STOCK BASED COMPENSATION

9 Months Ended

Oct. 01, 2023

STOCK BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 6 - STOCK-BASED COMPENSATION

In 2019, we adopted the BT Brands, Inc. 2019 Incentive Plan (the “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. As of October 1, 2023, there were 429,750 shares available for grant under the  Plan.

Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expense over the applicable service period. Total equity-based compensation expenses through the third quarter of 2023 were $118,000, and $102,300 through the third quarter of 2022, including approximately $77,000 for the Contingent Share Award described below. Based on current estimates, we project that approximately $372,000 in stock-based compensation expense for current grants will be recognized over the next five years at approximately $200,000 in 2024, $95,000 in 2025, $35,000 in 2026, $28,000 in 2027 and $14,000 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 expense over the applicable service period.

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

·	Stock price – Published trading market values of the Company’s 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 United States Treasury yield curve rate corresponding to the expected life of the award

Information regarding our stock options is summarized below:

	Number of			Weighted Average		Weighted Average Remaining Term		Aggregate Intrinsic
	Options			Exercise Price		(In Years)		Value
Options outstanding at January 1, 2023		220,250		$	2.74		9.0	$	0
Granted		100,000			2.50		6.7
Exercised		0			0
Canceled, forfeited, or expired		(750	)		0
Options outstanding at October 1, 2023		319,500		$	2.74		8.8	$	0
Options exercisable at October 1, 2023		106,802		$	3.18		8.3	$	0

On February 27, 2023, the Company finalized a Contingent Incentive Share Award with senior executives. The Contingent Share Awards provides that so long as the Company’s publicly traded warrants are outstanding, senior management of the Company will be deemed to earn an aggregate award of 250,000 shares of common stock as an award upon the Company’s share price reaching $8.50 per share for 20 consecutive trading days, provided, however, participants must be employed by the Company at the time the Incentive Shares are earned.  The estimated fair value of the plan is $1.00 per share, and $250,000 of compensation expense will be recognized over the remaining 2.1 years available under the Plan. $77,000 of stock-based compensation was recognized for this Agreement for the 39 weeks of 2023. We utilized a lattice model when determining the fair value of the Contingent Incentive Share Awards. Assumptions utilized in the model include a risk-free rate of 4.4% and volatility of 63%.