NOTE 12: STOCK BASED COMPENSATION

The Company has a shareholder approved long-term incentive plan (the "LTIP") to assist the Company and its affiliates in attracting, motivating and retaining selected individuals to serve as employees, directors, consultants and advisors of the Company and its affiliates by providing incentives to such individuals through the ownership and performance of the Company's common stock. There are 1.1 million shares of common stock authorized for issuance under the LTIP. Shares available for grant under the LTIP may be either authorized, but unissued shares or shares that have been reacquired by the Company and designated as treasury shares. As of December 31, 2014 and December 31, 2013, 420,392 and 57,923 shares, respectively, of the Company's common stock were available for grant under the LTIP. The LTIP permits the issuance by the Company of awards in the form of stock options, stock appreciation rights, restricted stock and restricted stock units and performance shares. The exercise price per share of the Company's common stock purchasable under any stock option or stock appreciation right may not be less than 100% of the fair market value of one share of common stock on the date of grant. The term of any stock option or stock appreciation right may not exceed ten years. The LTIP also provides plan participants with a cashless mechanism to exercise their stock options. Issued restricted stock, stock options and restricted stock units are subject to vesting restrictions.

Restricted Stock Awards

The following table summarizes the restricted stock granted to certain eligible participants for the years ended December 31, 2014, and 2013:


Restricted stock granted		2014		2013
Shares		22,508		420,824
Grant date weighted average fair value per share	$	8.40	$	10.19

Stock-based compensation expense for restricted stock awards of $0.8 million and $1.4 million was recorded for the years ended December 31, 2014 and 2013, respectively. The Company records stock-based compensation for grants of restricted stock awards on a straight-line basis over their respective vesting periods of two or three years. The Company has determined expected forfeitures based on recent activity and is recognizing compensation expense only for those restricted common shares expected to vest.

The following table summarizes the restricted common stock activity during the year ended December 31, 2014:


	December 31, 2014
				Weighted
				Average Fair
	Shares			Value

Balance - nonvested at January 1, 2014	409,889		$	10.33
Granted	22,508			8.40
Vested	(140,476	)		10.36
Forfeited	(167,343	)		10.41
Balance - nonvested at December 31, 2014	124,578		$	9.84

The total fair value of the restricted shares vested for the years ended December 31, 2014 and 2013 were $1.5 million and $0.5 million, respectively.

Stock Options

The following tables summarize stock option activity for the year ended December 31, 2014, along with options exercisable at the end of the year:


	For the Year Ended
	December 31, 2014
					Weighted
					Average
				Weighted	Remaining
				Average	Contractual
	Shares			Exercise Price	Life (Years)

Outstanding - Beginning of period	499,542		$	11.78
Forfeited or expired	(172,539	)		11.03
Outstanding - End of period	327,003		$	12.18	6.54

Vested and Expected to Vest at December 31, 2014	310,653
Exercisable at December 31, 2014	229,480

Stock-based compensation expense for stock option awards was de minimis and $0.1 million for the years ended December 31, 2014 and 2013, respectively. The Company records stock-based compensation for grants of stock options awards on a straight-line basis over their respective vesting periods of three years. The Company has determined expected forfeitures based on recent activity and is recognizing compensation expense only for those stock option awards expected to vest. The total fair value of the stock options vested for both years ended December 31, 2014 and 2013 were $1.7 million.

The following table summarizes information about fixed price stock options outstanding at December 31, 2014:


					Weighted Average
				Weighted	Remaining	Aggregate
		Shares		Average	Contractual	Intrinsic
	Exercise Price per Share	Outstanding		Exercise Price	Life (Years)	Value

	December 31, 2014
$	9.90- 10.80	167,425	$	10.02	6.93
$	12.88- 12.97	20,400	$	12.89	4.75
$	14.38- 14.85	139,178	$	14.67	6.33
		327,003	$	12.18	6.54	$	-

	Vested and expected to vest at December 31, 2014	310,653	$	12.18	6.54	$	-
	Exercisable at December 31, 2014	229,480	$	13.03	6.09	$	-

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on December 31, 2014, and the exercise price times the number of shares) that would have been received by the option holders had all the option holders exercised in-the-money stock options on December 31, 2014. This amount will change based on the fair market value of the Company's common stock. No options were exercised for the years ended December 31, 2014 and 2013.

The fair value of the above stock-based awards was estimated using the Black-Scholes model. No options were granted in the year ended December 31, 2014. The following weighted-average assumptions were used for the year ended December 31, 2013:


		For the Year Ended
		December 31, 2013
Expected life (in years)		6
Interest rate		0.97	%
Volatility		27.89	%
Dividend yield		10.78	%
Weighted-average fair value per share at grant date	$	0.50

The following table presents the total stock-based compensation expense resulting from stock options and restricted stock granted to employees that are included in the Company's consolidated statements of operations for the years ended December 31, 2014 and 2013.


		For the Years Ended December 31,
($ in thousands)		2014		2013
Cost of services and products	$	-	$	6
Selling, general and administrative expense		767		1,451
	$	767	$	1,457

As of December 31, 2014, $0.7 million of total unrecognized compensation expense related to stock options and restricted stock is expected to be recognized over a weighted average period of approximately 1.74 years.

Shareholder Rights Plan

On September 2, 2014, in connection with an unsolicited, non-binding acquisition proposal, the Company's Board of Directors (the "Alteva Board") adopted a Stockholder Rights Plan that provides for the distribution of one right for each share of common stock outstanding. Each right entitles the holder to purchase one one-thousandth (1/1000^th) of a share of Series A Junior Participating Preferred Stock, par value of $0.01 per share, of the Company (the "Preferred Stock") at a price of $22.20 per one-thousandth of a share of Preferred Stock, subject to adjustment. The rights generally become distributed and exercisable at the discretion of the Alteva Board following a public announcement that 20% or more of the Company's common stock has been acquired or an intent to acquire has become apparent. The rights will expire on September 1, 2015, unless the final expiration date is advanced or extended or unless the rights are earlier redeemed or exchanged by the Company. Further description and terms of the rights are set forth in the Rights Agreement between the Company and American Stock Transfer & Trust Company, LLC. As of December 31, 2014, the Company is not aware of the occurrence of any events that would trigger the rights under the plan.

Share Repurchase Program

On August 25, 2014, the Alteva Board authorized a repurchase program for up to $3.0 million of its common stock. Share purchases may take place in open market transactions or in privately negotiated transaction and may be made from time to time depending on market conditions, share price, trading volume and other factors. The repurchase program authorized by the Alteva Board does not require the Company to acquire a specific number of shares, and may be terminated, suspended, or modified at any time. The timing and actual number of shares repurchased, if any, will depend on a variety of factors including the market price of the Company's common stock, regulatory, legal and contractual requirements, and other market factors. The share repurchase is expected to be funded from available cash on hand.

As of December 31, 2014, the Company repurchased 9,600 shares under the repurchase program at a value of $0.1 million. Shares were purchased on the open market at the prevailing days' stock price, plus transaction costs.