STOCK INCENTIVE PLANS

9 Months Ended

Sep. 30, 2022

STOCK INCENTIVE PLANS

STOCK INCENTIVE PLANS

NOTE 17 – STOCK INCENTIVE PLAN

On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan” or the “Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 28, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted.

The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its stockholders to provide additional incentives for certain employees, including executive officers, and non-employee members of the Board by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock awards, restricted stock units, cash-based awards and other stock-based Awards (“Awards”). The Plan will continue in effect until its termination by the Compensation Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date.

The Company issued 1,351,688 RSUs to board members and 200,000 Nonstatutory Stock Options (“NSOs”) to an employee of the Company and did not issue any incentive stock options (“ISOs”) or restricted common stock (“RCS”) during the nine months ended September 30, 2022. The Company issued 650,801 NSOs to employees of the Company and did not issue any ISOs, RCS or RSUs during the nine months ended September 30, 2021. Vesting periods for awarded RCS, ISOs and NSOs range from immediate to quarterly over a 4-year period. Vesting period for RSUs is the earlier of (i) the day prior to the next annual meeting of stockholders following the date of grant, and (ii) one (1) year from the Date of Grant. For ISOs and NSOs awarded, the term to exercise their ISO or NSO is 10 years.

The Company issued 1,518,194 stock options to a consultant that contains performance-based vesting conditions where revenue milestones are to be met over a certain period. Such stock option awards would be valued using a Monte Carlo simulation based on the probability of the performance condition being met and the underlying expense would be recognized as the associated vesting conditions are met. No stock options that contain performance-based vesting conditions vested during the nine months ended September 30, 2022 and it is improbable that the performance-based condition will be met.

Stock Options

The Company’s stock option activity was as follows:

	Options			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life (years)
Outstanding, December 31, 2020		6,285,792		$	1.52		8.86
Granted		1,555,526			0.95		9.25
Exercised		-			-		-
Forfeited/Expired		(611,250	)		0.97		-
Outstanding, December 31, 2021		7,230,068		$	1.45		8.27
Granted		200,000			0.34		9.81
Exercised		-			-		-
Forfeited/Expired		(2,067,519	)		1.44		-
Outstanding, September 30, 2022		5,362,549		$	1.41		7.62
Exercisable at September 30, 2022		3,173,469		$	1.55		7.13

Range of Exercise Price	Number of Awards		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Awards Exercisable		Weighted Average Exercise Price
$0.34 - $4.01		5,362,549		7.62	$	1.41		3,173,469	$	1.55
		5,362,549		7.62	$	1.41		3,173,469	$	1.55

The aggregate intrinsic value of options outstanding and exercisable at September 30, 2022 was $0.

The aggregate grant date fair value of options granted during the nine months ended September 30, 2022 and 2021 amounted to $0.05 million and $1.1 million, respectively. Compensation expense related to stock options for the three and nine months ended September 30, 2022 was $0.2 million and $0.9 million, respectively. Compensation expense related to stock options was $0.5 million and $1.2 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the total unrecognized fair value compensation cost related to unvested stock options was $0.6 million, which is to be recognized over a remaining weighted average period of approximately 0.9 years.

The weighted-average fair value of options granted during the three months ended September 30, 2022 and 2021, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows:

	September 30, 2022			September 30, 2021
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		2.75	%	-		%
Expected stock price volatility		70.0	%	-		%
Expected dividend payout		-			-
Expected option life (in years)		7			-
Expected forfeiture rate		0	%	-		%

Restricted Stock

Subject to the restrictions set with respect to the particular Award, a recipient of restricted stock generally shall have the rights and privileges of a shareholder, including the right to vote the restricted stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the restricted stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of restricted stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Board Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the restricted stock and, if the restricted stock is forfeited, the recipient shall have no right to the dividends.

The Company’s restricted stock activity was as follows:

	Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2020		50,000		$	1.60
Granted		338,443			1.20
Vested		(338,443	)		1.26
Forfeited/Expired		-			-
Non-vested, December 31, 2021		-			-
Granted		921,664			0.31
Vested		(921,664	)		0.31
Forfeited/Expired		-			-
Non-vested, September 30, 2022		-		$	-

Compensation expense related to restricted shares for the three and nine months ended September 30, 2022 was $0.2 million and $0.2 million, respectively. Compensation expense related to restricted shares for the three and nine months ended September 30, 2021 was $0.1 million and $0.4 million, respectively.

Restricted Stock Units

The terms and conditions of a grant of RSUs shall be determined by the Board or a Board Committee. No shares of common stock shall be issued at the time a RSU is granted. A recipient of RSUs shall have no voting rights with respect to the RSUs. Upon the expiration of the restrictions applicable to a RSU, the Company will either issue to the recipient, without charge, one share of common stock per RSU or cash in an amount equal to the fair market value of one share of common stock.

The Company’s restricted stock unit activity was as follows:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding, December 31, 2020		431,578		$	1.33
Granted		629,338			0.74
Vested		(411,027	)		1.33
Forfeited/Expired		(61,654	)		1.33
Outstanding, December 31, 2021		588,235		$	0.70
Granted		1,351,688			0.29
Vested		(588,235	)		0.70
Forfeited/Expired		-			-
Outstanding, September 30, 2022		1,351,688		$	0.29

At September 30, 2022 and December 31, 2021, the Company had approximately $0.4 million and $0.4 million, respectively, of total unrecognized compensation expense related to restricted stock units. As of September 30, 2022 and December 31, 2021, compensation will be recognized over a weighted-average period of approximately 0.75 years and 0.85 years, respectively.

Compensation expense related to restricted stock units for the three and nine months ended September 30, 2022 was $0.1 million and $0.3 million, respectively. Compensation expense related to restricted stock units was $0.2 million and $0.4 million for the three and nine months ended September 30, 2021, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses.