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Note 10 - Capital Stock and Stock-based Compensation | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Shareholders' Equity and Share-based Payments [Text Block] |
| 10. | Capital Stock and Stock-Based Compensation
Retirement of Treasury Stock In May 2021, the Company retired the 7,745,507 shares of common stock held by the Company as treasury shares and returned these shares to the status of authorized and unissued shares of common stock. Preferred Stock The Company’s Board of Directors has the authority to issue up to 5.0 million shares of preferred stock and to determine the price privileges and other terms of the shares. The Board of Directors may exercise this authority without any further approval of stockholders. As of December 31, 2021 and 2020, the Company had no preferred stock issued or outstanding. Employee Stock Purchase Plan (“ESPP”) Under the 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. There were 95,507 and 126,255 shares issued under the ESPP during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there were 96,834 shares available for issuance under the ESPP. Equity Incentive Plans During 2021, the Company’s Board of Directors and stockholders adopted the 2021 Incentive Plan which authorizes approximately 2.2 million additional shares available for grants to officers, employees, non-employee directors and other key persons of the Company and its subsidiaries. Approximately 2.1 million shares available under the prior plan were also made available for issuance under the 2021 Incentive Plan. As of December 31, 2021, there were approximately 4.1 million shares available for issuance under the 2021 Incentive Plan. Restricted Stock Units with a Market Condition The Company grants deferred stock awards of Market Condition RSUs (the “Market Condition RSUs”) to certain members of the Company’s management team. The vesting of the Market Condition RSUs is linked to the achievement of a relative total shareholder return of the Company’s common stock measured from the earlier of (i) the measurement period as set out in the award agreement or (ii) upon a change of control (measured relative to the Nasdaq Biotechnology or Russell 2000 index and based on a 20-day trading average price). For Market Condition RSUs granted during the years ended December 31, 2021 and 2020, the total shareholder return of the Company’s common stock relative to the applicable index resulted in a positive performance factor adjustment and the issuance of 163,216 and 233,055 of additional awards during the year ended December 31, 2021 and 2020, respectively. Of the 860,155 Market Condition RSUs granted and subject to vesting as of December 31, 2021, there are 293,509 which remain subject to a relative total shareholder return measurement which can result in vesting rates ranging from -0-% to 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 under the Company’s Incentive Plans for the years ended December 31, 2021 and 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 |  |  | 894,154 |  |  |  | 2.61 |  |  |  | 1,027,486 |  |  |  | 2.75 |  |  |  | 332,622 |  |  |  | 2.98 |
Exercised |  |  | (253,853 | ) |  |  | 3.94 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Vested (RSUs) |  |  | - |  |  |  | - |  |  |  | (930,985 | ) |  |  | 2.41 |  |  |  | (240,205 | ) |  |  | 1.53 |
Cancelled/Forfeited |  |  | (269,084 | ) |  |  | 3.68 |  |  |  | (126,490 | ) |  |  | 3.13 |  |  |  | (41,932 | ) |  |  | 3.04 |
Performance Factor Adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 233,055 |  |  |  | 1.47 |
Balance at December 31, 2020 |  |  | 2,637,339 |  |  |  | 3.51 |  |  |  | 1,560,461 |  |  | $ | 2.44 |  |  |  | 813,031 |  |  |  | 2.12 |
Granted |  |  | - |  |  |  | - |  |  |  | 820,831 |  |  |  | 4.74 |  |  |  | 293,509 |  |  |  | 4.61 |
Exercised |  |  | (579,968 | ) |  |  | 3.77 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Vested (RSUs) |  |  | - |  |  |  | - |  |  |  | (1,167,473 | ) |  |  | 2.88 |  |  |  | (403,422 | ) |  |  | 2.11 |
Cancelled/Forfeited |  |  | (652,555 | ) |  |  | 4.24 |  |  |  | (72,655 | ) |  |  | 3.67 |  |  |  | (6,179 | ) |  |  | 2.98 |
Performance Factor Adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 163,216 |  |  |  | 2.98 |
Balance at December 31, 2021 |  |  | 1,404,816 |  |  | $ | 3.10 |  |  |  | 1,141,164 |  |  | $ | 3.57 |  |  |  | 860,155 |  |  | $ | 3.13 |
Earnings per share Basic earnings per share is based upon net income divided 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:
|  | Year Ended December 31, |
(in thousands) |  | 2021 |  |  | 2020 |
Basic |  |  | 40,343 |  |  |  | 38,640 |
Dilutive effect of equity awards |  |  | - |  |  |  | - |
Diluted |  |  | 40,343 |  |  |  | 38,640 |
For the years ended December 30, 2021 and 2020, the Company excluded from the calculations of diluted earnings per share approximately 4.3 million shares and 5.0 million shares, respectively, of weighted average shares of underlying stock-based awards as the impact of including these potential shares would be anti-dilutive. The following table summarizes outstanding and exercisable options as of December 31, 2021 (Aggregate Intrinsic Value, in thousands):
|  |  |  | Options Outstanding |  |  | Options Exercisable |
|  |  |  |  |  |  |  | Weighted |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Weighted |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  | Average |  |  | Weighted |  |  |  |  |  |  |  |  |  |  | Average |  |  | Weighted |  |  |  |  |
Range of |  |  |  |  |  |  | Remaining |  |  | Average |  |  | Aggregate |  |  |  |  |  |  | Remaining |  |  | Average |  |  | Aggregate |
Exercise |  |  | Number |  |  | Contractual Life |  |  | Exercise |  |  | Intrinsic |  |  | Shares |  |  | Contractual Life |  |  | Exercise |  |  | Intrinsic |
Price |  |  | Outstanding |  |  | in Years |  |  | Price |  |  | Value |  |  | Exercisable |  |  | in Years |  |  | Price |  |  | Value |
$ | 1.78 - 2.62 |  |  |  | 188,253 |  |  |  | 6.4 |  |  | $ | 2.08 |  |  | $ | 935 |  |  |  | 90,551 |  |  |  | 6.1 |  |  | $ | 2.09 |  |  | $ | 449 |
| 2.63 - 2.78 |  |  |  | 586,160 |  |  |  | 5.4 |  |  |  | 2.63 |  |  |  | 2,591 |  |  |  | 234,299 |  |  |  | 5.4 |  |  |  | 2.63 |  |  |  | 1,036 |
| 2.79 - 3.24 |  |  |  | 160,071 |  |  |  | 7.6 |  |  |  | 2.95 |  |  |  | 656 |  |  |  | 99,751 |  |  |  | 7.5 |  |  |  | 2.95 |  |  |  | 409 |
| 3.25 - 3.72 |  |  |  | 206,808 |  |  |  | 5.2 |  |  |  | 3.38 |  |  |  | 760 |  |  |  | 206,808 |  |  |  | 5.2 |  |  |  | 3.38 |  |  |  | 760 |
| 3.73 - 5.51 |  |  |  | 263,524 |  |  |  | 4.3 |  |  |  | 4.73 |  |  |  | 611 |  |  |  | 219,931 |  |  |  | 3.7 |  |  |  | 4.91 |  |  |  | 471 |
$ | 1.78 - 5.51 |  |  |  | 1,404,816 |  |  |  | 5.6 |  |  | $ | 3.10 |  |  | $ | 5,553 |  |  |  | 851,340 |  |  |  | 5.2 |  |  | $ | 3.38 |  |  | $ | 3,125 |
The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $7.05 as of December 31, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. The aggregate intrinsic value of options exercised was $1,310,765 and $92,162 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the total compensation costs related to unvested awards not yet recognized is $5.2 million and the weighted average period over which it is expected to be recognized is approximately 1.9 years. Valuation and Expense Information under Stock-Based-Payment Accounting Stock-based compensation expenses related to stock options, restricted stock units, Market Condition RSU’s and the ESPP for the years ended December 31, 2021 and 2020 was allocated as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2021 |  |  | 2020 |
Cost of revenues |  | $ | 118 |  |  | $ | 65 |
Sales and marketing expenses |  |  | 507 |  |  |  | 263 |
General and administrative expenses |  |  | 3,416 |  |  |  | 3,122 |
Research and development expenses |  |  | 128 |  |  |  | 197 |
Total stock-based compensation expenses |  | $ | 4,169 |  |  | $ | 3,647 |
The Company did not capitalize any stock-based compensation. The weighted-average estimated fair value per share of stock options granted during the year ended December 31, 2020 was $1.21, using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|  | 2020 |
Volatility |  |  | 58.3 | %
Risk-free interest rate |  |  | 0.3 | %
Expected holding period (in years) |  |  | 4.4 |
Dividend Yield |  |  | - | %
The weighted average estimated fair value per share of the Market Condition RSUs granted during the year ended December 31, 2021 and 2020 was $4.61 and $2.98, respectively, using a Monte-Carlo valuation simulation, with the following weighted-average assumptions:
|  | 2021 |  |  | 2020 |
Volatility |  |  | 65.1 | % |  |  | 80.6 | %
Risk-free interest rate |  |  | 0.3 | % |  |  | 0.2 | %
Correlation coefficient |  |  | 35.7 | % |  |  | 31.5 | %
Dividend yield |  |  | - | % |  |  | - | %
The Company used historical volatility to calculate the expected volatility. 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.

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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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