5.	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 of our common stock for restricted stock and restricted stock unit (“RSU”) awards, on or prior to June 2018, to our executive officers, non-employee directors and other key employees (of which, there were 167,593 shares available for future awards as of June 30, 2019). 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. In March 2019 and 2020, as part of their annual director compensation, certain of our non-employee directors were granted a total of 28,191 and 24,010 service-based RSUs, respectively, under the 2013 Plan which will vest ratably over the next three years provided that the participant is still on the board on the vesting date. In December 2019 certain of our key employees were granted a total of 17,988 service-based RSUs under the 2013 Plan which will vest ratably over the next three years provided that the participants are employed on the vesting date.

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 through June 2023.

In addition to grants under the Company’s 2013 Restricted Stock Plan, in October 2018, we granted a total of 644,000 RSUs to the Company’s Chief Executive Officer (“CEO”), of which (i) 460,000 are service-based RSUs that vest ratably over a period of five years from the grant date based on our CEO’s continued employment in her role, (ii) 92,000 are performance-based RSUs that will vest if the Company’s operating income exceeds $12 million dollars two fiscal years in a row, and (iii) 92,000 are performance-based RSUs that will vest if the Company’s operating income exceeds $14 million dollars in one fiscal year.

A summary of the activity for non-vested restricted stock and RSU awards as of June 30, 2019 and 2018 is presented below:

	Shares			Grant Fair Value
Balance, December 31, 2018		657,717		$	7.39
Granted		28,191			5.64
Forfeited		(5,319	)		5.64
Vested		(1,408	)		7.72
Balance, June 30, 2019		679,181		$	7.39

Balance, December 31, 2017		36,803		$	7.93
Granted		-			-
Vested		(16,648	)		8.22
Balance, June 30, 2018		20,155		$	7.93

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 and $0.4 million for the three and six-month periods ended June 30, 2019, respectively, and less than $0.1 million and $0.1 million for the three and six-month periods ended June 30, 2018, respectively.

As of June 30, 2019, the Company has concluded it is not probable that the performance conditions related to performance-based RSUs will be achieved, and as a result no compensation expense related to performance-based RSUs has been recorded.

As of June 30, 2019, there was unrecognized compensation cost related to non-vested, service-based restricted stock and RSU awards of $3.2 million which will be recognized in each of the following years:

Unrecognized Expense
2019	$	404,977
2020		777,537
2021		758,325
2022		721,284
2023		509,910
	$	3,172,033

We issue shares from authorized shares upon the lapsing of vesting restrictions on restricted stock and RSUs. For the six months ended June 30, 2019, we issued 1,408 shares resulting from the vesting of restricted stock. We do not use cash to settle equity instruments issued under stock-based compensation awards.