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STOCK BASED COMPENSATION
 12 Months Ended
Dec. 29, 2024
STOCK BASED COMPENSATION  
STOCK-BASED COMPENSATION

NOTE 8 – STOCK-BASED COMPENSATION

 

In 2019, we adopted the BT Brands, Inc. 2019 Incentive Plan (the “Plan”) 2019 Plan, under which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants.

 

In December 2022, the stockholders authorized the increase of shares available for grant under the 2019 Plan from 250,000 to 1,000,000 shares. As of January 1, 2024, there were 660,750 shares available for a grant under the 2019 Plan.

 

In 2024, we issued 15,000 ten-year options to the then-existing outside members of our Board of Directors to purchase shares at $1.61 per share; we also granted 5,000 fully-vested options to purchase shares at $1.70 per share to a new member of the Board. In 2022, we granted 216,000 options, including 175,000 options to company officers and 41,000 options to employees and a consultant to purchase shares at $2.58 per share.

 

In 2023, we issued a consultant warrant to purchase 100,000 shares at $2.50 per share for seven years, with the warrants vesting monthly for over five years as long as the consultant continues in this capacity. Assuming the consulting agreement continues to full term, we project that we will recognize approximately $112,000 in stock-based compensation at $32,000 annually through 2027 and $16,000 in 2028.

 

As outlined in each agreement, stock options granted to employees and directors vest over four years in annual installments. Options expire ten years from the date of the grant. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expenses over the applicable service period. Compensation expense for 2024 was approximately $72,500 and will be approximately $59,000 in 2025 and $9,000 in 2026. Based on current estimates, we project that we will recognize approximately $183,000 in stock-based compensation expense related to options and consultant warrants over the next four years, including approximately $91,000 in 2025, $41,000 in 2026, $35,000 in 2028, and $16,000 in 2029.

 

On February 27, 2023, the board of directors Compensation Committee approved an “Incentive Shares” proposal wherein, so long as the Company’s publicly traded warrants are outstanding, senior management will be granted 250,000 shares of common stock as an award upon our share price reaching $8.50 per share for twenty consecutive trading days. The total estimated grant date fair value of the award was determined using a lattice model with assumptions similar to the stock option calculation. The total of this award was determined to be $265,000. For 2024, stock-based compensation included approximately $126,000 in expenses for the award. We project the remainder of approximately $36,000 of stock-based compensation will be recognized in 2025

 

We utilize the Black-Scholes option pricing model at the date of grant when determining the compensation cost associated with stock options issued using the following significant assumptions:

 

 

·

Stock price – Published trading market values of our common stock as of the grant date;

 

·

Exercise price – The stated exercise price of the stock option;

 

·

Expected life – The simplified method;

 

·

Expected dividend – The rate of dividends expected to be paid over the term of the stock option;

 

·

Volatility – Estimated volatility;

 

·

Risk-free interest rate – The daily US Treasury yield corresponding to the expected life of the award.

 

Information regarding our stock options, including consultant warrants, is summarized below:

 

 

 

Number of Options

 

 

Weighted Average

Exercise Price

 

 

Weighted Average Remaining Term

(In Years)

 

 

Aggregate Intrinsic Value

 

Options outstanding at January 1, 2023

 

 

220,250

 

 

$2.74

 

 

 

9.0

 

 

$-

 

Granted

 

 

100,000

 

 

 

2.50

 

 

 

6.2

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Canceled, forfeited, or expired

 

 

(1,000)

 

 

2.58

 

 

 

-

 

 

 

-

 

Options outstanding at December 31, 2023

 

 

319,250

 

 

$2.62

 

 

 

7.6

 

 

$-

 

Options exercisable at December 31, 2023

 

 

106,702

 

 

 

2.85

 

 

 

8.3

 

 

$-

 

Options outstanding at December 31, 2023

 

 

319,250

 

 

$2.62

 

 

 

7.6

 

 

$-

 

Granted

 

 

20,000

 

 

 

1.64

 

 

 

9.3

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Canceled, forfeited, or expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Options outstanding at December 29, 2024

 

 

339,250

 

 

$2.53

 

 

 

7.4

 

 

$-

 

Options exercisable at December 29, 2024

 

 

169,554

 

 

$2.65

 

 

 

6.8

 

 

$-

 

 

 

The Black-Scholes option-pricing model was used to estimate the fair value of the stock options at the date of grant with the following weighted-average assumptions for grants during the year ended December 29, 2024.

 

 

 

2024

 

 

2023

 

The fair value of options and warrants granted during the period

 

$

1.08 to $ 1.19

 

 

$1.60

 

Expected life (in years)

 

 

6.0

 

 

 

6.0

 

Expected dividend

 

 

-

 

 

 

-

 

Expected stock volatility

 

 

63%

 

 

63%

Risk-free interest rate

 

 

3.75%

 

 

3.75%