Shareholders' Equity

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Shareholders' Equity

(12) Shareholders’ Equity

Preferred Stock

In June 2008, the Board of Directors authorized 2,500 shares of preferred stock, par value $0.001 per share. The Board of Directors has the authority to issue the undesignated preferred stock in one or more series and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of the Company without further action by shareholders and may adversely affect the voting and other rights of the holders of common stock.

The Board of Directors authorized 10 shares of Series A Redeemable Nonvoting Preferred stock (“Series A Preferred”) that were issued to certain executive officers at the time of formation. The Series A Preferred has no

voting rights, except as required by law, and may be redeemed at the option of the Company’s Board of Directors at any time.

The Series A Preferred is redeemable based on the stated fair value of $5.00 per share. The Series A Preferred has no dividend rights and no rights to the undistributed earnings of the Company.

On September 29, 2020, the Company entered into a Subscription Agreement with TCM Strategic Partners L.P. to issue and sell 17 shares of its Series B Convertible Preferred Stock, par value $0.001 per share (“Series B Shares”), for $16,970 of cash proceeds and paid $84 in stock issuance costs. The closing of the sale and issuance of the Series B Shares occurred on October 1, 2020. Subject to shareholder approval, the Series B Shares automatically convert into fully paid and non-assessable shares of common stock at a conversion price equal to $14.37 per share.

On December 10, 2020, the Company held a Special Meeting of Shareholders that approved the issuance of the Company’s common stock upon the conversion of the Series B Shares issued to TCM Strategic Partners L.P. in connection with the private placement on October 1, 2020. On December 10, 2020, the Series B Shares automatically converted into 1,198 shares of the Company’s common stock (“the Conversion Shares”). Under the terms of the Subscription Agreement, the Conversion Shares continued to be subject to the restrictions on transfer that expired on October 1, 2021.

The Series B Shares contained a contingent beneficial conversion feature (“BCF”) that was recognized and accreted at its intrinsic value of $11,443 upon shareholder approval on December 10, 2020 and recognized in the Consolidated Statements of Shareholders’ Equity. The BCF is treated as a deduction from net loss to arrive at net loss attributable to common shares for the purposes of calculating earnings per share. See Note 5 for the calculation of basic and diluted earnings per share.

Common Stock

In June 2008, the Board of Directors authorized 50,000 shares of common stock, par value $0.001 per share. The holders of Digimarc common stock are entitled to one vote for each share held of record on all matters submitted to a vote of its shareholders, including the election of directors. Subject to preferences that may be granted to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends as may be declared by the Board of Directors out of funds legally available for such purpose, as well as any distributions to the Company’s shareholders. In the event of the Company’s liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all of the Company’s assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock. Holders of common stock have no preemptive or other subscription or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable.

On September 29, 2020, the Company entered into a Subscription Agreement with TCM Strategic Partners L.P. to issue and sell 2,542 shares of its common stock in a private placement at a price of $14.37 per share. The closing of the sale of common stock occurred the same day. The offering was made without an underwriter or placement agent. The Company received $36,530 of cash proceeds and paid $190 in stock issuance costs.

On December 10, 2020, the Series B Shares automatically converted into 1,198 shares of the Company’s common stock.

In May 2019, the Company entered into an Equity Distribution Agreement, whereby the Company may sell from time to time through Wells Fargo Securities, LLC, as its sales agent, the Company’s common stock having an aggregate offering price of up to $30,000.

There were no shares sold for the year end December 31, 2021.

For the year ended December 31, 2020, the Company sold 162 shares at an average price of $16.80 under this Equity Distribution Agreement totaling $2,718 of cash proceeds, less $61 of commissions and $394 of stock issuance costs, for net cash proceeds of $2,263.

As of December 31, 2021, $6,932 remained available for future issuance under the Equity Distribution Agreement.

Stock Incentive Plan

In March 2018, the Company’s Board of Directors approved the 2018 Incentive Plan (“2018 Plan”) which was later approved by the Company’s shareholders at the Company’s 2018 Annual Meeting of Shareholders in April 2018. The 2018 Plan replaced the 2008 Incentive Plan (“2008 Plan”). The 2018 Plan provides for the grant of incentive and non-qualified stock options, stock appreciation rights, stock awards, restricted stock awards, restricted stock units, performance shares, performance units, and other stock or cash-based awards, which may be granted to officers, directors, employees, consultants, agents, advisors and independent contractors who provide services to the Company and its affiliated companies.

The 2018 Plan authorizes the issuance of 1,000 shares of common stock. In addition, up to 770 shares of common stock subject to awards outstanding under the 2008 Plan became available for issuance under 2018 Plan to the extent that those shares cease to be subject to the awards (as a result of, for example, expiration, cancellation or forfeiture of the award). The shares authorized under the 2018 Plan are subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event. Shares issued under the 2018 Plan will consist of authorized and unissued shares or shares held by the Company as treasury shares. If an award granted under the 2018 Plan lapses, expires, terminates or is forfeited or surrendered without having been fully exercised or without the issuance of all the shares subject to the award, the shares covered by that award will again be available for issuance under the 2018 Plan. Shares that are (i) tendered by a participant or retained by the Company as payment for the purchase price of an award or to satisfy tax withholding obligations or (ii) covered by an award that is settled in cash, or in some manner that some or all of the shares covered by the award are not issued, will again be available for issuance under the 2018 Plan. In addition, awards granted as substitute awards in connection with acquisition transactions will not reduce the number of shares authorized for issuance under the 2018 Plan.

As of December 31, 2021, under all of the Company’s stock-based compensation plans, an additional 1,004 shares remained available for future grants under the 2018 Plan. The Company issues new shares upon exercises of stock options, grants of restricted stock awards and vesting of restricted stock unit awards.

Stock Options

The following table reconciles the outstanding balance of stock option awards:

				Weighted		Weighted
				Average		Average		Aggregate
				Exercise		Grant Date		Intrinsic
	Options			Price		Fair Value		Value
Options outstanding, December 31, 2019		558		$	31.22	$	14.03
Granted		105		$	15.36	$	7.36
Exercised		(358	)	$	29.36	$	13.24
Forfeited or expired		—			—		—
Options outstanding, December 31, 2020		305		$	27.94	$	12.65
Granted		—		$	—	$	—
Exercised		(220	)	$	27.31	$	17.36
Forfeited or expired		(35	)	$	15.36	$	7.36
Options outstanding, December 31, 2021		50		$	39.54	$	22.23	$	—
Options exercisable, December 31, 2021		50		$	39.54			$	—
Options unvested, December 31, 2021		—		$	—			$	—

The aggregate intrinsic value is based on the closing price of $39.48 per share of Digimarc common stock on December 31, 2021, which would have been received by the optionees had all of the options with exercise prices less than $39.48 per share been exercised on that date.

The following table summarizes information about stock option awards outstanding at December 31, 2021:

Options Outstanding

Options Exercisable

Weighted

Weighted

Remaining

Average

Remaining

Average

Number

Contractual

Exercise

Number

Contractual

Exercise

Exercise Price

Outstanding

Life (Years)

Price

Outstanding

Life (Years)

Price

$39.54

50

1.61

$

39.54

50

1.61

$

39.54

Restricted Stock

The following table reconciles the unvested balance of restricted stock awards:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Unvested balance, December 31, 2019		435		$	27.05
Granted		256		$	29.95
Vested		(260	)	$	28.25
Forfeited		(15	)	$	23.73
Unvested balance, December 31, 2020		416		$	28.20
Granted		255		$	40.53
Vested		(246	)	$	29.76
Forfeited		(65	)	$	33.64
Unvested balance, December 31, 2021		360		$	34.90

The following table indicates the fair value of all restricted stock awards that vested:

	Year Ended		Year Ended
	December 31,		December 31,
	2021		2020
Fair value of restricted stock awards vested	$	8,957	$	5,946

Restricted Stock Units

The following table reconciles the unvested balance of restricted stock unit awards:

				Weighted
				Average
	Number of			Grant Date
	Units			Fair Value
Unvested balance, December 31, 2019		—		$	—
Granted		45		$	15.36
Vested		—		$	—
Forfeited		—		$	—
Unvested balance, December 31, 2020		45		$	15.36
Granted		—		$	—
Vested		(30	)	$	15.36
Forfeited		(15	)	$	15.36
Unvested balance, December 31, 2021		—		$	—

The fair value of RSUs vested was $1,050 for the year ended December 31, 2021.

Performance Restricted Stock Units

The following table reconciles the unvested balance of performance restricted stock unit awards:

				Weighted
				Average
	Number of			Grant Date
	Units			Fair Value
Unvested balance, December 31, 2019		—		$	—
Granted		124		$	11.08
Vested		—		$	—
Forfeited		—		$	—
Unvested balance, December 31, 2020		124		$	11.08
Granted		—		$	—
Vested (1)		(82	)	$	15.54
Forfeited		(42	)	$	11.08
Unvested balance, December 31, 2021		—		$	—

(1)

Includes the impact of the modification of 21 PRSUs which were cancelled and reissued at a grant date fair value of $28.93.

The fair value of PRSUs vested was $2,886 for the year ended December 31, 2021.