11. STOCK-BASED COMPENSATION

During 2022, an additional 1,000,000 shares of common stock and 200,000 shares of Series B Preferred Stock were added to the Company’s Amended and Restated 2014 Equity Incentive Plan (the “A&R Plan”) for future issuance. As of September 30, 2023, 500,427 shares of common stock and 38,000 shares of Series B Preferred Stock are available for grant. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.

Certain equity-based RSU agreements contain a provision in which the units shall immediately vest and become converted into common shares at the rate of one share per RSU, immediately after a change in control, as defined in the award agreement.

Common and preferred stock RSUs

In February 2022, the Compensation Committee approved executive bonuses to be paid in shares of Series B Preferred Stock, with the number of shares and the amount based on specified criteria being achieved during the year 2022. These shares were awarded in early 2023 based on the achievement of the specified criteria.

In February 2023, the Compensation Committee approved executive bonuses to be paid in shares of Series B Preferred Stock with the number of shares and the amount based on specified criteria being achieved during the year 2023. For the three and nine months ended September 30, 2023, an expense of approximately $254,000 and $629,000, respectively, was recorded for these bonuses based on the value of the shares at the grant date and recognized over the service period. The portion of the stock compensation expense to be used for the payment of withholding and payroll taxes is included in accrued compensation in the consolidated balance sheets. The balance of the stock compensation expense has been recorded as additional paid-in capital.

The following table summarizes the RSU transactions related to the common and preferred stock under the A&R Plan for the nine months ended September 30, 2023 and 2022:

DISCLOSURE OF SHARE-BASED COMPENSATION ARRANGEMENTS BY SHARE-BASED PAYMENT AWARD 

The liability for the 41,430 cash-settled awards and the liability for withheld taxes in connection with the equity awards was approximately $577,000 and $1.0 million at September 30, 2023 and December 31, 2022, respectively, and is included in accrued compensation in the consolidated balance sheets. During the nine months ended September 30, 2022, approximately $13,000 was paid in connection with the cash-settled awards. No amounts were paid in connection with cash-settled awards during the nine months ended September 30, 2023.

Stock-based compensation expense

The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2023 and 2022:

SCHEDULE OF EMPLOYEE SERVICE SHARE-BASED COMPENSATION, ALLOCATION OF RECOGNIZED PERIOD COSTS