Ekso Bionics Holdings, 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, 2017

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

Disclosure of Compensation Related Costs, Share-based Payments

14. Stock-based Compensation

2014 Equity Incentive Plan

In the first quarter of 2014, prior to the Merger, the Board of Directors and a majority of the stockholders adopted the 2014 Equity Incentive Plan (the “2014 Plan”) allowing for the issuance of 2,058 shares of common stock. On June 10, 2015, the 2014 Plan was amended and restated with approval by the stockholders to increase the maximum number of shares issuable by 1,656 shares to an aggregate of 3,714 shares of common stock. On June 20, 2017, the 2014 Plan was further amended with the approval by the stockholders to increase the maximum number of shares issuable under the 2014 Plan by 1,000 shares to an aggregate of 4,714 shares of common stock.

October 30, 2017, the Board approved an amendment to the 2014 Plan to increase the maximum number of shares of common stock that may be issued under the 2014 Plan by 4,400 shares, from 4,714 to 9,114 shares (the “2014 Plan Amendment”) effective as of the time such amendment is approved by the stockholders. At the December Special Meeting, a proposal was submitted to be voted on by the stockholders to approve the 2014 Plan Amendment contingent on the approval by the stockholders of the Authorized Capital Amendment. The proposal was approved by the stockholders at the December Special Meeting, with approximately 25,205 shares voted for, 2,955 shares voted against, and 356 shares abstaining. However, since the proposal was contingent on the approval by the stockholders of the Authorized Capital Amendment, stockholders will be asked to vote again on the 2014 Plan Amendment at the 2018 Annual Meeting of Shareholders. Further information about such vote will be provided in the Company’s Proxy Statement relating to the Company’s 2018 Annual Meeting of Shareholders, to be filed with the SEC within 120 days of December 31, 2017.

As of December 31, 2017, there were 4,838 shares available for future awards after taking into account the 2014 Plan Amendment.

Under the terms of the 2014 Plan, the Board of Directors may award stock, options, or similar rights having either a fixed or variable price related to the fair market value of the shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions or any other security with the value derived from the value of the shares. Such awards include stock options, restricted stock, restricted stock units, stock appreciation rights and dividend equivalent rights.

Shares available for future grant under the 2014 Plan, after taking into account the 2014 Plan Amendment, is as follows for the year ended December 31, 2017:

	Shares Available For Grant
Available as of December 31, 2016		948
Granted		(1,872)
Forfeited		211
Expired		151
Share pool increase		5,400
Available as of December 31, 2017		4,838

Stock Options

The Board of Directors may grant stock options under the 2014 Plan at a price of not less than 100% of the fair market value of the Company’s common stock on the date the option is granted. Incentive stock options granted to employees who, on the date of grant, own stock representing more than 10% of the voting power of all of the Company’s classes of stock, are granted at an exercise price of not less than 110% of the fair market value of the Company’s common stock. The maximum term of incentive stock options granted to employees who, on the date of grant, own stock possessing more than 10% of the voting power of all the Company’s classes of stock, may not exceed five years. The maximum term of an incentive stock option granted to any other participant may not exceed ten years. Subject to the limitations discussed above, the Board of Directors determines the term and exercise or purchase price of other awards granted under the 2014 Plan. To date, no incentive stock options have been granted. The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2014 Plan may vest upon the passage of time, generally four years, or upon the attainment of certain performance criteria established by the Board of Directors. We may from time to time grant options to purchase common stock to non-employees for advisory and consulting services. At each measurement period we re-measure the fair value of these stock options using the Black-Scholes option pricing model and recognize expense ratably over the vesting period of each stock option award. Upon exercise of an option, it is the Company’s policy to issue new shares of common stock.

A summary of the option activity as of December 31, 2017 and changes during the fiscal year then ended is presented below:

	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at beginning of year		2,477	$	6.50
Granted		1,112	$	1.79
Exercised		(82)	$	0.57
Forfeited		(200)	$	7.04
Expired		(151)	$	6.46
Outstanding at end of year		3,156	$	4.96		7.68	$	683
Vested and expected to vest		3,156	$	4.96		7.68	$	683
Exercisable at year end		1,581	$	6.35		6.39	$	53

In 2017, the Company received $46 in cash from exercised stock options. The intrinsic value of the options exercised totaled $86, $103, and $1,089, for the years ended December 31, 2017, 2016, and 2015, respectively.

The weighted-average fair value of stock options granted for the years ended December 31, 2017, 2016 and 2015 was $1.26, $3.52 and $5.74, respectively. The total fair value of shares vested during the years ended December 31, 2017, 2016 and 2015 was $2,192, $2,456 and $1,138, respectively.

As of December 31, 2017, total unrecognized compensation cost related to unvested stock options was $3,301. This amount is expected to be recognized as stock-based compensation expense in the Company’s consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of 2.3 years.

The following table summarizes information about stock options outstanding as of December 31, 2017:

	Options Outstanding						Options Exercisable
			Weighted-Average		Weighted				Weighted
Range of			Remaining		Average				Average
Exercise	Number of		Contractual Life		Exercise		Number of		Exercise
Prices	Shares		(Years)		Price		Shares		Price
$0.49 - $1.25		700		9.43	$	1.16		32	$	0.49
$2.27 - $3.78		882		6.95	$	3.09		518	$	3.27
$3.97 - $7.00		877		7.39	$	5.82		563	$	6.25
$7.07 - $15.33		697		7.21	$	10.05		468	$	10.29
		3,156		7.68	$	4.96		1,581	$	6.35

The Company recognizes compensation expense using the straight-line method over the requisite service period. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model under the following assumptions:

	Years Ended December 31,
	2017	2016	2015
Dividend yield	—	—	—
Risk-free interest rate	1.83% - 2.37%	1.24% - 2.37%	1.41% - 2.50%
Expected term (in years)	5.27-9.23	5.27-10	5.52-10
Volatility	77%-88%	77%-83%	73%-76%

Restricted Stock Units

Beginning in 2017, the Company issued restricted stock units (“RSUs”), to employees and non-employees as permitted by the 2014 Plan. Each RSU corresponds to one share of the Company’s common stock and becomes issuable upon vesting. The fair value of restricted stock units is determined based on the closing price of the Company’s common stock on the date of grant.

RSU activity for the year ended December 31, 2017 is summarized below:

	Number of Shares		Weighted Average Grant- Date Fair Value
Unvested as of January 1, 2017		-	$	-
Granted		760	$	1.63
Vested		(132)	$	1.59
Forfeited		(11)	$	1.25
Unvested as of December 31, 2017		617	$	1.65

The total grant-date fair value of RSUs that vested in 2017 was $1,239. As of December 31, 2017, $599 of total unrecognized compensation expense related to employee RSUs was expected to be recognized over a weighted average period of 2.08 years.

Of the 760 RSUs granted and 132 RSUs vested during the year ended December 31, 2017, 120 were granted and 115 vested to employees terminated in connection with the restructuring in May 2017.

Compensation Expense

Stock-based compensation is included in the consolidated statements of operations and comprehensive loss in general and administrative, research and development, or sales and marketing expenses, depending upon the nature of services provided. Stock-based compensation expense recorded for stock options and RSUs granted to employees and non-employees was as follows:

	Years Ended December 31,
	2017		2016		2015
Sales and marketing	$	485	$	677	$	579
Research and development		439		632		414
General and administrative		1,304		1,812		738
Restructuring		186		-		-
	$	2,414	$	3,121	$	1,731

Employee Stock Purchase Plan

In June 2017, the Company’s stockholders approved the Employee Stock Purchase Plan (the “2017 ESPP”). Under the 2017 ESPP, the Company reserved 500 shares of common stock for issuance, subject to adjustment in the event of a stock split, stock dividend, combination or reclassification or similar event. The 2017 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 25% of their eligible compensation, subject to any plan limitations. The 2017 ESPP provides for six-month offering periods. At the end of each offering period, employees can purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period. As of December 31, 2017, enrollment in the plan had not yet commenced.