Equity Incentive Plan Grants

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Equity Incentive Plan Grants

Note 7. Equity Incentive Plan Grants

On December 15, 2021, our shareholders approved the FG Financial Group, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The purpose of the 2021 Plan is to attract and retain directors, consultants, officers and other key employees of the Company and its subsidiaries and to provide to such persons incentives and rewards for superior performance. The 2021 Plan is administered by the Compensation and Management Resources Committee of the Board and has a term of ten years. The 2021 Plan awards may be in the form of stock options (which may be incentive stock options or nonqualified stock options), stock appreciation rights (or “SARs”), restricted shares, restricted share units, and other share-based awards, and provides for a maximum of 1,500,000 shares available for issuance.

As of June 30, 2022, the Company had 133,859 RSUs outstanding and 130,000 non-qualified stock options outstanding under its equity incentive plans.

RSUs Outstanding

The following table summarizes RSU activity for the six months ended June 30, 2022 and 2021.

Restricted Stock Units	Number of Units			Weighted Average Grant Date Fair Value
Non-vested units, January 1, 2022		164,655		$	4.35
Granted		—			—
Vested		(30,796	)		4.45
Forfeited		—			—
Non-vested units, June 30, 2022		133,859		$	4.33
Non-vested units, January 1, 2021		148,486		$	5.44
Granted		—			—
Vested		(22,067	)		5.46
Forfeited		—			—
Non-vested units, June 30, 2021		126,419		$	5.44

On December 17, 2021, we issued a total of 83,329 RSUs to our non-employee directors. The RSUs vest in five equal annual installments, beginning with the first anniversary of the grant date, other than those RSUs granted to a former director. As the former director made himself available to serve on the Board but was not elected to do so at the Company’s 2021 annual meeting of shareholders, the Board accelerated the vesting of his RSUs, such that they all vested on January 1, 2022. This included 14,492 RSUs granted on December 17, 2021, as well as an additional 15,224 RSUs previously granted.

Stock Options Outstanding

On January 12, 2021, in connection with Larry G. Swets, Jr.’s appointment as Chief Executive Officer, the Company entered into a Stock Option Agreement (the “Stock Option”) with Mr. Swets. The Stock Option entitles Mr. Swets to purchase up to 130,000 shares of the Company’s common stock at an exercise price of $3.38 per share. The Stock Option becomes vested and fully exercisable in 20% increments on each anniversary of the grant date, provided that Mr. Swets remains in the continuous service of the Company through each applicable vesting date and that the Company’s book value per share has increased by 15% or more as compared to the Company’s book value per share as of the fiscal year end prior. The Stock Option expires on January 11, 2031.

FG FINANCIAL GROUP, INC.

Notes to Consolidated Financial Statements

The Stock Option contains performance and service conditions that affect vesting. Pursuant to ASC Topic 718- Stock Compensation, these conditions have not been reflected in estimating the fair value of the award upon its grant date; however, the Company employed a Monte-Carlo model to estimate the likelihood of satisfaction of the required performance and service conditions. This resulted in a derived service period of approximately 3.3 years under the grant.

In estimating the fair value of the Stock Option, the Company estimated volatility based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the Stock Option. The expected life of the Stock Option is assumed to be equivalent to its contractual term. The dividend rate is based on our historical rate, which the Company anticipates will remain at zero. The following assumptions were used to determine the estimated fair value of the Stock Option:

Expected volatility	45.60	%
Expected life (years)	10.00
Risk-free interest rate	1.15	%
Dividend yield	0.00	%

The following table summarizes activity for stock options issued for the six months ended June 30, 2022 and 2021.

Common Stock Options	Shares		Weighted Ave Exercise Price		Weighted Ave Remaining Contractual Term (yrs)		Weighted Ave Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding, January 1, 2022		130,000	$	3.38		9.04	$	1.88	$	49,400
Exercisable, January 1, 2022		–	$	–		–	$	–	$	–
Granted								–		–
Exercised		–		–		–		–		–
Cancelled		–		–		–		–		–
Outstanding, June 30, 2022		130,000	$	3.38		8.79	$	1.88	$	(249,600	)
Exercisable, June 30, 2022		–	$	–		–	$	–	$	–
Outstanding, January 1, 2021		–	$	–		–	$	–	$	–
Exercisable, January 1, 2021		–	$	–		–	$	–	$	–
Granted		130,000		3.38		10.00		1.88		–
Exercised		–		–		–		–		–
Cancelled		–		–		–		–		–
Outstanding, June 30, 2021		130,000	$	3.38		9.54	$	1.88	$	781,300
Exercisable, June 30, 2021		–	$	–		–	$	–	$	–

On January 18, 2021, Company entered into an Equity Award Letter Agreement (the “Letter Agreement”) with Mr. Swets, pursuant to which the Company clarified its intention to grant an additional 370,000 stock options, restricted shares or restricted stock units pursuant to a future award (the “Future Award”), subject to the approval of an amended and/or new equity plan, among other conditions. Specifically, under the Letter Agreement, no such Future Award may be granted until there is a determination by the Compensation Committee of the specific vesting and other terms of the award.

Total stock-based compensation expense for the six months ended June 30, 2022 and 2021 was approximately $115,000 and $247,000, respectively. As of June 30, 2022, total unrecognized stock compensation expense of approximately $495,000 remains, which will be recognized through December 31, 2026. Stock compensation expense has been reflected in the Company’s financial statements as part of general and administrative expense.

Warrants

No warrants were granted or exercised during the six months ended June 30, 2022 and 2021. On February 24, 2022, 1,500,000 warrants with an exercise price of $15.00 expired. As of June 30, 2022, the Company did not have any warrants outstanding.

FG FINANCIAL GROUP, INC.

Notes to Consolidated Financial Statements