Note 16 – Stock-Based Compensation and Stock Repurchases

Employee and Director Stock Option Plan

The Company may grant stock options and other share-based payment awards of our Common Stock to eligible employees, directors, and consultants under the 2010 Stock Incentive Plan, as amended (the “Plan”). The aggregate total number of shares of the Common Stock authorized for issuance under the Plan at March 31, 2020 was 2,197,460, of which 521,297 remain available for future issuance. In total, 1,676,163 shares of Common Stock had, as of that date, been issued pursuant to the exercise of previously granted options and/or the vesting of restricted stock units.

Stock options are generally granted at exercise prices equal to the grant-date market prices and typically expire no later than five years from the grant date. In contrast to a stock option where the grantee buys the Company’s share at an exercise price determined on grant date, a restricted stock unit (“RSU”) entitles the grantee to receive one share for every RSU based on a vesting plan, typically between one and four years from grant. Grants to directors and certain executive officers are subject to Board approval; discretion to make grants to other officers and employees has been delegated to the Compensation and Stock Options Committee. At the time the options are exercised or RSUs vest and are settled, at the discretion of management, we will issue treasury shares or make a new issuance of shares to the option or RSU holder.

Stock Options

We estimate the grant-date fair value of our stock options using the Black-Scholes option-valuation model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options. We expense the estimated grant-date fair values of options over the vesting period on a straight-line basis. Based on our historical experience, the “deemed exercise” of expiring in-the-money options and the relative market price to strike price of the options, we have not hereto estimated any forfeitures of vested or unvested options.

There were nil and 219,408 stock options issued in the quarter ended March 31, 2020 and March 31, 2019, respectively. The weighted average assumptions used in the option-valuation model were as follows:



	Three Months Ended March 31,
	2020		2019
Stock option exercise price	$	—	$	16.12
Risk-free interest rate		—		2.42%
Expected dividend yield		—		—
Expected option life in years		—		3.75
Expected volatility		—		23.32%
Weighted average fair value	$	—	$	3.50

For the quarters ended March 31, 2020 and 2019, we recorded compensation expense of $120,000 and $70,000, respectively with respect to our prior stock option grants. At March 31, 2020, the total unrecognized estimated compensation expense related to non-vested stock options was $1.0 million, which we expect to recognize over a weighted average vesting period of 1.69 years. The intrinsic, unrealized value of all options outstanding vested and expected to vest, at March 31, 2020 was nil, as the closing price of our Common Stock on that date was $3.89.

The following table summarizes the number of options outstanding and exercisable as of March 31, 2020 and December 31, 2019:



	Outstanding Stock Options - Class A Shares
	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Years of Contractual Life	Aggregate Intrinsic Value
	Class A	Class A		Class A	Class A
Balance - December 31, 2018	586,469	$	14.01	2.88	$	1,530,528
Granted	219,408		16.12	—		—
Exercised	(69,500)		13.42	—		185,175
Forfeited	(25,000)		13.42	—		—
Balance - December 31, 2019	711,377	$	14.74	2.79	$	136,350
Granted	—		—	—		—
Exercised	—		—	—		—
Forfeited	(8,000)		12.34	—		—
Balance - March 31, 2020	703,377	$	14.79	1.69	$	—

Restricted Stock Units

We estimate the grant-date fair values of our RSUs using our Company’s stock price at grant-date and record such fair values as compensation expense over the vesting period on a straight-line basis. The following table summarizes the status of the RSUs granted to-date as of March 31, 2020:



	Outstanding Restricted Stock Units
	RSU Grants (in units)			Vested,	Unvested,	Forfeited,
Grant Date	Directors	Management	Total Grants	March 31, 2020	March 31, 2020	March 31, 2020
March 10, 2016	35,147	27,381	62,528	62,262	—	266
April 11, 2016	—	5,625	5,625	3,962	1,146	517
March 23, 2017	30,681	32,463	63,144	54,196	8,416	532
August 29, 2017	—	7,394	7,394	5,546	1,848	—
January 2, 2018	29,393	—	29,393	29,393	—	—
April 12, 2018	—	29,596	29,596	7,409	21,412	775
April 13, 2018	—	14,669	14,669	3,668	11,001	—
July 6, 2018	—	932	932	—	—	932
November 7, 2018	23,010	—	23,010	23,010	—	—
March 13, 2019	—	24,366	24,366	5,316	15,946	3,104
March 14, 2019	—	23,327	23,327	5,832	17,495	—
May 7, 2019	11,565	—	11,565	—	11,565	—
March 10, 2020	—	271,131	271,131	—	271,131	—

Total	129,796	436,884	566,680	200,594	359,960	6,126

RSU awards to management vest 25% on the anniversary of the grant date over a period of four years. Beginning this year, a performance component has been added to RSUs granted to Management. On March 10, 2020, RSUs covering 271,131 shares were issued to members of executive management and other employees of our Company.

Prior to November 7, 2018, RSU awards to non-employee directors vested 100% in January of the following year in which such RSUs were granted. At the November 7, 2018 Board meeting, it was determined that it would be more appropriate for the vesting of RSUs to align with the director’s term of office. Accordingly, the RSUs granted on November 7, 2018, vest on the first to occur of (i) 5:00 pm, Los Angeles, CA time on the last business day prior to the one-year anniversary of the grant date, or (ii) the date on which the recipient’s term as a director shall end and the recipient, or as the case may be, the recipient’s successor is elected to the board of directors at the next occurring annual meeting or special meeting of stockholders called for such purpose (the “Vesting Date”). This means that the Vesting Date of the RSUs granted to directors on November 7, 2018 was the date of the 2019 annual meeting of stockholders. Due to the fact that our Company moved up our annual meeting of stockholders from November to May in 2019, an unanticipated shorter than normal vesting period for the RSUs issued on November 7, 2018 resulted. In order to adjust for this factor, the award of RSUs to directors made immediately following the 2019 Annual Meeting of Stockholders was determined using a value of $35,000 or one half of the dollar amount of the prior year's annual grant. The RSUs issued to non-employee directors on May 7, 2019 vested on May 6, 2020. RSUs were issued to the directors in January 2020 pursuant to the RSU agreement. No RSUs were granted to non-employee directors during the first quarter of 2020.

For the quarter ended March 31, 2020 and 2019, we recorded compensation expense of $216,000 and $209,000, respectively. The total unrecognized compensation expense related to the non-vested RSUs was $2.7 million as of March 31, 2020, which we expect to recognize over a weighted average vesting period of 2.12 years.

Stock Repurchase Program

On March 2, 2017, the Company's Board of Directors authorized management, at its discretion, to spend up to an aggregate of $25.0 million to acquire shares of Reading’s Class A Non-Voting Common Stock. On March 14, 2019, the Board of Directors extended this stock buy-back program for two years, through March 2, 2021. On March 10, 2020, the Board increased the authorized amount by $25.0 million and extended it to March 2, 2022. At the present time, the repurchase program authorization is $26.0 million.

The repurchase program allows Reading to repurchase its shares in accordance with the requirements of the SEC on the open market, in block trades and in privately negotiated transactions, depending on market conditions and other factors. All purchases are subject to the availability of shares at prices that are acceptable to Reading, and accordingly, no assurances can be given as to the timing or number of shares that may ultimately be acquired pursuant to this authorization.

Under the stock repurchase program, as of March 31, 2020, the Company had reacquired a total of 1,792,819 shares of Class A Non-Voting Common Stock for $24.0 million at an average price of $13.39 per share (excluding transaction costs). 75,157 shares of Class A Non-Voting Common Stock were purchased during the quarter ended March 31, 2020 at an average price of $8.92 per share. This leaves $26.0 million available under the March 2, 2017 program, as extended, to March 2, 2022.