NOTE 10 – STOCK-BASED COMPENSATION AND RESTRICTED STOCK AWARDS

2021 Omnibus Incentive Plan

In May 2021, the Board of Directors approved the Farmhouse, Inc. Omnibus Incentive Plan (the “2021 OIP”). The 2021 OIP permits the granting of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, other stock-based awards, and cash-based awards. The maximum number of shares of common stock that may be issued pursuant to awards under the 2021 OIP is 3,000,000. Stockholders holding a majority of the Company’s outstanding common stock ratified the 2021 OIP by written consent.

Options granted under the 2021 OIP may be either “incentive stock options,” as defined in Section 422 of the Internal Revenue Code, or “non-statutory stock options,” subject to Section 83 of the Internal Revenue Code, at the discretion of the Board of Directors and as set forth in the applicable award agreement. The option exercise price may not be less than 100% of the fair market value of the Company’s common stock on the date of grant (or 110% in the case of a participant who owns more than 10% of the voting power of all classes of the Company’s stock). Options become exercisable at times and on conditions determined by the Board and must be exercised within ten years from the date of grant (or five years for optionees holding more than 10% of the Company’s voting stock).

Restricted stock awards granted under the 2021 OIP are issued and measured at fair market value on the date of grant and typically vest in monthly or quarterly installments, subject to the recipient’s continued service with the Company on the applicable vesting dates. Vesting of restricted stock awards is based solely on continued service. Stock-based compensation expense is recognized on a straight-line basis as awards vest, with a corresponding credit to additional paid-in capital.

Restricted Stock Awards (“RSAs”)

A summary of the Company’s non-vested restricted stock awards as of September 30, 2024, and changes for the nine months then ended is presented below:

On May 17, 2024, the Board of Directors granted a total of 340,000 RSAs under the 2021 OIP to advisors deemed critical to closing the SEA with Thrown. The awards included 100,000 RSAs to LFSI, the Company’s contracted CFO, and 240,000 RSAs to the Company’s newly engaged legal counsel.

The RSAs to LFSI vest as follows: 50,000 shares vested on September 30, 2024, and 25,000 shares will vest on each of the next two fiscal quarter-ends. The RSAs granted to the legal counsel vest 10,000 shares monthly beginning September 30, 2024, through May 31, 2026.

On September 6, 2024, the Board granted an additional RSA of 10,000 shares under the 2021 OIP to an advisor. These shares vest in equal installments of 2,500 shares per month beginning September 30, 2024.

All RSAs are measured at fair value based on the closing price of the Company’s common stock on the OTCQB market on the grant date. Stock-based compensation expense is recognized as the shares vest. The Company expects to continue issuing restricted stock awards to employees, advisors, and consultants as part of its equity compensation strategy.

No RSAs were granted during the nine months ended September 30, 2023.

Stock-Based Compensation Expense

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Stock-based compensation expense is recognized based on the grant-date fair value of awards and is expensed over the requisite service period, which is generally the vesting period. The Company’s stock-based awards consist of RSAs granted under its 2021 OIP. No stock options or other equity awards were granted during the periods presented.

For the nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense of $41,685 and $136,452, respectively. For the three months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense of $5,895 and $19,934, respectively.

As of September 30, 2024, there was $23,974 of unrecognized stock-based compensation expense related to unvested RSAs, which is expected to be recognized over a weighted-average remaining period of approximately 1.43 years, as follows: