The condensed consolidated statements of operations include $0.3 million and $0.8 million of stock compensation expense for the three months ended March 31, 2023 and 2022, respectively. Stock compensation expense was lower during the three months ended March 31, 2023 compared to the same period in 2022 primarily because of revisions to forecasts for performance-based share awards under long-term incentive plans.

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


	Three Months Ended March 31,
	2023			2022
Service-based awards	$	361		$	320
Performance-based awards (short-term incentive plan)		115			81
Performance-based awards (long-term incentive plan)		(259	)		306
Employee stock purchase plan		61			67
Total	$	278		$	774

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


	Three Months Ended March 31,
	2023		2022
Cost of revenues	$	29	$	65
Research and development		58		136
Sales and marketing		43		197
General and administrative		148		376
Total	$	278	$	774

The following table presents a summary of the remaining unrecognized share-based compensation expense related to outstanding share-based awards as of March 31, 2023:


Award Type	Remaining Unrecognized Compensation Expense		Weighted Average Life (Years)
Service-based awards	$	1,409		1.4
Performance-based awards	$	1,407		1.9

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. During the first quarter 2023, the Company awarded executives long-term incentives comprised one-third of service-based restricted stock and two-thirds of performance-based restricted stock.

The following table summarizes service-based restricted stock activity for the three months ended March 31, 2023:


	Shares			Weighted Average Fair Value
Unvested Restricted Stock Awards - December 31, 2022		354,037		$	6.12
Shares awarded		80,393			4.55
Shares vested		(163,975	)		6.80
Shares cancelled		(267	)		8.70
Unvested Restricted Stock Awards - March 31, 2023		270,188		$	5.24

The intrinsic value of service-based restricted shares that vested was $0.8 million during the three months ended March 31, 2023 and 2022.

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 three months ended March 31, 2023:


	Shares			Weighted Average Fair Value
Unvested Restricted Stock Units - December 31, 2022		35,253		$	5.42
Units vested/Shares awarded		(9,152	)		5.40
Unvested Restricted Stock Units - March 31, 2023		26,101		$	5.45

The intrinsic value of service-based restricted stock units that vested and were issued as shares during the three months ended March 31, 2023 and 2022 was $40 and $16, respectively.

The Company may grant employees options to purchase the Company’s 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 typically over a period of not less than three years. 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 March 31, 2023 have a seven-year life. There was no activity related to stock options during the first quarter 2023.

The following table summarizes information about stock options outstanding under all stock option plans at March 31, 2023:


	Options Outstanding and Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Contractual Life (Years)		Intrinsic Value		Weighted- Average Exercise Price
$ 5.06 - $ 6.98		4,000		1.17	$	0	$	6.02

For outstanding stock options, the Company calculated the fair value of each 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 incentive awards to executives, key managers, and non-sales employees under the Company’s 2022 Short-Term Incentive Plan (“STIP”) based upon achievement of specifically identified corporate annual 2022 adjusted EBITDA and revenue goals. In the first quarter 2023 bonuses were paid 50% Company common stock for a total of $1.2 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, 2022		521,204		$	6.85
Awards granted		163,222			4.55
Awards vested		(53,345	)		8.70
Awards cancelled		(82,544	)		8.70
Unvested Performance Awards - March 31, 2023		548,537		$	5.70

The Company granted performance awards under its long-term incentive plan to executives in February 2023 (the “2023 LTIP”). The performance period for the 2023 LTIP is from January 1, 2023 through December 31, 2025. At target, the total fair market value of the award was $0.7 million based on the average share price of $4.55 on the grant date. On the award date, the aggregate number of shares that could be earned at target was 163,222 and the maximum number of aggregate shares that could be earned was 285,639.

Under the 2023 LTIP, and under similar plans from 2022 and 2021, 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.

During the first quarter 2023, the Company issued 53,345 shares with an intrinsic value of $0.2 million related to achievement under the 2020 LTIP.

The following table summarizes the active performance-based long-term incentive plans at March 31, 2023:


			Number of Shares
	Share Price		That Could Be Earned:
LTIP award	on Grant Date		Target		Maximum		Performance Period
2021 LTIP	$	8.23		153,697		268,970	January 1, 2021 through December 31, 2023
2022 LTIP	$	4.83		231,618		405,332	January 1, 2022 through December 31, 2024
2023 LTIP	$	4.55		163,222		285,639	January 1, 2023 through December 31, 2025
				548,537		959,941

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. Shares are issued in April and October each year under the ESPP.

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 option-pricing 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
	2023			2022
Dividend yield		5.2	%		4.7	%
Risk-free interest rate		4.6	%		1.7	%
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 common stock that vest one year after issuance. In addition, new directors receive a one-time grant that vests over three years. There was no activity related to director awards during the first quarter 2023. The outstanding shares vest in May 2023.

The number of unvested director awards was as follows at March 31, 2023:


	Shares		Weighted Average Fair Value
Outstanding - December 31, 2022		120,696	$	4.02
Shares awarded		0		0
Shares vested		0		0
Outstanding - March 31, 2023		120,696	$	4.02

For ease in administering the issuance of stock awards, the Company holds back shares of vested restricted stock awards, stock option exercises and short-term and long-term incentive plan stock awards for the value of the statutory withholding taxes. For everyone receiving a share award, the Company redeems the shares it computes as the value for the withholding tax and remits this amount to the appropriate tax authority. For withholding taxes related to stock awards, the Company paid $0.7 million and $0.4 million during the three months ended March 31, 2023 and 2022, respectively.