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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Stock Plans During the year ended December 31, 2022, the Company granted 1.4 million shares of restricted stock under the Company’s 2015 Omnibus Equity Incentive Plan, as amended ("2015 OEIP"), which was approved by Smith Micro’s stockholders on June 18, 2015. Subsequent amendments to the 2015 OEIP to increase the number of shares reserved thereunder were approved by its stockholders on June 14, 2018 and June 9, 2020. The 2015 OEIP replaced the 2005 Stock Option / Stock Issuance Plan (“2005 Plan”) which was due to expire on July 28, 2015. The outstanding options under the 2005 Plan remain outstanding, but no new grants will be made under the 2005 Plan. The maximum number of shares of the Company’s common stock available for issuance over the term of the 2015 OEIP may not exceed 9,625,000 shares. As of December 31, 2022, there were approximately 2.4 million shares available for future grants under the Company’s 2015 OEIP. The 2015 OEIP provides for the issuance of full value awards (restricted stock, performance stock, dividend equivalent right or restricted stock units) and partial value awards (stock options or stock appreciation rights) to employees, non-employee members of the board and consultants. Any full value award settled in shares will be debited as 1.2 shares, and partial value awards settled in shares will be debited as 1.0 shares against the share reserve. The exercise price per share for stock option grants is not to be less than the fair market value per share of the Company’s common stock on the date of grant. The Board of Directors has the discretion to determine the vesting schedule. Stock options may be exercisable immediately or in installments, but generally vest over a four-year period from the date of grant. In the event the holder ceases to be employed by the Company, all unvested stock options terminate, and all vested stock options may be exercised within a period of 90 days following termination. In general, stock options expire ten years from the date of grant. Restricted stock is valued using the closing stock price on the date of the grant. The total value is expensed over the vesting period of 12 to 48 months. Stock Compensation Expense The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. Non-cash stock-based compensation expenses related to stock options, restricted stock grants and the ESPP were recorded in the financial statements as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021
Cost of sales | $ | 2 |  |  | $ | 1 |
Sales and marketing | 1,101 |  |  | 901 |
Research and development | 1,082 |  |  | 965 |
General and administrative | 2,764 |  |  | 2,981 |
Total non-cash stock compensation expense | $ | 4,949 |  |  | $ | 4,848 |
As of December 31, 2022, there was approximately $7.4 million of unrecognized compensation costs related to non-vested stock options and restricted stock granted under the 2015 OEIP and the 2005 Plan. In the second quarter of 2022 there was a modification of a restricted stock award which accelerated the vesting of that award. As such an additional $0.6 million of stock compensation expense was recorded in Sales and Marketing expense in that period. Valuation of Stock Option Awards There were no options granted in 2022. The assumptions used to compute the share-based compensation costs for the stock options granted during the year ended December 31, 2021 using the Black-Scholes option pricing model, were as follows:
| Year Ended December 31,
| 2021
Weighted average grant date fair value of stock options | $5.94
Assumptions |
Risk-free interest rate (weighted average) | 0.87 | %
Expected dividend yield | — |
Weighted average expected life (years) | 6.2
Volatility (weighted average) | 74.5 | %
Forfeiture rate | 12.0 | %
The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The Company assumed no dividend yield because it does not expect to pay dividends for the foreseeable future. The weighted average expected life is the vesting period for those options granted during that period. The average volatility is based on the actual historical volatility of the Company’s common stock. The forfeiture rate was based on modified employee turnover. Stock Options A summary of the Company’s stock options outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2022 and 2021 and the activity during the years ended herein are as follows (in thousands except per share amounts):
|  | Shares |  | Weighted Avg. Exercise Price |  | Wtd. Avg. Remaining Contractual Life (Yrs) |  | Aggregate Intrinsic Value
Outstanding as of December 31, 2021 |  | 194 |  |  | $ | 4.12 |  |  |  |  | $ | 218 |
Exercised |  | (9) |  |  | $ | 2.11 |  |  |  |  | $ | 12 |
Forfeited |  | (2) |  |  | $ | 4.82 |  |  |  |  | $ | — |
Expired |  | (44) |  |  | $ | 5.66 |  |  |  |  | $ | — |
Outstanding as of December 31, 2022 |  | 139 |  |  | $ | 3.75 |  |  | 5.1 |  | $ | 6 |
Vested and expected to vest at December 31, 2022 |  | 137 |  |  | $ | 3.72 |  |  | 5.1 |  | $ | 6 |
Exercisable as of December 31, 2022 |  | 117 |  |  | $ | 3.49 |  |  | 4.6 |  | $ | 6 |
Employee Stock Purchase Plan The Company has a shareholder approved employee stock purchase plan (“ESPP”), under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning and end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 10% of the employee’s compensation and employees may not purchase more than the lesser of $25,000 of stock, or 250 shares, for any purchase period. Additionally, no more than 250,000 shares in the aggregate may be purchased under the ESPP. Valuation of ESPP The fair values are estimated at the beginning of each offering period using a Black-Scholes valuation model that uses the assumptions noted in the following table. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. Expected volatility was based on the historical volatility on the day of grant. Following is a schedule of the shares purchased, the fair value per share, and the Black-Scholes model assumptions for each offering period:
Offering Period Ended | September 30, 2022 |  | March 31, 2022 |  | September 30, 2021 |  | March 31, 2021
Shares purchased for offering period | 10,901 |  |  | 6,019 |  |  | 5,360 |  |  | 4,668 |
Fair value per share as of the beginning of the offering period | $ | 1.15 |  |  | $ | 1.61 |  |  | $ | 1.90 |  |  | $ | 1.25 |
Assumptions |  |  |  |  |  |  |
Risk-free interest rate (average) | 0.86 | % |  | 0.05 | % |  | 0.05 | % |  | 0.12 | %
Expected dividend yield | — |  |  | — |  |  | — |  |  | — |
Weighted average expected life (years) | 0.5 |  | 0.5 |  | 0.5 |  | 0.5
Volatility (average) | 32.5 | % |  | 43.1 | % |  | 44.6 | % |  | 47.1 | %
Restricted Stock Awards A summary of the Company’s restricted stock awards outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2022 and 2021, and the activity during years ended therein, are as follows (in thousands, except weighted average grant date fair value):
|  | Number of shares |  | Weighted average grant date fair value
Unvested at December 31, 2020 |  | 1,702 |  |  | $ | 4.07 |
Granted |  | 1,287 |  |  | $ | 7.02 |
Vested |  | (1,027) |  |  | $ | 4.47 |
Canceled and forfeited |  | (295) |  |  | $ | 5.60 |
Unvested at December 31, 2021 |  | 1,667 |  |  | $ | 5.83 |
Granted |  | 1,398 |  |  | $ | 3.76 |
Vested |  | (1,174) |  |  | $ | 4.87 |
Canceled and forfeited |  | (212) |  |  | $ | 6.06 |
Unvested at December 31, 2022 |  | 1,679 |  |  | $ | 4.75 |

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