GrowGeneration Corp.GRWG
GrowGeneration Corp. Stock Compensation Disclosure
9. SHARE-BASED PAYMENTS
Equity Incentive Plans Overview
The Company maintains a long-term incentive plan, the Second Amended and Restated 2018 Equity Incentive Plan, for employees, non-employee members of its Board of Directors (the "Board"), and consultants. The plan allows the Company to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, common stock warrants, or a combination of awards (collectively, "share-based awards").
On January 7, 2018, the Board adopted the 2018 Equity Incentive Plan (the "2018 Plan"), and on April 20, 2018, the shareholders approved the 2018 Plan. On February 7, 2020, the Board approved the amendment and restatement of the 2018 Plan to increase the number of shares issuable thereunder from 2,500,000 to 5,000,000, which amendment was approved by the shareholders on May 11, 2020 (the "First Restated 2018 Plan"). On April 22, 2024, the Board approved another amendment of the First Restated 2018 Plan to increase the number of shares issuable thereunder from 5,000,000 to
6,500,000, which amendment was approved by shareholders on June 20, 2024 (the "Second Restated 2018 Plan"). As of December 31, 2024, there were 1.4 million shares available for issuance under the 2018 Plan.
The 2018 Plan is administered by the Board. The Board may grant options to purchase shares of common stock, stock appreciation rights, restricted stock units, restricted or unrestricted shares of common stock, performance shares, performance units, other cash-based awards and other share-based awards. The Board also has broad authority to determine the terms and conditions of each option or other kind of equity award, adopt, amend and rescind rules and regulations for the administration of the 2018 Plan and amend or modify outstanding options, grants and awards.
No options, stock purchase rights or awards may be made under the 2018 Plan on or after the ten-year anniversary of the adoption of the 2018 Plan by the Board, but the 2018 Plan will continue thereafter while previously granted options, stock appreciation rights or awards remain subject to the 2018 Plan. Options granted under the 2018 Plan may be either "incentive stock options" that are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or "non-statutory stock options" that do not meet the requirements of Section 422 of the Code. The Board will determine the exercise price of options granted under the 2018 Plan. The exercise price of stock options may not be less than the fair market value, on the date of grant, per share of the Company's common stock issuable upon exercise of the option (or 110% of fair market value in the case of incentive options granted to a 10% stockholder). No option may be exercisable for more than ten years (five years in the case of an incentive stock option granted to a 10% stockholder) from the date of grant.
Share-Based Compensation
The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based awards made to employees, non-employee members of the Board, and consultants of the Company, including stock options, restricted stock units, and common stock warrants. The following table presents share-based compensation expense for the years ended December 31, 2024, 2023, and 2022.
| December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Restricted stock units | $ | 2,421 | $ | 3,171 | $ | 3,889 | |||||||||||
| Stock options | — | — | 59 | ||||||||||||||
| Common stock warrants | — | — | 1,019 | ||||||||||||||
| Total | $ | 2,421 | $ | 3,171 | $ | 4,967 | |||||||||||
As of December 31, 2024, the Company had $2.9 million of unamortized share-based compensation for share-based awards, which are expected to be recognized over a weighted average period of 2.7 years.
Restricted Stock Units
The Company issues shares of restricted stock units to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest on the first, second, third, or fourth anniversary of the date of grant, subject to the employee's continuing employment as of that date. Restricted stock units are valued using market value on the grant date.
Restricted stock unit activity for the year ended December 31, 2024 is presented in the following table:
| Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested as of December 31, 2023 | 905 | $ | 5.23 | ||||||||
| Granted | 1,224 | $ | 2.14 | ||||||||
| Vested | (517) | $ | 5.28 | ||||||||
| Forfeited | (209) | $ | 4.88 | ||||||||
| Nonvested as of December 31, 2024 | 1,403 | $ | 2.57 | ||||||||
The weighted-average grant-date fair value of restricted stock units granted during the years ended December 31, 2024, 2023 and 2022 was $2.14, $3.73, and $8.85, respectively.
Stock Options
The table below summarizes all option activity under all plans during the year ended December 31, 2024:
| Options | Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Weighted- Average Grant Date Fair Value | |||||||||||||||||||
| Outstanding, vested and exercisable as of December 31, 2023 | 577 | $ | 4.01 | 0.95 | $ | 2.25 | |||||||||||||||||
| Granted | — | $ | — | $ | — | ||||||||||||||||||
| Exercised | — | $ | — | $ | — | ||||||||||||||||||
| Forfeited or expired | (561) | $ | 3.99 | $ | 2.24 | ||||||||||||||||||
| Outstanding, vested and exercisable as of December 31, 2024 | 16 | $ | 4.63 | 0.36 | $ | 2.56 | |||||||||||||||||
The aggregate intrinsic value of stock options is calculated as the amount by which the fair value of the underlying stock exceeds the exercise price of the stock options. The aggregate intrinsic value of stock options outstanding, vested, and exercisable was less than $0.1 million for the years ended December 31, 2024 and 2023, and $0.1 million for the year ended December 31, 2022.
Liability Awards
In August 2022, the Company issued certain stock awards classified as liabilities based on the guidance set forth at ASC 480, Distinguishing Liabilities from Equity, and ASC 718, Compensation-Stock Compensation. These awards entitled the employees to receive an equity award with a specified dollar value of common stock on future dates ranging from June 15, 2023, through June 15, 2025. The awards generally vested over three years subject to the employee's continued employment.
On June 15, 2023, the three employees subject to these awards entered into new employment agreements which superseded the prior agreements and removed the liability awards from their compensation package. In accordance with ASC 718-20-35-2A through 718-20-35-9, these awards were evaluated and accounted for as modified awards. The liability of $0.7 million was relieved to additional paid-in capital, and the incremental expense of $0.1 million will be recognized over the remaining term of the modified awards.
The expense related to liability-classified stock awards for the years ended December 31, 2023 and 2022 was $0.2 million, and $0.5 million, respectively. As of December 31, 2024 and 2023, the Company no longer had any outstanding liability-classified stock awards.
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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.