STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Share Incentive Plans

2015 Plan

On December 31, 2015, the Company adopted the Stanley Brothers, Inc. 2015 Stock Option Plan (the "2015 Plan"), which provides for grants of incentive stock options and nonqualified stock options to employees (including officers), consultants, and directors. The 2015 Plan, and grants made under the 2015 Plan, were designed to align Shareholder and participant interests. The Company’s board of directors established the terms and conditions of the grants under the 2015 Plan. No further grants are authorized to be made under the 2015 Plan.

2018 Plan

On August 31, 2018, the Company adopted the Charlotte’s Web Holdings, Inc. 2018 Long-Term Incentive Plan (the "2018 Plan"), which provides for grants of stock options, stock appreciation rights, share awards, share units, performance shares, performance units, and other share-based awards (collectively the "Awards") to eligible individuals on the terms and subject to conditions set forth in the 2018 Plan. The 2018 Plan is designed to attract and retain key personnel and service providers. The Company’s board of directors, or appointed administrators, establish the terms and conditions of any grants under the 2018 Plan.

The aggregate number of common shares of the Company as to which share incentive awards may be granted from time to time under both the 2015 Plan and 2018 Plan shall not exceed 15,408,505 shares. The maximum exercise period of any option grant shall not exceed ten years from the date of grant. The share incentive awards vest over a time-based service period, generally a period of one to four years, and are settled in equity. The number of available awards at December 31, 2024, was 7,083,172.

Stock options

Stock options vest over a prescribed service period and are approved by the board of directors on an award-by-award basis. Options have a prescribed service period generally lasting up to four years, with certain options vesting immediately upon issuance. Upon the exercise of any stock options, the Company issues shares to the award holder from the pool of authorized but unissued common shares.

There were no options granted for the year ended December 31, 2024. The fair values of options granted for the year ended December 31, 2023 were determined using a Black-Scholes valuation model, which requires assumptions and judgments regarding stock price, volatility, risk-free interest rates, dividend yields and expected option terms. The Company uses the historical volatility and grant date closing price of its publicly traded shares to estimate the grant date fair value of its stock options. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the "simplified" method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Share-based compensation is recognized net of actual forfeitures when they occur. All share-based compensation costs are recorded in the consolidated statements of operations in selling, general and administrative expense.

The following principal inputs were used in the valuation of awards issued for the year ended December 31, 2023:


	Year Ended December 31,
		2023
Expected volatility		88.8% - 89.5%
Expected term (years)		5.5 – 6.5
Risk-free interest rate		3.4% - 3.5%
Expected dividend yield		0%
Value of underlying share		$0.33 - $0.56

Detail of the number of stock options outstanding for the year ended December 31, 2024 and 2023 under the 2015 and 2018 plans is as follows:


	Number of Options	Weighted- Average Exercise Price per Option		Weighted- Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2023	5,780,134	$	0.75	8.56	$	—
Granted	—	—
Exercised	—	—
Forfeited (and expired)	(2,267,055)	0.56
Outstanding as of December 31, 2024	3,513,079	$	0.88	7.30	$	—

Exercisable/vested as of December 31, 2024	2,721,715	$	0.94	6.98	$	—

For the options outstanding at December 31, 2024, the weighted average remaining contractual life is 7.30 years. There were no options granted during the year ended December 31, 2024.

For the options outstanding at December 31, 2023, weighted average remaining contractual life is 8.56 years. The weighted average grant-date fair value of options granted during the year ended December 31, 2023 was $0.38.

For the year ending December 31, 2024 and 2023 there were no exercise of options, respectively.

Vesting of awards under these plans were generally time based over a period of one to four years. For the 1,918,063 option awards vested during the year ended December 31, 2024, the weighted average grant date fair value was $0.64. For the 1,000,642 option awards vested during the year ended December 31, 2023, the weighted average grant date fair value was $0.72.

Of the 3,513,079 options outstanding at December 31, 2024, the 2015 Plan has 985,012 options outstanding with an exercise price of $0.56, and the remaining 2,528,067 options per the 2018 Plan have an exercise price ranging between $0.32 and $11.92.

Restricted share units

The Company has issued time-based restricted share units to certain employees as permitted under the 2018 Plan. The restricted share units granted vest in accordance with the board-approved agreement, typically over equal installments over one to four years. Upon vesting, one share of the Company’s common shares is issued for each restricted share awarded. The fair value of each restricted share unit granted is equal to the market price of the Company’s shares at the date of the grant. The fair value of shares vested during the year ended December 31, 2024 and 2023 was $1,089 and $1,450, respectively.

Details of the number of restricted share units outstanding under the 2018 Plan is as follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding as of December 31, 2023	7,250,766	$	0.31
Granted	3,256,276	0.21
Forfeited	(1,481,930)	0.23
Vested	(4,540,035)	0.32
Outstanding as of December 31, 2024	4,485,077	$	0.26

Share-based Compensation Expense

Share-based compensation expense for all equity arrangements for the year ended December 31, 2024 and 2023 was $1,520 and $2,100, respectively, included in selling, general and administrative expense in the consolidated statements of operations.

As of December 31, 2024, and 2023, there was approximately $1,164 and $2,656 of total unrecognized share-based compensation expense, related to unvested options granted to employees under the Company’s share option plan that is expected to be recognized over a weighted average period of 1.87 years as of each year ended.