STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

5. STOCK-BASED COMPENSATION

In 2009, the Company adopted the Performance Equity Plan 2009 (the “2009 Plan”). The 2009 Plan reserved 500,000 common shares for issuance. The 2009 Plan provides for the issuance of either incentive stock options or nonqualified stock options to employees, consultants or others who provide services to the Company. The Company has 2,364 shares available for grant under the 2009 Plan as of March 31, 2024.

In 2016, the Company adopted the 2016 Long Term Incentive Plan (the “2016 Plan”). The 2016 Plan reserved 600,000 common shares for issuance, provided that, no more than 200,000 common shares be granted as incentive stock options. Awards may be made or granted to employees, officers, directors and consultants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Any shares of common stock granted in connection with awards other than stock options and stock appreciation rights are counted against the number of shares reserved for issuance under the 2016 Plan as one and one-half shares of common stock for every one share of common stock granted in connection with such award. Any shares of common stock granted in connection with stock options and stock appreciation rights are counted against the number of shares reserved for issuance under the 2016 Plan as one share for every one share of common stock issuable upon the exercise of such stock option or stock appreciation right awarded. In the fourth quarter of 2020, the Company added 800,000 shares to the 2016 Plan, which increased the number of shares reserved for issuance under the 2016 Plan to 1,400,000 shares. In the second quarter of 2023, the Company added an additional 800,000 shares to the 2016 Plan, which increased the number of shares for reserved for issuance under the 2016 Plan to 2,200,000 shares. The Company has 599,055 shares available for grant under the 2016 Plan as of March 31, 2024.

Stock-based compensation expense for restricted stock in the consolidated statements of operations is summarized as follows:

	Three months ended March 31,
	2024			2023
Cost of sales	$	(10,755	)	$	15,077
Selling, general and administrative		292,277			323,846
Total stock-based compensation expense	$	281,522		$	338,923

The Company grants restricted stock units (“RSUs”) to its board of directors as partial compensation. These RSUs vest quarterly on a straight-line basis over a one-year period. At March 31, 2024, the weighted average remaining amortization period was nine months.

The following table summarizes activity related to outstanding RSUs for the three months ended March 31, 2024:

	RSUs			Weighted Average Grant Date Fair Value of RSUs
Non-vested – January 1, 2024		—		$	—
Granted		181,323		$	2.45
Vested		(45,328	)	$	2.45
Forfeited		—		$	—
Non-vested – March 31, 2024		135,995		$	2.45

The Company grants shares of common stock (“Restricted Stock Awards”) to select employees. These shares have various vesting dates, ranging from vesting on the grant date to as late as four years from the date of grant. In the event that the employee’s employment is voluntarily terminated prior to certain vesting dates, portions of the shares may be forfeited. At March 31, 2024, the weighted average remaining amortization period was 2.6 years.

The following table summarizes activity related to outstanding Restricted Stock Awards for the three months ended March 31, 2024:

	Restricted Stock Awards			Weighted Average   Grant Date   Fair Value of  Restricted Stock  Awards
Non-vested – January 1, 2024		167,071		$	3.25
Granted		—		$	—
Vested		(9,294	)	$	2.93
Forfeited		(12,572	)	$	3.03
Non-vested – March 31, 2024		145,205		$	3.28

The Company grants shares of common stock (“Performance Restricted Stock Awards” or “PRSAs”) to select officers as part of our long-term incentive program that will result in that number of PRSAs being paid out if the target performance metric is achieved. The award vesting is based on specific performance metrics related to accounts payable delinquency, debt, and net income during the performance period. The PRSAs vest at 0% or 100% and all three metrics must be met to vest at 100%. The PRSAs granted under this program will vest on the fourth anniversary of the grant date, subject to the aforementioned performance criteria. At March 31, 2024, the weighted average remaining amortization period was 2.5 years.

The following table summarizes activity related to outstanding PRSAs for the three months ended March 31, 2024:

	PRSAs			Weighted Average   Grant Date   Fair Value of  PRSAs
Non-vested – January 1, 2024		48,050		$	3.27
Granted		1,245		$	1.60
Vested		—		$	—
Forfeited		(6,851	)	$	3.08
Non-vested – March 31, 2024		42,444		$	3.25

The fair value of all RSUs, PRSAs and Restricted Stock Awards is based on the closing price of our common stock on the grant date. All RSUs, PRSAs, and Restricted Stock Awards vest and settle in common stock (on a one-for-one basis).

As of March 31, 2024, unamortized stock-based compensation costs related to restricted share arrangements was $463,262.