Note 11 – Stock-based compensation

Issuance of Common Stock

On July 10, 2020, the non-employee members of the Board of Directors were granted an aggregate of 44,600 shares of Common Stock as compensation, in lieu of $55 of cash compensation, for service as directors during the second quarter of 2020, pursuant to the Company's non-employee director compensation policy. The Company recorded $56 in accrued expenses as of September 30, 2020, in relation to the service as directors for the three months ended September 30, 2020. On October 10, 2020, the non-employee members of the Board of Directors were granted an aggregate of 58,804 shares of Common Stock as compensation, in lieu of cash compensation, for service as directors during the third quarter of 2020, pursuant to the Company's non-employee director compensation policy. The number of shares granted to the Company's directors, in lieu of cash compensation, is determined by the dollar amount of quarterly fees due under the non-employee director compensation policy divided by the fair market value of a share of Common Stock as of the grant date.

On September 1, 2020 the Company completed a securities purchase agreement (the "Securities Purchase Agreement") in which it sold and issued, in a registered direct offering, an aggregate of 3,200,000 shares of the Company's common stock par value $0.0001 per share (the "Common Stock"), and pre-funded warrants to purchase an aggregate of 5,533,625 shares of Common Stock (the "Pre-Funded Warrants"). The offering price was $1.145 for each share of Common Stock and $1.144 for each Pre-Funded Warrant. The Pre-Funded Warrants are immediately exercisable at a price of $.0001 per share of Common Stock. Pursuant to the Securities Purchase Agreement, in a concurrent private placement, the Company has also agreed to sell and issue to the purchasers warrants to purchase up to 8,733,625 shares of Common Stock. These warrants are immediately exercisable at an exercise price of $1.30 per share and expire on the fifth anniversary of the date of issuance. In connection with the closing of the offering, the Company received gross proceeds of $9,994 before deducting placement agent fees and other offering expenses of $830, from the issuance of the Common Stock and the Pre-Funded Warrants.

Issuance of Warrants to Purchase Common Stock

On June 6, 2018, the Company entered into a consultant agreement with a service provider which shall continue until the agreement is terminated by the Company or service provider by providing at least five business days' prior written notice. Pursuant to the agreement, the Company (a) issued a warrant on June 6, 2018 to purchase 10,000 shares of the Company's common stock, with an exercise price of $5.25 per share, at which time a measurement date was reached (b) issued a warrant on October 6, 2018 to purchase 10,000 shares of the Company's common stock, with an exercise price of $6.25 per share at which time a measurement date was reached, and (c) issued a warrant on February 6, 2019 to purchase 10,000 shares of the Company's common stock, with an exercise price of $7.25 per share (collectively, such warrants referred to as the "Consultant Warrants"). The Consultant Warrants each have a five-year term, vest immediately, and provide for cashless exercise. The Company recorded $0 and $10 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss in relation to the 30,000 warrants for the three and nine months ended September 30, 2019, respectively.

On July 2, 2018, the Company entered into a consultant agreement with a service provider which continued until February 28, 2019. Pursuant to the agreement, the Company (i) issued a fully-vested and nonforfeitable warrant on July 2, 2018 (at which point a measurement date was reached) to purchase 25,000 shares of the Company's common stock, with an exercise price of $7.39 per share, and expired 12 months from the date of agreement, (ii) issued a fully-vested and nonforfeitable warrant on July 2, 2018 (at which point a measurement date was reached) to purchase 25,000 shares of the Company's common stock, with an exercise price of $7.39 per share, and expires 18 months from the date of the agreement, (iii) issued a fully-vested and nonforfeitable warrant on October 2, 2018 (at which point a measurement date was reached) to purchase 25,000 shares of the Company's common stock with an exercise price of $8.75 per share, and expires 18 months from the date of the agreement and (iv) issued a fully-vested and nonforfeitable warrant on January 2, 2019 to purchase 25,000 shares of common stock of the Company with an exercise price of $10.00 per share, and expires 24 months from the date of the agreement. The warrants issued under this agreement are callable by the Company and it will have the right to require the consultant to exercise all or any warrants still unexercised for a cash exercise or the Company may re-purchase the warrant at a price of $0.01 per warrant share if the Company's stock trades above a closing floor price ranging from $9.00 to $13.00 per share for ten (10) consecutive trading days. In accordance with ASC 480, "Distinguishing Liabilities from Equity", the call feature is a conditional obligation upon an event not certain to occur that becomes mandatorily redeemable if that event occurs, the condition is resolved, or that event becomes certain to occur. Because the conditional event is within control of the Company, the call feature is not recognized for accounting purposes until the Company exercises its rights under agreement. The Company recorded $0 and $31 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss for the three and nine months ended September 30, 2019, respectively.

On July 3, 2018, the Company entered into an amendment to a consulting agreement dated May 27, 2017 as a continuation of investor relation and consulting services to extend the termination of the agreement to July 2019 and issued 30,000 shares of common stock which vested immediately and a warrant to purchase 90,000 shares of common stock which vested immediately. The warrants are exercisable at $8.50 per share and expire five years from the date of issuance. The Company recorded $139 and $276 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss for the three and nine months ended September 30, 2019, respectively. 

On January 1, 2019, the Company entered into an amended and restated consultant agreement to restate and replace the existing consultant agreement dated October 1, 2018 with a service provider which shall continue until September 30, 2019, unless and until sooner terminated by the Company or service provider by providing at least thirty days prior written notice. Pursuant to the agreement, the Company issued a fully-vested and nonforfeitable warrant on February 13, 2019 to purchase 50,000 shares of the Company's common stock, with an exercise price of $5.00 per share, and expires March 20, 2022. The Company recorded $30 and $60 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss for the three and nine months ended September 30, 2019, respectively.

On February 13, 2019, the Company issued to an existing service provider for past services rendered a fully-vested and nonforfeitable warrant to purchase 30,000 shares of the Company's common stock, with an exercise price of $5.00 per share, and expires March 20, 2022. The Company recorded $0 and $55 as general and administrative expense in the accompanying condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2019.

On February 6, 2020, the Company entered into a services agreement whereby it agreed to issue warrants to purchase 120,000 shares of common stock of the Company. The warrants will vest over a one-year period on a monthly basis and expire three years from the date of issuance. 60,000 of the granted warrants are exercisable at a price equal to $2.16 per share of common stock and 60,000 of the remaining warrants granted are exercisable at a price equal to $3.50 per share of common stock. The fair value of the warrants were valued on the date of grant at $112 using the Black-Scholes option-pricing model with the following parameters: (1) risk-free interest rate of 1.43%; (2) expected life in years of 3.0; (3) expected stock volatility of 74.82%; and (4) expected dividend yield of 0%. The Company recorded $28 and $75 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss in relation to the consulting agreement for the three and nine months ended September 30, 2020, respectively.

On June 11, 2020, the Company entered into a services agreement whereby it agreed to issue warrants to purchase 50,000 shares of common stock of the Company which vested immediately. The warrants are exercisable at $1.17 per share and expire three years from the date of issuance. The fair value of the warrants were valued on the date of grant at $28 using the Black-Scholes option-pricing model with the following parameters: (1) risk-free interest rate of 0.22%; (2) expected life in years of 3.0; (3) expected stock volatility of 73.06%; and (4) expected dividend yield of 0%. The Company recorded $14 and $17 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss in relation to the consulting agreement for the three and nine months ended September 30, 2020, respectively.  As of September 30, 2020, the Company has recorded a prepaid expense which will be recognized through December 31, 2020, in the amount of $11 related to the fully vested nonforfeitable warrants issued for which services have not been rendered. On July 10, 2020 and August 3, 2020, the Company issued an aggregate of 50,000 shares of common stock upon exercise of the warrant which resulted in aggregate proceeds of approximately $59.

In connection with the Securities Purchase Agreement, as described above, the Company issued a pre-funded common stock purchase warrant to purchase up to 5,533,625 shares of its common stock with the aggregate exercise price already being pre-funded to the Company on September 1, 2020 and, consequently, no additional consideration other than the nominal exercise price of $0.001 per warrant share shall be required to be paid to effect any exercise of the warrant. The pre-funded common stock purchase warrant will be exercisable until it is exercised in full. Pursuant to the Securities Purchase Agreement, on September 1, 2020, the Company also issued a common stock purchase warrant to purchase 8,733,625 of its common stock at an exercise price of $1.30 per share that expires on September 1, 2025. The terms of both warrants include certain provisions related to fundamental transactions, a cashless exercise provision in the event registered shares are not available, and do not include any mandatory redemption provisions. Therefore, the warrants have been classified as equity upon issuance.

Warrants

A summary of the Company's warrants to purchase common stock activity is as follows:

As of September 30, 2020, 17,018,051 shares of the Company's common stock were issuable upon exercise of outstanding warrants.

Stock Options

2016 Equity Incentive Plan

In December 2016, the Company adopted the Motus GI Holdings, Inc. 2016 Equity Incentive Plan (the "2016 Plan"). Pursuant to the 2016 Plan, the Company's board of directors may grant options to purchase shares of the Company's common stock, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards to employees, officers, directors, consultants and advisors. Pursuant to the terms of an annual evergreen provision in the 2016 Plan, the number of shares of common stock available for issuance under the 2016 Plan shall increase annually by six percent (6%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year; provided, however, that the board of directors may act prior to the first day of any calendar year to provide that there shall be no increase such calendar year, or that the increase shall be a lesser number of shares of the Company's common stock than would otherwise occur. On January 1, 2020, pursuant to an annual evergreen provision, the number of shares of common stock reserved for future grants was increased by 1,728,665 shares. Under the 2016 Plan, effective as of January 1, 2020, the maximum number of shares of the Company's common stock authorized for issuance is 5,656,324. As of September 30, 2020, there were 635,663 shares of common stock available for future grant under the 2016 Plan.

A summary of the Company's stock option activity is as follows:

The Company estimated the fair value of each stock option award using the Black-Scholes option pricing model based on the following weighted average assumptions:

As of September 30, 2020, unamortized share-based compensation for stock options was $2,477, with a weighted-average recognition period of 1.00 year.

As of September 30, 2020, outstanding options to purchase 2,389,700 shares of common stock were exercisable with a weighted-average exercise price per share of $4.22.

For the three and nine months ended September 30, 2020, the Company recorded $619 and $1,798, respectively, for share based compensation expense related to stock options.

For the three and nine months ended September 30, 2019, the Company recorded $578 and $1,811, respectively, for share based compensation expense related to stock options.

Restricted Stock Units 

The Company recorded $124 and $352 as general and administrative expense in the accompanying condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020, respectively, in relation to the aggregate 501,265 restricted stock units issued to date to the CEO, executives, and directors.

A summary of the Company's restricted stock unit awards activity is as follows:

As of September 30, 2020, unamortized stock compensation for restricted stock units was $1,021, with a weighted-average recognition period of 1.21 years.

Stock-based Compensation

The following table sets forth total non-cash stock-based compensation for the issuance of common stock, options to purchase common stock, warrants to purchase common stock, and restricted stock unit award by operating statement classification for the three and nine months ended September 30, 2020 and 2019: