SHARE-BASED COMPENSATION

Stock Issued

On June 24, 2014, under the 2013 Long-Term Incentive Plan (the "2013 Plan"), the board of directors authorized and the Company issued a total of 8,800 shares of stock to all the current Company’s employees. For the year ended 2014, the Company recognized $65,120 of compensation expense related to the stock issuance.

Stock Options

In December 2013, the board of directors adopted the 2013 Plan. Under the 2013 Plan employees, directors and consultants of the Company may receive incentive stock options and other awards. A total of 900,000 shares of common stock of BG Staffing, Inc. were initially reserved for issuance pursuant to the 2013 Plan. To the extent any option or award expires unexercised or is canceled, terminated or forfeited in any manner without the issuance of common stock hereunder, such shares shall again be available for issuance under the 2013 Plan.

The term of each option shall be determined by the board of directors but shall not exceed 10 years. Unless otherwise specified in an option agreement, options shall vest and become exercisable on the following schedule: 20% immediately and 20% on each anniversary date of the grant date. Each option shall be designated as an incentive stock option (“ISO”) or a non-qualified option (“NQO”). The exercise price of an ISO shall not be less than the fair market value of the stock covered by the ISO at the grant date; provided, however, the exercise price of an ISO granted to any person who owns, directly or indirectly, stock of the Company constituting more than 10% of the total combined voting power of all classes of outstanding stock of the Company or of any affiliate of the Company, shall not be less than 110% of such fair market value.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model that uses the assumptions noted in the following table. Because this option valuation model incorporates ranges of assumptions for inputs, those ranges are disclosed below. The Company bases the estimate of expected volatility on the historical volatility of similar entities whose share prices are publicly available. The volatilities of those entities will continue to be considered unless circumstances change such that the identified entities are no longer similar to the Company or until there is sufficient information available to utilize the Company’s own stock volatility. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company expects to use historical data to estimate employee termination within the valuation model; separate groups of employees that have similar historical termination behavior are considered separately for valuation purposes. The Company believes these estimates and assumptions are reasonable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

For the years ended 2015 and 2014, the Company recognized $346,358 and $1,017,675 of compensation expense related to stock awards, respectively. Unamortized share-based compensation expense as of December 27, 2015 amounted to $731,464 which is expected to be recognized over the next 3.0 years.

The following assumptions were used to estimate the fair value of share options for the years ended:



	2015			2014
Weighted-average fair value of options	$	1.83		$	2.84
Weighted-average risk-free interest rate	1.5		%	1.3		%
Weighted-average dividend yield	$	1.00		$	—
Weighted-average volatility factor	43.2		%	49.0		%
Weighted-average expected life	6.0		yrs	5.6		yrs

A summary of stock option activity is presented as follows:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Options (in thousands)
Options outstanding at December 29, 2013	—		$	—	0.0	$	—
Granted	596,363		$	6.51		$	3,268
Exercised	(8,290	)	$	6.25		$	48
Forfeited	(2,607	)	$	6.25		$	15
Options outstanding at December 28, 2014	585,466		$	6.52	9.1	$	3,204
Granted	286,000		$	11.03		$	769
Exercised	(50,800	)	$	6.66		$	264
Forfeited	(45,000	)	$	6.25		$	279
Options outstanding at December 27, 2015	775,666		$	8.19	8.7	$	5,246

Options exercisable at December 28, 2014	297,366		$	6.71	9.1	$	2,449
Options exercisable at December 27, 2015	377,666		$	7.30	8.3	$	2,889



	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested outstanding at December 31, 2014	288,100	$	3.02
Nonvested outstanding at December 31, 2015	398,000	$	2.34

Warrant Activity

For the years ended 2015 and 2014, the Company recognized $6,523 and $110,413 of compensation cost related to warrants, respectively. There is no unamortized stock compensation expense as of December 27, 2015.

The following assumptions were used to estimate the fair value of warrants for the years ended:



	2015			2014
Weighted-average fair value of warrants	$	2.43		$	3.05
Weighted-average risk-free interest rate	0.9		%	0.6		%
Weighted-average dividend yield	$	1.00		$	0.35
Weighted-average volatility factor	49.0		%	49.0		%
Weighted-average expected life	5.0		yrs	4.1		yrs

A summary of warrant activity is presented as follows:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Warrants (in thousands)
Warrants outstanding at December 29, 2013	224,205		$	7.08	2.6	$	—
Granted	121,375		$	9.80		$	266
Exercised	(18,458	)	$	4.51		$	138
Expired	(300	)	$	4.51		$	2
Warrants outstanding at December 28, 2014	326,822		$	8.24	2.9	$	1,226
Granted	77,970		$	11.85		$	146
Exercised	(102,510	)	$	4.68		$	804
Expired	(168,449	)	$	10.85		$	105
Warrants outstanding at December 27, 2015	133,833		$	10.21	3.5	$	634

Warrants exercisable at December 28, 2014	205,447		$	7.32	2.0	$	960
Warrants exercisable at December 27, 2015	133,833		$	10.21	3.5	$	634



	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested outstanding at December 31, 2014	121,375	$	3.44
Nonvested outstanding at December 31, 2015	—	$	—

The intrinsic value in the table above is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options or warrants, before applicable income taxes and represents the amount holders would have realized if all in-the-money options or warrants had been exercised on the last business day of the period indicated.