The condensed consolidated statements of operations include $1.1 million and $0.4 million of stock compensation expense for the three months ended September 30, 2022 and 2021, respectively. The condensed consolidated statements of operations include $3.0 million and $2.0 million of stock compensation expense for the nine months ended September 30, 2022 and 2021, respectively. The Company accounts for forfeitures as they occur.

The stock-based compensation expense by type is as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021
Service-based awards	$	447	$	341		$	1,150	$	1,435
Performance-based awards (short-term incentive plan)		346		(196	)		689		0
Performance-based awards (long-term incentive plan)		278		160			949		394
Employee stock purchase plan		76		67			219		200
Total	$	1,147	$	372		$	3,007	$	2,029

Total stock-based compensation is reflected in the condensed consolidated statements of operations as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenues	$	61	$	51	$	156	$	185
Research and development		163		102		472		384
Sales and marketing		241		73		694		458
General and administrative		682		146		1,685		1,002
Total	$	1,147	$	372	$	3,007	$	2,029

The following table presents a summary of the remaining unrecognized share-based compensation expense related to outstanding share-based awards as of September 30, 2022:


Award Type	Remaining Unrecognized Compensation Expense		Weighted Average Life (Years)
Service-based awards	$	1,946		1.3
Performance-based awards	$	2,161		1.7

The Company grants both service-based and performance-based stock awards to employees pursuant to the PCTEL, Inc. 2019 Stock Incentive Plan. When service-based restricted stock is granted, the Company records deferred stock compensation within additional paid-in capital, representing the fair value of the common stock on the date the restricted shares are granted. The Company records stock compensation expense on a straight-line basis over the vesting period of the applicable service-based restricted shares. For the annual awards granted to executives and key managers in the nine months ended September 30, 2022 and 2021, respectively, the Company awarded long-term incentives comprised of one-third service-based restricted stock and two-thirds performance-based restricted stock. The Company awarded service-based restricted stock to all other participating employees.

The following table summarizes service-based restricted stock activity for the nine months ended September 30, 2022:


	Shares			Weighted Average Fair Value
Unvested Restricted Stock Awards - December 31, 2021		326,336		$	7.76
Shares awarded		233,744			4.66
Shares vested		(166,473	)		7.30
Shares cancelled		(3,285	)		5.85
Unvested Restricted Stock Awards - September 30, 2022		390,322		$	6.12

The intrinsic value of service-based restricted shares that vested during the nine months ended September 30, 2022 and 2021 was $0.8 million and $2.2 million, respectively.

The Company grants service-based restricted stock units as employee incentives. Restricted stock units are primarily granted to foreign employees for long-term incentive purposes. Employee restricted stock units are service-based awards and are amortized over the vesting period. At the vesting date, these units are converted to shares of common stock. The Company records expense on a straight-line basis for restricted stock units.

The following table summarizes the restricted stock unit activity during the nine months ended September 30, 2022:


	Shares			Weighted Average Fair Value
Unvested Restricted Stock Units - December 31, 2021		21,437		$	7.23
Units awarded		26,667			4.40
Units vested/Shares awarded		(4,501	)		7.33
Units cancelled		(2,000	)		6.98
Unvested Restricted Stock Units - September 30, 2022		41,603		$	5.42

The intrinsic value of service-based restricted stock units that vested and were issued as shares during the nine months ended September 30, 2022 and 2021 was $21 and $42, respectively.

The Company may grant employees stock options to purchase common stock. The Company issues stock options with exercise prices no less than the fair value of the Company’s stock on the grant date. Employee stock options are subject to installment vesting. Stock options may be exercised at any time prior to their expiration date or within 180 days of termination of employment, or such shorter time as may be provided in the related stock option agreement. The stock options outstanding at September 30, 2022 have a seven-year life. There was no activity related to stock options during the third quarter of 2022.

The following table summarizes information about stock options outstanding under all stock option plans at September 30, 2022:


	Options Outstanding								Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Contractual Life (Years)		Intrinsic Value		Weighted Average Exercise Price		Number Exercisable		Weighted Average Contractual Life (Years)		Intrinsic Value		Weighted Average Exercise Price
$ 5.06 - $ 6.98		4,000		1.67	$	0	$	6.02		4,000		1.67	$	0	$	6.02

For outstanding employee stock options, the Company calculated the fair value of each stock option on the date of grant using the Black-Scholes option-pricing model. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the employee stock options. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life.

The dividend yield rate is calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate is based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The expected volatility is based on a five-year historical period of the Company’s stock price. The expected life for options granted is based on historical data of employee exercise performance. The Company records expense based on the graded vesting method.

The Company granted short-term inventive awards to executives, key managers, and non-sales employees under the Company’s 2022 Short-Term Incentive Plan (“STIP”) based on upon achievement of specifically identified corporate annual 2022 adjusted EBITDA and revenue goals. The 2022 STIP awards, like the 2021 STIP awards, will be paid 50% in cash and 50% in the Company’s stock. In the first quarter 2022, the Board of Directors exercised its discretion to approve bonus awards. The first quarter 2022 bonus was equal to those payable for achievement of the 2021 STIP adjusted EBITDA goal at the threshold level. No awards were received by 2021 STIP participants with respect to the revenue goal. These payments were made during the first quarter 2022, 50% in the Company’s common stock for a total of $0.3 million and 50% in cash for executives and key managers and 100% in cash for all other participants.

The Company grants performance-based awards to executives and key managers to encourage sustainable growth, consistent earnings, and management retention. Based on the fair value of the shares on the grant date, the Company records stock compensation expense over the performance period based on the estimated achievement of the award.

The following table summarizes the performance award activity:


	Awards at Target			Weighted Average Fair Value
Unvested Performance Awards - December 31, 2021		333,153		$	8.44
Awards granted		269,618			4.84
Awards cancelled		(18,800	)		8.01
Unvested Performance Awards - September 30, 2022		583,971		$	6.79

The Company granted performance awards under its long-term incentive plan to executives and key managers in February 2022 (“2022 LTIP”). The performance period for the 2022 LTIP is from January 1, 2022 through December 31, 2024. At target, the total fair market value of the award was $1.3 million based on the average share price of $4.84 on the grant date. On the award date, the aggregate number of shares that could be earned at target was 269,618 and the maximum number of aggregate shares that could be earned was 471,832.

Under the 2022 LTIP and similar plans from 2021 and 2020, shares of the Company’s stock can be earned based on achievement of a three-year revenue growth target with a penalty if a certain Adjusted EBITDA level is not maintained. If the Company achieves less than the target growth over the performance period, the participant will receive fewer shares than the target award, determined on a straight-line basis. If the Company achieves greater than the target growth, the participant will receive more shares than the target award on an accelerated basis. Participants are required to be in service at the determination date of the award following the end of the performance period in order to receive the award. Shares earned will be fully vested shares. The Company records stock compensation expense over the performance period based on the Company’s estimate of the aggregate number of shares that will be earned under the incentive plan.

The following table summarizes the active performance-based long-term incentive plans at September 30, 2022:


			Number of Shares
	Share Price		That Could Be Earned:
LTIP award	on Grant Date		Target		Maximum		Performance Period
2020 LTIP	$	8.70		135,889		237,806	January 1, 2020 through December 31, 2022
2021 LTIP	$	8.25		179,797		314,645	January 1, 2021 through December 31, 2023
2022 LTIP	$	4.84		268,285		469,499	January 1, 2022 through December 31, 2024
				583,971		1,021,950

The ESPP enables eligible employees to purchase common stock at the lower of 85% of the fair market value of the common stock on the first or last day of each offering period. Each offering period is approximately six months.

Based on the 15% discount and the fair value of the option feature of the ESPP, it is considered compensatory. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model.

The Company calculated the fair value of each employee stock purchase grant on the date of grant using the Black-Scholes option-pricing model using the following assumptions:


	Employee Stock Purchase Plan
	2022			2021
Dividend yield		4.7	%		3.1	%
Risk-free interest rate		1.7	%		0.1	%
Expected volatility		48	%		48	%
Expected life (in years)		0.5			0.5

The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate was based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The volatility was based on a five-year historical period of the Company’s stock price. The expected life was based on the offering period.

The Company grants equity awards to members of its Board of Directors as an annual retainer and for committee service. These awards are shares of the Company’s stock that vest one year after issuance. In addition, new directors receive a one-time grant that vests over three years. In May 2022, the Company issued 120,768 shares to directors for their annual retainer and committee services. In July 2022, in conjunction with the changes in the directors serving as Chairman of the Board and the Audit Committee Chair positions, an additional 4,033 shares were issued and 4,105 shares were cancelled. The fair value of the service-based restricted shares for directors that vested during the nine months ended September 30, 2022 was $47.

The following table summarizes the director awards activity:


	Shares			Weighted Average Fair Value
Outstanding - December 31, 2021		11,534		$	6.57
Shares awarded		124,801			4.02
Shares vested		(11,534	)		6.57
Shares cancelled		(4,105	)		4.02
Outstanding - September 30, 2022		120,696		$	4.02