STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2025

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. 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. All shares remaining ungranted under the 2013 Plan were canceled upon the adoption of the new 2023 Plan described below.

The Tandy Leather Factory, Inc. 2023 Incentive Stock Plan (the “2023 Plan” and, together with the 2013 Plan, the “Plans”) was adopted by our Board of Directors in April 2023 and approved by our stockholders in June 2023. The 2023 Plan initially reserved up to 800,000 shares of our common stock for a variety of equity awards (including, but not limited to, RSUs, the only type of awards that have been granted to date) to our executive officers, non-employee directors and other key employees. In June 2023, as part of their annual director compensation, certain of our non-employee directors were granted a total of 12,993 service-based RSUs under the 2023 Plan, which will vest ratably over the next four years, subject to each participant’s continued service on the board as of each vesting date. In March 2024, the Company granted to certain employees a total of 59,649 RSUs under the 2023 Plan, which will vest ratably over the next three years, subject to the recipients’ continued employment as of each vesting date. In June 2025 and 2024, the Company granted 17,554 and 12,527 shares respectively to various members of the Board of Directors, which will vest ratably over the next four years, subject to each participant’s continued service on the board as of each vesting date. In February 2025, in connection with hiring Johan Hedberg as the Company’s Chief Executive Officer, the Company granted Mr. Hedberg 100,000 RSU, which will vest in February 2026, and 900,000 RSUs, which will vest upon the Company’s achievement of certain performance targets. In June 2025, the Company’s stockholders approved an increase to the plan reserve of an additional 900,000 shares of our common stock for the potential vesting those performance-based RSU grants to Mr. Hedberg.

A summary of the activity for RSU awards as of June 30, 2025 is presented below:

	Shares (in thousands)			Weighted Average Share Price

Balance, January 1, 2025		409		$	4.32
Granted		1,018			4.58
Forfeited		(355	)		4.32
Vested		(19	)		4.39
Balance, June 30, 2025		1,053		$	3.96

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 $0.1 million and $0.2 million for the three months ended June 30, 2025 and June 30, 2024, and $0.2 million and $0.4 million for the six months ended June 30, 2025 and 2024 respectively.

As of June 30, 2025, there was unrecognized compensation cost related to non-vested, RSU awards of $0.5 million, which will be recognized in each of the following years (dollars in thousands):

Unrecognized Expense
2025	$	252
2026		172
2027		36
2028		17
2029		6
	$	483

We issue shares from authorized shares upon the lapsing of vesting restrictions on restricted stock and RSUs. For the three months ended June 30, 2025 and 2024, we issued 3,078 and 20,574 shares, respectively, resulting from the vesting of RSUs. We do not use cash to settle equity instruments issued under stock-based compensation awards. The payment of the employees’ tax liability for a portion of the vested shares may be satisfied by withholding shares with a fair value equal to the tax liability.