STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

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. As of September 30, 2021, there were 591,138 shares available for future awards. 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 February and May 2021, as part of their annual director compensation, certain of our non-employee directors were granted a total of 21,673 and 3,415 service-based RSUs, respectively, under the 2013 Plan, which will vest ratably over the next four years provided that the participant is still on the board on the vesting date.

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 September 30, 2021 and 2020 is presented below:

	Shares (in thousands)			Weighted Average Share Price
Balance, December 31, 2020		522		$	7.11
Granted		25			3.88
Forfeited		(11	)		3.53
Vested		(16	)		5.28
Balance, September 30, 2021		520		$	7.08

Balance, December 31, 2019		606		$	7.27
Granted		33			4.38
Vested		(19	)		6.61
Balance, September 30, 2020		620		$	7.14

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 $0.6 million for the three and nine month periods, respectively, ended on both September 30, 2021 and 2020.

As of September 30, 2021, the Company has concluded it is not probable that the performance conditions related to performance-based RSUs granted to our CEO will be achieved, and as a result no compensation expense related to performance-based RSUs has been recorded.

As of September 30, 2021, there was unrecognized compensation cost related to non-vested, service-based restricted stock and RSU awards of $1.6 million, which will be recognized in each of the following years:

(in thousands)
2021	$	205
2022		784
2023		538
2024		24
2025		5
Unrecognized Expense	$	1,556

We issue shares from authorized shares upon the lapsing of vesting restrictions on restricted stock and RSUs. For the nine months ended September 30, 2021, we issued 16,080 shares resulting from the vesting of restricted stock. We do not use cash to settle equity instruments issued under stock-based compensation awards.