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9. Stock Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

Employee Stock Incentive Plan

Our 2008 Stock Incentive Plan (the “2008 Plan”), which permitted the grant of up to 533,333 equity awards, expired in January 2016. In November 2016, our stockholders approved a new stock incentive plan, the 2016 Plan, under which were authorized to grant awards for up to 500,000 shares of our common stock over the 10 year life of the plan.

In 2019, we issued 160,000 shares of restricted common stock to certain key employees pursuant to the 2016 Plan valued at approximately $1.1 million for services and to encourage retention. These shares vest over four years, with 50% vesting on September 1, 2021, and 6.25% vesting each quarter thereafter for the next eight quarters. Also in 2019, we issued 90,000 shares of restricted common stock pursuant to the 2016 Plan valued at $648,000 for services to non-employee members of our Board of Directors. One third of these shares vested on June 14, 2020, and the remainder will vest in equal proportions on the first two anniversaries of that date. Also in 2019, we issued 9,833 shares of restricted common stock pursuant to the 2016 Plan valued at approximately $59,000 to certain members of our Board of Directors for their services in lieu of cash compensation. Of these, 8,194 shares vested equally over the following three months. The remaining 1,639 shares were issued pursuant to our share purchase match program (described below). Also in of 2019, we issued 4,202 shares of restricted common stock pursuant to the 2016 Plan valued at $25,000 to an employee in lieu of cash for a bonus, which vested equally over the following three months.

In September 2019, our Board approved a share purchase match program to encourage ownership and further align the interests of key employees and directors with those of our shareholders. Under this program, we will match 20% of any shares of our common stock purchased on the open market or granted in lieu of cash compensation by key employees and directors up to $25,000 in aggregate value per individual within any calendar year. These shares vest on the second anniversary of the date on which the matched shares were purchased if the individual is still with the Company. During 2020, we issued approximately 22,000 shares valued at approximately $147,000 under this program. During 2019, we issued approximately 2,000 shares valued at approximately $10,000 under this program.

In December 2019, our Board approved the 2019 HireQuest, Inc. Equity Incentive Plan (the “2019 Plan”), intended to replace the 2016 Plan with respect to future grants. Subject to adjustment in accordance with the terms of the 2019 Plan, no more than 1,500,000 shares of common stock are available in the aggregate for the grant of awards under the 2019 Plan. No more than 1,000,000 shares may be issued in the aggregate pursuant to the exercise of incentive stock options. In addition, no more than 250,000 shares may be issued in the aggregate to any employee or consultant, and no more than 50,000 shares may be issued in the aggregate to any non-employee director in any twelve-month period. Shares of common stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. The 2019 Plan was approved by our shareholders in June 2020 and became effective as of that date. Pursuant to the terms of the 2019 Plan, any award already granted under the 2016 Plan as of June 15, 2020 remained in full force and effect, as if the 2016 Plan had not been amended or terminated.

In 2020, we issued 83,283 shares of restricted common stock pursuant to the 2019 Plan valued at approximately $547,000 to members of our Board of Directors for their services in lieu of cash compensation. Of these, 61,868 shares vested equally over the following three months. The remaining 21,415 shares were issued pursuant to our share purchase match program.

Also in 2020, we issued 25,000 shares of restricted common stock to an employee pursuant to the 2019 Plan valued at approximately $179,000 for services, and to encourage retention. These shares vest over four years, with 50% vesting on September 11, 2021, and 6.25% vesting each quarter thereafter for the next eight quarters. Also in 2020, we issued 402 shares of restricted common stock to certain employees pursuant to our share purchase match program valued at approximately $3,000.

The following table summarizes our restricted stock outstanding at December 31, 2018, and changes during the years ended December 31, 2019 and December 31, 2020.

	Shares			Weighted average grant date price
Non-vested, December 31, 2018		-		$	-
Granted		264,035			-
Vested		(8,401	)		6.19
Non-vested, December 31, 2019		255,634			7.18
Granted		110,639			6.71
Forfeited		(9,454	)		7.14
Vested		(73,500	)		6.56
Non-vested, December 31, 2020		283,456			7.19

Stock options that were outstanding at Command Center were deemed to be issued on the date of the Merger. Outstanding awards continue to remain in effect according to the terms of the 2008 Plan, the 2016 Plan, and the corresponding award documents. There were approximately 15,000 and 24,000 stock options vested at December 31, 2020 and December 31, 2019, respectively.

The estimated fair value of each option granted is calculated using the Black-Scholes option-pricing model. Expected volatilities are based on the Company’s historical data and implied volatility. The Company uses historical data to estimate expected employee forfeitures of stock options. The expected life of options granted is management’s best estimate using recent and expected transactions. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. There were no options granted in 2020. The weighted-average assumptions used in the model were as follows:

	2019
Expected term (years)		2.3 - 8.9
Expected volatility		46.8% - 63.1	%
Dividend yield		0.0	%
Risk-free rate		1.7% - 2.4	%
Weighted average grant date fair value	$	3.18

The following table summarizes our stock options outstanding at December 31, 2018, and changes during the years ended December 31, 2020 and December 31, 2019.

	Number of shares underlying options			Weighted average exercise price per share		Weighted average grant date fair value
Outstanding, December 31, 2018		-		$	-	$	-
Granted		160,831			5.86		3.18
Forfeited		(100,000	)		5.70		3.16
Exercised		(31,666	)		5.11		2.71
Outstanding, December 31, 2019		29,165			7.20		3.76
Forfeited		(12,083	)		8.76		4.34
Outstanding, December 31, 2020		17,082			6.10		3.36

The following table summarizes our non-vested stock options outstanding at December 31, 2018, and changes during the years December 31, 2020 and December 31, 2019:

	Number of shares underlying options			Weighted average exercise price per share		Weighted average grant date fair value
Non-vested, December 31, 2018		-		$	-	$	-
Granted		84,523			5.56		3.05
Forfeited		(57,857	)		5.70		3.16
Vested		(21,250	)		5.21		2.73
Non-vested, December 31, 2019		5,417			5.48		3.01
Vested		(3,229	)		5.47		2.98
Non-vested, December 31, 2020		2,188			5.50		3.05

The following table summarizes information about our outstanding stock options, and reflects the intrinsic value recalculated based on the closing price of our common stock of $10.22 on December 31, 2020:

	Number of shares underlying options		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value
Outstanding		17,082	$	6.10		5.67	$	82,496
Exercisable		14,894		6.18		5.41		60,135

At December 31, 2020, there was unrecognized stock-based compensation expense totaling approximately $845,000 relating to non-vested options and restricted stock grants that will be recognized over the next 2.7 years.