Note 13 - Stock Based Compensation

3 Months Ended

Mar. 31, 2025

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 13 – Stock Based Compensation

The Company’s 2017 Omnibus Stock Plan (2017 OSP) was adopted by the Company’s BOD on February 24, 2017, and approved by the Company’s shareholders at the May 25, 2017, Annual Meeting of Shareholders. The 2017 OSP enables the Company to grant stock incentive awards to current and new employees, including officers, and to BOD members and service providers. The 2017 OSP permits stock incentive awards in the form of Options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other awards in stock or cash. The 2017 OSP permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards. As of March 31, 2025, 47,499 shares remain available for future grants under the 2017 OSP.

Option Awards

In 2022, after considerable study, discussion and interaction with our consultants, the Compensation Committee granted non-qualified stock Options (Options). The Compensation Committee believed that grants of Options more directly aligned management long-term equity compensation with increased shareholder value creation at a time when the Company is engaged in significant investment and transformation as part of its long-term strategy. The Compensation Committee also determined to extend the grant of Options to include Named Executive Officers, senior employee directors and other employee directors as key members of the Company leadership team and contributors to our overall success.

As previously disclosed, the number of Options awarded was computed as a percentage of the employee’s base salary using a Black-Scholes formula using an exercise price equal to the closing price of Company common stock of $11.00 on March 28, 2024, $14.70 on March 31, 2023, and $21.20 on April 11, 2022. The 2024 Options will vest one-third each on March 28, 2025, 2026 and 2027. The 2023 Options will vest one-third each on March 31, 2024, 2025 and 2026. The 2022 Options will vest one-third each on April 11, 2023, 2024 and 2025.

				Closing
				Stock		Vesting
	Options			Price		Date
Balance at December 31, 2021		-
Issued		40,577		$	21.20	4/11/2023
Issued		40,583		$	21.20	4/11/2024
Issued		40,583		$	21.20	4/11/2025
Balance at December 31, 2022		121,743
Issued		51,431		$	14.70	3/31/2024
Issued		51,431		$	14.70	3/31/2025
Issued		51,432		$	14.70	3/31/2026
Balance at December 31, 2023		276,037
Issued		35,817		$	11.00	3/28/2025
Issued		35,818		$	11.00	3/28/2026
Issued		35,818		$	11.00	3/28/2027
Balance at December 31, 2024		383,490
Forfeited		(8,169	)
Balance at March 31, 2025		375,321

The grant date fair value of employee stock Option awards was determined using the Black Scholes Option-pricing model. The following assumptions were used during the following periods:

	2024 Grants			2023 Grants			2022 Grants
Exercise Price	$	11.00		$	14.70		$	21.20
Risk-Free Rate of Interest		3.866	%		2.957	%		1.515	%
Expected Term (Years)		10			10			10
Expected Stock Price Volatility		36.6	%		20.7	%		18.1	%
Dividend Yield		2.11	%		2.83	%		2.44	%

The following table summarizes the Company’s exercisable employee stock Option activity under the 2017 OSP, which was approved by the Company’s shareholders, for the following periods:

							Weighted		Aggregate
	Number of			Weighted			Average		Intrinsic
	Shares			Average			Remaining		Value
	Excercisable			Exercise Price			Term (Years)		(in Thousands)
Outstanding as of December 31, 2021		-		$	-			-	$	-
Granted		121,743			21.20			7.03		-
Forfeited		-			-			-		-
Outstanding as of December 31, 2022		121,743		$	21.20			7.03	$	-
Granted		154,294			14.70			8.00		-
Forfeited		-			-			-		-
Outstanding as of December 31, 2023		276,037		$	17.57			7.58	$	-
Granted		107,453			11.00			8.99		-
Forfeited		-			-			-		-
Outstanding as of December 31, 2024		383,490		$	15.73			7.98	$	-
Granted		-			-			-		-
Forfeited		(8,169	)		(15.21	)		-		-
Outstanding as of March 31, 2025		375,321		$	16.79			7.97	$	-
Exercisable as of March 31, 2025		219,839		$	17.38			7.97	$	-

The Options had no intrinsic value as of March 31, 2025.

The weighted average grant date fair value per share for employee stock and non-employee Option grants issued on March 28, 2024, was $4.34. The weighted average grant date fair value per share for employee stock and non-employee stock Option grants issued on March 31, 2023, was $2.90. The weighted average grant date fair value per share for employee stock and non-employee Option grants issued on April 11, 2022, was $3.24. As of March 31, 2025, the total unrecognized compensation related to unvested employee and non-employee stock Option awards granted was $449,014, which the Company expects to recognize over a weighted-average period of approximately 1.65 years. As of December 31, 2024, the total unrecognized compensation related to unvested employee and non-employee stock Option awards granted was $571,335, which the Company expects to recognize over a weighted-average period of approximately 1.79 years.

On March 13, 2023, the Company Board adopted changes to the Nuvera Communications, Inc. 2017 OSP. Most of the changes eliminate language specific to the requirements and limitations on grants under Internal Revenue Code Section162 (m), which has been repealed by Congress. This includes provisions related to “Performance-Based Exception” in several sections of the 2017 OSP. The Board also increased the limit on annual grants from 50,000 to 100,000 shares per participant and eliminated separate provisions on new-hire stock grants and cash-based grants. The Board also made minor changes to other sections of the 2017 OSP. The Board did not increase the number of shares authorized for issuance under the 2017 OSP or change the terms of eligibility for participants under the 2017 OSP. The foregoing description of the changes to the 2017 OSP does not purport to be complete and is qualified in its entirety by reference to the full text of the 2017 OSP, as amended, which is filed as Exhibit 10.12 to the 2022 Annual Report on Form 10-K and is incorporated by reference.

On March 27, 2025, the Compensation Committee and the Board adopted a new cash-based long-term incentive plan (2025 Plan). The 2025 Plan is a 3-year, cash-based long-term incentive and retention arrangement which measures operating income before interest, taxes, depreciation, and amortization (OIBITDA) and entails continued service with Nuvera throughout a 3-year period. Awards will be made annually (subject to the Compensation Committee’s oversight on plan design, which may change from time to time) with 3-year overlapping cycles, and performance measured each individual year. Vesting is based (i) on achievement of predetermined OIBITDA targets set annually and (ii) on continued service with Nuvera through the end of the 3-year performance cycle. Cash payouts will be made at the end of the 3-year cycle. OIBITDA performance targets for each year within the 3-year period will be aligned with approved operating budget for that year.

Cash-based awards currently issued and outstanding are as follows:

	Targeted
	Performance-Based				Vesting
	Cash		Vested		Date
Balance at December 31, 2024	$	-	$	-
Issued	$	408,853	$	-	4/1/2028
Balance at March 31, 2025	$	408,853	$	-