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Share-Based Payments

12 Months Ended

Dec. 31, 2021

10. Share-Based Payments

Employee Stock Option Plans

The Company’s share-based incentive plan offering stock options is primarily through 2007 Equity Incentive Plan (the “2007 Plan”). Under this plan, one new share is issued for each stock option exercised. The plan is described below.

The 2007 Plan was restated and approved by the shareholders on December 12, 2016. Provisions of the restated 2007 Plan include the granting of up to 2,000,000 incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. Options may be granted to employees, officers, non-employee directors and other service providers and may be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion.

All vesting schedules for options granted are based on 3 or 4-year vesting schedules, with either one-third or one-fourth vesting on the first anniversary and the remaining options vesting ratably over the remainder of the vesting term. Generally, directors and officers have 3-year vesting schedules and all other employees have 4-year vesting schedules. Additionally, in the event of a change in control or the occurrence of a corporate transaction, the Company’s Board of Directors has the authority to elect that all unvested options shall vest and become exercisable immediately prior to the event or closing of the transaction. As of December 31, 2021, the Company had 471,071 options with contractual lives of ten years and 360,000 options with contractual lives of 6 years.

As of December 31, 2021, there were 831,071 options outstanding under the 2007 Plan. As of December 31, 2021, the 2007 Plan had 633,783 authorized unissued options.

The Company uses judgment in determining the fair value of the share-based payments on the date of grant using an option-pricing model with assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the risk-free interest rate of the awards, the expected life of the awards, the expected volatility over the term of the awards, and the expected dividends of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of share-based payments granted under the guidelines of ASC Topic 718.

The Company granted 50,000 options during the year ended December 31, 2021. In applying the Black-Scholes methodology to the options granted during the year ended December 31, 2021, the Company used the following assumptions:

Risk free interest rate, average	0.84%
Expected option life, average	5 years
Expected price volatility, average	69.74%
Expected dividend yield	0%

The risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of the grant, based on the expected life of the stock option. The expected life of the stock option is determined using historical data.

The expected price volatility is determined using a weighted average of daily historical volatility of the Company’s stock price over the corresponding expected option life.

Under guidelines of ASC Topic 718, the Company recognizes the associated compensation cost for only those awards expected to vest on a straight-line basis over the underlying requisite service period. The Company estimated the forfeiture rates based on its historical experience and expectations about future forfeitures.

The following table shows the stock option activity:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
As of December 31, 2019		544,647		$	9.01		4.93	$	—
Granted		337,500			2.50
Expired and canceled		(38,701	)		4.81
Forfeited prior to vesting		—			—
Exercised		—			—
As of December 31, 2020		843,446		$	6.60		4.91	$	—
Granted		50,000			2.30
Expired and canceled		(34,875	)		6.70
Forfeited prior to vesting		(27,500	)		2.50
Exercised		—			—
As of December 31, 2021		831,071		$	6.47		4.10	$	—
Vested and Expected to Vest at December 31, 2020		843,446		$	6.60		4.91	$	—
Vested at December 31, 2020		505,946		$	9.33		4.21	$	—
Vested and Expected to Vest at December 31, 2021		831,071		$	6.47		4.10	$	—
Vested at December 31, 2021		555,237		$	8.46		3.64	$	—

The total pre-tax compensation cost related to stock options recognized during the years ended December 31, 2021 and 2020 was $131 and $58, respectively. Tax benefit from compensation cost related to stock options during the years ended December 31, 2021 and 2020 was $0. As of December 31, 2021, the total compensation cost related to stock options not yet recognized and before the effect of any forfeitures was $356, which is expected to be recognized over approximately the next 2.65 years on a straight-line basis.

Employee Stock Purchase Plan

During the years ended December 31, 2021 and 2020, the Company issued shares to employees under the Company’s 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP was approved by the Company’s shareholders on December 12, 2016. As of December 31, 2021, and December 31, 2020, 402,704 and 413,868, respectively of the originally approved 500,000 shares were available for offerings under the ESPP. Offering periods under the ESPP commence on each Jan 1 and July 1 and continue for a duration of six months. The ESPP is available to all employees who do not own, or are deemed to own, shares of stock making up an excess of 5% of the combined voting power of the Company, its parent or subsidiary.

During each offering period, each eligible employee may purchase shares under the ESPP after authorizing payroll deductions. Under the ESPP, each employee may purchase up to the lesser of 2500 shares or $25 of fair market value (based on the established purchase price) of the Company’s stock for each offering period. Unless the employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase common stock on the last business day of the period at a price equal to 85% (or a 15% discount) of the fair market value of the common stock on the first or last day of the offering period, whichever is lower.

Shares purchased and compensation expense associated with Employee Stock Purchase Plans were as follows:

	2021		2020
Shares purchased under ESPP plan		11,164		8,998
Plan compensation expense	$	5	$	5

Issuance of Common Stock and Warrants

On September 13, 2020, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the “Purchasers”), pursuant to which the Company issued and sold, in a registered direct offering 2,116,050 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at an offering price of $2.4925 per share, (the “Registered Offering”). The Company received gross proceeds of approximately $5,275 (4,764 net of issuance costs) in connection with the Registered Offering, before deducting placement agent fees and related offering expenses. In a concurrent private placement, the Company issued to the Purchasers who participated in the Registered Offering warrants exercisable for an aggregate of 1,058,025 shares of common stock at an exercise price of $2.43 per share. Each warrant became immediately exercisable and had an expiry term of five years from the issuance date.

On September 12, 2021, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company issued 3,623,189 shares of the Company's common stock, par value $0.001 per share at an offering price of $2.76 per share. The Company received gross proceeds of approximately $10,000 and net proceeds of $9,288 after deducting placement agent fees and related offering expenses. In a concurring private placement the Company also issued to the same purchasers warrants exercisable for an aggregate of 3,623,189 shares of common stock at an exercise price of $2.76 per share. Each warrant became immediately exercisable and will expire on March 15, 2027.