Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.19.1
Stock-Based Compensation
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

Note 10 — Stock-Based Compensation

 

PAVmed Inc. 2014 Long-Term Incentive Equity Plan

 

The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “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 types of awards that may be granted under the PAVmed Inc. 2014 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the compensation committee of the Company’s board of directors.

 

Stock options outstanding under the PAVmed Inc. 2014 Equity Plan is summarized as follows:

 

PAVmed Inc. 2014 Equity Plan  

Number

Stock

Options

   

Weighted

Average

Exercise

Price

   

Aggregate

Intrinsic

Value

 
                   
Outstanding at December 31, 2017     1,936,924     $ 5.19          
Granted     1,585,324     $ 2.01          
Exercised         $          
Forfeited     (195,108 )   $ 5.00          
Outstanding at December 31, 2018     3,327,140     $ 3.68     $         —  
Vested and exercisable at December 31, 2018     1,620,310     $ 4.40     $  
Unvested at December 31, 2018     1,656,830     $ 2.73     $  
                         
Outstanding at December 31, 2016     1,633,313     $ 5.14          
Granted     380,000     $ 5.35          
Exercised         $          
Forfeited     (76,389 )   $ 5.00          
Outstanding at December 31, 2017     1,936,924     $ 5.19     $  
Vested and exercisable at December 31, 2017     964,080     $ 5.14     $  
Unvested at December 31, 2017     972,844     $ 5.23     $  

 

The aggregate intrinsic value is computed as the difference between the quoted price of the PAVmed Inc. common stock on each of December 31, 2018 and 2017 and the exercise price of the underlying PAVmed Inc. stock options, to the extent such quoted price is greater than the exercise price.

 

As of December 31, 2018, a total of 5,951,081 shares of common stock of PAVmed Inc. are reserved for issuance under the PAVmed Inc. 2014 Equity Plan, of which, 3,124,795 shares are available for grant under such plan, exclusive of 500,854 PAVmed Inc. stock options granted outside the PAVmed Inc. 2014 Equity Plan, including 250,000 in 2017.

 

As of December 31, 2018, under the PAVmed Inc. 2014 Equity Plan, the weighted average remaining contractual term was 8.3 years for stock options outstanding and 7.8 years for stock options vested and exercisable.

 

As noted above, during the year ended December 31, 2018, an aggregate of 1,585,324 stock options were granted under the PAVmed Inc. 2014 Equity Plan, each with a ten year contractual term from date-of-grant, including:

 

January 2018 - 175,000 PAVmed Inc. stock options were granted to a new hire employee, having an exercise price of $2.96 per share of common stock of PAVmed Inc. and vesting ratably on a quarterly basis commencing March 31, 2018 and ending December 31, 2020;

 

February 2018 - a total of 500,000 PAVmed Inc. stock options were granted to non-executive members of the Company’s board of directors, and a total of 590,216 PAVmed Inc. stock options were granted to employees, each having an exercise price of $2.01 per share of common stock of PAVmed Inc. and vesting ratably on a quarterly basis commencing March 31, 2018 and ending December 31, 2020; and,

 

May 2018 - a total of 75,000 PAVmed Inc. stock options were granted, including 25,000 stock options granted to each of the three non-employee “EsoCheck™ Technology” physician inventors under each of their respective consulting agreements with Lucid Diagnostics Inc., having an exercise price of $1.59 per share of common stock of PAVmed Inc. and vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021. See Note 7, Agreements Related to Acquired Intellectual Property Rights, for a discussion of the “EsoCheck™ Technology” and the corresponding “EsoCheck™ License Agreement” between Lucid Diagnostics Inc. and Case Western Reserve University and the consulting agreements between the three individual physicians and Lucid Diagnostics Inc.

 

PAVmed Inc. 2014 Long-Term Incentive Equity Plan - continued

 

July 2018 - 195,108 PAVmed Inc. stock options were granted to a new hire employee, having an exercise price of $1.58 per share of common stock of PAVmed Inc. and vesting ratably on a quarterly basis commencing September 30, 2018 and ending June 30, 2021.

 

November 2018 - 50,000 PAVmed Inc. stock options were granted to a new hire employee having an exercise price of $0.97 per share of common stock of PAVmed Inc. and vesting ratably on a quarterly basis commencing December 31, 2018 and ending September 30, 2021.

 

In February 2018, a total of 195,108 stock options, previously granted under the PAVmed Inc. 2014 Equity Plan, were forfeited in connection with the resignation of two members from the Company’s board of directors.

 

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 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 types of awards that may be granted under the Lucid Diagnostics Inc. 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, 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.

 

Stock options outstanding under the Lucid Diagnostics Inc. 2018 Equity Plan is summarized as follows:

 

Lucid Diagnostics Inc. 2018 Equity Plan  

Number

Stock

Options

   

Weighted

Average

Exercise

Price

 
Outstanding at December 31, 2017         $  
Granted     375,000     $ 0.60  
Exercised         $  
Forfeited         $    
Outstanding at December 31, 2018     375,000     $ 0.60  
Vested and exercisable at December 31, 2018     87,500     $ 0.57  
Unvested at December 31, 2018     287,500     $ 0.61  

 

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. In this regard, as of September 30, 2018, 1,625,000 shares of common stock of Lucid Diagnostics Inc. were available for grant under the Lucid Diagnostics Inc. 2018 Equity Plan.

 

As of December 31, 2018, the weighted average remaining contractual term was 9.4 years for both stock options outstanding and stock options vested and exercisable under the Lucid Diagnostics Inc. 2018 Equity Plan.

 

As noted above, during the year ended December 31, 2018, an aggregate of 375,000 Lucid Diagnostics Inc. stock options were granted under the Lucid Diagnostics Inc. 2018 Equity Plan, each with a ten year contractual term from date-of-grant, including:

 

May 2018 - under their respective consulting agreements with Lucid Diagnostics Inc., each of the three non-employee “EsoCheck™ Technology” physician inventors were granted 100,000 stock options under the Lucid Diagnostics Inc. 2018 Equity Plan to purchase shares of common stock of Lucid Diagnostics Inc. at an exercise price of $0.50 per share of common stock of Lucid Diagnostics Inc., with such stock options vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021. See Note 7, Agreements Related to Acquired Intellectual Property Rights, for a discussion of the “EsoCheck™ Technology” and the corresponding “EsoCheck™ License Agreement” between Lucid Diagnostics Inc. and Case Western Reserve University; and the consulting agreements between the three individual physicians and Lucid Diagnostics Inc; and,
   
June 2018 - under a consulting agreement between Lucid Diagnostics Inc., as sole compensation under such consulting agreement, the unrelated third party owner of the manufacturing firm of the “EsoCheck™ CCD™ CDMO Supply Agreement”, was granted 75,000 stock options under the Lucid Diagnostics Inc. 2018 Equity Plan to purchase shares of common stock of Lucid Diagnostics Inc. at an exercise price of $1.00 per share of common stock of Lucid Diagnostics Inc., with such stock options vesting ratably on a quarterly basis commencing September 30, 2018 and ending June 30, 2021. See Note 7, Agreements Related to Acquired Intellectual Property Rights, for a discussion of each of the separate consulting agreement and the EsoCheck™ CCD™ CDMO Supply Agreement.

 

Subsequently, an aggregate of 1,600,000 stock options were granted under the PAVmed Inc. 2014 Equity Plan, including 800,000 such stock options granted to non-executive members of the Company’s board of directors and 800,000 of such stock options granted to employees, each with a grant date of March 7, 2019, an exercise price of $1.00 per share of PAVmed Inc common stock, vesting ratably on a quarterly basis commencing March 31, 2019 and ending December 31, 2021, and a ten year contractual term from date-of-grant.

 

Subsequently, in connection with a new hire employee, the following stock options were granted: (i) 150,000 stock options were granted under the PAVmed Inc. 2014 Equity Plan, with a grant date of March 7, 2019, an exercise price of $1.00 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing March 31, 2019 and ending December 31, 2021, and a ten year contractual term from date-of-grant; and, (ii) 300,000 stock options were granted under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan, with a grant date of February 18, 2019, an exercise price of $1.00 per share of common stock of Lucid Diagnostics Inc., and with 200,000 such stock options vesting immediately upon grant, and 100,000 of such stock options vesting ratably on a quarterly basis commencing March 31, 2019 and ending December 31, 2021, and having a ten year contractual term from date-of-grant. In addition to the 300,000 Lucid Diagnostics Inc. stock options granted on February 18, 2019, such new hire employee is eligible for a separate grant of 200,000 Lucid Diagnostics Inc stock options upon achievement of certain product development objective(s), with the achievement of such objective(s) determined solely by the Lucid Diagnostics Inc. board of directors.

 

Subsequently, as discussed in Note 9, Commitments and Contingencies, under the caption “Employment Agreements”, a total of 700,000 restricted stock awards were granted 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, with the first vesting date of March 15, 2020 and a final vesting date of March 15, 2022.

 

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, for the periods indicated, was as follows:

 

    Year Ended December 31,  
    2018     2017  
General and administrative expenses   $ 948,143     $ 925,534  
Research and development expenses     280,556       122,593  
Total   $ 1,228,699     $ 1,048,127  

 

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

 

Stock-based compensation recognized by Lucid Diagnostics Inc. included $12,485 in the year ended December 31, 2018 with respect to stock options granted under the PAVmed Inc. 2014 Equity Plan to non-employees providing services to Lucid Diagnostics Inc., and $40,748 in the year ended December 31, 2018 with respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to non-employees providing services to Lucid Diagnostics Inc. - with each such stock based compensation expense included in consolidated research and development expense as presented above. There was no such Lucid Diagnostics Inc. stock-based compensation expense recognized for the prior year period.

 

As of December 31, 2018, under the PAVmed Inc. 2014 Equity Plan, total unrecognized stock-based compensation expense of approximately $1.4 million is expected to be recognized over the weighted average remaining requisite service period of 1.3 years; and, under the Lucid Diagnostics Inc. 2018 Equity Plan, total unrecognized stock-based compensation expense of approximately $152,000 is expected to be recognized over the weighted average remaining requisite service period of 2.3 years.

 

The Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both 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.

 

Stock-Based Compensation Expense - continued

 

Stock-based compensation expense recognized for stock options granted to employees and members of the board of directors under the PAVmed Inc. 2014 Equity Plan was based on a weighted average fair value of $1.21 per share and $2.62 per share, during the year ended December 31, 2018 and 2017, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

 

    Year Ended December 31,  
    2018     2017  
Risk free interest rate     2.1 %     2.1 %
Expected term of stock options (in years)     5.8       5.8  
Expected stock price volatility     50 %     50 %
Expected dividend yield     0 %     0 %

 

Stock-based compensation expense recognized for stock options granted to non-employees under the PAVmed Inc. 2014 Equity Plan was based on a weighted average fair value of $1.97 per share and $2.80 per share, during the year ended December 31, 2018 and 2017, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

 

    Year Ended December 31,  
    2018     2017  
Risk free interest rate     2.5 %     2.3 %
Expected term of stock options (in years)     8.7       9.0  
Expected stock price volatility     60 %     60 %
Expected dividend yield     0 %     0 %

 

Stock-based compensation expense recognized for stock options granted to non-employees under the Lucid Diagnostics Inc. 2018 Equity Plan was based on a weighted average fair value of $0.51 per share during the year ended December 31, 2018, calculated using the following weighted average Black-Scholes valuation model assumptions:

 

   

Year Ended

December 31, 2018

 
Risk free interest rate     2.7 %
Expected term of stock options (in years)     9.4  
Expected stock price volatility     62 %
Expected dividend yield     0 %

 

There was no such Lucid Diagnostics Inc. 2018 Equity Plan stock-based compensation expense for the prior year period.