4 Shareholders’ equity

Authorized share capital

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

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 278,764 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). On January 1, 2020, the number of the Company’s common shares reserved for issuance under the ESPP increased by 245,057 common shares. As of March 31, 2020, 523,821 common shares were available and 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 three-month period ended March 31, 2020, the Company issued a total of 53,722 common shares [2019 –18,153] for a total cash consideration of $77 [2019 - $25] pursuant to the exercise of 53,722 stock options [2019 – 18,153] at an average exercise price of US$1.44 per option [2019 – US$1.32]. As a result, an amount of $56 [2019 - $26] 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


	Three months ended March 31,
	2020		2019
Opening balance	$	3,805	$	2,655
Share-based compensation expense		981		211
Exercise of stock options		(56)		(26)
Closing balance	$	4,730	$	2,840

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 number of common shares issuable under the 2019 Plan was 2,316,933. 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 will become available for issuance under the 2019 Plan. 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. At March 31, 2020, a total of 2,305,826 options are still outstanding under the 2011 Plan.

Under the 2019 Plan and 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.

On January 1, 2020, the number of the Company’s common shares reserved for issuance under the 2019 Plan increased by 980,229 common shares. In addition, 19,077 options forfeited under the 2011 Plan after its termination and became available for issuance under the 2019 Plan. As of March 31, 2020, there were 3,316,239 shares available for issuance under the 2019 Plan, of which 2,333,689 shares were available for future grants.

The total outstanding and exercisable options from the 2011 Plan and 2019 Plan as at March 31 were as follows:


	2020							2019
		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 - 2011 Plan		—		2,364,526	2,364,526	$	2.15	2,295,045	$	1.77
Outstanding at beginning of period - 2019 Plan		220,140		—	220,140		20.78	—		—
Granted - 2011 Plan		—		—	—		—	116,742		9.42
Granted - 2019 Plan		765,160		—	765,160		21.49	—		—
Exercised - 2011		—		(53,722)	(53,722)		1.44	(18,153)		1.32
Forfeited - 2011		—		(4,978)	(4,978)		2.12	—		—
Forfeited - 2019		(2,750)		—	(2,750)		21.48	—		—
Outstanding - 3/31/2020		982,550		2,305,826	3,288,376	$	7.89	2,393,634	$	1.99
Outstanding - 3/31/2020 - Weighted average exercise price	$	21.33	$	2.17
Exercisable at end of period		5,660		1,327,637	1,333,297	$	1.92	670,168	$	1.35
Exercisable at end of period - Weighted average exercise price	$	18.43	$	1.85

As of March 31, 2020, the weighted average remaining contractual life was 8.2 [2019 – 8.5 years]. The weighted average remaining contractual life was 7.0 years for vested options [2019 – 6.6 years]. There were 7,728 options forfeited for the three-month period ended March 31, 2020 [2019 – nil].

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’ equity. The weighted average fair values of options granted in the three-month period ended March 31, 2020 was $15.19 per share [2019 - $6.65]. Share-based compensation expense recognized for the three-month period ended March 31, 2020 was $981[2019 - $211].

As of March 31, 2020, there was $17,442 [2019 – $3,047] 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 2.9 years [2019 – 3.0 years].

The non-vested options as at March 31 were as follows:


	2020							2019
		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 - 2011 Plan		—		1,152,300	1,152,300	$	1.88	1,706,303	$	1.35
Non-vested share options at beginning of period - 2019 Plan		218,975		—	218,975	$	14.44	—		—
Granted - 2011 Plan		—		—	—		—	116,742		6.65
Granted - 2019 Plan		765,160		—	765,160		15.19	—		—
Vested, outstanding		—		(169,133)	(169,133)		5.81	(99,579)		1.18
Vested, outstanding		(4,495)		—	(4,495)		12.85	—		—
Forfeited - 2011		—		(4,978)	(4,978)		1.52	—		—
Forfeited - 2019		(2,750)		—	(2,750)		15.25	—		—
Non-vested share options at end of period		976,890		978,189	1,955,079	$	8.12	1,723,466	$	1.72
Non-vested share options at end of period - Weighted average fair value	$	11.80	$	1.21

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 three-month ended March 31:


	Three months ended March 31,
	2020			2019
Exercise price	$	21.41		$	9.42
Share price	$	21.41		$	9.42
Volatility		82	%		80	%
Risk-free interest rate		1.60	%		2.50	%
Expected life		6.24			6.25
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.

The Company recognized share-based compensation expense as follows for the three months ended March 31:


	Three months ended March 31,
	2020		2019
Administration	$	399	$	70
Research and development		386		125
Commercial activities		196		16
	$	981	$	211