Share-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Compensation [Abstract]

Share-Based Compensation

13. Share-Based Compensation

The American Virtual Cloud Technologies, Inc. 2020 Equity Incentive Plan (the “Plan”) provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and other share-based awards. Stock options, if issued, have a maximum term of ten years from the grant date.

As of December 31, 2021, 666,666 shares had been authorized for issuance under the Plan, of which 328,997 shares remained available for issuance. The RSUs were issued to certain directors, employees and, in one case, a contractor, and can only be settled in shares. RSUs awarded to directors are time-based. RSUs issued to nondirectors are 50% time-based and 50% performance-based. Twenty-five percent or, in some cases, one-third, of the time-based awards vests on each grant date anniversary, while 25% or, in some cases, one-third of the performance-based awards vests on December 31^st of each year, if the market condition (stock price target) is met. If the market condition attached to the performance-based awards is not met in any year, the eligibility is delayed until the market condition is met, except that the market condition must be met by the third anniversary or, in some cases, the second anniversary of the first target date.

The fair values of time-based awards are estimated by reference to the Company’s stock price and stock marketability on the grant date, while the fair values of the performance-based awards are determined using the Monte Carlo simulation model, once the stock price target is set. Weighted average assumptions used in estimating the performance-based awards were as follows:

	Year Ended
	December 31, 2022			December 31, 2021
Stock price volatility		72	%		68	%
Expected life of awards (in years)		0.90			0.91
Risk-free interest rate		0.80	%		0.09	%

Performance targets are generally set annually for the performance-based awards that are scheduled to vest in that year.

The following summarizes RSU activity for the years ended December 31, 2022 and 2021:

				Weighted Average
	Number of			Grant Date
	RSUs			Fair Value
Outstanding at January 1, 2021		156,333		$	49.35
Granted		160,417		$	83.70
Vested and delivered		(44,583	)	$	52.05
Vested, not delivered		(26,333	)	$	54.60
Forfeited		(66,279	)	$	72.75
Outstanding at December 31, 2021		179,555		$	67.80
Granted		201,264		$	18.00
Vested and delivered		(74,152	)	$	57.90
Vested, not delivered		(6,666	)	$	51.30
Forfeited		(99,556	)	$	33.60
Cancelled		(66,666	)	$	32.10
Unvested RSUs at December 31, 2022		133,779		$	40.78

Vested but not delivered RSUs represent RSUs that vested but for which delivery was deferred. Awards outstanding in the table above exclude 37,027 performance-based RSUs that have been awarded but deemed not granted as the performance targets have not yet been determined. The Company’s policy is to determine the fair value of performance-based awards and begin recognizing compensation expense for such awards when the targets are set. For performance-based awards, compensation cost is recognized over the shorter of the performance or service period. For time-based awards, compensation expense is recognized over the vesting period, based on the grant date fair value. Share-based compensation expense recognized consisted of the following:

	Year Ended
	December 31, 2022		December 31, 2021
Cost of revenue	$	185	$	370
Research and development		355		1,007
Selling, general and administrative expenses		1,223		7,252
	$	1,763	$	8,629

The fair value of awards that vested and were delivered during the years ended December 31, 2022 and 2021, based on the stock prices on the vesting dates, was $1,018 and $3,521, respectively. Total compensation cost not yet recognized, related to unvested awards, as of December 31, 2022 was $1,358.