Note 5 - Stock Based Compensation

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note

5

–Stock Based Compensation

No

share-based compensation associated with outstanding stock options and restricted stock grants was recorded during the

twelve

months ended

December 31, 2018.

Approximately

$413,000

was recorded for the

twelve

months ended

December 31, 2017.

No

income tax benefit was recognized in the statements of comprehensive income (loss) for share-based arrangements in any period presented.

Stock Option Plan

The Company has

two

share-based compensation plans as described below.

Qualstar adopted the

2008

Stock Incentive Plan (the

“2008

Plan”) under which incentive and nonqualified stock options and restricted stock

may

be granted for shares of common stock. The

2008

Plan expired in

2018

and

no

additional options

may

be granted under that plan. However,

20,000

options that were previously granted under the

2008

Plan will continue under their terms.

The

2017

Stock Incentive Plan (the

“2017

Plan”) was approved by Qualstar shareholders on

June 13, 2017.

The

2017

Plan permits the award of stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance shares, dividend equivalent rights and cash-based awards to employees (including executive officers), directors and consultants of the Company and its subsidiaries. The

2017

Plan authorizes the issuance of an aggregate of

200,000

shares of common stock and the plan is administered by the Compensation Committee of the Company’s Board of Directors.

With respect to options, the fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses various inputs, including volatility, expected term and risk-free interest rate. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination in determining forfeiture rates. The expected term of options granted is estimated based on the vesting term of the award, historical employee exercise behavior, expected volatility of the Company’s stock and an employee’s average length of service. The risk-free interest rate used in this model correlates to a U.S. constant rate Treasury security with a contractual life that approximates the expected term of the option award.

No

options were granted in the fiscal year ended

December 31, 2018.

The following table summarizes the assumptions used in the Black-Scholes model to determine the fair value of stock options granted in the fiscal year ended

December 31, 2017.

	Fiscal Year Ended December 31, 2017
Expected lives, in years		5.0
Estimated volatility		36.89	%
Dividend yield		—
Risk-free interest rate		1.92	%
Weighted average fair value on grant date	$	2.50

The following table summarizes all stock option activity:

Options	Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2016		23,333			9.49		6.43		—
Granted		165,300			7.08		—		—
Exercised		(600	)		7.08		—		—
Forfeited, canceled or expired		—			—		—		—
Outstanding at December 31, 2017		188,033			7.38		8.63		—
Granted		—			—		—		—
Exercised		(5,500	)		7.08		—		—
Forfeited, canceled or expired		(4,533	)		15.23		—		—
Outstanding at December 31, 2018		178,000			7.19		8.63		—
Exercisable at December 31, 2018		178,000		$	7.19		8.63	$	—

At

December 31, 2018

and

2017,

 there is

no

unrecognized compensation cost related to non-vested share-based compensation awards granted.

No

shares vested during the year ended

December 31, 2018.

The total fair value of shares vested for the year ended

December 31, 2017

was

$413,000.