Stock Incentive Plan |
15.Stock Incentive Plan The Company’s stock-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of its stockholders. Stock options have been granted to employees under the stockholder-approved 2007 Key Person Stock Option Plan (“2007 Plan”) and stock options and restricted stock have been granted to employees under the stockholder-approved 2014 Stock Incentive Plan (“2014 Plan”). Stockholder approval of the 2014 Plan became effective in September 2014. The 2014 Plan originally provided that the aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2014 Plan may not exceed 450,000 shares (the “Share Reserve”), however in October 2015, the stockholders approved a 1,500,000 increase to the Share Reserve. In addition, the Share Reserve automatically increases on January 1st of each year, for a period of not more than 10 years, beginning on January 1st of the year following the year in which the 2014 Plan became effective and ending on (and including) January 1, 2024, in an amount equal to 4% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Company’s board of directors may act prior to January 1st of a given year to provide that there will be no January 1st increase in the Share Reserve for such year or that the increase in the Share Reserve for such year will be a lesser number of shares of common stock than would otherwise occur. On January 1, 2023, the Share Reserve increased by 267,685. The Share Reserve is currently 3,582,888 shares as of September 30, 2023. In light of stockholder approval of the 2014 Plan, the Company no longer grants equity awards under the 2007 Plan. As of September 30, 2023, there were no shares available for future stock-based compensation grants under the 2007 Plan and 1,707,281 shares of an aggregate total of 3,582,888 shares were available for future stock-based compensation grants under the 2014 Plan. Treasury Stock Acquired- Related Party Transaction On March 14, 2022, the Company’s board of directors authorized a share repurchase program under which it may repurchase up to $20.0 million of its outstanding common stock. Under this program the Company may purchase shares on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans or through the use of other techniques such as accelerated share repurchases. The timing and amount of any transactions will be subject to the discretion of the Company based upon market conditions and other opportunities that it may have for the use or investment of its cash balances. The repurchase program has no expiration date, does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. Since the inception of the program, the Company purchased 148,500 shares at a cost of approximately $4,991 as of September 30, 2023. On May 17, 2023, the Company acquired outstanding warrants to acquire 76,875 shares of its common stock from its chief executive officer at a cost of $1,949. The warrants were originally issued on June 7, 2012 (16,875 shares) with an exercise price of $4.00 per share and on July 31, 2013 (60,000 shares), with an exercise price of $4.50 per share, were amended in September 2015 and, as amended, had an expiration date of July 31, 2023. The $1,949 aggregate cash purchase price reflects the difference between the aggregate exercise price of the warrants and the aggregate fair market value of the shares of common stock underlying the warrants, based on the closing price of a share of the Company’s common stock on May 16, 2023, the date of the warrant repurchase agreement. Following the warrant repurchase, the warrants were cancelled and are no longer issued and outstanding. Stock Awards The Company granted fully vested stock awards of 23,868 shares of common stock to a non-employee member of the board of directors and employees as compensation during the nine months ended September 30, 2023. Net shares issued after deducting taxes paid on these grants were 15,229. Fair value of these stock awards on grant date was $846. The Company granted fully vested stock awards of 10,482 shares of common stock to the non-employee members of the board of directors, employees and one non-employee as compensation during the nine months ended September 30, 2022. Net shares issued after deducting taxes paid on these grants were 8,772. Fair value of these stock awards on grant date was $698. Stock Options Aggregate intrinsic value represents the difference between the closing market value as of September 30, 2023 of the underlying common stock and the exercise price of outstanding, in-the-money options. A summary of the Company’s stock option activity and related information for the three months ended September 30, 2023 is as follows: | | | | | | | | | | | | | Options Outstanding | | | | | | | | Weighted | | | | | | | | | | | Average | | | | | | Number of | | Weighted | | Remaining | | Aggregate | | | Stock Options | | Average | | Contractual | | Intrinsic Value | | | Outstanding | | Exercise Price | | Term (In Years) | | (In Thousands) | Balance, December 31, 2022 | | 1,287,847 | | $ | 3.44 | | 3.03 | | $ | 38,053 | Options exercised | | (19,781) | | | 3.11 | | — | | | — | Options granted | | 17,950 | | | 25.52 | | 9.84 | | | — | Options cancelled | | (450) | | | — | | — | | | — | Balance, September 30, 2023 | | 1,285,566 | | $ | 3.75 | | 2.39 | | $ | 27,825 | Exercisable as of September 30, 2023 | | 1,264,806 | | $ | 3.38 | | 2.27 | | $ | 27,825 |
As of September 30, 2023, the fair value of unvested stock options was approximately $389. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 3.78 years. During the three and nine months period ended September 30, 2023, the Company awarded stock options of 17,500 to employees as compensation pursuant to the 2014 Plan. During the three and nine months period ended September 30, 2022 , the Company awarded 5,000 options to an employee as compensation pursuant to the 2014 Plan. Of these options, 1/4th are vested one year after the grant date and 1/48th for each month thereafter contingent upon the participant’s continued service beginning on the initial vesting date and ending when the Vested Ratio equals 1/1. The fair value of each option grant is estimated using the Black-Scholes option pricing model. The weighted-average assumptions used, and the calculated weigheted average fair values of options are as follows: | | | | | | | | September 30, | | September 30, | | | | 2023 | | 2022 | | Expected term (in years) | | 7 | | 7 | | Risk-free interest rate | | 4.14-4.41 | | 2.88 | | Expected volatility | | 69.0%-79.5% | | 78.6% | | Expected dividend rate | | 0 | | 0 | | Fair value of options granted | | $17.54-$19.04 | | $22.27 | |
The expected term represents an estimate of the period of time options are expected to remain outstanding. The risk-free interest rate is based on the term structure of interest rates at the time of the option grant. Expected volatilities are based on the historical returns on the Company’s stock. The expected dividend yield is based on the recent historical dividend yield. The following table represents the stock based compensation for the three and nine months ended September 30, 2023 and 2022: | | | | | | | | | | | | | | | | Three months ended September 30, | | Nine months ended September 30 | | | | 2023 | | 2022 | | 2023 | | 2022 | | Cost of Revenues | | $ | 4 | | $ | — | | $ | 4 | | $ | — | | Engineering and Product Development | | | 6 | | | — | | | 51 | | | 45 | | Sales and Marketing | | | 3 | | | — | | | 301 | | | 172 | | General and Administrative | | | 34 | | | 32 | | | 551 | | | 491 | | Total | | $ | 47 | | $ | 32 | | $ | 907 | | $ | 708 | |
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