statements of operations. The components of stock-based compensation from continuing operations for the years ended December 31, 2022 and 2021 were as follows:
|  | For the Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Stock options and restricted stock units, net of forfeitures |  | $ | 224 |  |  | $ | 82 |
After-tax effect of stock based compensation |  | $ | 224 |  |  | $ | 82 |
Stock Options The stock options granted to employees under the Incentive Plan have a 10-year life and they vest as follows: 50% after the second anniversary of the award date, 25% after the third anniversary, and the final 25% after the fourth anniversary of the award date. Fuel Tech calculates stock compensation expense for employee option awards based on the grant date fair value of the award, less expected annual forfeitures, and recognizes expense on a straight-line basis over the four-year service period of the award. Stock options granted to members of our Board of Directors vest immediately. Stock compensation for these awards is based on the grant date fair value of the award and is recognized in expense immediately. Fuel Tech uses the Black-Scholes option pricing model to estimate the grant date fair value of employee stock options. The principal variable assumptions utilized in valuing options and the methodology for estimating such model inputs include: (1) risk-free interest rate – an estimate based on the yield of zero–coupon treasury securities with a maturity equal to the expected life of the option; (2) expected volatility – an estimate based on the historical volatility of Fuel Tech’s common stock for a period equal to the expected life of the option; and (3) expected life of the option – an estimate based on historical experience including the effect of employee terminations. There were no stock options granted during the years ended December 31, 2022 and 2021. The following table presents a summary of our stock option activity and related information for the years ended December 31:
|  | 2022 |  |  | 2021 |
|  | Number of Options |  |  | Weighted-Average Exercise Price |  |  | Number of Options |  |  | Weighted-Average Exercise Price |
Outstanding at beginning of year |  |  | 434,500 |  |  | $ | 3.05 |  |  |  | 484,500 |  |  | $ | 3.57 |
Granted |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Expired or forfeited |  |  | (50,000 | ) |  |  | 3.55 |  |  |  | (50,000 | ) |  |  | 8.16 |
Outstanding at end of year |  |  | 384,500 |  |  | $ | 2.98 |  |  |  | 434,500 |  |  | $ | 3.05 |
Exercisable at end of year |  |  | 384,500 |  |  | $ | 2.98 |  |  |  | 434,500 |  |  | $ | 3.05 |
Weighted-Average Remaining Contractual Life (years) |  |  |  |  |  |  | 2.43 |  |  |  |  |  |  |  | 3.08 |
Aggregate Intrinsic Value |  |  |  |  |  | $ | 27 |  |  |  |  |  |  | $ | 38 |
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on our closing stock price of $1.27 as of December 31, 2022, which would have been received by the option holders had those options holders exercised their stock options as of that date. The following table summarizes information about stock options outstanding at December 31, 2022:
Options Outstanding and Exercisable |
Range of Exercise Prices |  | Number of Options |  |  | Weighted-Average Remaining Contractual Life (years) |  |  | Weighted-Average Exercise Price |
$0.96 - $1.27 |  |  | 88,000 |  |  |  | 4.9 |  |  | $ | 0.97 |
$1.28 - $2.01 |  |  | 27,000 |  |  |  | 3.4 |  |  |  | 1.58 |
$2.02 - $3.15 |  |  | 105,000 |  |  |  | 2.4 |  |  |  | 2.44 |
$3.16 - $4.54 |  |  | 70,000 |  |  |  | 0.4 |  |  |  | 3.85 |
$4.55 - $5.22 |  |  | 94,500 |  |  |  | 1.4 |  |  |  | 5.22 |
|  |  | 384,500 |  |  |  | 2.4 |  |  | $ | 2.98 |
As of and for the 12 months ended December 31, 2022, there was no non-vested stock option activity and no total unrecognized compensation cost related to non-vested stock options granted under the Incentive Plan. Fuel Tech received no proceeds from the exercise of stock options in the years ended December 31, 2022 and 2021. It is our policy to issue new shares upon option exercises, loan conversions, and vesting of restricted stock units. We have not used cash and do not anticipate any future use of cash to settle equity instruments granted under share-based payment arrangements. Shares received for exercise of stock options come from newly issued shares. Restricted Stock Units RSUs granted to employees vest over time based on continued service (typically vesting over a period between two and four years), and RSUs granted to directors vest after a one year vesting period based on continued service. Such time-vested RSUs are valued at the date of grant using the intrinsic value method based on the closing price of the common stock on the grant date. Compensation cost, adjusted for estimated forfeitures, is amortized on a straight-line basis over the requisite service period. During the years ended December 31, 2022 and 2021, there were 45,003 and 50,002 restricted stock units that vested with a grant date fair value of $68 and $75, respectively. As of December 31, 2022, there was $738 of total unrecognized compensation cost related to all non-vested share-based compensation arrangements granted under the Incentive Plan. That cost is expected to be recognized over the remaining requisite service period of 2.4 years. A summary of restricted stock unit activity for the years ended December 31, 2022 and 2021 is as follows:
|  | Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested restricted stock units at December 31, 2020 |  |  | 100,005 |  |  | $ | 1.50 |
Forfeited |  |  | (5,000 | ) |  |  | 0.97 |
Vested |  |  | (50,002 | ) |  |  | 1.50 |
Unvested restricted stock units at December 31, 2021 |  |  | 45,003 |  |  |  | 1.51 |
Granted |  |  | 807,048 |  |  |  | 1.32 |
Forfeited |  |  | (40,000 | ) |  |  | 1.32 |
Vested |  |  | (45,003 | ) |  |  | 1.51 |
Unvested restricted stock units at December 31, 2022 |  |  | 767,048 |  |  | $ | 1.32 |
Deferred Directors Fees In addition to the Incentive Plan, Fuel Tech has a Deferred Compensation Plan for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech common stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards as opposed to liability awards. In 2022 and 2021, there was no stock-based compensation expense under the Deferred Plan.

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