Equity Compensation Plans

12 Months Ended

Dec. 31, 2023

Equity Compensation Plans [Abstract]

EQUITY COMPENSATION PLANS

9. EQUITY COMPENSATION PLANS

In April 2018, the Company adopted the FlexShopper, Inc. 2018 Omnibus Equity Compensation Plan (the “2018 Plan”). The 2018 Plan replaced the Prior Plans. No new awards will be granted under the Prior Plans; however, awards outstanding under the Prior Plans upon approval of the 2018 Plan remain subject to and will be settled with shares under the applicable Prior Plan.

Grants under the 2018 Plan and the Prior Plans consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares, restricted stock units, dividend equivalents and other stock-based awards. Employees, directors and consultants and other service providers are eligible to participate in the 2018 Plan and the Prior Plans. As of December 31, 2023, approximately 2,150,461 shares remained available for issuance under the 2018 Plan.

Stock-based compensation expense include the following components:

	Year Ended December 31,
	2023		2022
Stock options	$	1,288,750	$	997,830
Performance share units (“PSU”)		388,958		-
Total stock-based compensation	$	1,677,708	$	997,830

The fair value of stock-based compensation is recognized as compensation expense over the vesting period. Compensation expense recorded for stock-based compensation in the consolidated statements of operations was $1,677,708 for the twelve months ended December 31, 2022 and $997,830 for twelve months ended December 31, 2021. Unrecognized compensation cost related to non-vested options and PSU at December 31, 2022 amounted to $1,181,541, which is expected to be recognized over a weighted average period of 2.09 years.

Stock options:

The fair value of stock options is recognized as compensation expense using the straight-line method over the vesting period. The Company measured the fair value of each stock option award on the date of grant using the Black-Scholes-Merton (BSM) pricing model with the following weighted average assumptions:

	Year ended December 31, 2023			Year ended December 31, 2022
Exercise price	$	0.83		$	1.45
Expected life		6 years			6 years
Expected volatility		95	%		71	%
Dividend yield		0	%		0	%
Risk-free interest rate		3.59	%		2.25	%

The expected dividend yield is based on the Company’s historical dividend yield. The expected volatility is based on the historical volatility of the Company’s common stock. The expected life is based on the simplified expected term calculation permitted by the Securities and Exchange Commission, which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The risk-free interest rate is based on the annual yield on the grant date of a zero-coupon U.S. Treasury bond the maturity of which equals the option’s expected life.

Activity in stock options for the twelve months period ended December 31, 2023 and December 31, 2022 was as follows:

	Number of options			Weighted average exercise price		Weighted average contractual term (years)		Aggregate intrinsic value
Outstanding at January 1, 2023		3,919,228		$	1.97			$	52,223
Granted		1,645,619			0.83				75
Exercised		(1,500	)		0.79				345
Forfeited		(1,110,900	)		1.90				4,400
Expired		-			-				-
Outstanding at December 31, 2023		4,452,447		$	1.57		7.34	$	2,152,602
Vested and exercisable at December 31, 2023		3,696,778		$	1.65		7.10	$	1,668,723
Outstanding at January 1, 2022		3,080,904		$	2.06			$	1,923,642
Granted		1,179,183			1.45				-
Exercised		(308,526	)		0.85				480,029
Forfeited		(7,333	)		2.22				2,273
Expired		(25,000	)		1.70				-
Outstanding at December 31, 2022		3,919,228		$	1.97		6.78	$	52,223
Vested and exercisable at December 31, 2022		3,152,169		$	2.02		6.52	$	52,223

The weighted average grant date fair value of options granted during the twelve month period ended December 31, 2023 and December 31, 2022 was $0.62 and $0.90 per share, respectively.

Performance Share Units:

On February 10, 2022, and on April 21, 2023, the Compensation Committee of the Board of Directors approved awards of performance share units to certain senior executives of the Company (the “2022 PSU”, and the “2023 PSU”, respectively).

For performance share units, which are settled in stock, the number of shares earned is subject to both performance and time-based vesting. For the performance component, the number of shares earned is determined at the end of the periods based upon achievement of specified performance conditions such as the Company’s Adjusted EBITDA. When the performance criteria are met, the award is earned and vests assuming continued employment through the specified service period(s). Shares are issued from the Company’s 2018 Omnibus Equity Compensation Plan upon vesting. The number of 2023 PSU which could potentially be issued ranges from 0 up to a maximum of 1,250,000 of the target awards depending on the specified terms and conditions of the target award.

The fair value of performance share units is based on the fair market value of the Company’s common stock on the date of grant. The compensation expense associated with these awards is amortized on an accelerated basis over the vesting period based on the Company’s projected assessment of the level of performance that will be achieved and earned. In the event the Company determines it is no longer probable that the minimum performance criteria specified in the plan will be achieved, all previously recognized compensation expense is reversed in the period such a determination is made. The 2022 PSU were forfeited in April 2023 as the minimum performance component was not achieved. For the 2023 PSU, the Company determined it was probable that the minimum performance component would be met and accordingly commenced amortization in the quarter ended June 30, 2023.

Activity in performance share units for the twelve months ended December 31, 2023 was as follows:

	Number of performance share units			Weighted average grant date fair value
Non- vested at January 1, 2023		790,327		$	1.53
Granted		1,250,000			0.78
Forfeited/ unearned		(790,327	)		1.53
Vested		-			-
Non- vested at December 31, 2023		1,250,000		$	0.78