SHARE-BASED COMPENSATION

12 Months Ended

Dec. 29, 2019

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

Stock Options and Restricted Stock

In December 2013, the board of directors adopted the original 2013 Plan. Under the original 2013 Plan team members, directors and consultants of the Company may receive incentive stock options and other awards. A total of 900,000 shares of common stock of BG Staffing, Inc. were initially reserved for issuance pursuant to the original 2013 Plan. On May 16, 2017, stockholders of the Company approved and made effective an amendment to the 2013 Plan to add an additional 250,000 shares of common stock reserved for issuance. To the extent any option or award expires unexercised or is canceled, terminated or forfeited in any manner without the issuance of common stock thereunder, such shares shall again be available for issuance under the original 2013 Plan.

The term of each option is determined by the board of directors but cannot exceed 10 years. Unless otherwise specified in an option agreement, options vest and become exercisable on the following schedule: 20% immediately and 20% on each anniversary date of the grant date. Each option shall be designated as an incentive stock option (“ISO”) or a non-qualified option (“NQO”). The exercise price of an ISO shall not be less than the fair market value of the stock covered by the ISO at the grant date; provided, however, the exercise price of an ISO granted to any person who owns, directly or indirectly, stock of the Company constituting more than 10% of the total combined voting power of all classes of outstanding stock of the Company or of any affiliate of the Company, shall not be less than 110% of such fair market value.

The fair value of each option award was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions in the following table. Because this option valuation model incorporates ranges of assumptions for inputs, those ranges are disclosed below. The Company bases the estimate of expected volatility on the historical volatilities of the Company for a period equal to the expected life of the option.

The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company expects to use historical data to estimate team member termination within the valuation model; separate groups of team members that have similar historical termination behavior are considered separately for valuation purposes. The Company believes these estimates and assumptions are reasonable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

On May 31, 2018, the Company entered into a stock option cancellation agreement (the “Option Cancellation Agreement”) with L. Allen Baker, Jr., the Company's former President and Chief Executive Officer, pursuant to which the Company agreed to pay Mr. Baker $18.00 per share of common stock underlying his vested in-the-money stock options granted under the Company’s 2013 Plan, less the exercise price per share thereof, in exchange for the cancellation and termination of such stock options. Pursuant to the terms of the Option Cancellation Agreement, the Company paid $3.3 million to Mr. Baker in exchange for the cancellation of 284,888 stock options granted to him under the 2013 Plan.

For Fiscal 2019, 2018 and 2017, the Company recognized $1.0 million, $1.1 million and $0.4 million of compensation expense related to stock awards, respectively. Unamortized share-based compensation expense as of December 29, 2019 amounted to $1.8 million which is expected to be recognized over the next 2.7 years.

The following assumptions were used to estimate the fair value of share options and restricted stock for the years ended:



	2019			2018			2017
Weighted-average fair value of awards	$	6.12		$	12.27		$	3.94
Weighted-average risk-free interest rate	2.3		%	2.7		%	1.8		%
Weighted-average dividend yield	$	1.18		$	1.04		$	1.00
Weighted-average volatility factor	42.6		%	42.3		%	43.2		%
Weighted-average expected life	10.0		yrs	8.6		yrs	6.0		yrs

A summary of stock option and restricted stock activity is presented as follows:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Options (in thousands)
Awards outstanding at December 25, 2016	678,411		$	8.95	7.8	$	4,511
Granted	128,000		$	16.76
Exercised	(28,800	)	$	7.71
Forfeited / Canceled	(12,200	)	$	11.00
Awards outstanding at December 31, 2017	765,411		$	10.27	7.3	$	4,521
Granted	217,000		$	20.73
Exercised	(163,338	)	$	10.47
Forfeited / Canceled	(292,088	)	$	6.71
Awards outstanding at December 30, 2018	526,985		$	16.49	7.7	$	2,932
Granted	138,750		$	21.49
Exercised	(48,190	)	$	10.25
Forfeited / Canceled	(34,700	)	$	14.39
Awards outstanding at December 29, 2019	582,845		$	18.32	7.5	$	2,793

Awards exercisable at December 30, 2018	238,085		$	13.96	7.2	$	1,684
Awards exercisable at December 29, 2019	313,645		$	16.05	6.8	$	1,991



	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested outstanding at December 30, 2018	288,900	$	8.34
Non-vested outstanding at December 29, 2019	269,200	$	20.96

For Fiscal 2019, 2018 and 2017, the Company issued 16,777; 49,541, and 5,221 shares of common stock upon the cashless exercise of 39,014; 86,053, and 13,800 stock options, respectively.

Included in awards outstanding are 18,000 and 31,500 shares of restricted stock, at a grant date price per share of $28.61, issued under the 2013 Plan as of December 29, 2019 and December 30, 2018, respectively. For Fiscal 2019, 2018 and 2017, the Company recognized $0.2 million, $0.4 million, and $-0- million of compensation expense related to restricted stock, respectively.

As of December 29, 2019, a total of 838,739 shares remain available for issuance under the 2013 Plan.

Warrant Activity

For Fiscal 2019, 2018 and 2017, the Company did not recognize of compensation cost related to warrants. There was no unamortized stock compensation expense remaining to be recognized as of December 29, 2019.

A summary of warrant activity is presented as follows:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Warrants (in thousands)
Warrants outstanding at December 25, 2016 and December 31, 2017	123,984		$	11.51	2.2	$	577
Exercised	(30,768	)	$	11.27
Warrants outstanding at December 30, 2018	93,216		$	11.59	1.3	$	805
Exercised	(28,734	)	$	6.55
Warrants outstanding at December 29, 2019	64,482		$	13.84	0.8	$	473

Warrants exercisable at December 30, 2018	93,216		$	11.59	1.3	$	805
Warrants exercisable at December 29, 2019	64,482		$	13.84	0.8	$	473

There were no non-vested warrants outstanding at December 29, 2019 and December 30, 2018.

For Fiscal 2019, 2018 and 2017, the Company issued 20,059; 16,623 and -0- shares of common stock upon the cashless exercise of 28,734; 30,768 and -0- warrants, respectively.

The intrinsic value in the tables above is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options or warrants, before applicable income taxes and represents the amount holders would have realized if all in-the-money options or warrants had been exercised on the last business day of the period indicated.