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STOCK COMPENSATION

12 Months Ended

Dec. 31, 2021

NOTE 13 – STOCK COMPENSATION

Grants made under the Equity Incentive Plans must be approved by the Company’s board of directors. The total number of underlying shares of the Company’s Class A common stock available for grant to directors, officers, key employees and consultants of the Company or a subsidiary of the Company under the Company’s 2021 Equity Incentive Plan and 2014 Equity Inventive Plan, as amended (together “Equity Incentive Plans”), in the aggregate were 5,000,000 and 725,381 shares, respectively.

The 2021 Equity Incentive Plan was approved by the Company’s Board on April 12, 2021 and approved by the shareholders at the Company’s 2021 Annual Shareholders Meeting held on June 25, 2021.

On April 15, 2020, the Company’s 2014 Equity Incentive Plan was amended, whereby the board of directors approved increasing the shares available for issuance under the 2014 Equity Incentive Plan by 3,700,000 shares. The Company obtained shareholder approval of the aforementioned action at the Company’s 2020 annual meeting of stockholders, which was held on September 4, 2020. The number of underlying shares available, under the 2014 Equity Incentive Plan, as amended, was 6,390,438.

Stock Options

Under our Equity Incentive Plans, an employee may receive an award of stock grants that provides the opportunity in the future to purchase the Company’s shares at the market price of our stock on the date the award is granted (strike price). The options become exercisable over a range of immediately vested to four-year vesting periods and expire five years from the grant date, unless stated differently in the option agreements, if they are not exercised. Stock options have no financial statement effect on the date they are granted but rather are reflected over time through compensation expense. We record compensation expense based on the estimated fair value of the awards which is amortized as compensation expense on a straight-line basis over the vesting period. Accordingly, total

expense related to the award is reduced by the fair value of options that are forfeited by employees that leave the Company prior to vesting.

Following is a summary of the option activities during the years ended December 31, 2021 and 2020:


				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Units	Exercise Price		Term (in years)
Outstanding, December 31, 2019	2,384,688	$	3.35	4.15
Granted	2,956,000	$	0.76
Exercised	(3,751)	$	0.70
Cancelled	(486,153)	$	3.58
Outstanding, December 31, 2020	4,850,784	$	1.76	3.51
Granted	—		—
Exercised	(492,460)	$	0.84
Cancelled	(304,208)		1.01
Outstanding, December 31, 2021	4,054,116	$	1.92	2.29
Exercisable, December 31, 2021	2,836,366	$	2.36	1.85

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model. As of December 31, 2021, and 2020, the options had an intrinsic value of approximately $1.9 million and $2.7 million, respectively.

There were no issuances of stock options in 2021. The issuances in 2020 are as follows:

On January 2, 2020, the Company granted 100,000 stock options each, for a total of 300,000 options to purchase common stock, to its President, Chairman and Chief Executive Officer, its Chief Commercial Officer and its Chief Operating Officer; such options have an exercise price of $1.15 per share, and vest monthly over one-year period. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $264,000 on the grant date that was calculated using the Black-Scholes option-pricing model.

On January 13, 2020, the Company granted 50,000 stock options to Mark Elliott as part of his new employment agreement as the Company’s Chief Commercial Officer with an exercise price of $1.20 per share, which options vest monthly over one-year period. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $67,000 on the grant date that was calculated using the Black-Scholes option-pricing model.

On April 15, 2020, the Company granted an aggregate of 2,550,000 stock options in total to its employees with an exercise price of $0.70 per share vesting monthly over four years. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $1.5 million on the grant date.

On April 20, 2020, the Company granted an aggregate of 20,000 stock options in total to a new employee with an exercise price of $0.67 per share vesting quarterly over four years. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $11,000 on the grant date.

On September 17, 2020, the Company granted an aggregate of 16,000 stock options in total to an employee with an exercise price of $1.46 per share vesting annually over four years. The expiration date of these options is ten years from the grant date. These options had an aggregated fair value of approximately $20,000 on the grant date.

On November 23, 2020, the Company granted an aggregate of 10,000 stock options in total to an employee with an exercise price of $1.45 per share vesting annually over four years. The expiration date of these options is ten years from the grant date. These options had an aggregated fair value of approximately $13,000 on the grant date.

On December 11, 2020, the Company granted an aggregate of 10,000 stock options in total to an employee with an exercise price of $1.95 per share vesting annually over four years. The expiration date of these options is ten years from the grant date. These options had an aggregated fair value of approximately $14,000 on the grant date.

Variables used in the Black-Scholes option-pricing model for options granted during the twelve months ended December 31, 2020 include: (1) discount rate of 0.23% – 1.61%, (2) expected life, using simplified method, of 3- 4 years, (3) expected volatility of 136-148%, and (4) zero expected dividends.

Restricted Stock Units

Under our Equity Incentive Plans, the Company may grant restricted stock units (“RSUs”) to certain employees, contractors and non-employee directors. Upon granting the RSUs, the Company records a fixed compensation expense equal to the fair market value of the underlying shares of RSUs granted on a straight-line basis over the requisite services period for the RSUs. Compensation expense related to the RSUs is reduced by the fair value of units that are forfeited by employees that leave the Company prior to vesting. The restricted stock units vest over a range of immediately vested to four-year vesting periods in accordance with the terms of the applicable RSU grant agreement.

The following is a summary of the restricted stock activities during the years ended December 31, 2021.


		Weighted
		Average
		Grant Date Fair
	Number of Units	Value
Outstanding, December 31, 2020	2,721,347	$	1.62
Granted	1,019,583		2.81
Vested	(1,498,492)		2.18
Forfeited	(268,491)		1.66
Outstanding, December 31, 2021	1,973,947	$	1.81

2021 Grants

On February 24, 2021, the Company granted an aggregate of 130,547 RSUs to its board members. These RSUs vest ratably over one year and had an aggregated fair value of approximately $374,000 on the grant date.

In addition, on March 20, 2021, the Company granted an aggregate of 875,245 shares of restricted common stock to Michael Pope, the Company’s CEO and Chairman, pursuant to his employment agreement. These shares were issued pursuant to the 2014 Equity Incentive Plan, vest ratably over one year, are issued monthly as they vest, and had an aggregated fair value of approximately $2.5 million on the grant date.

2020 Grants

On March 20, 2020, the Company granted an aggregate of 186,484 shares of restricted common stock to Michael Pope, CEO pursuant to his employment agreement. These shares vest ratably over one year and had an aggregated fair value of approximately $76,000 on the grant date.

On June 30, 2020, the Company granted an aggregate of 108,696 RSUs to new board members. These RSUs vest over one year and had an aggregated fair value of approximately $100,000 on the grant date.

On September 18, 2020, the Company granted an aggregate of 34,483 RSUs to a new employee. These RSUs vest over four years and had an aggregated fair value of approximately $50,000 on the grant date.

On September 25, 2020, the Company granted an aggregate of 2,725,400 RSUs to its new employees retained in relation to the Sahara acquisition. These RSUs vest over four years and had an aggregated fair value of approximately $4.5 million on the grant date.

On October 1, 2020, the Company granted an aggregate of 20,000 RSUs to a new employee. These RSUs vest over four years and had an aggregated fair value of approximately $37,000 on the grant date. On October 19, 2020, the Company granted an aggregate of 18,634 RSUs to a new employee. These RSUs vest over four years and had an aggregated fair value of approximately $30,000 on the grant date.

Warrants

Following is a summary of the warrant activities during the years ended December 31, 2021 and 2020:


				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Units	Exercise Price		Term (in years)

Outstanding, December 31, 2019	350,000	$	2.20	2.11
Granted	20,000	$	0.70	—
Cancelled	(5,000)	$	4.76	—
Outstanding, December 31, 2020	365,000	$	1.44	1.27
Granted	2,043,291		2.00	5.00
Exercised	(295,000)		0.45	0.28
Outstanding, December 31, 2021	2,113,291	$	2.00	4.88
Exercisable, December 31, 2021	58,750	$	6.66	1.05

2021 Warrants

On December 31, 2021, the Company granted Whitehawk, Inc., 2,043,291 warrants, in conjunction with the issuance of a loan credit facility to the Company. The warrants had an exercise price of $2.00 per share and include a provision that allows for the exercise price to be adjusted based on the Company’s stock price as of March 31, 2022. The expiration period for these warrants is five years from the issuance date. The warrants had an aggregated fair market value of approximately $3.1 million on the grant date.

2020 Warrants

On April 20, 2020, the Company granted 20,000 warrants to Ryan Legudi, the managing director of Stemify, as part of his compensation with an exercise price of $0.70 per share, which warrants vest quarterly over four-year period. The expiration of these warrants is five years from the grant date. The warrants had an aggregated fair market value of approximately $11,000 on the grant date.

Stock compensation expense

For the year ended December 31, 2021 and 2020, the Company recorded the following stock compensation in general and administrative expense (in thousands):


	2021		2020
Stock options	$	660	$	1,205
Restricted stock units		3,399		421
Warrants		1		2
Total stock compensation expense	$	4,060	$	1,628

As of December 31, 2021, there was approximately $4.3 million of unrecognized compensation expense related to unvested options, RSU’s, and warrants, which will be amortized over the remaining vesting period. Of that total, approximately $2.0 million is estimated to be recorded as compensation expense in 2022.