7 Shareholders’ equity (deficit)

Authorized share capital

An unlimited number of common shares, voting and participating, without par value.

In May 2019, the Company completed its initial public offering ("IPO"), whereby the Company issued in total 6,325,000 common shares at a public offering price of $15.00 per share (note 1). The gross proceeds received by the Company from the offering were $94.9 million. Upon the closing of the IPO, all outstanding shares of Class A1, A2, B, C, D1 and D2 preferred shares converted into 17,550,802 common shares.

The Company's board of directors adopted and its shareholders approved the 2019 Employee Share Purchase Plan ("ESPP") in April 2019, which became effective on May 8, 2019. The number of common shares initially reserved for issuance under the ESPP was 278,734 common shares. The number of shares reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2020 through January 1, 2029, by the lesser of (1) 1% of the total number of shares of the Company's share capital outstanding on the last day of the calendar month before the date of the automatic increase and (2) 487,837 shares; provided that before the date of any such increase, the Company's board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). As of December 31, 2019, no common shares have been issued under the ESPP. The first offering period has not yet been decided by the Company's board of directors.

During the year ended December 31, 2019, the Company issued a total of 33,162 common shares (in 2018, 356,797) for a total cash consideration of $44 (in 2018, $461) pursuant to the exercise of 33,162 stock options (in 2018, 356,797) at an average exercise price of $1.326 per option (in 2018, $1.287 per option). As a result, an amount of $41 (in 2018, $350) previously included in additional paid‑in capital related to the exercised options has been credited to share capital and deducted from additional paid‑in capital.

Additional paid‑in capital



	2019		2018
Opening balance	$	2,655	$	2,372
Share-based compensation expense		1,191		633
Exercise of stock options		(41)		(350)
Closing balance	$	3,805	$	2,655

Share‑based compensation

The Company's board of directors adopted and its shareholders approved the 2019 Equity Incentive Plan (the "2019 Plan") in April 2019, which became effective on May 8, 2019 in connection with the IPO. Initially, the maximum number of the Company's common shares that may be issued under the 2019 Plan was 4,710,564 shares, which is the sum of (1) 1,923,501 new shares, plus (2) the number of shares (not to exceed 2,787,063 shares) (i) that remained available for the issuance of awards under the Company's Stock Option Plan (the "2011 Plan") at the time the 2019 Plan became effective, and (ii) any shares subject to outstanding options or other share awards that were granted under the 2011 Plan that terminate, expire or are otherwise forfeited, reacquired or withheld. In addition, the number of the Company's common shares reserved for issuance under the 2019 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2020 through January 1, 2029, in an amount equal to 4% of the total number of the Company's capital shares outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company's board of directors. As of May 8, 2019, the Company's 2011 Plan was terminated and no further option grants will be made under the 2011 Plan.

On October 15, 2018, the Company amended for a third time and restated the share option plan (the 2011 Plan) whereby options to purchase common shares of the Company’s shares may be granted to directors, officers, employees, consultants and members of the scientific advisory board. The 2011 Plan is administered by the Board of Directors. The Board of Directors determines the number of options to be granted, the vesting period and the exercise price of new options. It is the Company’s policy to establish the exercise price at an amount that approximates the fair value of the underlying shares on the date of grant as determined by the Board of Directors.

Under the 2011 Plan, unless otherwise decided by the Board of Directors, options vest and are exercisable as follows: 25% are exercisable from the first anniversary of grant date and 2.0833% become available at the end of each month after the first anniversary of grant date.

The 2011 Plan was terminated as of May 8, 2019 and a total of 2,364,526 options are outstanding at December 31, 2019.

As of December 31, 2019, there were 2,316,933 options available for awards under the 2019 Plan, of which 287,138 options were granted and 66,998 forfeited, leaving 2,096,793 available for future grant. The outstanding and exercisable options at December 31 were as follows:


	2019							2018
		Number				Weighted		Number	Weighted
		of shares				average		of shares	average
						exercise			exercise
		2019 Plan		2011 Plan	Total	price		2011 Plan	price
Outstanding at beginning of period		—		2,295,045	2,295,045	$	1.771	968,782	$	1.133
Granted - 2011 Plan		—		116,742	116,742		9.417	1,695,258		2.037
Granted - 2019 Plan		287,138		—	287,138		19.948	—		—
Exercised - 2011		—		(33,162)	(33,162)		1.326	(356,797)		1.287
Forfeited - 2011		—		(14,099)	(14,099)		2.660	(12,198)		1.096
Forfeited - 2019		(66,998)		—	(66,998)		17.224	—		—
Outstanding - 12/31/2019		220,140		2,364,526	2,584,666	$	3.755	2,295,045	$	1.771
Outstanding - 12/31/2019 - Weighted average exercise price	$	20.777	$	2.151
Exercisable at end of period		1,165		1,212,226	1,213,391	$	1.652	588,817	$	1.314
Exercisable at end of period - Weighted average exercise price	$	17.780	$	1.637

As of December 31, 2019, the weighted average remaining contractual life was 7.8 years (for 2018, 8.6 years). The weighted average remaining contractual life was 7.0 years for vested options (for 2018, 6.6 years). For the year ended December 31, 2019, 14,099 options and 66,998 options were forfeited under the 2011 Plan and the 2019 Plan, respectively, amounting to a total of 81,097 options forfeited in 2019 (for 2018, 12,198).

Options granted are valued using the Black‑Scholes option pricing model. Amortization of the fair value of the options over vesting years has been expensed and credited to additional paid‑in capital in shareholders’ deficit. The weighted average fair values of options granted in 2019 was $6.649 for the 2011 Plan and $13.912 for the 2019 plan (in 2018 for the 2011 Plan, $1.463). Share‑based compensation expense recognized for the year ended December 31, 2019 was $1,191 (in 2018, $633).

As of December 31, 2019, there was $6,464 (for 2018, $2,402) of total unrecognized compensation cost, related to non‑vested share options, which is expected to be recognized over a remaining weighted average vesting period of 2.6 years (for 2018, 3.1 years).


	2019							2018
		Number				Weighted		Number	Weighted
		of options				average		of options	average
		2019 Plan		2011 Plan	Total	fair value		2011 Plan	fair value
Non-vested share options at beginning of period		—		1,706,303	1,706,303	$	1.346	451,113	$	1.027
Granted - 2011 Plan		—		116,742	116,742		6.649	1,695,258		1.463
Granted - 2019 Plan		287,138		—	287,138		13.912	—		—
Vested, outstanding		—		(656,646)	(656,646)		1.333	(427,870)		1.479
Vested, outstanding		(1,165)		—	(1,165)		12.160	—		—
Forfeited - 2011		—		(14,099)	(14,099)		1.906	(12,198)		1.064
Forfeited - 2019		(66,998)		—	(66,998)		12.221	—		—
Non-vested share options at end of period		218,975		1,152,300	1,371,275	$	3.889	1,706,303	$	1.346
Non-vested share options at end of period - Weighted average fair value	$	14.439	$	1.884

The following table summarizes information with respect to share options outstanding as of December 31, 2019:


	Options outstanding				Options exercisable
		Weighted				Weighted
		average	Weighted			average	Weighted
		remaining	average			remaining	average
	Number	contractual	exercise		Number	contractual	exercise
Exercise price	of options	life (years)	price		of options	life (years)	price
C$0.96	235,497	3.3	$	0.914	235,497	3.3	$	0.914
$1.12	261,913	6.3	$	1.117	207,319	6.2	$	1.117
$1.54	956,688	7.9	$	1.543	429,175	7.9	$	1.543
$1.91	82,772	8.6	$	1.915	40,122	9	$	2
$2.66	710,914	8.9	$	2.660	300,113	8.9	$	2.660
$9.42	116,742	9.2	$	9.415	—	—	$	—
$15.87	23,620	9.6	$	15.870	—	—	$	—
$17.78	42,000	9.9	$	17.780	1,165	9.9	$	17.780
$19.14	3,760	9.8	$	19.140	—	—	$	—
$21.28	3,760	9.7	$	21.280	—	—	$	—
$22.45	147,000	9.7	$	22.450	—	—	$	—
Total	2,584,666	7.8	$	3.755	1,213,391	7.0	$	1.652

The intrinsic value of all outstanding options as of December 31, 2019 was $32.7 million, based on the fair value of our common shares of $16.01 per share at December 31, 2019, of which approximately $17.4 million related to vested options and approximately $15.5 million related to unvested options.

The fair value of share‑based payment transaction is measured using Black‑Scholes valuation model. This model also requires assumptions, including expected option life, volatility, risk‑free interest rate and dividend yield, which greatly affect the calculated values.

The fair value of options granted was estimated using the Black‑Scholes option pricing model, resulting in the following weighted average assumptions for the options granted for the years ended December 31, 2019 and 2018:



	2019			2018
Exercise price	$	16.900		$	2.037
Share price	$	16.900		$	2.037
Volatility		80	%		82	%
Risk-free interest rate		1.92	%		2.84	%
Expected life		6.21 years			6.25 years
Dividend		0	%		0	%

Expected volatility is determined using comparable companies for which the information is publicly available. The risk‑free interest rate is determined based on the US sovereign rates benchmark in effect at the time of grant with a remaining term equal to the expected life of the option. Expected option life is determined based on the simplified method as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The simplified method is an average of the contractual term of the options and its ordinary vesting period. Dividend yield is based on the share option’s exercise price and expected annual dividend rate at the time of grant.

Share‑based payment awards with performance targets attainable after the requisite service period are treated as performance conditions that affect vesting. No compensation expense is recorded related to an award for which the transfer to the employee is contingent on the attainment of a performance target until it becomes probable that the performance target will be met.

The Company recognized share‑based compensation expense as follows at December 31, 2019 and 2018:



	2019		2018
Administration	$	574	$	209
Research and development		495		371
Commercial activities		122		53
	$	1,191	$	633