Note 7 - Stock-based Compensation

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

7. Share-based Compensation          

Service Vesting-Based Stock Options

The following is a summary of service vesting based stock option activity for the three months ended March 31, 2021, and the status of stock options outstanding at March 31, 2021:

	Three Months Ended
	March 31, 2021
	Shares			Wtd. Avg. Exercise Price
Outstanding at beginning of year		844,455		$	2.00
Exercised		(85,555	)		1.37
Forfeited		(1,146	)		5.69
Expired		(35,714	)		1.73
Outstanding at March 31, 2021		722,040		$	2.09
Stock options exercisable at March 31, 2021		716,936		$	2.07

We recognized stock compensation expense of $9,000 and $61,000 related to service vesting-based options during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was $24.5 million of aggregate intrinsic value of outstanding service vesting-based stock options, including $24.3 million of aggregate intrinsic value of exercisable service vesting-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2021. This amount will change based on the fair market value of the Company’s stock. During the quarters ended March 31, 2021 and 2020 intrinsic value of service vesting-based awards exercised was $3.3 million and $3.0 million, respectively. The weighted average remaining contractual life of service vesting-based options outstanding and exercisable at March 31, 2021 is 3.8 years. Total unrecognized compensation cost of service vesting-based stock options at March 31, 2021 of $16,000 is expected to be recognized over a weighted average period of 0.7 years.

Performance-based Stock Options

The following is a summary of performance-based stock option activity under our stock option plan for the three months ended March 31, 2021, and the status of performance-based stock options outstanding at March 31, 2021:

	Three Months Ended
	March 31, 2021
	Shares			Wtd. Avg. Exercise Price
Outstanding at beginning of year		686,001		$	1.64
Exercised		(77,310	)		1.64
Outstanding at March 31, 2021		608,691		$	1.64
Stock options exercisable at March 31, 2021		608,691			1.64

No stock compensation expense was recognized during the three months ended March 31, 2021 and 2020 related to performance-based options. As of March 31, 2021, there was $20.9 million of aggregate intrinsic value of outstanding and exercisable performance-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2021. This amount will change based on the fair market value of the Company’s stock. Intrinsic value of performance-based awards exercised during the three months ended March 31, 2021 was $2.9 million. The weighted average remaining contractual life of performance-based options outstanding and exercisable at March 31, 2021 is 0.7 years. All compensation cost of performance-based stock options outstanding at March 31, 2021 has been recognized.

There were no stock options granted to employees and non-employee directors in the three month periods ended March 31, 2021 and 2020.

Restricted Stock

Service vesting-based restricted stock

The following is a summary of service vesting-based restricted stock activity for the three months ended March 31, 2021, and the status of unvested service vesting-based restricted stock outstanding at March 31, 2021:

	Three Months Ended
	March 31, 2021
	Shares			Wtd. Avg. Grant Date Fair Value
Outstanding at beginning of year		930,854		$	19.31
Granted		52,616			41.98
Vested		(68,365	)		10.07
Forfeited		(4,941	)		23.94
Non-vested at March 31, 2021		910,164		$	21.29

The aggregate fair value of the service vesting-based awards granted during the three months ended March 31, 2021 and 2020 was $2.2 million and $1.7 million, respectively, which represents the market value of BioLife common stock on the date that the restricted stock awards were granted. The aggregate fair value of the service vesting-based restricted stock awards that vested was $2.6 million and $813,000 for the three months ended March 31, 2021 and 2020, respectively.

We recognized stock compensation expense of $1.4 million and $394,000 related to service vesting-based restricted stock awards for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was $17.0 million in unrecognized compensation costs related to service vesting-based restricted stock awards. We expect to recognize those costs over 3.2 years.

Performance-based restricted stock

We recognized stock compensation benefit of $186,000 for the three months ended March 31, 2021 related to 20,285 performance-based restricted stock awards that were awarded but did not vest. We recognized stock compensation expense of $189,000 for the three months ended March 31, 2020 related to performance-based restricted stock awards.

Market-based restricted stock

The following is a summary of market-based restricted stock option activity under our stock option plan for the three months ended March 31, 2021, and the status of market-based restricted stock options outstanding at March 31, 2021:

	Three Months Ended
	March 31, 2021
	Shares			Wtd. Avg. Grant Date Fair Value
Outstanding at beginning of year		224,774		$	19.20
Granted		146,250			32.14
Vested		(231,268	)		26.98
Non-vested at March 31, 2021		139,756		$	21.29

On February 25, 2019, the Company granted 94,247 shares and on April 1, 2019 granted 29,604 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on Total Shareholder Return (“TSR”). The TSR market condition measures the Company’s performance against a peer group. On February 8, 2021, the Company determined the TSR attainment was 200% of the targeted shares and 231,268 shares were granted and immediately vested to current executives of the Company based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined at the grant date using a Monte Carlo simulation with the following assumptions: a historical volatility of 69%, 0% dividend yield and a risk-free interest rate of 2.5%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $3.1 million was expensed on a straight-line basis over the grant date to the vesting date of December 31, 2020.

On March 25, 2020, the Company granted 109,140 shares of market-based stock to certain executives in the form of restricted stock. The shares granted contain a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2020 through December 31, 2021 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 78%, 0% dividend yield and a risk-free interest rate of 0.3%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award will be expensed on a straight-line basis over the grant date to the vesting date of December 31, 2021.

On February 8, 2021, the Company granted 30,616 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2021 through December 31, 2022 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 68%, 0% dividend yield and a risk-free interest rate of 0.1%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award will be expensed on a straight-line basis over the grant date to the vesting date of December 31, 2022.

We recognized stock compensation expense of $285,000 and $469,000 for the three months ended March 31, 2021 and 2020, respectively, related to market-based restricted stock awards. As of March 31, 2021, there was $2.0 million in unrecognized non-cash compensation costs related to market-based restricted stock awards expected to vest. We expect to recognize those costs over 1.5 years.

We recorded total stock compensation expense for the three months ended March 31, 2021 and 2020, as follows:

	Three Months Ended
	March 31,
(In thousands)	2021		2020
Research and development costs	$	183	$	174
Sales and marketing costs		184		229
General and administrative costs		979		577
Cost of revenue		159		133
Total	$	1,505	$	1,113