Note 11 – Share-based compensation and Common Stock Issuance

The following table sets forth total non-cash share-based compensation for the issuance of common stock, options to purchase common stock, warrants to purchase common stock, and restricted stock unit awards by operating statement classification for the years ended December 31, 2022 and 2021:

 Schedule of Stock-based Compensation

For the year ended December 31, 2022 and 2021, the Company recorded $1,145 and $2,270, respectively, for share-based compensation expense related to stock options.

As of December 31, 2022, unamortized share-based compensation for stock options was $964, with a weighted-average recognition period of 0.87 years.

For the year ended December 31, 2022 and 2021, the Company recorded $57 and $335, respectively, for share-based compensation expense related to warrants.

For the year ended December 31, 2022 and 2021, the Company recorded $607 and $867, respectively, for share-based compensation expense related to restricted stock units.

As of December 31, 2022, unamortized stock compensation for restricted stock units was $308, with a weighted-average recognition period of 0.81 years.

Stock option and warrant activity

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 our common stock than would otherwise occur. On January 1, 2022, pursuant to an annual evergreen provision, the number of shares of common stock reserved for future grants was increased by 279,586 shares. Under the 2016 Plan, effective as of January 1, 2023, the maximum number of shares of the Company’s common stock authorized for issuance is 804,371. As of December 31, 2022, there were 15,165 shares of common stock available for future grant under the 2016 Plan.

A summary of the Company’s stock option and warrant activity is as follows:

 Schedule of Stock option and Warrants

The options granted during the years ended December 31, 2022 and 2021 were valued using the Black-Scholes option pricing model using the following weighted average assumptions:

 Schedule of Option Pricing Model Using Weighted Average Assumptions

The grant date fair value for stock options issued during the years ended December 31, 2022 and 2021 were $8.62 and $26.4, respectively.

Restricted Stock Units

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

 Schedule of Restricted Stock Unit Awards Activity

As of December 31, 2021, there were 3,138 vested and unissued restricted stock units. These restricted stock units were issued as common stock during the year ended December 31, 2022.

Issuance of Warrants to Purchase Common Stock

In February 2020, the Company entered into a services agreement whereby it agreed to issue warrants to purchase 6,000 shares of common stock of the Company. The warrants fully vested over a one-year period on a monthly basis and expire three years from the date of issuance and were exercisable at weighted average exercise price equal to $56.60 per share of common stock. In March 2022, the Company granted new warrants as a replacement to the vested warrants held by the service provider, for which all the share-based compensation expense had been recognized in prior fiscal periods. The issuance of new warrants concurrently with the cancellation of the existing warrants was treated as a modification. The Company agreed to issue replacement warrants to purchase 6,000 shares of common stock of the Company exercisable at a price equal to $10 per share of common stock. The fair value of the warrants were valued on the date of grant at $0.38 using the Black-Scholes option-pricing model with the following parameters: (1) risk-free interest rate of 0.91%; (2) expected life in years of 1.62; (3) expected stock volatility of 81.97%; and (4) expected dividend yield of 0%. The replacement warrants immediately vested upon issuance and expire three years from the date of issuance. As a result, the Company recognized $26 of share-based compensation for the year ended December 31, 2022, related to the incremental fair value which is equal to the excess of the fair value of the new warrants granted over the fair value of the original award on the cancellation date.

Issuance of Common Stock

On January 5, 2022, non-employee members of the Board of Directors were granted an aggregate of 24,458 shares of fully-vested common stock with a fair value of $9.60 per share of common stock, as compensation, in lieu of $235 of cash compensation, for service as directors for 2022. The Company recorded $235 and $177 in expense for director services during the year ended December 31, 2022 and 2021, respectively.

In March 2021, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Oppenheimer & Co. Inc. (“Oppenheimer”), under which we may offer and sell from time to time common shares having an aggregate offering price of up to $25.0 million. During the year ended December 31, 2022, we sold approximately 2.2 million shares of our common stock under this agreement, resulting in net cash proceeds of $9.9 million, after deducting issuance costs of $0.4 million. From January 1, 2023 to March 14, 2023, the Company issued and sold approximately 119,104 common shares of our common stock under this agreement, resulting in net cash proceeds of approximately $118.0 thousand, after deducting issuance costs $4.0 thousand.