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Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Stock-Based Compensation.

Stock-Based Compensation

8. Stock-Based Compensation

2020 Long-Term Incentive Plan

Our 2020 Long-Term Incentive Plan (the “2020 Plan”) provides for the granting of stock appreciation rights, stock awards, stock units, and other stock-based awards and for accelerated vesting under certain change of control transactions. The number of shares of our common stock available for issuance under the 2020 plan will automatically increase on January 1 of each year through 2030, by an amount equal to the smaller of (a) 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Board of Directors (the “Evergreen Provision”). On January 1, 2023, the number of shares of common stock available for issuance under the 2020 Plan automatically increased by 2,580,716 shares pursuant to the Evergreen Provision. As of March 31, 2023, 242,036 shares of common stock were available for issuance under the 2020 Plan.

The 2020 Plan replaced all prior equity award plans and such plans have been discontinued, however, the outstanding awards will continue to remain in effect in accordance with their terms. Shares that are returned under these prior plans upon cancellation, termination or expiration of awards outstanding will not be available for grant under the 2020 Plan. As of March 31, 2023, a total of 672,193 shares of common stock were reserved for issuance related to the remaining outstanding equity awards granted under the prior plans.

2022 Inducement Plan

On January 25, 2022, the Board of Directors approved the adoption of our 2022 Inducement Plan (the “2022 Inducement Plan”). The 2022 Inducement Plan was recommended for approval by the Compensation Committee of the Board (the “Compensation Committee”), and subsequently approved and adopted by the Board of Directors without stockholder approval pursuant to Rule 5635(c)(4) of the rules and regulations of The Nasdaq Stock Market, LLC (the “Nasdaq Listing Rules”).

310,000 shares of our common stock were reserved for issuance pursuant to equity awards that may be granted under the 2022 Inducement Plan, and the 2022 Inducement Plan will be administered by the Compensation Committee. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, equity awards under the 2022 Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board of Directors, or following a bona fide period of non-employment by us, if he or she is granted such equity awards in connection with his or her commencement of employment with us and such grant is an inducement material to his or her entering into employment with us. As of March 31, 2023, a total of 2,800 shares were available for issuance under the 2022 Inducement Plan.

Employee Stock Purchase Plan

In November 2020, stockholders approved the Liquidia Corporation 2020 Employee Stock Purchase Plan (the “ESPP”). The number of shares of our common stock available for issuance under the ESPP will automatically increase by the lesser of (a) 1.0% of the number of shares of common stock issued and outstanding on the immediately, (b) 150,000 shares, or (c) an amount determined by the Board of Directors. On January 1, 2023, the number of shares of common stock available for issuance under the ESPP increased by 150,000 shares. As of March 31, 2023, a total of 616,778 shares of common stock are reserved for issuance under the ESPP. The ESPP allows eligible employees to purchase shares of our common stock at a discount through payroll deductions, subject to plan limitations. Unless otherwise determined by the administrator, the common stock will be purchased for the accounts of employees participating in the ESPP at a price per share that is 85% of the lesser of the fair market value of our common stock on the first and last trading day of the offering period. During the three months ended March 31, 2023 and 2022, 81,281 and 5,017 shares were issued under the ESPP, respectively.

CEO Options

During December 2020, we issued a stock option grant to our then new Chief Executive Officer, Damian deGoa, to purchase up to 2,000,000 shares of our common stock (the “CEO Option”) at an exercise price of $3.00 per share. The CEO Option was issued outside of the 2020 Plan and 1,375,000 options vested in the fourth quarter of 2021 upon the achievement of certain milestones and the passage of time, and ceased vesting upon the termination of Mr. deGoa’s employment on January 31, 2022. However, the CEO Option will remain exercisable so long as Mr. deGoa remains a member of our Board of Directors in accordance with his Separation Agreement. This change to vesting terms was treated as a modification of the original award resulting in a stock-based compensation charge of $2.9 million during the three months ended March 31, 2022.

Stock-Based Compensation Valuation and Expense

We account for employee stock-based compensation plans using the fair value method. The fair value method requires us to estimate the grant-date fair value of stock-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term. The fair value of each option grant is estimated using a Black-Scholes option-pricing model.

For restricted stock units (“RSUs”), the grant-date fair value is based upon the market price of our common stock on the date of the grant. This fair value is then amortized to compensation expense over the requisite service period or vesting term.

Total stock-based compensation expense recognized for employees and non-employees was as follows:


		Three Months Ended
		March 31,
By Expense Category:		2023			2022
Research and development		$	581		$	383
General and administrative			1,971			3,802
Total stock-based compensation expense		$	2,552		$	4,185

The following table summarizes the unamortized compensation expense and the remaining years over which such expense would be expected to be recognized, on a weighted average basis, by type of award:


		As of March 31, 2023
					Weighted
					Average
					Remaining
					Recognition
		Unamortized			Period
		Expense			(Years)
Stock options		$	19,293		2.9
Restricted stock units		$	10,692		3.6

Fair Value of Stock Options Granted and Purchase Rights Issued under the ESPP

We use the Black-Scholes option-pricing model to determine the fair value of stock options granted and purchase rights issued under the ESPP.

The following table summarizes the assumptions used for estimating the fair value of stock options granted under the Black-Scholes option-pricing model:


		Three Months Ended
		March 31,
		2023		2022
Expected dividend yield		—		—
Risk-free interest rate		3.46% - 3.64%		1.46% - 2.34%
Expected volatility		94% - 95%		90% - 92%
Expected life (years)		5.9 - 6.1		6.0 - .6.1

The weighted average fair value for options granted during the three months ended March 31, 2023 and 2022 was $4.80 and $4.37 per share, respectively.

The following table summarizes the assumptions used for estimating the fair value of purchase rights granted to employees under the ESPP under the Black-Scholes option-pricing model:


		Three Months Ended
		March 31,
		2023		2022
Expected dividend yield		—		—
Risk-free interest rate		5.20%		0.69%
Expected volatility		64%		80%
Expected life (years)		0.50		0.50

The following table summarizes stock option activity during the three months ended March 31, 2023:


							Weighted
				Weighted			Average
				Average			Contractual		Aggregate
		Number of		Exercise			Term		Intrinsic
		Shares		Price			(in years)		Value
Outstanding as of December 31, 2022		8,398,262		$	4.49
Granted		1,144,146			6.17
Exercised		(21,447)			3.68
Cancelled		(6,120)			2.97
Outstanding as of March 31, 2023		9,514,841		$	4.69		8.5		$	22,693
Exercisable as of March 31, 2023		4,366,134		$	4.27		7.8		$	13,072
Vested and expected to vest as of March 31, 2023		9,112,607		$	4.69		8.5		$	21,845

The aggregate intrinsic value of stock options in the table above represents the difference between the $6.91 closing price of our common stock as of March 31, 2023 and the exercise price of outstanding, exercisable, and vested and expected to vest in-the-money stock options.

Restricted Stock Units

Restricted Stock Units (“RSUs”) represent the right to receive shares of our common stock at the end of a specified time period or upon the achievement of a specific milestone. RSUs can only be settled in shares of our common stock. RSUs generally vest over a four-year period similar to stock options granted to employees.

A summary of unvested RSU awards outstanding as of March 31, 2023 and changes during the three months ended March 31, 2023 is as follows:


				Weighted
				Average
				Grant-Date
		Number of		Fair Value
		RSUs		(per RSU)
Unvested as of December 31, 2022		407,726		$	5.57
Granted		1,483,166			6.48
Vested		(89,804)			6.00
Forfeited		(1,617)			6.75
Unvested as of March 31, 2023		1,799,471		$	6.30