Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.19.3.a.u2
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
The Company issues shares pursuant to the 2007 Stock Incentive Plan (the “2007 Plan”) which provides for the grant of stock incentive awards in the form of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units and other awards in stock to certain key employees, non-employee directors and service providers. The exercise price of stock options granted under the 2007 Plan is equal to the market value on the date of grant. As of December 31, 2019, there were 3,230,320 shares authorized under the 2007 Plan, of which 604,950 were available for future grant.
The Company recognized the following amounts related to the Company’s share-based payment arrangements (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Stock-based compensation cost charged against loss, before income tax benefit
 
 
 
 
 
Stock options
$
331

 
$
326

 
$
366

Restricted stock and restricted stock units
521

 
566

 
765

Performance stock units
5

 
190

 
59

Total stock-based compensation costs
$
857

 
$
1,082

 
$
1,190

Stock-based compensation cost included in:
 
 
 
 
 
Cost of revenues
$
26

 
$
34

 
$
39

Operating expenses
831

 
1,048

 
1,151

Total stock-based compensation costs
$
857

 
$
1,082

 
$
1,190


As of December 31, 2019, compensation expense of $578,000 related to non-vested option awards was not yet recognized and is expected to be recognized over a weighted-average period of 2.4 years. As of December 31, 2019, compensation expense of $468,000 related to non-vested shares and restricted share unit awards was not yet recognized and is expected to be recognized over a weighted-average period 2.2 years.
Stock Options
The fair value of each option award is estimated at the date of grant using the Black-Scholes option pricing model. The assumptions used to determine the fair value of stock option awards granted were as follows:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Expected life of options in years
4.70 - 4.75
 
4.54 - 4.75
 
4.75
Risk-free interest rate
1.8% - 2.5%
 
2.6% - 2.9%
 
1.7% - 2.0%
Expected volatility
69.7% - 73.6%
 
69.6% - 70.5%
 
64.2% - 66.2%
Expected dividend yield
—%
 
—%
 
—%

The Company reviews these assumptions at the time of each new option award and adjusts them as necessary to ensure proper option valuation. The expected life represents the period that the stock option awards are expected to be outstanding. The Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term, and therefore it uses the simplified method for determining the expected life of stock options granted to employees in 2019, 2018 and 2017, which bases the expected life calculation on the average of the vesting term and the contractual term of the awards. The risk-free interest rate is based on the yield of constant maturity U.S. treasury bonds with a remaining term equal to the expected life of the awards. The Company estimated the stock price volatility using weekly price observations over the most recent historical period equal to the expected life of the awards.
A summary of share option activity is presented in the table below (in thousands, except per share data):
(In thousands, except per share data)
Shares
 
Weighted Average Exercise Price
 
Weighted
Average
Remaining
Contractual Term
(in years)
 
Aggregate
Intrinsic Value(1)
Options outstanding at December 31, 2016
1,508

 
$
7.03

 
 
 
 

Granted
165

 
2.16

 
 
 
 

Exercised

 

 
 
 
 

Canceled
(385
)
 
7.81

 
 
 
 

Options outstanding at December 31, 2017
1,288

 
6.18

 
 
 
 
Granted
758

 
2.24

 
 
 
 
Exercised

 

 
 
 
 
Canceled
(604
)
 
7.60

 
 
 
 
Options outstanding at December 31, 2018
1,442

 
3.51

 
 
 
 
Granted
39

 
3.11

 
 
 
 

Exercised
(40
)
 
2.55

 
 
 
 

Canceled
(381
)
 
5.20

 
 
 
 

Options outstanding at December 31, 2019
1,060

 
2.93

 
4.6
 
$
275

Total vested and expected to vest as of December 31, 2019
1,060

 
2.93

 
4.6
 
$
275

Options exercisable as of:
 
 
 
 
 
 
 
December 31, 2017
838

 
$
7.85

 
 
 
 
December 31, 2018
572

 
5.29

 
 
 
 
December 31, 2019
540

 
3.51

 
3.9
 
$
92

________________________________________________________________
(1) 
Aggregate intrinsic value includes only those options with intrinsic value (options where the exercise price is below the market value).
Other information pertaining to options is as follows (in thousands, except per share data):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Fair value of options granted
$
71

 
$
982

 
$
193

Per share weighted average fair value of options granted
$
1.83

 
$
1.30

 
$
1.17

Total intrinsic value of stock options exercised
$
55

 
$

 
$


Restricted Stock and Restricted Stock Units
Restricted stock and restricted stock units are valued based on the market value of the Company’s shares on the date of grant, which was equal to the intrinsic value of the shares on that date. These awards vest and the restrictions lapse over varying periods from the date of grant. The Company recognizes compensation expense for the intrinsic value of the restricted awards ratably over the vesting period.
A summary of restricted stock and restricted stock units activity is presented in the table below (in thousands, except per share data):
 
Number of Shares
 
Weighted Average
Grant-Date Fair Value
Nonvested at December 31, 2016
190

 
$
7.13

Granted
213

 
2.44

Vested
(146
)
 
5.67

Canceled
(39
)
 
5.21

Nonvested at December 31, 2017
218

 
3.87

Granted
279

 
2.17

Vested
(186
)
 
3.66

Canceled
(3
)
 
14.78

Nonvested at December 31, 2018
308

 
2.38

Granted
230

 
3.16

Vested
(198
)
 
2.53

Canceled
(31
)
 
2.25

Nonvested at December 31, 2019
309

 
$
2.87


Other information pertaining to restricted stock and restricted stock units is as follows (in thousands, except per share data):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Per share weighted average grant-date fair value of restricted stock and restricted stock units granted
$
3.16

 
$
2.17

 
$
2.44

Total fair value of restricted stock and restricted stock units vested
$
749

 
$
377

 
$
392


Performance Stock Units
The Company granted performance stock units during 2018 ("2018 Performance Stock Units") and 2017 ("2017 Performance Stock Units"). In settlement of the performance stock units, the Company issues a number of shares equal to the number of performance stock units issued multiplied by the total percentage achievement of the performance goals for each award. The percentage achievement for the performance stock units may not exceed 100%.
A summary of performance stock units activity is presented in the table below (in thousands):
 
Number of Units
 
2018 Performance Stock Units
 
2017 Performance Stock Units
 
Total Performance Stock Units
Nonvested at December 31, 2016

 

 

Granted

 
166

 
166

Vested

 

 

Canceled

 
(26
)
 
(26
)
Nonvested at December 31, 2017

 
140

 
140

Granted
169

 

 
169

Vested

 
(116
)
 
(116
)
Canceled
(21
)
 
(24
)
 
(45
)
Nonvested at December 31, 2018
148

 

 
148

Granted

 

 

Vested
(98
)
 

 
(98
)
Canceled
(9
)
 

 
(9
)
Nonvested at December 31, 2019
41

 

 
41


In settlement of the vested 2018 Performance Stock Units, during 2019 the Company issued 98,492 shares of restricted stock, which was equal to the number of vested 2018 Performance Stock Units multiplied by the performance goals achievement of 100.0%. At December 31, 2019, there were 40,599 shares of common stock underlying the outstanding 2018 Performance Stock Units that subject to vesting upon the achievement of performance goals for the performance period of January 1, 2019 to December 31, 2019. The 2018 Performance Stock Units were canceled on February 10, 2020 upon determination by the Compensation Committee of the Company's Board of Directors that the performance metric for the 2019 performance period was not achieved.
The 2017 Performance Stock Units consisted of 140,493 units outstanding as of December 31, 2017, of which 116,168 vested during 2018. In settlement of the vested 2017 Performance Stock Units, during 2018 the Company issued 25,726 shares upon vesting, which was equal to the number of 2017 Performance Stock Units vested multiplied by the weighted percentage achievement of the performance goals for the 2017 Incentive Plan of approximately 22.1%. With the vesting and settlement of the 2017 Performance Stock Units in shares, the 2017 Performance Stock Units terminated.