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Note 11 - Capital Stock and Stock-based Compensation | 3 Months Ended
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Mar. 31, 2020
Notes to Financial Statements |
Shareholders' Equity and Share-based Payments [Text Block] |
11. |  | Capital Stock and Stock-Based Compensation
Employee Stock Purchase Plan (as amended, the ESPP) Under the Company’s ESPP, participating employees can authorize the Company to withhold a portion of their base pay during consecutive six -month payment periods for the purchase of shares of the Company’s common stock. At the conclusion of the period, participating employees can purchase shares of the Company’s common stock at 85% of the lower of the fair market value of the Company’s common stock at the beginning or end of the period. Shares are issued under the ESPP for the six -month periods ending June 30 and December 31. On May 16, 2019, the stockholders of the Company approved an increase of 350,000 shares of common stock in the number of shares available for issuance under the ESPP. Following such amendment, 1,400,000 shares of common stock are authorized for issuance, of which 1,081,404 shares were issued as of December 31, 2019. There were no shares issued under the ESPP during the period ended March 31, 2020. As of March 31, 2020, there were 318,596 shares available for issuance under the plan. Third Amended and Restated 2000 Stock Option and Incentive Plan (as amended, the Third A&R Plan) On May 25, 2011, the stockholders of the company approved the Third A&R Plan, which such plan currently authorizes the grant of stock options and stock-based awards to officers, employees, non-employee directors and other key persons of the Company and its subsidiaries. The Third Amendment to the Third A&R Plan (the Amendment) was adopted by the Board of Directors on April 2, 2018. Such Amendment was approved by the stockholders at the Company’s 2018 Annual Meeting of Stockholders. Pursuant to the Amendment, the aggregate number of shares authorized for issuance under the Third A&R Plan was increased by 3,400,000 shares to 20,908,929. As of March 31, 2020, there were 275,419 shares available for issuance under the plan Restricted Stock Units with a Market Condition (the Market Condition RSUs) In 2019, the Compensation Committee of the Board of Directors of the Company approved and granted deferred stock awards of Market Condition RSUs (the 2019 Market Condition RSUs) to certain members of the Company’s management team under the Third A&R Plan. The vesting of the 2019 Market Condition RSUs is based on a graded-vesting schedule ( one third at the end of each year for three years) and linked to the achievement of a relative total shareholder return of the Company’s common stock measured relative to the Nasdaq Biotechnology index from the 2019 Market Condition RSUs grant date to the earlier of (i) the anniversary date of the grant or (ii) upon a change of control. As of March 31, 2020, the target number of these market condition restricted stock units that may be earned is 529,491 shares; the maximum amount is 150% of the target number. Stock-Based Payment Awards The Company accounts for stock-based payment awards in accordance with the provisions of FASB ASC 718, which requires it to recognize compensation expense for all stock-based payment awards made to employees and directors including stock options, restricted stock units, Market Condition RSUs and employee stock purchases related to the ESPP. The Company has elected as an accounting policy to account for forfeitures for service-based awards as they occur, with no adjustment for estimated forfeitures. Stock option and restricted stock unit activity for the three months ended March 31, 2020 were as follows:
|  | Stock Options |  | Restricted Stock Units |  | Market Condition RSU's
|  |  |  | Weighted |  |  |  |  |  |  |  |
|  | Stock |  | Average |  | Restricted |  |  |  | Market |  |
|  | Options |  | Exercise |  | Stock Units |  | Grant Date |  | Condition RSU's |  | Grant Date
|  | Outstanding |  | Price |  | Outstanding |  | Fair Value |  | Outstanding |  | Fair Value
Balance at December 31, 2019 |  |  | 2,266,122 |  |  | $ | 3.93 |  |  |  | 1,590,450 |  |  | $ | 2.27 |  |  |  | 529,491 |  |  | $ | 1.67 |
Granted |  |  | 42,373 |  |  |  | 2.58 |  |  |  | 142,766 |  |  |  | 3.00 |  |  |  | - |  |  |  | - |
Vested (RSUs) |  |  | - |  |  |  | - |  |  |  | (267,588 | ) |  |  | 2.75 |  |  |  | - |  |  |  | - |
Cancelled / forfeited |  |  | (49,074 | ) |  |  | 3.81 |  |  |  | (31,795 | ) |  |  | 3.02 |  |  |  | - |  |  |  | - |
Balance at March 31, 2020 |  |  | 2,259,421 |  |  | $ | 3.90 |  |  |  | 1,433,833 |  |  | $ | 2.24 |  |  |  | 529,491 |  |  | $ | 1.67 |
For the three months ended March 31, 2020, the total compensation costs related to unvested awards not yet recognized is $3.3 million and the weighted average period over which it is expected to be recognized is approximately two years. Valuation and Expense Information under Stock-Based-Payment Accounting Stock-based compensation expense for the three months ended March 31, 2020 and 2019 was allocated as follows:
|  | Three Months Ended March 31,
|  | 2020 |  | 2019
|  | (in thousands)
Cost of product revenues |  | $ | 10 |  |  | $ | 13 |
Sales and marketing |  |  | 51 |  |  |  | (7 | )
General and administrative |  |  | 696 |  |  |  | 551 |
Research and development |  |  | 36 |  |  |  | 34 |
Total stock-based compensation |  | $ | 793 |  |  | $ | 591 |
The Company did not capitalize any stock-based compensation. The weighted-average estimated fair value per share of stock options granted during the three months ended March 31, 2020 was $1.18 using the Black Scholes option-pricing model with the following weighted-average assumptions:
|  | 2020
Volatility |  |  | 54.83 | %
Risk-free interest rate |  |  | 1.16 | %
Expected holding period (in years) |  |  | 4.6 |
The Company used historical volatility to calculate the expected volatility as of March 31, 2020. Historical volatility was determined by calculating the mean reversion of the daily adjusted closing stock price. The risk-free interest rate assumption is based upon observed U.S. Treasury bill interest rates (risk-free) appropriate for the term of the Company’s stock options. The expected holding period of stock options represents the period of time options are expected to be outstanding and were based on historical experience. The vesting period ranges from one to four years and the contractual life is ten years. Earnings per share Basic earnings per share is calculated by dividing net income by the number of weighted average common shares outstanding during the period. The calculation of diluted earnings per share assumes conversion of stock options, restricted stock units and Market Condition RSUs into common stock using the treasury method. The weighted average number of shares used to compute basic and diluted earnings per share consists of the following:
|  | Three Months Ended March 31,
|  | 2020 |  | 2019
Basic |  |  | 38,328,791 |  |  |  | 37,644,684 |
Diluted |  |  | 38,328,791 |  |  |  | 37,644,684 |
Excluded from the shares used in calculating the diluted earnings per common share in the above table are options, restricted stock units and Market Condition RSUs of approximately 4,222,745 and 3,691,304 shares of common stock for the three months ended March 31, 2020 and 2019, respectively, as the impact of these shares would be anti-dilutive.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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