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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 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 September 30, 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 376,094 shares available for grant under the 2016 Plan as of September 30, 2024.

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


		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Cost of sales		$	14,430			$	6,612			$	3,675			$	58,860
Selling, general and administrative			58,283				134,104				526,096				600,995
Total stock-based compensation expense		$	72,713			$	140,716			$	529,771			$	659,855

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 and will fully vest on October 1, 2024.

The following table summarizes activity related to outstanding RSUs for the nine months ended September 30, 2024:

		RSUs				Weighted Average Grant Date Fair Value of RSUs
Non-vested – January 1, 2024			—			$	—
Granted			181,323			$	2.45
Vested			(135,900	)		$	2.45
Forfeited			—			$	—
Non-vested – September 30, 2024			45,423			$	2.45

The Company grants shares of common stock (“Restricted Stock Awards” or “RSAs”) 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 September 30, 2024, the weighted average remaining amortization period was 2.7 years.

The following table summarizes activity related to outstanding Restricted Stock Awards for the nine months ended September 30, 2024:

		Restricted Stock Awards				Weighted Average Grant Date Fair Value of Restricted Stock Awards
Non-vested – January 1, 2024			167,071			$	3.25
Granted			107,604			$	2.39
Vested			(58,587	)		$	3.18
Forfeited			(63,213	)		$	2.78
Non-vested – September 30, 2024			152,875			$	2.86

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 September 30, 2024, the weighted average remaining amortization period was 2.6 years.

The following table summarizes activity related to outstanding PRSAs for the nine months ended September 30, 2024:

		PRSAs				Weighted Average Grant Date Fair Value of PRSAs
Non-vested – January 1, 2024			48,050			$	3.27
Granted			64,611			$	2.91
Vested			—			$	—
Forfeited			(68,585	)		$	3.12
Non-vested – September 30, 2024			44,076			$	2.98

The fair value of all RSUs, PRSAs and RSAs 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 September 30, 2024, unamortized stock-based compensation costs related to restricted share arrangements was $284,780.