Note 9. Stock-Based Compensation

Equity Incentive Plan

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. On March 25, 2026, the Company’s board of directors adopted and approved an amendment and restatement of the 2022 Plan (the “2022 Amended Plan”). The 2022 Amended Plan was approved by the Company’s stockholders at the Annual Meeting on June 24, 2026, increasing the maximum number of shares authorized for issuance under the 2022 Amended Plan to 21,033,333 shares. No other provisions of the 2022 Plan were amended in the 2022 Amended Plan. 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 2022 Plan. As of September 30, 2026, 10,360,029 shares of common stock were available for future issuance under the 2022 Amended 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 Amended Plan provides for accelerated vesting if there is a change of control, as defined in the 2022 Amended Plan.

Stock Options

The estimated aggregate intrinsic value of stock options exercisable as of September 30, 2026 was approximately $0.1 million.

Restricted Stock Units (RSUs)

During the nine months ended September 30, 2026, the Company granted 292,500 RSUs. During the nine months ended September 30, 2025 the Company granted 292,500 RSUs. Outstanding RSUs are subject to market conditions which require our closing stock price to equal or 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, one-third of the award will vest, and thereafter, one-third of the award will vest on the first and second anniversaries of the achievement date, subject to the recipient’s continued service through each applicable vesting date.

Stock-Based Compensation Expense

As of September 30, 2026, there was $2.5 million of total unrecognized stock-based compensation expense related to outstanding stock options that will be recognized over a weighted average period of 1.5 years. As of September 30, 2026, there was $0.4 million of total unrecognized stock-based compensation expense related to outstanding RSUs that will be recognized over a weighted average period of 1.7 years.

Fair Value Assumptions 

Stock Options (Service Vesting)

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2026 and 2025 was $1.02 and $0.91, respectively. The assumptions used in the Black-Scholes model for stock options are as follows:

Restricted Stock Units (RSUs)

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, the Company considered the two-year vesting period following achievement of the performance condition. Accordingly, the Company’s common stock value was simulated over a six-year period to capture iterations through which the performance condition was satisfied on the Performance Period End Date. The analysis involved projecting the Company’s common stock value starting with its 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 the Company’s stock price on a daily basis over the specified period assuming 252 trading days per year. The Monte Carlo simulation for the Particle Swarm Optimization (“PSO”) utilized the following assumptions:

         Beginning Stock Price. As of the valuation date, the Company is a publicly traded company with an observable share price. Therefore, the publicly traded share price as of the valuation date was utilized 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 RSUs, 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 latest date on which the award could vest.

         Dividends. The Company has not historically paid dividends nor does it expect to pay dividends going forward. As such, no dividends were considered in the analysis.

2.       Consideration of the Performance-Vesting Schedule. As previously discussed, the Company's 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, one-third of the award shall vest on the Hurdle Achievement Date, one-third of the award shall vest one year following the Hurdle Achievement Date, and one-third 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 the Monte Carlo simulation. For the purposes of calculating the weighted service period associated with the RSUs, a separate simulation was performed using the Company’s cost of equity as the drift rate. The service period was then determined based on the median Hurdle Achievement Date.