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Note 9 - Capital Stock and Stock-based Compensation

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

9.	Capital Stock and Stock-Based Compensation

Fourth Amended and Restated 2000 Stock Option and Incentive Plan

On June 11, 2020, the stockholders of the Company approved the Fourth Amended and Restated 2000 Stock Option and Incentive Plan (the Fourth A&R Plan), which plan 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 Fourth A&R Plan modified the Company’s Third Amended and Restated 2000 Stock Option and Incentive Plan to, among other things, increase the aggregate number of shares authorized for issuance by 3,700,000 shares to 24,608,929 and reduce the fungible share ratio for deferred stock awards from 1.79 to 1.49. As of June 30, 2020, there were up to 3,264,267 shares available for issuance under the Fourth A&R Plan.

Stock-Based Payment Awards

Stock option and restricted stock unit activity for the six months ended June 30, 2020 were as follows:

		Stock Options								Restricted Stock Units								Market Condition RSU's
						Weighted												Market
		*Stock*				*Average*				*Restricted*								*Condition*
		*Options*				*Exercise*				*Stock Units*				*Grant Date*				*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			894,154				2.61				994,513				2.73				332,622				2.98
Exercised			(7,359	)			2.56				-				-				-				-
Expired			(15,819	)			2.59				-				-				-				-
Vested (RSUs)			-				-				(513,779	)			2.59				-				-
Cancelled / forfeited			(233,080	)			3.55				(70,313	)			3.24				(39,286	)			3.03
Balance at June 30, 2020			2,904,018			$	3.56				2,000,871			$	2.38				822,827			$	2.13

As of June 30, 2020, the total compensation costs related to unvested awards not yet recognized is $6.5 million and the weighted average period over which it is expected to be recognized is approximately 2.5 years.

Valuation and Expense Information under Stock-Based-Payment Accounting

Stock-based compensation expense for the three and six months ended June 30, 2020 and 2019 was allocated as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
		(in thousands)								(in thousands)
Cost of revenues		$	14			$	8			$	24			$	21
Sales and marketing expenses			62				36				113				29
General and administrative expenses			645				529				1,341				1,080
Research and development expenses			48				42				84				76
Total stock-based compensation expenses		$	769			$	615			$	1,562			$	1,206

The Company did not capitalize any stock-based compensation.

The weighted-average estimated fair value per share of stock options granted during the six months ended June 30, 2020 and six months ended June 30, 2019 was $1.21 and $0.97, respectively. The weighted average estimated fair value per share of stock options granted during the six months ended June 30, 2020 and June 30, 2019 was $1.21 and $1.56, respectively.

The following assumptions were used to estimate the fair value of the options granted during the six months ended June 30, 2020:

Volatility	58.5	%
Risk-free interest rate	0.3	%
Expected holding period (in years)	4.4	years
Dividend Yield	-	%

The weighted average fair value of the 2020 Market Condition RSUs that were granted during the six months ended June 30, 2020 was $2.98. The weighted average fair value of the 2019 Market Condition RSUs that were granted during the six months ended June 30, 2019 was $4.16.

The following assumptions were used to estimate the fair value, using a Monte-Carlo valuation simulation, of the Market Condition RSUs granted during the six months ended June 30, 2020:

Volatility			80.6	%
Risk-free interest rate			0.2	%
Correlation coefficient			0.3
Dividend yield			-	%

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) 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 June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Basic			38,467,686				37,735,717				38,389,358				37,682,539
Dilutive effect of equity awards			-				-				-				-
Diluted			38,467,686				37,735,717				38,389,358				37,682,539

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 5,727,716 and 3,300,586 as of June 30, 2020 and 2019, respectively, as the impact of these shares would be anti-dilutive.