HeartBeam, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

In 2015, the Company’s Board of Directors approved the HeartBeam, Inc. 2015 Equity Incentive Plan ("2015 Plan"), to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors, and consultants, and to promote the success of the Company’s business. The 2015 Plan provides for the grant of stock options and RSU’s to purchase common stock of which 1,636,362 were authorized by the board of which 970,704 are outstanding as of December 31, 2023. The 2015 Plan was terminated upon shareholder approval of the 2022 Equity Incentive Plan (“2022 Equity Plan”) whereby no new awards can be issued under the 2015 Plan.

The Company’s shareholders approved the 2022 Equity Plan at the annual meeting of stockholders held on June 15, 2022, pursuant to which 1,900,000 shares of common stock were authorized for issuance. Under the 2022 Equity Plan, the number of shares available for issuance will be increased on the first day of each fiscal year beginning with the 2023 fiscal year, in an amount equal to the lesser of 3,800,000 shares, five percent (5%) of the total number of shares of all classes of common stock of the Company outstanding on the last day of the immediately preceding fiscal year, and a lesser number of shares determined by the administrator. On January 1, 2023 400,487 shares, equivalent to five percent (5%) of common stock outstanding were added to the shares available for issuance under the 2022 Equity Plan. Also see Note 9- Subsequent event section below.

At the July 7, 2023, Annual Shareholders’ Meeting, the proposal to amend the 2022 Equity Incentive Plan to increase the number of authorized shares from 1,900,000 shares to 5,900,000 shares was approved.

The 2022 Equity Plan includes a provision to add-back any cancelled options from the 2015 Plan up to 1,372,816 shares. As of December 31, 2023, there are 252,856 shares from the 2015 Plan that are included in the 849,171 shares available for issuance under the 2022 Equity Plan.

During 2023, the Company granted 2,208,000 options to various executives and employees. Sixty percent (60%) of these options vest based on FDA Clearance for marketing of HeartBeam’s synthesized 12L product and the remaining forty percent (40%) vest monthly over a period of 48 months. The Company calculated the fair value for each of these grants using the Black-Scholes option pricing model and it is expensed based on management’s probability assessment of FDA clearance. The 60% milestone options are issued and outstanding as of December 31, 2023.

The Company received proceeds of $0.2 million from the exercise of stock options during the year ended December 31, 2023 and a de minimis amount during the year ended December 31, 2022.

STOCK OPTIONS

The following is a summary of stock option activity during the years ended December 31, 2023 and 2022:


	Number of options outstanding	Weighted average exercise price		Average remaining contractual life (in years)	Aggregate intrinsic value (in thousands) (*)

Outstanding – December 31, 2021	1,105,938	$	2.03	8.8	$	1,535
Options granted	1,251,000	1.70
Forfeitures	(121,334)	2.98
Options exercised	(38,806)	—

Outstanding – December 31, 2022	2,196,798	$	1.76	8.7	$	6,770
Options granted	4,363,800	2.42
Forfeitures	(288,001)	2.48
Options exercised	(180,072)	1.19

Outstanding – December 31, 2023	6,092,525	2.22		8.7	$	2,945
Exercisable – December 31, 2023	1,212,312	$	1.78	7.4	$	1,203

(*) Intrinsic value is based on the fair market value of the Company's common stock.

The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. For the years ended December 31, 2023 and 2022, the assumptions used in the Black-Scholes option pricing model, which was used to estimate the grant date fair value per option, were as follows:


	Year ended December 31,
	2023		2022
Weighted-average Black-Scholes option pricing model assumptions:
Volatility	110.23% - 117.62%		107.25% - 111.06%
Expected term (in years)	5.85 - 6.07		5.62 - 5.94
Risk-free rate	3.54% - 4.77%		1.47% - 3.17%
Expected dividend yield	$	—	$	—
Weighted average grant date fair value per share	$1.75 - 3.38		$1.08 - 3.34

RESTRICTED STOCK UNITS

The following is a summary of RSUs award activity:


	Year ended December 31,
	2023			2022
	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Non-vested at beginning of the year	253,970	$	1.47	30,000	$	3.20
Shares granted	222,881	3.11		248,970	1.36
Shares vested	(258,970)	1.48		(25,000)	2.46
Non-vested at end of year	217,881	$	3.12	253,970	$	1.47

STOCK BASED COMPENSATION

The following is a summary of stock-based compensation expense:


	Year ended December 31,
	2023		2022
General and administration
Stock options	$	2,069,556	$	657,368
RSUs	488,971		235,035
Total general and administration	2,558,527		892,403
R&D
Stock options	629,092		213,813
RSUs	20,457		13,601
Total R&D	649,549		227,414
Total stock based compensation	$	3,208,076	$	1,119,817

As of December 31, 2023 total compensation cost not yet recognized related to unvested stock options and unvested RSUs was approximately $8.1 million and $0.4 million, respectively, which is expected to be recognized over a weighted-average period of 2.66 years and 1.2 years, respectively.