Note P - Share-based Compensation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE P—SHARE-BASED COMPENSATION

Equity Plans 

The Company’s board of directors and stockholders approved the following equity plans:

‑ the 2006 Share Incentive Plan

‑ the 2013 Equity Incentive Plan (“2013 Plan”)

‑ the 2021 Equity Incentive Plan (“2021 Plan”)

The Company issued stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. Stock option awards generally vest over a four year period and have a maximum term of ten years. Stock options under these plans have been granted with an exercise price equal to the fair market value on the date of the grant. Nonqualified and Incentive Stock Options, RSAs and RSUs may be granted from these plans. Prior to the Company’s initial public offering in September 2013, the fair market value of the Company’s stock had been historically determined by the board of directors and from time to time with the assistance of third party valuation specialists.

Stock Options 

Options have been granted to the Company’s employees under the two incentive plans and generally become exercisable as to 25% of the shares on the first anniversary date following the date of grant and 12.5% on a semi-annual basis thereafter. All options expire ten years after the date of grant.

The following is a summary of option activity (in thousands, except per share data):

						Weighted				Weighted
				Weighted		Average				Average
				Average		Share Price		Weighted		Remaining		Aggregate
	Number of			Exercise		on Date of		Average		Contractual		Intrinsic
	shares			Price		Exercise		Fair Value		Life		Value
	(in thousands, except price data)
Outstanding, January 1, 2022		270		$	10.32			$	5.44		1.69	$	—
Exercised		—			—		—		—				—
Forfeited		(6	)		6.54				5.03				—
Outstanding, December 31, 2022		264			10.41				5.45		0.71		—
Exercisable, December 31, 2022		264			10.41				5.45		0.71		—
Vested and expected to vest		264			10.41				5.45		0.71		—

As of December 31, 2022, there was no unrecognized stock option expense.

Performance Based Incentive Plan/Restricted Stock Unit

The Company approved to grant restricted performance stock units (“PSUs”) to senior executives as a part of our long-term equity compensation program starting from June 2021. The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 0% to 200% of the number granted and is determined based on certain performance criteria over a three-year measurement period. The performance criteria for the PSUs are based on a combination of the performance of our stock price and the Total Shareholder Return (“TSR”) for the performance period compared with the TSR of certain peer companies or index for the performance period. PSUs granted vest 100% on the third anniversary of their grant, assuming achievement of the applicable performance criteria. We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized ratably over the explicit service period. The Company recognized PSU expenses for the twelve months ended December 31, 2022 and 2021 was $1.7 million and $0.7 million, respectively. 

Restricted stock units are issued to employees through a vesting plan and distribution schedule after employee remains with the Company for a particular length of time. The following is a total summary of PSU/RSU activity (in thousands, except per share data):

				Weighted
				Average Share		Weighted		Aggregate
	Number of			Price on Date		Average Fair		Intrinsic
	shares			of Release		Value		Value
	(in thousands, except price data)
Outstanding at January 1, 2022		2,170				$	11.15	$	11,156
Granted		1,977					2.04		3,687
Released		(1,023	)	$	2.75		8.65		2,818
Cancelled/Forfeited		(149	)				10.02		281
Outstanding, December 31, 2022		2,975					6.01		5,623
Vested and expected to vest		2,975					6.01		5,623

As of  December 31, 2022, there was $13.8 million of unrecognized compensation expense related to these RSUs. This expense is expected to be recognized over 1.95 years.

Share-Based Compensation 

The Company recognizes compensation expense on a straight-line basis over the applicable vesting term of the award and expense is adjusted as forfeitures occur.

In 2014, the Company ceased issuing stock options and began issuing RSUs and RSAs as share-based compensation to employees. The Company estimates the fair value of RSUs and RSAs at the fair market value on the grant date.

Employee share-based compensation expenses recognized for the years ended December 31, were as follows (in thousands):

Share-Based compensation - by expense type:

	2022		2021		2020
Cost of goods sold	$	488	$	885	$	937
Research and development		1,332		2,173		2,812
Sales and marketing		857		1,115		1,191
General and administrative		6,923		7,948		8,106
Total share-based compensation expense	$	9,600	$	12,121	$	13,046