Note 5 - Stock-based Compensation |
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Share-Based Payment Arrangement [Text Block] |
(5) Stock-Based Compensation
Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include stock options, restricted stock awards, restricted stock units, and performance restricted stock units.
Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.
Determining Fair Value
Stock Options
The Company estimates the fair value of stock options on the date of grant (measurement date) using the Black-Scholes option pricing model. The Company recognizes the fair value of stock option awards on a straight-line basis over the vesting period of the award.
No stock options were granted during the year ended December 31, 2023. There were 1 stock options granted during the year ended December 31, 2022 as replacement equity awards for vested stock options held by EVRYTHNG employees.
Restricted Stock Awards
The fair value of restricted stock awards (“RSA”) that vest upon meeting a service condition is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally to years for employee grants and to years for director grants.
Restricted Stock Units
The fair value of restricted stock unit (“RSU”) awards that vest upon meeting a service condition is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally to years for employee grants.
Performance Restricted Stock Units
The fair value of performance restricted stock unit (“PRSU”) awards that vest upon meeting a service condition and a performance condition, such as the Company exceeding a future annual recurring revenue target, is determined based on the probability of achievement of the performance criteria as of each reporting date (measurement date). The probability of achievement is subject to judgment, and could change from period to period, impacting the amount of expense to be recognized. The Company recognizes the fair value of the award, after adjusting for any changes in the probability of achievement, on a straight-line basis over the service period of the award, which is generally years for employee grants.
The fair value of performance restricted stock units awards that vest upon meeting a service condition and a market condition, such as the Company exceeding shareholder returns as compared to an index of peer companies, is determined on the date of grant (measurement date) using the Monte Carlo valuation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally years for employee grants.
The following inputs are used in the Monte Carlo Simulation model to estimate the fair value:
Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.
Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.
Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the term of the award.
Monte Carlo Simulation Inputs:
Stock-based Compensation
The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under the Company’s equity compensation plans:
Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.
The Company expects to recognize the total unrecognized compensation costs as of December 31, 2023 for all non-vested stock-based awards over weighted average periods through December 31, 2027 as follows:
As of December 31, 2023, under the Company’s stock-based compensation plan, an additional 1,447 shares remained available for future grants. Of this total, 137 shares require re-registration with the SEC. The Company issues new shares upon exercises of stock options, grants of restricted stock awards and vesting of restricted stock units and performance restricted stock units awards.
Stock Option Activity
The following tables present the outstanding stock option activity:
The aggregate intrinsic value is based on the closing price of $36.12 per share of Digimarc common stock on December 31, 2023, which would have been received by the optionees had all of the options with exercise prices less than $36.12 per share been exercised on that date.
The following table summarizes information about stock option awards outstanding December 31, 2023:
Restricted Stock Awards Activity
The following table reconciles the unvested balance of RSAs:
The fair value of RSAs vested is as follows:
Restricted Stock Units Activity
The following table reconciles the unvested balance of RSU awards:
The fair value of RSU awards vested is as follows:
Performance Restricted Stock Units Activity
The following table reconciles the unvested balance of PRSU awards:
The fair value of PRSU awards vested is as follows:
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