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Equity Incentive Plans
 9 Months Ended
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Equity Incentive Plans

Note 9 – Equity Incentive Plans

 

2017 Equity Incentive Plan

 

Under the Company’s 2017 Equity Incentive Plan, as may be modified and amended by the Company from time to time (the “2017 Equity Plan”), the Board of Directors (the “Board”) (or the compensation committee of the Board, if one is established) may award stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017 Equity Plan allocates 333,333 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the 2017 Equity Plan. If any shares subject to an award are forfeited, expire, or otherwise terminate without issuance of such shares, the shares will, to the extent of such forfeiture, expiration, or termination, again be available for awards under the 2017 Equity Plan.

 

During the nine months ended September 30, 2022, no shares or options were issued, and 13,569 options were cancelled under the 2017 Plan.

 

As of September 30, 2022, of the 333,333 shares authorized under the 2017 Plan for equity awards, 163,692 shares have been issued, awards related to 148,669 options remain outstanding, and 20,972 shares remain available for future equity awards.

 

2021 Equity Incentive Plan

 

On March 22, 2021, the Board approved the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which was approved by the stockholders on July 22, 2021. The 2021 Equity Plan permits the Board to grant awards of up to 666,667 shares of common stock. The 2021 Equity Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), non-qualified stock options, stock appreciation rights (“SARs”), restricted stock awards and restricted stock unit awards and other equity linked awards to our employees, consultants, and directors. If an equity award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the award receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that may be issued pursuant to this Plan.

 

During the nine months ended September 30, 2022, the Company issued 3,367 shares of its common stock to two new independent directors under the 2021 Equity Incentive Plan, pursuant to the Director Compensation plan adopted in January 2022.

 

During the nine months ended September 30, 2022, the Company granted awards for 22,167 non-qualified stock options to newly hired employees and 1,666 stock options were cancelled under the 2021 Equity Incentive Plan as described below.

 

 

CEA Industries Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in US Dollars except share numbers)

(Unaudited)

 

During the nine months ended September 30, 2022, the Company granted awards for 6,250 non-qualified stock options to directors under the 2021 Equity Incentive Plan, pursuant to the Director Compensation plan adopted in August of 2021.

 

On April 1, 2022, 31,793 non-qualified stock options were issued to 21 employees in respect of the Company’s 2021 Equity Incentive Plan. The options vested immediately, have a term of 10 years and an exercise price of $2.51. The expense in respect of this issuance had been fully accrued in 2021.

 

As of September 30, 2022, of the 666,667 shares authorized under the 2021 Equity Plan, 10,170 relate to restricted shares issued, 64,535 relate to outstanding non-qualified stock options, 40,816 relate to outstanding incentive stock options, 3,367 relate to outstanding restricted stock units and 547,779 shares remain available for future equity awards.

 

There was $114,825 in unrecognized compensation expense for unvested non-qualified stock options, incentive stock options and restricted stock units at September 30, 2022 which will be recognized over approximately 3 years.

 

Non-Qualified and Incentive Stock Options

 

A summary of the non-qualified stock options and incentive stock options granted to employees and consultants under the 2017 and 2021 Equity Plans during the nine months ended September 30, 2022, are presented in the table below:

 

   Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Aggregate Intrinsic Value 
                 
Outstanding, December 31, 2021   158,174   $10.99    7.60   $                 - 
Granted   53,960   $2.90    9.50   $- 
Exercised   -   $-    -   $- 
Forfeited   (15,235)  $8.58    9.30   $- 
Expired   -   $-    -   $- 
Outstanding, September 30, 2022   196,899   $8.95    7.90   $- 
Exercisable, September 30, 2022   149,719   $9.92    7.50   $- 

 

During the nine months ended September 30, 2022, we issued a total of 53,960 stock options to employees as follows:

 

●7,167 stock options were issued to four new employees. The vesting of these options ranges from immediate to three years, have a term of 10 years and exercise prices ranging from $1.42 to $6.90.
●15,000 stock options were issued to our newly appointed Chief Financial Officer. The options vest as follows: 2,000 vested immediately, 3,000 on March 11, 2023, 5,000 on March 11, 2024, and 5,000 on March 11, 2025. The options have a term of 10 years and an exercise price of $2.20.
●31,793 stock options were issued to 21 employees in respect of the Company’s 2021 Annual Incentive Awards which vested immediately. The options have a term of 10 years and an exercise price of $2.51.
●During the nine months ended September 30, 2022, 3,568 fully vested stock options and 11,667 unvested stock options were forfeited following the departure of three former employees.

 

  

CEA Industries Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in US Dollars except share numbers)

(Unaudited)

 

A summary of non-vested non-qualified stock options activity for employees and consultants under the 2017 and 2021 Equity Plans for the nine months ended September 30, 2022, are presented in the table below:

 

  Number of Options   Weighted Average Grant-Date Fair Value   Aggregate Intrinsic Value   Grant-Date Fair Value 
                    
Nonvested, December 31, 2021   41,846   $7.65   $                   -   $320,122 
Granted   53,960   $2.86   $-   $153,054 
Vested   (36,960)  $2.68   $-   $(97,811)
Forfeited   (11,667)  $9.01   $-   $(105,120)
Expired   -   $-   $-   $- 
Nonvested, September 30, 2022   47,179   $5.73   $-   $270,245 

 

For the nine months ended September 30, 2022 and September 30, 2021, the Company recorded $129,733 and $29,881 as compensation expense related to vested options issued to employees and consultants, net of forfeitures, respectively.

 

A summary of the non-qualified stock options granted to directors under the 2017 Equity Plan and the 2021 Equity Plan, during the nine months ended September 30, 2022, are presented in the table below:

 

   Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Aggregate Intrinsic Value ($000) 
                 
Outstanding, December 31, 2021   50,872   $10.02    6.6   $- 
Granted   6,250   $4.80    9.3   $- 
Exercised   -   $-    -   $- 
Forfeited/Cancelled   -   $-    -   $- 
Expired   -   $-    -   $- 
Outstanding, September 30, 2022   57,122   $9.44    6.2   $- 
Exerciseable, September 30, 2022   57,122   $9.44    6.2   $- 

 

 

CEA Industries Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in US Dollars except share numbers)

(Unaudited)

 

A summary of non-vested non-qualified stock options activity for directors under the 2017 Equity Plan and the 2021 Equity Plan, for the nine months ended September 30, 2022, are presented in the table below:

 

  Number of Options   Weighted Average Grant-Date Fair Value   Aggregate Intrinsic Value   Grant-Date Fair Value 
                    
Nonvested, December 31, 2021   -   $-   $                  -   $- 
Granted   6,250   $4.80   $-   $29,656 
Vested   (6,250)  $4.80   $-   $(29,656)
Forfeited   -   $-   $-   $- 
Expired   -   $-   $-   $- 
Nonvested, September 30, 2022   -        $-   $- 

 

During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred $29,656 and $21,174 respectively, as compensation expense related to 6,250 and 8,205 vested options, respectively, issued to directors.

 

Effective January 3, 2022, the Company issued 6,250 non-qualified stock options under the 2021 Equity Plan to its then current directors. The options vested upon grant. The options have a term of 10 years and an exercise price equal to the closing price of the Company’s common stock on The OTC Markets on the day immediately preceding the grant date.

 

Restricted Stock Units

 

Effective January 17, 2022, the Company issued 6,734 restricted stock units (RSUs) under the 2021 Equity Plan to newly appointed directors. 3,367 of these RSUs vested upon grant and the remining 3,367 will vest on January 17, 2023.

 

The Company recorded $42,413 during the nine months ended September 30, 2022, as compensation expense related to vested RSUs issued to directors.

 

  Number of Units   Weighted Average Grant-Date Fair Value   Aggregate Intrinsic Value 
               
Outstanding, December 31, 2021   -   $-   $                        - 
Granted   6,734   $7.42   $- 
Vested and settled with share issuance   (3,367)  $7.42   $- 
Forfeited/canceled   -   $-   $- 
Outstanding, September 30, 2022   3,367   $7.42   $- 

 

 

CEA Industries Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in US Dollars except share numbers)

(Unaudited)