Note 12 - Share-based Compensation

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

12.  SHARE-BASED COMPENSATION

On March 31, 2017, the Company adopted, and the stockholders approved, the 2017 Stock Incentive Plan (the “Plan”) authorizing 2,000,000 shares of Company Common Stock for issuance as stock options and restricted stock units to employees, directors or consultants. In May 2019, the stockholders ratified an increase in the Plan authorizing an additional 2,100,000 shares of Common Stock and in June 2020 ratified a further authorization of 1,900,000 shares of Common Stock for a total of 6,000,000 shares subject to the Plan. In June 2021, the stockholders ratified an increase in the 2017 Stock Incentive Plan authorizing an additional 1,500,000 shares of Common Stock to a total of 7,500,000 shares. At December 31, 2021 there were 1,380,816 shares of Common Stock available for grant under the Plan.

The Company generally recognizes share-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

Stock Options

The following table summarizes stock option activity for the years ended December 31, 2020 and 2021:

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding January 1, 2020		2,928,750		$	2.96		3.71
Granted		1,423,836		$	6.66		-
Exercised		(371,000	)	$	1.90		-
Forfeited, cancelled, expired		(50,000	)	$	3.00		-
Outstanding December 31, 2020		3,931,586		$	4.41		4.80
Granted		1,254,500		$	5.33
Exercised		(915,404	)	$	1.83
Forfeited, cancelled, expired		(334,799	)	$	5.14
Outstanding December 31, 2021		3,935,883		$	5.24		4.79	$	1,608
Exercisable December 31, 2021		2,415,063		$	5.19		2.44	$	1,608

All outstanding options at December 31, 2021 are service-based options.

The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:

	For the Year Ended
	December 31,
	2021			2020
Expected stock price volatility		50	%		47	%
Risk-free interest rate		0.90	%		0.38	%
Expected dividend yield		0	%		0	%
Expected life of options - years		5.74			5.64
Weighted-average fair value of options granted	$	2.57		$	2.90

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical data.

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

				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Range of		Number		Contractual		Exercise		Number		Exercise
Exercise Prices		Outstanding		Life (Years)		Price		Exercisable		Price
$	1.50 - 3.61		652,750		1.32	$	1.61		652,750	$	1.61
$	3.85 - 5.775		2,638,133		5.83	$	5.20		1,373,564	$	5.33
$	5.88 - 8.82		295,000		8.45	$	6.58		38,749	$	6.34
$	11.22		350,000		0.33	$	11.22		350,000	$	11.22

Restricted Stock Units

The Plan provides for the grant of restricted stock units (“RSUs”). RSUs are settled in shares of the Company’s Common Stock as the RSUs become vested. In January 2019 the Company granted 263,087 service-based RSUs to officers and employees vesting over a period of three years. In August and September 2019, the Company granted 45,000 service-based RSUs to employees vesting over a period of three years. In January 2020 the Company granted 73,992 service-based RSUs to officers and directors vesting over a period of three years. In April 2020 the Company granted 122,222 service-based RSUs to employees vesting over a period of three years. Also, in April 2020 the Company granted an officer 35,211 performance-based RSUs. During the period July 2020 to December 2020 the Company granted 114,660 service-based RSU’s to employees vesting over three and four years.

The following table summarizes RSU activity under the Plan for the years ended December 31, 2020 and 2021:

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value		Period (Years)
Unvested at January 1, 2020		308,087		$	6.77	3.0
Granted - service based		310,874		$	6.02
Granted - performance based		35,211		$	4.26
Vested		(144,687	)	$	5.17
Forfeited and cancelled		(81,479	)	$	6.47
Unvested at December 31, 2020		428,006		$	6.13	2.3
Granted - service based		398,662		$	5.59
Vested		(524,491	)	$	5.55
Forfeited and cancelled		(32,874	)	$	6.10
Unvested at December 31, 2021		269,303		$	6.47	2.0

Share-Based Compensation Expense

The Company recorded share-based compensation in its statements of operations for the relevant periods for options and RSUs as follows:

	For the Year Ended
	December 31,
	2021		2020
Selling, general and administrative	$	4,558	$	1,957
Research and development		798		280
Total share-based expense	$	5,356	$	2,237

As of December 31, 2021, total estimated compensation cost of stock options granted and outstanding but not yet vested was $3.0 million which is expected to be recognized over the weighted average period of 2.2 years. As of December 31, 2021, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $1.4 million which is expected to be recognized over the weighted average period of 2.0 years.