Note 6 - Shareholders' Equity

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

Note 6 - Shareholders' Equity

We recorded non-cash stock compensation expense in each period as follows:

	Year ended December 31,
	2021		2020
Stock options	$	618	$	838
Restricted stock		53		105
Total	$	671	$	943

We have various stock-based employee compensation plans, for which compensation cost is recognized in the financial statements. The cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).

Our shareholders have approved various equity-based plans that permit the grant of stock options, restricted stock and other equity-based awards. In addition, our shareholders have approved the grant of stock options outside of these plans.

In June 2004, our shareholders adopted the 2004 Long-Term Incentive Plan (“2004 LTIP”) pursuant to which we were authorized to issue up to 750,000 shares of common stock and grant stock options, restricted stock awards, stock appreciation rights and other stock-based awards. Through shareholder approved amendments to the LTIP in 2006, 2008, 2011, and 2013, the total number of shares authorized under the 2004 LTIP was increased to 2,900,000.

In June 2014, our shareholders approved the 2014 Long-Term Incentive Plan (“2014 LTIP”) as the successor plan to the 2004 LTIP that expired on June 10, 2014. Under the 2014 LTIP, a total of 1,750,000 shares of common stock were made available for grant of awards. In July 2021, our shareholders approved an amendment to the 2014 LTIP to increase the total number shares of our common stock authorized to be issued pursuant to the 2014 LTIP to 2,750,000. Of the total number of shares of common stock available for awards under the 2014 LTIP, no more than 800,000 shares of common stock may be used for awards other than stock options and stock appreciation rights.  Grants under the 2014 LTIP may be awarded through June 2, 2024.

Stock options granted under the LTIPs are either Incentive Stock Options (“ISOs”) or Non-Qualified Stock Options (“NQSOs”). Key employees are eligible to receive ISOs and NQSOs; however, directors and consultants are eligible to receive only NQSOs. Stock options vest over a three-year period and expire on the seventh anniversary of the grant date. As of December 31, 2021, there were 1,306,824 stock options outstanding under the 2014 LTIP. There were no stock options outstanding under the 2004 LTIP.

As of December 31, 2021, there was $850 of total unrecognized compensation costs related to outstanding stock options, which we expect to recognize over a weighted average period of 1.4 years.

We use the Black-Scholes option-pricing model to estimate fair value of stock-based awards. The following weighted average assumptions were used to value options granted during the years ended December 31, 2021 and 2020:

	Year ended December 31,
	2021			2020
Risk-free interest rate		1.0	%		0.4	%
Volatility factor		50	%		49	%
Weighted average expected life (years)		4.8			5.3
Forfeiture rate		10.0	%		10.0	%
Dividends		0.0	%		0.0	%

We used a Monte Carlo simulation option-pricing model to estimate the fair value of market performance stock-based awards, of which there were no new awards for the years ended December 31, 2021 and 2020.

We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. Forfeiture rates are calculated by dividing unvested shares forfeited by beginning shares outstanding. The pre-vesting forfeiture rate is calculated yearly and is determined using a historical twelve-quarter rolling average of the forfeiture rates.

The following tables summarize data for the stock options issued by us:

Year ended December 31, 2021
	Number of shares			Weighted average exercise price per share		Weighted average remaining contractual term		Aggregate intrinsic value
Shares under option – January 1		1,217,163		$	6.50
Options granted		340,500			6.78
Options exercised		(204,429	)		4.39
Options forfeited or expired		(46,410	)		7.44
Shares under option – December 31		1,306,824		$	6.87		4.22	$	504
Vested and expected to vest - December 31		1,189,175		$	6.86		4.05	$	492
Options exercisable – December 31		745,288		$	6.85		2.80	$	439

Year ended December 31, 2020
	Number of shares			Weighted average exercise price per share
Shares under option – January 1		1,541,792		$	6.88
Options granted		256,000			6.51
Options exercised		(355,797	)		6.08
Options forfeited or expired		(224,832	)		9.76
Shares under option – December 31		1,217,163		$	6.50
Options exercisable – December 31		738,452		$	5.82

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

			Option outstanding						Options exercisable
Range of exercise prices			Number of outstanding options		Weighted- average remaining contractual life		Weighted- average exercise price		Number of options exercisable		Weighted- average exercise price
$3.71	-	$5.31		325,579		2.68	$	4.58		240,579	$	4.34
$5.71	-	$6.51		321,411		4.36		6.28		166,602		6.07
$6.69	-	$7.16		205,750		6.45		6.97		11,667		7.09
$8.25	-	$9.96		454,084		4.22		8.88		326,440		9.08
$3.71	-	$9.96		1,306,824		4.22	$	6.87		745,288	$	6.85

The weighted average fair value of options granted during the years ended December 31, 2021 and 2020 was $2.90 and $2.78, respectively. The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the years ended December 31, 2021 and 2020 was $738 and $427, respectively.

Cash received from stock option exercises under our stock-based compensation plans for the years ended December 31, 2021 and 2020 was $398 and $238, respectively.

Restricted shares vest in equal annual installments over three years. As of December 31, 2021, there was $17 of total unrecognized compensation costs related to outstanding restricted shares, which we expect to recognize over a weighted average period of 1.2 years

There were 941,986 shares of common stock available for future issuance under equity compensation plans as of December 31, 2021.