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 June 28, 2026, 718,250 shares were available for grant under the 2019 Incentive Plan.

In July 2025, the Board granted 62,500 options with an exercise price of $1.50 per share. This grant included 22,500 fully-vested one-year options and 40,000 options that vest 20% upon grant and 20% on each of the succeeding four anniversary dates.

In April 2026, the Board amended vesting terms for certain Board members, an employee of the company who is deemed to be a related party, and an external consultant. The amended vesting terms were such that all outstanding stock options as of the date of this amendment became immediately vested and exercisable.

In July 2026, the Board approved the grant of 180,000 stock options, with a strike price equal to the closing price of the Company’s stock on the previous business day. The stock options were granted to the Company’s CEO, an employee of the Company who is deemed to be a related party, an external consultant, and three independent Board members.

In 2024, we issued 15,000 ten-year options to the then-existing outside member 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 to company officers and 41,000 to employees and a consultant, to purchase shares at $2.58 per share.

In 2023, outside of the plan, we granted a consultant a warrant to purchase 100,000 shares at $2.50 per share, exercisable for seven years. The warrant vests monthly over five years, provided the consultant continues in this capacity. Assuming the consulting agreement runs full term, we project that approximately $80,000 in stock-based compensation will be recognized, with $32,000 recognized in each of the next two years and $16,000 recognized in 2028.

Stock-based 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 stock-based compensation expenses for stock options and warrants for the 26-week periods in 2026 and 2025 were $59,459 and $93,735, respectively. As of June 28, 2026, we estimated that approximately $191,000 in stock-based compensation expense for stock options, including consultant warrants, would be recognized over the next four years: $54,000 in 2026, and $58,000 in 2027, $40,000 in 2028, $26,000 in 2029, and $14,000 in 2030.

At the date of grant, the Board of Directors determines the vesting provision in each agreement. Generally, stock options granted to employees and directors vest 20% upon grant and 20% each year for 4 years. Options expire ten years from the date of the grant.

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

Information regarding our stock options is summarized below: 

On February 27, 2023, the Company finalized a Contingent Incentive Share Award with senior executives. The Contingent Incentive Share Award 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 total expense associated with this award was $265,000 and was fully expensed in 2025. In connection with the resignation of the Company’s Chief Financial Officer in May 2026, his award of 100,000 shares were forfeited.