Note 5 - Stock Based Compensation

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 

5

 –Stock Based Compensation

The Company granted to Steven N. Bronson, the Company’s President and Chief Executive Officer,

50,000

restricted stock units (the “Restricted Stock Units”) for shares of the Company’s common stock under the terms of the Company’s

2017

Stock Option and Incentive Plan and an associated Restricted Stock Unit Agreement with Mr. Bronson (the “Restricted Stock Unit Agreement”).  The Restricted Stock Units were awarded pursuant to that certain employment agreement entered into between the Company and Mr. Bronson on

April 13, 2019. 

25,000

of the

50,000

restricted stock units vested and the underlying

25,000

shares of common stock became issuable as approved by the Company’s Compensation Committee on

December 18, 2019.

The share-based compensation of

$139,000

was recorded for the

twelve

months ended

December 31, 2019.

No

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

twelve

months ended

December 31, 2018. 

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,

3,333

options that were previously granted under the

2008

Plan will continue under their terms.

The

2017

Stock Incentive Plan (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

300,000

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 assumptions, such as 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 years ended

December 31, 2019

and

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, 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		—
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited, canceled or expired		(16,667	)		7.38		—		—
Outstanding at December 31, 2019		161,333		$	7.17		7.49		—
Exercisable at December 31, 2019		161,333		$	7.17		7.49		—

At

December 31, 2019

and

2018,

 there is

no

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

No

options vested during the years ended

December 31, 2019

and

2018.

Restricted Stock Units

On

October 29, 2019,

the Company granted to Steven N. Bronson, the Company’s President and Chief Executive Officer,

50,000

restricted stock units (the “Restricted Stock Units”) for shares of the Company’s common stock under the terms of the Company’s

2017

Stock Option and Incentive Plan and an associated Restricted Stock Unit Agreement with Mr. Bronson (the “Restricted Stock Unit Agreement”). The Restricted Stock Units were awarded pursuant to that certain employment agreement entered into between the Company and Mr. Bronson on

April 13, 2019.

For each of the fiscal years ended

December 31, 2019

and

December 31, 2020,

Restricted Stock Units for

25,000

shares of the Company’s common stock shall vest and the underlying common stock shall become issuable subject to the Company’s achievement of financial and performance objectives for the applicable fiscal year established by the Company’s Compensation Committee. Subject to the satisfaction of certain conditions, unvested Restricted Stock Units shall also vest and the underlying common stock shall become issuable upon Mr. Bronson’s death or disability, in the event the Company terminates Mr. Bronson’s employment without cause or if Mr. Bronson terminates his employment with the Company for good reason, and in the event of a change in control of the Company. The Compensation Committee approved vesting for the

25,000

shares on

December 18, 2019.