Stock Compensation

6 Months Ended

Jun. 30, 2022

Note 6 – Stock Compensation

The Company uses the fair value method of accounting for share-based compensation arrangements. The fair value of stock options is estimated at the date of grant using the Black-Scholes option valuation model. Stock-based compensation expense is reduced for estimated forfeitures and is amortized over the vesting period using the straight-line method.

The fair value of Restricted Stock Units, or RSU’s is established by the market price of the Company’s common stock at the date of grant and for time based grants, is amortized over the vesting period using the straight line method. Performance-based RSUs are typically granted such that they vest upon the achievement of EBITDA targets, during a specified performance period, subject to the satisfaction of certain time-based service criteria. Compensation expense from these awards is equal to the fair market value of the Company’s ordinary shares on the date of grant and is recognized over the remaining service period based on the probable outcome of achievement of the financial metrics used in the specific grant’s performance criteria. Management’s estimate of the number of shares expected to vest is based on the anticipated achievement of the specified non-market performance criteria, which are assessed at each reporting period.

The following table summarizes the allocation of non-cash stock-based compensation to our expense categories for the three and six months ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of revenues	$	30	$	3	$	58	$	3
Research and development		56		9		92		12
Selling, general and administrative		128		25		229		35
Total stock compensation expense	$	214	$	37	$	379	$	50

The following table summarizes the Company’s stock-based compensation expense by each award type:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Stock options	$	119	$	13	$	189	$	25
Restricted Share Units		95		24		190		25
Total stock compensation expense	$	214	$	37	$	379	$	50

At June 30, 2022, total unrecognized compensation costs related to stock options and RSUs was approximately $62 thousand and $0.9 million, respectively, net of estimated forfeitures. Total unrecognized compensation cost for stock options and RSUs will be adjusted for future changes in estimated forfeitures and is expected to be recognized over a weighted average period of approximately 0.9 years and approximately 2.1 years, respectively.

Stock Option Summary

The following key assumptions were used in the Black-Scholes option pricing model to determine the fair value of stock options granted:


	Six Months Ended
	June 30,
	2022				2021
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	1.77	-	2.48	%
Expected volatility	79.3	to	83.0	%	41.7	to	49.2	%
Expected term (in years)	5.0	to	5.5		3.5	to	4.0

The Company does not expect to pay dividends in the near future. Therefore, the Company used an expected dividend yield of 0%. The risk-free interest rate used in the Black-Scholes option pricing model is based on applicable yield available at the date of the option grant on U.S. Treasury securities with an equivalent term. Expected volatility is based on the weighted average historical volatility of the Company’s common stock for the equivalent term. The expected term of the options represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience and vesting schedules of similar awards.

A summary of the Company’s stock option activity for the six months ended June 30, 2022 presented in the following table (unaudited):



	Number of ‎Shares		Weighted ‎Average ‎Exercise ‎Price		Weighted Average Remaining Contractual Life (In Years)	Aggregate ‎Intrinsic ‎Value
Outstanding at December 31, 2021		3,712,867	$	1.81
Options granted		270,000		0.73
Options exercised		—		—
Options forfeited		(5,000)		0.40
Options cancelled or expired		(352,441)		3.59
Outstanding at June 30, 2022		3,625,426	$	1.56	3.66	$	144,835
Vested or expected to vest at June 30, 2022 ⁽¹⁾		3,622,861	$	1.56	3.65	$	144,835
Exercisable at June 30, 2022		3,489,426	$	1.59	3.42	$	144,835

(1)The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total unvested options.

The aggregate intrinsic value in the table above represents the difference between the exercise price of the underlying options and the quoted price of the Company’s common stock. The Company issues new shares of common stock upon exercise of stock options. There were no options were exercised in the three and six months ended June 30, 2022.

Restricted Stock Units (“RSU”) Summary

The following table summarized the activity in respect of RSUs issued under the Company for the six months ended June 30, 2022:


					Weighted Average Grant Date
	Number of Awards				Fair Value Per Share

	Service		Performance		Service		Performance
	based		based		based		based
RSU's outstanding at December 31, 2021		405,453		103,047	$	3.52	$	3.60
Granted		165,885		46,729		1.01		1.07
Vested and settled		(110,608)		—		3.60		—
Forfeited		(52,504)		(34,349)		3.60		3.60
RSU's outstanding at June 30, 2022		408,226		115,427	$	3.13	$	2.58