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EQUITY COMPENSATION PLANS | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
EQUITY COMPENSATION PLANS | 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 September 30, 2024, approximately 1,474,461 shares remained available for issuance under the 2018 Plan. Stock-based compensation expense included the following components:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Stock options | $ | 81,695 |  |  | $ | 242,180 |  |  | $ | 242,602 |  |  | $ | 1,047,324 |
Performance share units | 75,227 |  |  | 229,639 |  |  | 286,318 |  |  | 289,044 |
Total stock-based compensation | $ | 156,922 |  |  | $ | 471,819 |  |  | $ | 528,920 |  |  | $ | 1,336,368 |
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 condensed consolidated statements of operations was $156,922 and $528,920 for the three and nine months ended September 30, 2024, respectively, and $471,819 and $1,336,368 for the three and nine months ended September 30, 2023, respectively. Unrecognized compensation cost related to non-vested options and PSU at September 30, 2024 amounted to $1,033,134, which is expected to be recognized over a weighted average period of 2.19 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). The Company did not grant stock options during the nine months ended September 30, 2024. The weighted average assumptions used for the stock options granted during the nine months ended September 30, 2023 were as follows:
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023
Exercise price | $ | 1.03 |  | $ | 0.80 |
Expected life | 4 years | 6 years
Expected volatility | 69 | % | 95 | %
Dividend yield | 0 | % | 0 | %
Risk-free interest rate | 3.55 | % | 3.59 | %
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 nine month periods ended September 30, 2024 and September 30, 2023 was as follows:
| Number of options |  | Weighted average exercise price |  | Weighted average contractual term (years) |  | Aggregate intrinsic value
Outstanding at January 1, 2024 | 4,452,447 |  | $ | 1.57 |  |  |  |  | $ | 2,152,602 |
Granted | 677,500 |  | $ | 1.03 |  |  |  |  |
Exercised/Released | - |  |  |  |  |  |
Canceled/ Forfeited | (1,500) |  | 0.79 |  |  |  |  | 480 |
Expired | (55,000) |  | 8.00 |  |  |  |  | - |
Outstanding at September 30, 2024 | 5,073,447 |  | $ | 1.43 |  |  | 6.46 |  | $ | 525,296 |
Vested and exercisable at September 30, 2024 | 3,660,278 |  | $ | 1.57 |  |  | 6.46 |  | $ | 393,901 |
Outstanding at January 1, 2023 | 3,919,228 |  | $ | 1.97 |  |  |  |  | $ | 52,223 |
Granted | 1,596,567 |  | 0.80 |  |  |  |  | 75 |
Exercised | (1,500) |  | 0.79 |  |  |  |  | 345 |
Canceled/ Forfeited | (1,105,900) |  | 1.91 |  |  |  |  |
Outstanding at September 30, 2023 | 4,408,395 |  | $ | 1.56 |  |  | 7.56 |  | $ | 561,402 |
Vested and exercisable at September 30, 2023 | 3,183,408 |  | $ | 1.74 |  |  | 7.12 |  | $ | 328,031 |
The weighted average grant date fair value of options granted during the nine month periods ended September 30, 2024 and September 30, 2023 was $0.56 and $0.61 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 September 30, 2023. In April 2024, 1,250,000 shares of the 2023 PSU were earned as the performance criteria was met and 312,501 shares were vested. Activity in performance share units for the nine months ended September 30, 2024 and September 30, 2023 was as follows:
| Number of performance share units |  | Weighted average grant date fair value
Non- vested at January 1, 2024 | 1,250,000 |  | $ | 0.78 |
Exercised/Released | (312,501) |  | 0.78 |
Non- vested at September 30, 2024 | 937,499 |  | $ | 0.78 |
Non- vested at January 1, 2023 | 790,327 |  | $ | 1.53 |
Granted | 1,250,000 |  | 0.78 |
Forfeited/ unearned | (790,327) |  | 1.53 |
Non- vested at September 30, 2023 | 1,250,000 |  | $ | 0.78 |

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