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Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Note 9 — Stock-Based Compensation

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan

The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“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 awards, and other stock-based awards subject to limitations under applicable law. The Lucid Diagnostics Inc. 2018 Equity Plan grants are subject-to approval of the Lucid Diagnostics Inc. board of directors.

A total of 5,644,000 shares of common stock of Lucid Diagnostics Inc. are reserved for issuance under the Lucid Diagnostics Inc. 2018 Equity Plan, with 3,104,200 shares available for grant as of September 30, 2021, exclusive of 423,300 Lucid Diagnostics Inc. stock options previously granted outside the Lucid Diagnostics Inc. 2018 Equity Plan.

Lucid Diagnostics Inc. 2018 Equity Plan - Stock Options

Stock options issued and outstanding under the Lucid Diagnostics Inc. 2018 Equity Plan for the period indicated is as follows:

	Number Stock Options		Weighted Average Exercise Price		Remaining Contractual Term (Years)
Outstanding stock options at December 31, 2020		1,399,243	$	0.61		8.0
Granted⁽¹⁾		—	$	—
Exercised		—	$	—
Forfeited		—	$	—
Outstanding stock options at September 30, 2021		1,399,243	$	0.61		7.5
Vested and exercisable stock options at September 30, 2021		1,120,526	$	0.57		7.4

⁽¹⁾	Stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan generally vest ratably over twelve quarters, with the vesting commencing with the grant date quarter, and have a ten-year contractual term from date-of-grant.

Previously, in January 2020, 4,703 stock options issued under the Lucid Diagnostics Inc. 2018 Equity Plan were exercised for cash proceeds of $4,999, resulting in the issue of the same number of shares of common stock of Lucid Diagnostics Inc.

The three Physician Inventors were each granted 141,100 stock options under the Lucid Diagnostics Inc. 2018 Equity Plan, with a grant date of May 12, 2018, an exercise price of $0.35 per share of common stock of Lucid Diagnostics Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of ten years from the date of grant.

See Note 4, Related Party Transactions, for a summary of the stock-based compensation expense recognized with respect to the stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan to the Physician Inventors.

Note 9— Stock-Based Compensation - continued

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan – Restricted Stock Awards

As of September 30, 2021, a total of 1,813,135 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan, summarized as follows:

A total of 1,467,440 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan in March 2021, inclusive of grants to employees of PAVmed Inc., a member of the board of directors of Lucid Diagnostics Inc. (who is also a member of the board of directors of PAVmed Inc.), and to each of the three physician inventors of the intellectual property licensed under the CWRU License Agreement (“Physician Inventors”), with such restricted stock awards having a single vesting date of March 1, 2023, and an aggregate grant date fair value of approximately $18.9 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period, and classified in general and administrative expense in the accompanying unaudited condensed statement of operations. The restricted stock awards are subject to forfeiture if the requisite service period is not completed. See Note 4, Related Party Transactions, for a summary of the stock-based compensation expense recognized with respect to the restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan to the Physician Inventors.

A total of 91,715 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan in April 2021, inclusive of grants to an employee of PAVmed Inc. and a member of the board of directors of Lucid Diagnostics Inc., with such restricted stock awards having a single vesting date in April 2023, and an aggregate grant date fair value of approximately $1.2 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period, with approximately $1.1 million classified in general and administrative expense and $0.1 million classified in research and development expense in the accompanying unaudited condensed statement of operations. Subsequent to September 30, 2021, as of October 1, 2021, 7,055 restricted stock awards granted in April 2021 were forfeited upon the employee’s termination of employment. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.

A total of 253,980 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan in the three months ended September 30, 2021, to members of the board of directors of Lucid Diagnostics Inc., with 169,320 restricted stock awards having annual vesting dates on the grant date anniversary in each of September 2022 and 2023; and 84,660 restricted stock awards having a single vesting date in July 2023. The restricted stock awards granted in the three months ended September 30, 2021, had an aggregate grant date fair value of approximately 3.4 million, measured as discussed below, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period, classified in general and administrative expense in the accompanying unaudited condensed statement of operations.

Subsequent to September 30, 2021, as of October 14, 2021, an additional 84,660 restricted stock awards were granted under the Lucid Diagnostics Inc. 2018 Equity Plan to a member of the board of directors of Lucid Diagnostics Inc.

The estimated fair value of the restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan, as discussed above, was determined using a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under various exit scenarios and an estimation of the return to the common stockholders under each scenario. In this regard, the Lucid Diagnostics Inc. common stock grant-date estimated fair value was based upon an analysis of future values, assuming various outcomes, based upon the probability-weighted present value of expected future investment returns, considering each of the possible future outcomes available to Lucid Diagnostics Inc.

The PWERM principally involved (i) the identification of scenarios and related probabilities; (ii) determine the equity value under each scenario; and (iii) determine the common stock shareholders’ return in each scenario. The two scenarios identified were an initial public offering (“IPO”) of Lucid Diagnostics Inc. common stock (“IPO scenario”); and, to continue as a private company (“stay private scenario”). With respect to the IPO scenario, the valuation of the Lucid Diagnostics Inc. common stock was computed using assumptions, including dates of the IPO, to calculate an estimated pre-money valuation; and, with respect to the stay private scenario, an income approach was used, wherein a risk-adjusted discount rate is applied to projected future cash flows. A relative weighting of 75% - 97.5% was applied to the IPO scenario and 25% - 2.5% was assigned to the stay private scenario.

Note 9 — Stock-Based Compensation - continued

PAVmed Inc. 2014 Long-Term Incentive Equity Plan

The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed Inc. 2014 Equity Plan”), is separate and apart from the Lucid Diagnostics Inc. 2018 Equity Plan (as such equity plan is discussed above). The PAVmed Inc. 2014 Equity Plan is designed to enable PAVmed Inc. to offer employees, officers, directors, and consultants, as defined, an opportunity to acquire a proprietary interest in PAVmed Inc. The types of awards that may be granted under the PAVmed Inc. 2014 Equity Plan include stock options, stock appreciation rights, restricted stock awards, and other stock-based awards subject to limitations under applicable law. The PAVmed Inc. 2014 Equity Plan grants are subject-to approval of the PAVmed Inc. board of directors compensation committee. The PAVmed Inc. 2014 Equity Plan is separate from the Lucid Diagnostics Inc. 2018 Equity Plan discussed above.

The three Physician Inventors were each granted 25,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of May 12, 2018, an exercise price of $1.59 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2018 and ending March 31, 2021, and a contractual period of ten years from the date of grant. Additionally, the three Physician Inventors were each granted 50,000 stock options under the PAVmed Inc. 2014 Equity Plan, with a grant date of June 21, 2021, an exercise price of $6.41 per share of common stock of PAVmed Inc., vesting ratably on a quarterly basis commencing June 30, 2021 and ending March 31, 2024, and a contractual period of ten years from the date of grant. See Note 4, Related Party Transactions, for a summary of the stock-based compensation expense recognized with respect to the stock options granted under the PAVmed Inc. 2014 Equity Plan to the Physician Inventors.

Stock-Based Compensation Expense

The stock-based compensation expense recognized by the Company for both the Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan, for the periods indicated, was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Lucid Diagnostics Inc 2018 Equity Plan – general and administrative expense	$	2,694,882	$	—	$	5,988,299	$	—
Lucid Diagnostics Inc 2018 Equity Plan – research and development expenses		21,864		13,114		57,156		39,344
PAVmed Inc 2014 Equity Plan - research and development expenses		56,456		3,251		111,084		9,750
Total stock-based compensation expense – recognized by Lucid Diagnostics Inc	$	2,772,202	$	16,365	$	6,156,539	$	49,094

The stock-based compensation expense, as presented above, is inclusive of: stock options and restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan to employees of PAVmed Inc., the Physician Inventors (as discussed above), and members of the board of directors of Lucid Diagnostics Inc., as well as the stock options granted under the PAVmed Inc. 2014 Equity Plan to the Physician Inventors (as discussed above).

Stock-based compensation expense recognized by Lucid Diagnostics Inc. with respect to stock options granted to the Physician Inventors under the PAVmed Inc. 2014 Equity Plan, as such stock options as discussed above, during the three and nine months ended September 30, 2021, was based on a weighted average fair value of $4.19 per share of PAVmed Inc. common stock, calculated using the Black-Scholes valuation model, with an expected term of 5.7 years, estimated PAVmed Inc. stock price volatility of 75%, a risk-free interest rate of 1.0%, and, an expected PAVmed Inc. common stock dividend yield of 0%.

Note 9 — Stock-Based Compensation - continued

As of September 30, 2021, unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options granted under each of the Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan, as discussed above, is as follows:

	Unrecognized Stock-Based Compensation Expense		Weighted Average Remaining Service Period
Lucid Diagnostics Inc. 2018 Equity Plan
Stock Options	$	14,970		0.3 years
Restricted Stock Awards	$	17,491,130		1.5 years
PAVmed Inc. 2014 Equity Plan
Stock Options	$	520,665		2.5 years