STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2024

4. STOCK-BASED COMPENSATION

The Tandy Leather Factory, Inc. 2013 Restricted Stock Plan (the “2013 Plan”) was adopted by our Board of Directors in January 2013 and approved by our stockholders in June 2013. The 2013 Plan initially reserved up to 300,000 shares for restricted stock and restricted stock unit (“RSU”) awards to our executive officers, non-employee directors and other key employees. In June 2020, our stockholders approved an increase to the plan reserve to 800,000 shares of our common stock and extended the 2013 Plan to June 2023. Awards granted under the 2013 Plan may be service-based awards or performance-based awards and may be subject to a graded vesting schedule with a minimum vesting period of four years, unless otherwise determined by the Compensation Committee of the Board of Directors that administers the plan. All shares remaining ungranted under the 2013 Plan were canceled upon the adoption of the new 2023 Plan described below.

The Tandy Leather Factory, Inc. 2023 Incentive Stock Plan (the “2023 Plan” and, together with the 2013 Plan, the “Plans”) was adopted by our Board of Directors in April 2023 and approved by our stockholders in June 2023. The 2023 Plan initially reserved up to 800,000 shares of our common stock for a variety of equity awards (including, but not limited to, RSUs, the only type of awards that have been granted to date) to our executive officers, non-employee directors and other key employees. In June 2023, as part of their annual director compensation, certain of our non-employee directors were granted a total of 12,993 service-based RSUs under the 2023 Plan, which will vest ratably over the next four years, subject to each participant’s continued service on the board as of each vesting date. In October 2023, the Company granted Ms. Carr, our chief executive officer (“CEO”) a total of 276,000 service-based RSUs under the 2023 Plan, which will vest ratably over the next three years, subject to Ms. Carr’s continued employment as of each vesting date. In March 2024, the Company granted to certain employees other than Ms. Carr a total of 59,649 RSUs under the 2023 Plan, which will vest ratably over the next three years, subject to the recipients’ continued employment as of each vesting date. In June 2024, the Company granted 14,000 shares to various members of the Board of Directors, which will vest ratably over the next four years.

A summary of the activity for non-vested restricted stock and RSU awards as of September 30, 2024 is presented below:

	Shares (in thousands)			Weighted Average Share Price

Balance, January 1, 2024		623		$	5.12
Granted		74			0.85
Forfeited		(6	)		5.00
Vested		23			4.73
Balance, September 30, 2024		714		$	4.38

The Company’s stock-based compensation relates primarily to RSU awards. For these service-based awards, our stock-based compensation expense, included in operating expenses, was $0.2 million for the three months ended September 30, 2024 and 2023, respectively and $0.5 million and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the Company has concluded it is not probable that the performance conditions related to performance-based RSUs granted to our CEO in October 2018 will be achieved, and as a result no compensation expense related to performance-based RSUs has been recorded.

As of September 30, 2024, there was unrecognized compensation cost related to non-vested, service-based RSU awards of $1.2 million, which will be recognized in each of the following years (dollars in thousands):

Unrecognized Expense
2024	$	159
2025		555
2026		413
2027		35
2028		7
	$	1,169

We issue shares from authorized shares upon the lapsing of vesting restrictions on restricted stock and RSUs. For the nine months ended September 30, 2024 and 2023, we issued 23,301 and 39,199 shares, respectively, resulting from the vesting of RSUs. We do not use cash to settle equity instruments issued under stock-based compensation awards. The payment of the employees’ tax liability for a portion of the vested shares may be satisfied by withholding shares with a fair value equal to the tax liability.