Blüm Holdings Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

STOCK-BASED COMPENSATION

NOTE 14. STOCK-BASED COMPENSATION

NOTE 14 – STOCK-BASED COMPENSATION

2016 & 2018 Equity Incentive Plans

In the first quarter of 2016, the Company adopted the 2016 Equity Incentive Plan. In the fourth quarter of 2018, the Company adopted the 2018 Equity Incentive Plan. On February 14, 2020, the Company amended the number of shares reserved for issuance under the 2018 Equity Incentive Plan to 43,976,425. The following table contains information about the 2016 and the 2018 Equity Incentive Plans as of September 30, 2021:

	Awards Reserved for Issuance		Awards Outstanding

2016 Equity incentive plan		2,000,000		499,953
2018 Equity incentive plan		43,976,425		20,665,587

Stock Options

The following table summarizes the Company’s stock option activity and related information for the nine months ended September 30, 2021:

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value of In-the-Money Options

Options outstanding as of January 1, 2021		17,492,830		$	0.41

Options granted		88,930,019		$	0.23
Options exercised		(2,096,970	)	$	0.05
Options forfeited		(4,584,010	)	$	0.19
Options expired		-		$	-
Options outstanding as of September 30, 2021		99,741,869		$	0.46	9.0 years	$	2,797
Options exercisable as of September 30, 2021		5,593,814		$	0.91	8.4 years	$	1,390

As of September 30, 2021, there was $8.72 million total unrecognized stock-based compensation. Such costs are expected to be recognized over a weighted-average period of approximately 2.8 years.

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period.

The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin 107 to estimate the expected term of share option grants.

The expected stock price volatility assumption was determined by examining the historical volatilities for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, the Company has assumed no dividend yield for purposes of estimating the fair value of the Company stock-based compensation.

Stock-Based Compensation Expense

The following table sets forth the total stock-based compensation expense resulting from stock options and restricted grants of common stock to employees, directors and non-employee consultants in the consolidated statement of operations which are included in selling, general and administrative expenses, within continuing operations:

	(in thousands except for shares / options)

	For the Three Months Ended
	September 30, 2021				September 30, 2020
Type of Award	Number of Shares or Options Granted		Stock-Based Compensation Expense		Number of Shares or Options Granted		Stock-Based Compensation Expense



Stock options		83,020,303	$	780		909,090	$	298

Stock grants:
Employees (common stock)		-		-		-		-
Directors (common stock)		-		-		1,082,700		119
Non–employee consultants (common stock)		-		-		84,615		11

Total stock–based compensation expense			$	780			$	428

	For the Nine Months Ended
	September 30, 2021				September 30, 2020
Type of Award	Number of Shares or Options Granted		Stock-Based Compensation Expense		Number of Shares or Options Granted		Stock-Based Compensation Expense



Stock options		88,930,019	$	1,664		10,559,090	$	1,536

Stock grants:
Employees (common stock)		250,000		67		3,179,544		58	(a)
Directors (common stock)		885,159		213		909,090		19	(b)
Non–employee consultants (common stock)		322,947		32		1,159,615		59

Total stock–based compensation expense			$	1,976			$	1,672

(a) Expense for Q1 grants attributed to 2019 bonuses was recorded in 2019.
(b) clawback of shares granted in 2019.