Note 8 - Stock Plans

6 Months Ended

Jun. 30, 2020

Shareholders' Equity and Share-based Payments [Text Block]

8.	Stock Plans

The Company has previously granted RSUs underlying

401,111

shares of Class A common stock as of

December 31, 2018.

These RSUs (or a portion thereof) vest with respect to each recipient over a

one

five

year period from the date of grant, provided the recipient remains in the employment or service of the Company as of the vesting date and, in selected instances, certain performance criteria are attained. Additionally, these RSUs (or a portion thereof) could vest earlier in the event of a change in control of the Company, or upon involuntary termination without cause. Of the

401,111

previously granted RSUs, RSUs underlying

334,799

shares of Class A common stock have vested or were cancelled as of

December 31, 2018.

The previous RSU grants were made primarily to executive-level personnel at the Company and, as a result,

compensation costs have been capitalized. There were

RSUs granted by the Company during

2019.

During the

six

months ended

June 30, 2020,

14,500

RSUs were granted by the Company to

fourteen

management level employees.

The following table summarizes RSU activity for the

six

months ended

June 30, 2019:

				Weighted Average
				Grant Date
	RSUs			Fair Value

Outstanding at December 31, 2018		66,312		$	9.06
Granted		-			-
Vested		(34,202	)		5.09
Forfeited or cancelled		(11,817	)		13.30
Outstanding at June 30, 2019		20,293			13.30

The following table summarizes RSU activity for the

six

months ended

June 30, 2020:

				Weighted Average
				Grant Date
	RSUs			Fair Value

Outstanding at December 31, 2019		17,648		$	13.30
Granted		14,500			9.22
Vested		(12,920	)		13.30
Forfeited or cancelled		-			-
Outstanding at June 30, 2020		19,228			10.22

Stock-based compensation expense related to RSUs was

$33

thousand and

$71

thousand for the

six

months ended

June 30, 2020,

and

2019,

respectively. Stock-based compensation related to RSUs is recognized over the

-month vesting schedule. Accounting standards require that the Company estimate forfeitures for RSUs and reduce compensation expense accordingly. The Company has reduced its expense by the assumed forfeiture rate and will evaluate actual experience against the assumed forfeiture rate going forward. The forfeiture rate has been developed using historical performance metrics which could impact the size of the final issuance of Class A common stock.

As of

June 30, 2020,

and

2019,

the unrecognized total compensation cost related to unvested RSUs was

$149

thousand and

$145

thousand, respectively. That cost is expected to be recognized by the end of

2024.

October 15, 2018,

the Company granted

29,460

incentive stock options (“ISOs”) and

20,540

non-qualified (“NQ”) stock options to purchase shares of Class A common stock. These options vest with respect to the recipient thereof over a

five

-year period with

20%

becoming exercisable on each anniversary of the vesting commencement date of

October 15, 2019,

provided the recipient remains in the employment or service of the Company as of the vesting date. Additionally, these options (or a portion thereof) could vest earlier in the event of a change in control of the Company. These option grants were made to

one

executive-level employee of the Company and, as a result,

compensation costs have been capitalized.

The following table summarizes ISO and NQ stock option activity for the

six

months ended

June 30, 2019:

			Weighted Average
	ISOs and NQ		Grant Date
	Stock Options		Fair Value

Outstanding at December 31, 2018		50,000	$	16.97
Granted		-		-
Vested		-		-
Forfeited or cancelled		-		-
Outstanding at June 30, 2019		50,000		16.97

January 2, 2020,

the Company granted

34,500

ISOs and

30,000

NQ stock options to purchase shares of Class A common stock. These options vest with respect to the recipients thereof over a

five

-year period with

20%

becoming exercisable on each anniversary of the vesting commencement date of

January 1, 2021,

one

executive-level employee and

fourteen

management-level employees of the Company and, as a result,

compensation costs have been capitalized.

The following table summarizes ISO and NQ stock option activity for the

six

months ended

June 30, 2020:

			Weighted Average
	ISOs and NQ		Grant Date
	Stock Options		Fair Value

Outstanding at December 31, 2019		40,000	$	16.97
Granted		64,500		9.22
Vested		-		-
Forfeited or cancelled		-		-
Outstanding at June 30, 2020		104,500		12.19

Stock-based compensation expense related to ISOs and NQ stock options was

$71

thousand and

$43

thousand for the

six

months ended

June 30, 2020,

and

2019,

respectively.

As of

June 30, 2020,

and

2019,

the unrecognized total compensation cost related to unvested ISOs and NQ stock options was

$539

thousand and

$372

thousand, respectively. That cost is expected to be recognized by the end of

2024.

OTELCO INC. 10-Q