Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.19.3
Stock-Based Compensation
9 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

Note 4 — Stock-Based Compensation

 

PAVmed Inc. 2014 Long-Term Incentive Equity Plan

 

The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (“PAVmed Inc. 2014 Equity Plan”), adopted by the Company’s board of directors and stockholders in November 2014, is designed to enable the Company to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The PAVmed Inc. 2014 Equity Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, and other stock-based awards subject to limitations under applicable law. All awards under the PAVmed Inc. 2014 Equity Plan are subject to approval by the compensation committee of the Company’s board of directors.

 

A total of 7,951,081 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, with 2,598,406 shares available for grant as of September 30, 2019, exclusive of 500,854 PAVmed Inc. stock options previously granted outside the PAVmed Inc. 2014 Equity Plan.

 

PAVmed Inc 2014 Equity Plan - Stock Options

 

PAVmed Inc. 2014 Equity Plan - Stock Options   Number Stock Options     Weighted Average Exercise Price     Aggregate
Intrinsic Value
   

Remaining

Contractual

Term

(Years)

 
Outstanding stock options at December 31, 2018     3,327,140     $ 3.68     $     —          
Granted     1,875,000     $ 1.00                  
Exercised         $                  
Forfeited     (48,611 )   $ 5.00                  
Outstanding stock options at September 30, 2019     5,153,529     $ 2.70     $       8.4  
Vested and exercisable stock options at September 30, 2019     2,942,544     $ 3.62     $       7.7  
Unvested stock options at September 30, 2019     2,210,985     $ 1.46     $          

 

The aggregate intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of September 30, 2019 and December 31, 2018 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price.

 

During the nine months ended September 30, 2019, an aggregate of 1,875,000 stock options were granted under the PAVmed Inc. 2014 Equity Plan, each with a ten year contractual term from date-of-grant, and vesting ratably on a quarterly basis, generally over a 36 month period.

 

PAVmed Inc 2014 Equity Plan - Restricted Stock Awards

 

On March 15, 2019, a total of 700,000 restricted stock awards were granted to employees under the PAVmed Inc. 2014 Equity Plan, representing a corresponding number of shares of common stock of the Company, which vest ratably on an annual basis commencing March 15, 2020 and ending March 15, 2022. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. As of September 30, 2019, no restricted stock awards had vested.

  

PAVmed Inc Employee Stock Purchase Plan

 

The PAVmed Inc. Employee Stock Purchase Plan (“ESPP”), adopted by the Company’s board of directors effective April 1, 2019, with a reservation of 250,000 shares of PAVmed Inc. common stock, provides eligible employees the opportunity to purchase shares of PAVmed Inc. common stock through payroll deductions during six month periods, wherein the “purchase price per share” is the lower of 85% of the quoted closing price per share of PAVmed Inc. common stock at the beginning or end of each six month share purchase period. The PAVmed Inc. ESPP share purchase dates are March 31 and September 30, with an initial six month payroll deduction period of April 1, 2019 to September 30, 2019. On September 30, 2019, 82,772 shares of PAVmed Inc. common stock were issued for proceeds of $67,436 under the ESPP.

 

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan

 

The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (the “Lucid Diagnostics Inc. 2018 Equity Plan”) became effective on May 12, 2018 and is separate and apart from the PAVmed Inc. 2014 Equity Plan discussed above. The Lucid Diagnostics Inc. 2018 Equity Plan is designed to enable Lucid Diagnostics Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire shares of common stock of Lucid Diagnostics Inc. The Lucid Diagnostics Inc. 2018 Equity Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics Inc. board of directors.

 

A total of 2,000,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 1,305,000 shares available for grant as of September 30, 2019, exclusive of 300,000 Lucid Diagnostics Inc. stock options previously granted outside the Lucid Diagnostics Inc. 2018 Equity Plan.

 

Lucid Diagnostics Inc 2018 Equity Plan - Stock Options

 

Lucid Diagnostics Inc. 2018 Equity Plan - Stock Options   Number Stock Options     Weighted Average
Exercise Price
    Remaining Contractual
Term
(Years)
 
Outstanding stock options at December 31, 2018     375,000     $ 0.60          
Granted     620,000     $ 1.02          
Exercised         $          
Forfeited           $          
Outstanding stock options at September 30, 2019     995,000     $ 0.86       9.2  
Vested and exercisable stock options at September 30, 2019     441,246     $ 0.83       9.1  
Unvested stock options at September 30, 2019     553,754     $ 0.88          

 

During the nine months ended September 30, 2019, an aggregate of 620,000 stock options were granted under the Lucid Diagnostics Inc. 2018 Equity Plan, each having a ten year contractual term from date-of-grant, and vesting ratably on a quarterly basis, generally over a 36 month period, except for a grant with 200,000 stock options vesting immediately upon grant, with the remaining 100,000 stock options vesting ratably on a quarterly basis, over a 35 month period.

  

Stock-Based Compensation Expense

 

Consolidated stock-based compensation expense recognized for both the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, with respect to stock options and restricted stock awards, for the periods indicated, was as follows:

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
General and administrative expenses   $ 268,859     $ 247,818     $ 852,868     $ 701,174  
Research and development expenses     61,374       76,655       324,414       198,475  
Total   $ 330,233     $ 324,473     $ 1,177,282     $ 899,649  

 

The stock-based compensation expense related to stock options granted to employees and directors is based on the grant-date estimated fair value, and for stock options granted to non-employees is based on the vesting date estimated fair value, with the expense recognized on a straight-line basis over the award’s requisite service period, which is generally the vesting period.

 

The consolidated stock-based compensation expense classified in research and development expenses, as presented above, includes such expense recognized by Lucid Diagnostics Inc. with respect to each of the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Plan, including $3,247 and $11,552 in the three and nine months ended September 30, 2019, respectively, and $5,329 and $8,962 in the three and nine months ended September 30, 2018, respectively, with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan; and. $8,720 and 141,778 in the three and nine months ended September 30, 2019, respectively, and $12,973 and $21,250 in the three and nine months ended September 30, 2018, respectively, with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan.

 

As of September 30, 2019, total unrecognized stock-based compensation expense and weighted average remaining requisite service period under each of the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc 2018 Equity Plan, is as follows:

 

              Remaining  
      Unrecognized       Service  
      Expense       Period  
PAVmed Inc. 2014 Equity Plan                
Stock Options     $ 1.4 million       1.3 years  
Restricted Stock Awards     $ 0.6 million       2.4 years  
                 
Lucid Diagnostics Inc. 2018 Equity Plan                
Stock Options     $ 0.2 million       2.1 years  

 

Stock-based compensation expense recognized with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan to employees and members of the board of directors was based on a weighted average estimated fair value of such stock options of $0.92 and $1.22 per share during the nine months ended September 30, 2019 and 2018, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

 

    Nine Months Ended September 30,  
    2019     2018  
Risk free interest rate     2.3 %     2.1 %
Expected term of stock options (in years)     5.7       5.8  
Expected stock price volatility     50 %     50 %
Expected dividend yield     0 %     0 %

 

Stock-based compensation expense recognized with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan to non-employees was based on a weighted average estimated fair value of such stock options of $1.87 and $2.07 per share during the nine months ended September 30, 2019 and 2018, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

 

    Nine Months Ended September 30,  
    2019     2018  
Risk free interest rate     2.2 %     2.7 %
Expected term of stock options (in years)     8.6       8.8  
Expected stock price volatility     60 %     60 %
Expected dividend yield     0 %     0 %

 

The restricted stock awards granted to employees under the PAVmed Inc. 2014 Equity Plan are measured at their grant date estimated fair value based on the date-of-grant quoted price per share of PAVmed Inc. common stock. The 700,000 restricted stock awards granted on March 15, 2019 had an aggregate fair value of $742,000, with such stock-based compensation expense recognized ratably over the requisite service period, which is the vesting period, commencing on the March 15, 2019 grant date and ending on the March 15, 2022 final vesting date. The stock-based compensation expense recognized with respect to such restricted stock awards was $61,833 and $144,278 in the three and nine months ended September 30, 2019 was, respectively, and is included in the consolidated stock-based compensation expense classified in general and administrative expenses, as presented above. There was no such stock-based compensation expense in the corresponding prior year period.

  

Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to employees was based on a weighted average estimated fair value of such stock options of $0.32 and $0.40 per share during the three and nine months ended September 30, 2019 and 2018, respectively, and was calculated using the following weighted average Black-Scholes valuation model assumptions:

 

    Nine Months Ended  
    September 30,  
    2019  
Risk free interest rate     2.1 %
Expected term of stock options (in years)     5.8  
Expected stock price volatility     63 %
Expected dividend yield     0 %

 

There was no stock-based compensation expense recognized for Lucid Diagnostics Inc. stock options granted to employees in the corresponding prior year period.

 

Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to non-employees was based on a weighted average estimated fair value of such stock options of $0.36 and $0.40 per share during the three and nine months ended September 30, 2019 and 2018, respectively, and was calculated using the following weighted average Black-Scholes valuation model assumptions:

 

    Nine Months Ended  
    September 30,     September 30,  
    2019     2018  
Risk free interest rate     2.0 %     3.0 %
Expected term of stock options (in years)     9.0       9.7  
Expected stock price volatility     62 %     66 %
Expected dividend yield     0 %     0 %

 

As noted above, the Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under each of the PAVmed Inc. 2014 Equity Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, which requires the Company to make certain estimates and assumptions, with the weighted-average valuation assumptions for stock-based awards, as follows: weighted-average risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period commensurate with the assumed expected option term; expected term of stock options represents the period of time stock options are expected to be outstanding, which for employees is the expected term derived using the simplified method and for non-employees is the contractual term; expected stock price volatility is based on historical stock price volatilities of similar entities within the Company’s industry over the period commensurate with the expected term of the stock option; and, expected dividend yield is based on annual dividends of $0.00 as the Company has not historically paid, and does not expect to pay dividends for the foreseeable future. The PAVmed Inc. quoted closing price per share of common stock is used in the computation of estimated fair value of stock options granted under the PAVmed Inc. 2014 Equity Plan. The price per share common stock of Lucid Diagnostics Inc. used in the computation of estimated fair value of stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan was estimated using a discounted cash flow method applied to a multi-year forecast of future cash flows of Lucid Diagnostics Inc.