CEA Industries Inc. Stock Compensation Disclosure
Directors Remuneration
During the year ended December 31, 2024
On December 17,2024, the Company issued an RSU grant of shares of common stock under the 2021 Equity Incentive Plan to newly elected independent director. The RSUs were granted as an equity retention award pursuant to the Company’s compensation plan for independent directors. The award was issued such that 50% of the RSUs vested upon grant and the remaining 50% vested on the one-year anniversary of the award. A total of shares of the Company’s common stock were issued in settlement of the RSUs effective December 17, 2024, the date of the grant.
On January 2, 2024, the Company issued an RSU grant of shares of common stock under the 2021 Equity Incentive Plan to three of its four independent directors. Mr. Shipley declined to receive the RSUs which he was entitled to receive. The RSUs were granted as an equity retention award pursuant to the Company’s compensation plan for independent directors effective January 17, 2022 and vested immediately on the grant date. A total of shares of the Company’s common stock were issued in settlement of the RSUs.
CEA Industries Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(in US Dollars except share numbers)
During the year ended December 31, 2023
On January 3, 2023, the Company issued an RSU grant of shares of common stock under the 2021 Equity Incentive Plan to each of its four independent directors. The RSUs were granted as an equity retention award pursuant to the Company’s compensation plan for independent directors effective January 17, 2022 and vested immediately on the grant date. A total of shares of the Company’s common stock were issued in settlement of the RSUs.
Subsequent Events
As further discussed in Note 14 Subsequent Events below, on January 2, 2025, the Company issued an RSU grant of shares of common stock under the 2021 Equity Incentive Plan to each of its three independent directors who served the entire year of 2024. The RSUs were granted as an equity retention award pursuant to the Company’s compensation plan for independent directors effective January 2, 2025 and vested immediately on the grant date. A total of shares of the Company’s common stock were issued in settlement of the RSUs.
Revised Compensation Plan for Directors
On December 16, 2024, the Board of Directors revised the previously adopted compensation plan. This plan supersedes the plan adopted on January 17, 2022. The Plan is effective retroactively for the current independent directors and for independent directors elected or appointed after the Effective Date.
At the time of initial election or appointment, each independent director will receive an equity retention award in the form of restricted stock units (“RSUs”). The aggregate value of the RSUs at the time of grant will be $, with the number of shares underlying the RSUs to be determined based on the closing price of the Company’s common stock on the trade date immediately prior to the date of grant.
In addition, on the first business day of January each year, each independent director who was not initially appointed or elected in the previous year will receive an equity retention award in the form of RSUs. The aggregate value of the RSUs at the time of grant will be $, with the number of shares underlying the RSUs to be determined based on the closing price of the Company’s common stock on the trade date immediately prior to the date of grant. These RSUs will be fully vested at date of grant.
There is no additional compensation paid to members of any committee of the Board. Directors who are also executives of the Company, serving on the Board, do not receive compensation for their Board service.
All the independent directors, Messrs. Shipley, Etten, Mariathasan, and Tarallo are subject to the Plan.
Each independent director is responsible for the payment of any and all income taxes arising with respect to the issuance of any equity awarded under the plan, including the exercise of any non-qualified stock options.
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 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.
As of December 31, 2024, of the shares authorized under the 2017 Equity Plan, relate to restricted shares issued, relate to outstanding non-qualified stock options and shares remain available for future equity awards.
CEA Industries Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(in US Dollars except share numbers)
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 shares of common stock. The 2021 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.
Equity Incentive Plan Issuances During 2024
| - | Issued shares of common stock in settlement of restricted stock units issued to a newly elected independent director. The grant was for a total of shares, 50% of which vested immediately and the remaining units will vest in one year. |
| - | Issued shares of its common stock in settlement of restricted stock units issued to three of its independent directors under the 2021 Equity Incentive Plan, pursuant to the Director Compensation plan adopted on January 17, 2022. |
| - | non-qualified stock options were forfeited that had previously been issued under the 2021 Equity Incentive Plan. |
Share-based compensation costs (including expenses from the accrued compensation liabilities related to the annual incentive awards subsequently settled in non-qualified stock options) totaled $ and $ for the years ended December 31, 2024 and 2023, respectively. Such share-based compensation costs are classified in the Company’s consolidated financial statements in the same manner as if such compensation was paid in cash.
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Share-based compensation expense included in: | ||||||||
| Cost of revenue | $ | $ | 4,898 | |||||
| Advertising and marketing expenses | 1,113 | |||||||
| Product development costs | 3,570 | |||||||
| Selling, general and administrative expenses | 82,457 | 178,033 | ||||||
| Total share-based compensation expense included in consolidated statement of operations | $ | 82,457 | $ | 187,615 | ||||
As of December 31, 2024, of the shares authorized under the 2021 Equity Plan, relate to restricted shares issued, relate to outstanding non-qualified stock options, relate to outstanding incentive stock options, related to outstanding restrictive stock units, and shares remain available for future equity awards.
There was $ in unrecognized compensation expense for unvested restricted stock units at December 31, 2024 which will be recognized over approximately year.
As further discussed in Note 14 Subsequent Events below, effective January 2, 2025, the Company issued shares of common stock in settlement of restricted stock units issued to three directors that vested immediately.
CEA Industries Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(in US Dollars except share numbers)
Restricted Stock Awards
No shares of restricted stock were issued during the year ended December 31, 2024 or the year ended December 31, 2023.
Stock Options
The Company uses the Black-Scholes Model to determine the fair value of options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of option awards.
The Company determines the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year. No stock options were issued during the year ended December 31, 2024. During the year ended December 31, 2023, the valuation assumptions used to determine the fair value of each option award on the date of grant were: expected stock price volatility %; expected term of years and risk-free interest rate %.
Employee and Consultant Options
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding, December 31, 2022 | 16,006 | $ | 107.28 | $ | ||||||||||||
| Granted | 11,541 | $ | 10.80 | $ | - | |||||||||||
| Exercised | $ | - | $ | - | ||||||||||||
| Forfeited | (1,691 | ) | $ | 35.76 | $ | - | ||||||||||
| Expired | (687 | ) | $ | 10.68 | - | $ | - | |||||||||
| Outstanding, December 31, 2023 | 25,169 | $ | 70.44 | $ | ||||||||||||
| Granted | $ | - | $ | - | ||||||||||||
| Exercised | $ | - | $ | - | ||||||||||||
| Forfeited | (3,808 | ) | $ | 38.77 | - | $ | - | |||||||||
| Expired | $ | - | $ | - | ||||||||||||
| Outstanding, December 31, 2024 | 21,361 | $ | 76.04 | $ | ||||||||||||
| Exercisable, December 31, 2024 | 21,361 | $ | 76.04 | $ | ||||||||||||
CEA Industries Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(in US Dollars except share numbers)
| | Number of Options | Weighted Average Grant-Date Fair Value | Aggregate Intrinsic Value | Grant-Date Fair Value | ||||||||||||
| Nonvested, December 31, 2022 | 2,396 | $ | 60.36 | $ | $ | 144,643 | ||||||||||
| Granted | 11,541 | $ | 10.56 | $ | - | $ | 121,870 | |||||||||
| Vested | (13,076 | ) | $ | 11.04 | $ | - | $ | (144,359 | ) | |||||||
| Forfeited | (28 | ) | $ | 80.04 | $ | - | $ | (2,223 | ) | |||||||
| Expired | $ | $ | - | $ | ||||||||||||
| Nonvested, December 31, 2023 | 833 | $ | 80.04 | $ | (21,344 | ) | $ | 21,800 | ||||||||
| Granted | $ | $ | - | $ | ||||||||||||
| Vested | (417 | ) | $ | 26.16 | $ | 10,672 | $ | (10,900 | ) | |||||||
| Forfeited | (417 | ) | $ | 26.16 | $ | 10,672 | $ | (10,900 | ) | |||||||
| Expired | $ | $ | - | $ | ||||||||||||
| Nonvested, December 31, 2024 | $ | $ | $ | |||||||||||||
For the years ended December 31, 2024 and 2023, the Company recorded $ and $ as compensation expense related to vested options issued to employees and consultants, net of forfeitures, respectively. As of December 31, 2024, there was unrecognized share-based compensation related to unvested options.
Director Options
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value ($000) | |||||||||||||
| Outstanding, December 31, 2023 | 4,760 | $ | 113.34 | $ | ||||||||||||
| Granted | $ | $ | - | |||||||||||||
| Exercised | $ | - | $ | - | ||||||||||||
| Forfeited/Cancelled | $ | - | $ | - | ||||||||||||
| Expired | $ | - | $ | - | ||||||||||||
| Outstanding, December 31, 2023 | 4,760 | $ | 113.34 | $ | ||||||||||||
| Granted | $ | $ | - | |||||||||||||
| Exercised | $ | - | $ | - | ||||||||||||
| Forfeited/Cancelled | $ | - | $ | - | ||||||||||||
| Expired | $ | - | $ | - | ||||||||||||
| Outstanding, December 31, 2024 | 4,760 | $ | 113.34 | $ | ||||||||||||
| Exercisable, December 31, 2024 | 4,760 | $ | 113.34 | $ | ||||||||||||
There was non-vested non-qualified stock option activity for directors for the years ended December 31, 2023 and December 31, 2024.
CEA Industries Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(in US Dollars except share numbers)
Restricted Stock Units
| Number of Units | Weighted Average Grant-Date Fair Value | Aggregate Intrinsic Value | ||||||||||
| Outstanding, December 31, 2022 | 81 | $ | 89.04 | $ | ||||||||
| Granted | 9,919 | $ | 10.08 | $ | ||||||||
| Vested and settled with share issuance | (10,200 | ) | $ | 12.24 | $ | |||||||
| Forfeited/canceled | $ | $ | ||||||||||
| Outstanding, December 31, 2023 | $ | 8.18 | $ | |||||||||
| Granted | 14,422 | $ | 6.93 | $ | 17,104 | |||||||
| Vested and settled with share issuance | (12,893 | ) | $ | 6.79 | $ | (17,189 | ) | |||||
| Forfeited/canceled | $ | $ | ||||||||||
| Outstanding, December 31, 2024 | 1,529 | $ | 8.18 | $ | ||||||||
For the years ended December 31, 2024 and 2023, the Company recorded $ and $ as compensation expense related to vested RSUs issued to employees, directors and consultants. As of December 31, 2024, there was $ in unrecognized share-based compensation related to unvested RSUs.
As further discussed in Note 14 Subsequent Events below, effective January 2, 2025, the Company issued shares of common stock in settlement of restricted stock units issued to three directors that vested immediately.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 27, 2025 | Showing above |
| 2022 | Mar 28, 2023 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.