Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

9. Stock-Based Compensation

The Company sponsors the Pulmatrix, Inc. 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan). As of September 30, 2019, the 2013 Plan provides for the grant of up to 4,060,000 shares of common stock, of which 2,933,044 shares remained available for future grant.

In addition, the Company has two legacy plans: The Pulmatrix Operating’s 2013 Employee, Director and Consultant Equity Incentive Plan (the “Original 2013 Plan”) and Pulmatrix Operating’s 2003 Employee, Director, and Consultant Stock Plan (the “2003 Plan”). As of September 30, 2019, a total of 16,037 shares of common stock may be delivered under options outstanding under the Original 2013 Plan and the 2003 Plan, however no additional awards may be granted under the Original 2013 Plan or the 2003 Plan.

Options

No options were granted to employees, directors or consultants during the

three months e

nded S

eptember 30, 2019

. During the nine months ended September 30, 2019, the Company granted 561,600 options to employees and 90,000 options to directors. At the date of grant, the fair value of the options was $393 and $63 respectively. The stock options outstanding vest over either 36 or 48 months (the “Time Based Options”). Subject to the grantees’ continuous service with the Company and as defined in the grant agreement, Time Based Options vest in one of the following ways: (i) 25% on the first anniversary of the option grant date and the remainder in 36 equal monthly installments beginning in the month after the vesting start date, (ii) 25% on the option grant date and the remainder in 36 equal monthly installments beginning in the month after the vesting start date or (iii) in 48 equal monthly installments beginning on the monthly anniversary of the vesting start date. Stock options generally expire ten years after the date of grant.

The following table summarizes stock opti

n activity for the nine months ended September 30, 2019:


	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term ( Years)		Aggregate Intrinsic Value
Outstanding — January 1, 2019		972,569		$	23.85		0	$	0
Granted		651,600		$	1.06		0		0
Exercised		0		$	0		0		0
Forfeited or expired		(535,493	)	$	23.77		0		0

Outstanding — September 30, 2019		1,088,676		$	10.25		8.86	$	0

Exercisable — September 30, 2019		355,845		$	26.24		7.77	$	0

Vested and expected to vest — September 30, 2019		1,082,710		$	10.28		8.86	$	0

The estimated fair values of employee stock options granted during the three and nine months ended September 30, 2019 and 2018, were determined on the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019			2018
Expected option life (years)		0		6.05			6.02			5.58
Risk-free interest rate		0		2.79	%		2.22	%		2.77	%
Expected volatility		0		78.91	%		74.14	%		79.67	%
Expected dividend yield		0		0	%		0	%		0	%

The risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility was based upon the historical volatility for industry peers and used an average of those volatilities. The expected life of the Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s activity. The dividend yield considers that the Company has not historically paid dividends and does not expect to pay dividends in the foreseeable future. As of September 30, 2019, there was $1,345 of unrecognized stock-based compensation expense related to unvested stock options granted under the Company’s stock award plans. This expense is expected to be recognized over a weighted-average period of approximately 1.9 years.

The following table presents total stock-based compensation expense for the three and nine months ended September 30, 2019 and 2018:


	Three Months Ended September 30,				Nine months Ended September 30,
	2019		2018		2019		2018
Research and development	$	14	$	244	$	81	$	760
General and administrative		171		416	$	1,654	$	1,598

Total stock - based compensation expense	$	185	$	660	$	1,735	$	2,358