Vivani Medical, Inc. Stock Compensation Disclosure
Equity Incentive Plans
The Vivani Medical, Inc. 2022 Omnibus Incentive Plan (the “2022 Plan”) became effective on August 30, 2022. Under the 2022 Plan, 10,033,333 shares were authorized for issuance at its effective date. The maximum number of shares with respect to which stock awards could be granted is offset and reduced by stock awards previously granted under the Plan. As of December 31, 2024 2,165,958 shares of common stock were available for future issuance under the 2022 Plan pursuant to stock awards that had not previously been granted.
For stock option grants, the option price is determined by the Board of Directors but cannot be less than the fair value of the shares at the grant date. Generally, the options vest ratably over four years and expire ten years from the grant date. The 2022 plan provides for accelerated vesting if there is a change of control, as defined in the 2022 Plan.
Stock Options
| Weighted | ||||||||||||
| Weighted | Average | |||||||||||
| Average | Remaining | |||||||||||
| Exercise | Contractual | |||||||||||
| Number of | Price | Life | ||||||||||
| Shares | Per Share | (in Years) | ||||||||||
| Options outstanding at December 31, 2022 | 5,272 | $ | 3.07 | |||||||||
| Granted | 1,384 | $ | 1.22 | |||||||||
| Exercised | (333 | ) | $ | 0.52 | ||||||||
| Forfeited or expired | (232 | ) | $ | 8.12 | ||||||||
| Other adjustment | — | $ | — | |||||||||
| Options outstanding at December 31, 2023 | 6,091 | $ | 2.60 | |||||||||
| Granted | 1,093 | $ | 1.57 | |||||||||
| Exercised | — | $ | — | |||||||||
| Forfeited or expired | (375 | ) | $ | 1.19 | ||||||||
| Options outstanding, vested and expected to vest as of December 31, 2024 | 6,809 | $ | 2.52 | 6.55 | ||||||||
| Options exercisable as of December 31, 2024 | 4,813 | $ | 2.91 | 5.69 | ||||||||
The estimated aggregate intrinsic value of stock options exercisable as of December 31, 2024 was $0.1 million.
Restricted Stock Units (RSUs)
|
Number of Shares |
Weighted Average Grant Date Fair Value Per Share |
|||||||
| Outstanding as of December 31, 2023 | 403 | $ | 0.93 | |||||
| Granted | 292 | $ | 1.69 | |||||
| Vested and released | — | $ | — | |||||
| Forfeited and canceled | — | $ | — | |||||
| Outstanding as of December 31, 2024 | 695 | $ | 1.25 | |||||
During the years ended December 31, 2024 and 2023, the Company granted 292,500 and 402,500 RSUs, respectively, subject to market conditions which required our stock price to exceed $3.15 per share for three consecutive days in the four years from grant date for the RSUs to vest. Upon achievement of the market condition, of the award will vest, and thereafter, of the award will vest on the first and second anniversary of the achievement date, subject to the recipient’s continued service through each applicable vesting date.
Stock-Based Compensation Expense
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Research and development | $ | 1,001 | $ | 1,219 | ||||
| General and administrative | 609 | 645 | ||||||
| Total stock-based compensation expense | $ | 1,610 | $ | 1,864 | ||||
As of December 31, 2024, there was $1.9 million of total unrecognized stock-based compensation expense related to outstanding stock options that will be recognized over a weighted average period of 1.3 years. As of December 31, 2024, there was $0.2 million of total unrecognized compensation expense related to outstanding RSUs that will be recognized over a weighted average period of 0.8 years.
Stock Options
During the year ended December 31, 2024 and 2023, we granted stock options to purchase shares of common stock to certain employees and board members at a weighted average price of $1.26 and $0.93 per share, respectively, which was calculated at the fair value of our common stock on the respective grant date. The options generally vest over a period of four years.
Stock Options (Service Vesting)
| 2024 | 2023 | ||
| Risk-free interest rate | 3.79% to 5.53% | 3.99% – 4.79% | |
| Expected dividend yield | —% | —% | |
| Expected volatility | 100% | 100% | |
| Expected term | 5.04-6.08 years | 4.00-6.20 years |
Stock Options (Market Conditions Vesting)
During the year ended December 31, 2023, 200,000 stock options were granted and subject to market conditions which required our stock price to exceed $6.30 per share for three consecutive days in the four years from grant date for the stock option to vest. These stock options with market conditions vesting were valued at $0.1 million. The fair value of these options subject to market conditions were valued using the Monte-Carlo Simulation model with the following assumptions:
| ● | Beginning Stock Price. We utilized the Company’s publicly traded share price as of the Valuation Date as the beginning stock value. At the Valuation Date, the publicly traded common share price was $1.09 per share. |
| ● | Drift Rate. In determining the value of the instrument in the risk-neutral framework, risk-free rates were estimated based on the applicable treasury rate for the projection period. For each simulation, the term of the risk-free rate was based on the term from the Valuation Date through the latest date on which the award could vest (i.e., two years following the Performance Period End Date). Please note that, for the purposes of calculating the service period associated with the Subject Interest, the Company’s cost of equity was utilized as the drift rate. |
| ● | Volatility. The total equity volatility (standard deviation) was based on a total equity volatility analysis. |
| ● | Period. The period was measured as the number of years from the Valuation Date through the PSO expiration date (10 years following the date of grant). |
| ● | Dividends. The Company has not historically paid dividends. In addition, the Company does not expect to pay dividends going forward. As such, no dividends were considered in our analysis. |
Restricted Stock Units (RSUs)
During the year ended December 31, 2024, the Company granted 292,500 RSUs. These RSUs are subject to market conditions which required our stock price to exceed $3.15 per share for three consecutive days in the four years from grant date for the RSUs to vest.
The assumptions used to estimate the fair value of the performance-based restricted stock units granted during the years ended December 31, 2024 and 2023 and valued using a Monte Carlo simulation were as follows:
|
|
Year Ended December 31, | ||
|
|
2024 |
|
2023 |
|
RSUs Granted |
292,500 |
|
402,500 |
|
Valuation date stock price |
$1.81 |
|
$0.93 |
|
Risk-free interest rate |
4.53% |
|
4.13% |
| Expected divided yield |
0% | 0% | |
| Expected volatility | 100% | 100% | |
| Simulation term | 4 years | 1.1 years | |
The steps involved in utilizing the Monte Carlo simulation in order to value the performance-based RSUs included the following:
1. Projection of the Company’s Common Stock Value. The performance-based RSUs were measured based on the Company’s underlying common stock value over the performance period (four years following the Valuation Date).
Additionally, we considered the two-year vesting period following achievement of the performance condition. Accordingly, our common stock value was simulated over a period to capture iterations through which the performance condition was satisfied on the Performance Period End Date. The analysis involved projecting our common stock value starting with our current common stock value. The forecasted stock price was based on the Geometric Brownian motion (“GBM”), and the Monte Carlo simulation generated random variables using the GBM to forecast our stock price on a daily basis over the specified period assuming 252 trading days per year. The Monte Carlo simulation for the PSO utilized the following assumptions:
| ● |
Beginning Stock Price. As of the Valuation Date, we were a publicly traded company with an observable share price. Therefore, we utilized our publicly traded share price as of the Valuation Date as the beginning stock value. |
| ● |
Drift Rate. In determining the value of the instrument in the risk-neutral framework, risk free rates were estimated based on the applicable treasury rate for the projection period. For each simulation, the term of the risk-free rate was based on the term from the Valuation Date through the latest date on which the award could vest (i.e., two years following the Performance Period End Date). Please note that, for the purposes of calculating the service period associated with the Subject Interest, our cost of equity was utilized as the drift rate. |
| ● | Volatility. The total equity volatility (standard deviation) was based on a total equity volatility analysis. |
| ● | Period. The period was measured as the number of years from the Valuation Date through the latest date on which the award could vest. |
| ● | Dividends. We have not historically paid dividends nor do we expect to pay dividends going forward. As such, no dividends were considered in our analysis. |
2. Consideration of the Performance-Vesting Schedule. As previously discussed, our publicly traded common share price must equal or exceed the Stock Price Hurdle amount of $3.15 over a three-consecutive-trading-day rolling period on or before the Performance Period End Date. If such performance condition is achieved, of the award shall vest on the Hurdle Achievement Date, of the award shall vest one year following the Hurdle Achievement Date, and of the award shall vest two years following the Hurdle Achievement Date.
3. Performance-Based RSU Value Conclusion. The proceeds from the vesting of common shares were then discounted to the Valuation Date using the applicable risk-free rate, which is consistent with the assumption utilized to project stock prices in our Monte Carlo simulation. For the purposes of calculating the weighted service period associated with the Subject Interest, a separate simulation was performed using our cost of equity as the drift rate. The service period was then determined based on the median Hurdle Achievement Date.
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.