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Note 13 - Share Incentive Plans | 6 Months Ended
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Jun. 30, 2025
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | Note 13. Share Incentive Plans On March 22, 2021, the Company’s Board of Directors adopted the Turning Point Brands, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards may be granted to employees, non-employee directors, and consultants. In addition, the 2021 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2021 Plan, 1,290,000 shares, plus 100,052 shares remaining available for issuance under the 2015 Equity Incentive Plan (the “2015 Plan”), of TPB Common Stock are reserved for issuance as awards to employees, non-employee directors, and consultants as compensation for past or future services or the attainment of certain performance goals. The 2021 Plan is scheduled to terminate on March 21, 2031. The 2021 Plan is administered by the compensation committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the vesting criteria for the awards, with such criteria to be specified in the award agreement. As of June 30, 2025, net of forfeitures, there were 441,945 Restricted Stock Units (“RSUs”), 122,570 options and 99,603 Performance Based Restricted Stock Units (“PRSUs”) granted under the 2021 Plan. There are 725,934 shares available for future grant under the 2021 Plan as of June 30, 2025. On April 28, 2016, the Board of Directors of the Company adopted the 2015 Plan, pursuant to which awards could have been granted to employees, non-employee directors, and consultants. In addition, the 2015 Plan provided for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Upon adoption of the 2021 Plan, the 2015 Plan was terminated, and the Company determined no additional grants would be made under the 2015 Plan. However, all awards issued under the 2015 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2015 Plan. Stock option activity for the 2015 and 2021 Plans is summarized below:
|  |  |  |  |  | Weighted |  |  | Weighted |
|  | Stock |  |  | Average |  |  | Average |
|  | Option |  |  | Exercise |  |  | Grant Date |
|  | Shares |  |  | Price |  |  | Fair Value |
Outstanding, December 31, 2023 |  |  | 656,951 |  |  | $ | 29.79 |  |  | $ | 9.18 |
Granted |  |  | 54,289 |  |  |  | 27.19 |  |  |  | 9.21 |
Exercised |  |  | (132,572 | ) |  |  | 21.36 |  |  |  | 6.97 |
Forfeited |  |  | (42,878 | ) |  |  | 38.11 |  |  |  | 11.94 |
Outstanding, December 31, 2024 |  |  | 535,790 |  |  | $ | 30.69 |  |  | $ | 9.51 |
Exercised |  |  | (155,965 | ) |  |  | 31.56 |  |  |  | 9.69 |
Forfeited |  |  | (2,643 | ) |  |  | 36.11 |  |  |  | 10.88 |
Outstanding, June 30, 2025 |  |  | 377,182 |  |  | $ | 30.29 |  |  | $ | 9.42 |
Under the 2015 and 2021 Plans, the total intrinsic value of options exercised during the six months ended June 30, 2025 and 2024, was $6.4 million, and $1.1 million, respectively. At June 30, 2025, under the 2015 and 2021 Plans, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model. The following table outlines the assumptions based on the number of options granted under the 2015 Plan.
|  | February 10, |  |  | May 17, |  |  | March 7, |  |  | March 20, |  |  | March 18, |  |  | February 18, |
|  | 2017 |  |  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |
Number of options granted |  |  | 40,000 |  |  |  | 93,819 |  |  |  | 98,100 |  |  |  | 155,780 |  |  |  | 155,000 |  |  |  | 100,000 |
Options outstanding at June 30, 2025 |  |  | 5,000 |  |  |  | 23,969 |  |  |  | 36,367 |  |  |  | 74,440 |  |  |  | 37,513 |  |  |  | 43,500 |
Number exercisable at June 30, 2025 |  |  | 5,000 |  |  |  | 23,969 |  |  |  | 36,367 |  |  |  | 74,440 |  |  |  | 37,513 |  |  |  | 43,500 |
Exercise price |  | $ | 13.00 |  |  | $ | 15.41 |  |  | $ | 21.21 |  |  | $ | 47.58 |  |  | $ | 14.85 |  |  | $ | 51.75 |
Remaining lives |  |  | 1.62 |  |  |  | 1.88 |  |  |  | 2.69 |  |  |  | 3.72 |  |  |  | 4.72 |  |  |  | 5.64 |
Risk free interest rate |  |  | 1.89 | % |  |  | 1.76 | % |  |  | 2.65 | % |  |  | 2.34 | % |  |  | 0.79 | % |  |  | 0.56 | %
Expected volatility |  |  | 27.44 | % |  |  | 26.92 | % |  |  | 28.76 | % |  |  | 30.95 | % |  |  | 35.72 | % |  |  | 28.69 | %
Expected life |  |  | 6.000 |  |  |  | 6.000 |  |  |  | 6.000 |  |  |  | 6.000 |  |  |  | 6.000 |  |  |  | 6.000 |
Dividend yield |  |  | - |  |  |  | - |  |  |  | 0.83 | % |  |  | 0.42 | % |  |  | 1.49 | % |  |  | 0.55 | %
Fair value at grant date |  | $ | 3.98 |  |  | $ | 4.60 |  |  | $ | 6.37 |  |  | $ | 15.63 |  |  | $ | 4.41 |  |  | $ | 13.77 |
The following table outlines the assumptions based on the number of options granted under the 2021 Plan.
|  | May 17, |  |  | March 14, |  |  | April 29, |  |  | May 12, |  |  | March 11, |
|  | 2021 |  |  | 2022 |  |  | 2022 |  |  | 2023 |  |  | 2024 |
Number of options granted |  |  | 7,500 |  |  |  | 100,000 |  |  |  | 14,827 |  |  |  | 77,519 |  |  |  | 54,289 |
Options outstanding at June 30, 2025 |  |  | 2,200 |  |  |  | 16,112 |  |  |  | 6,273 |  |  |  | 77,519 |  |  |  | 54,289 |
Number exercisable at June 30, 2025 |  |  | 2,200 |  |  |  | 16,112 |  |  |  | 6,273 |  |  |  | 77,519 |  |  |  | 54,289 |
Exercise price |  | $ | 45.05 |  |  | $ | 30.46 |  |  | $ | 31.39 |  |  | $ | 20.71 |  |  | $ | 27.19 |
Remaining lives |  |  | 5.88 |  |  |  | 6.71 |  |  |  | 6.83 |  |  |  | 7.87 |  |  |  | 8.70 |
Risk free interest rate |  |  | 0.84 | % |  |  | 2.10 | % |  |  | 2.92 | % |  |  | 3.41 | % |  |  | 4.06 | %
Expected volatility |  |  | 31.50 | % |  |  | 35.33 | % |  |  | 35.33 | % |  |  | 34.51 | % |  |  | 35.09 | %
Expected life |  |  | 6.000 |  |  |  | 6.000 |  |  |  | 6.000 |  |  |  | 5.186 |  |  |  | 5.186 |
Dividend yield |  |  | 0.63 | % |  |  | 1.01 | % |  |  | 0.98 | % |  |  | 1.61 | % |  |  | 1.26 | %
Fair value at grant date |  | $ | 13.23 |  |  | $ | 10.23 |  |  | $ | 11.07 |  |  | $ | 6.45 |  |  | $ | 9.21 |
The Company records compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. In 2025, the Company has recorded no compensation expense related to the options, which are fully expensed. The Company recorded compensation expense related to the options of approximately $0.1 million and $0.4 million for the three and six months ended June 30, 2024, respectively. PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of shares of TPB Common Stock a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics related to the Company’s performance over a five-year period. PRSUs will vest on the measurement date, which is no more than 65 days after the performance period provided the applicable service and performance conditions are satisfied. As of June 30, 2025, there are 278,280 PRSUs outstanding. The following table outlines the PRSUs granted and outstanding as of June 30, 2025.
|  | February 18, |  |  | March 14, |  |  | May 4, |  |  | March 1, |  |  | April 1, |  |  | March 3, |
|  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2024 |  |  | 2025 |
Number of PRSUs granted |  |  | 100,000 |  |  |  | 49,996 |  |  |  | 133,578 |  |  |  | 111,321 |  |  |  | 8,242 |  |  |  | 41,137 |
PRSUs outstanding at June 30, 2025 |  |  | 65,740 |  |  |  | 20,505 |  |  |  | 68,319 |  |  |  | 75,985 |  |  |  | 6,594 |  |  |  | 41,137 |
Fair value as of grant date |  | $ | 51.75 |  |  | $ | 30.46 |  |  | $ | 22.25 |  |  | $ | 26.52 |  |  | $ | 29.12 |  |  | $ | 70.34 |
Remaining lives |  |  | 0.50 |  |  |  | 1.50 |  |  |  | 0.50 |  |  |  | 1.50 |  |  |  | 1.50 |  |  |  | 2.50 |
The Company records compensation expense related to the PRSUs based on the probability of achieving the performance condition. The Company recorded compensation expense related to the PRSUs of approximately $0.7 million and $0.8 million for the three months ended June 30, 2025 and 2024, respectively, and $1.4 million and $1.7 million for the six months ended June 30, 2025 and 2024, respectively. Total unrecognized compensation expense related to these awards at June 30, 2025, is $4.1 million which will be expensed over the service periods based on the probability of achieving the performance condition. The Company has granted 175,588 RSUs which are outstanding and vest over one to five years. The following table outlines the RSUs granted and outstanding as of June 30, 2025.
|  | March 14, |  |  | April 29, |  |  | May 5, |  |  | March 1, |  |  | April 1, |  |  | March 3, |  |  | March 5, |  |  | May 8, |
|  | 2022 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2024 |  |  | 2025 |  |  | 2025 |  |  | 2025 |
Number of RSUs granted |  |  | 50,004 |  |  |  | 4,522 |  |  |  | 130,873 |  |  |  | 105,257 |  |  |  | 5,495 |  |  |  | 36,843 |  |  |  | 14,921 |  |  |  | 8,464 |
RSUs outstanding at June 30, 2025 |  |  | 20,451 |  |  |  | 1,263 |  |  |  | 33,844 |  |  |  | 56,175 |  |  |  | 3,627 |  |  |  | 36,843 |  |  |  | 14,921 |  |  |  | 8,464 |
Fair value as of grant date |  | $ | 30.46 |  |  | $ | 31.39 |  |  | $ | 22.25 |  |  | $ | 26.52 |  |  | $ | 29.12 |  |  | $ | 70.34 |  |  | $ | 67.02 |  |  | $ | 75.66 |
Remaining lives |  |  | 1.50 |  |  |  | 1.50 |  |  |  | 0.75 |  |  |  | 1.75 |  |  |  | 1.75 |  |  |  | 2.75 |  |  |  | 0.75 |  |  |  | 1.00 |
The Company records compensation expense related to the RSUs based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the RSUs on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the RSUs of approximately $0.9 million and $1.0 million for the three months ended June 30, 2025 and 2024, respectively, and $1.9 million and $1.9 million for the six months ended June 30, 2025 and 2024 respectively. Total unrecognized compensation expense related to RSUs at June 30, 2025, is $4.3 million, which will be expensed over 1.84 years.

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