Ekso Bionics Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Employee Stock Options

Employee Stock Options

12 Months Ended

Dec. 31, 2016

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

14. Employee Stock Options

In the first quarter of 2014, prior to the Merger, the Board of Directors and a majority of the stockholders adopted 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 by 1,656 shares to an aggregate of 3,714 shares of common stock. Options previously issued under the Ekso Bionics 2007 Equity Incentive Plan that existed prior to the Merger were converted in connection with the Merger into options to purchase an aggregate of 1,086 shares of the Company’s common stock under the 2014 Plan. As of December 31, 2016, there were 948 shares available for future awards.

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.

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, 2016 and changes during the fiscal year then ended is presented below:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Options		Exercise		Contractual		Intrinsic
	Outstanding		Price		Life (Years)		Value
Outstanding as of December 31, 2015		1,963	$	7.09
Granted		813	$	5.40
Exercised		(44)	$	2.51
Forfeited		(224)	$	8.06
Expired		(31)	$	9.39
Outstanding as of December 31, 2016		2,477	$	6.50		7.46	$	674
Vested and expected to vest at December 31, 2016		2,321	$	6.49		7.34	$	672
Exercisable as of December 31, 2016		1,262	$	5.97		6.01	$	659

In 2016, we received $110 in cash from exercised stock options. The intrinsic value of options exercised in 2016 was $103. The weighted-average grant-date fair value of options granted in 2016 was $3.52 and the total fair value of shares vested during the year was $2,456.

As of December 31, 2016, total unrecognized compensation cost related to unvested stock options was $4,822. 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 2.6 years.

Shares available for future grant under the 2014 Plan is as follows for the year ended December 31, 2016:

	Shares
	Available For
	Grant
Available as of December 31, 2015		1,506
Granted		(813)
Forfeited		224
Expired		31
Available as of December 31, 2016		948

The following table summarizes information about stock options outstanding as of December 31, 2016:

	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
$0.28 - $0.49		106		1.89	$	0.36		106	$	0.36
$2.73 - $4.00		762		6.90	$	3.61		465	$	3.39
$4.67 - $7.42		876		8.03	$	6.55		387	$	6.81
$8.96 - $15.33		733		8.14	$	10.33		304	$	10.80
		2,477		7.45	$	6.50		1,262	$	5.97

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 to operations for stock options for both employees and non-employees was as follows:

	Years Ended December 31,
	2016		2015		2014
Sales and marketing	$	677	$	579	$	345
Research and development		632		414		180
General and administrative		1,812		738		618
	$	3,121	$	1,731	$	1,143

In connection with the resignation of the Company’s then Chief Executive Officer in February 2016, the Company accelerated the vesting of options that would have vested in the subsequent twelve months and extended the exercise period of the resulting options from three months to six years. In addition, the Company extended the exercise period for an employee that was terminated in March 2016 from three months to one year. These modifications resulted in incremental stock-based compensation expense of $59 and $774 included in research and development and general and administrative, respectively, for the year ended December 31, 2016 in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2014, due to a decline in the Company’s stock price following the Merger, options representing 122 shares of common stock that were granted to 14 employees with original per share exercise prices ranging from $24.99 to $45.50 were modified to a per share exercise price of $15.33. The modification resulted in an incremental compensation cost of $411 that is being recognized over the respective service periods of the original grant.

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,
	2016		2015		2014
Dividend yield	—		—		—
Risk-free interest rate	1.24% - 2.37	%	1.41% - 2.50	%	0.97% - 2.61	%
Expected term (in years)	5.27-10		5.52-10		3-10
Volatility	77%-83	%	73%-76	%	66%-75	%

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details