Share Based Compensation

9 Months Ended

Sep. 30, 2022

Share Based Compensation

Share Based Compensation

8     Share Based Compensation

Under the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) and the Company’s Stock Option Plan (the “2011 Plan”), unless otherwise decided by the Board of Directors, options vest and are exercisable as follows: 25% vest and are exercisable on the one year anniversary of the grant date and one thirty-sixth (1/36^th) of the remaining options vest and are exercisable each month thereafter, such that options are vested in full on four-year anniversary of the grant date.

On January 1, 2022, the number of the Company’s common shares reserved for issuance under the 2019 Plan increased by 1,195,902 common shares. In addition, 125,127 options have been forfeited under the 2011 Plan since the adoption of the 2019 Plan and have become available for issuance under the 2019 Plan. As of September 30, 2022, there were 5,811,310 common shares available for issuance under the 2019 Plan, of which 664,726 common shares were available for future grants.

On November 10, 2021, the Company established a 2021 Inducement Plan through the granting of awards. This 2021 Inducement Plan is intended to help the Company provide an inducement material for certain individuals to enter into employment with the Company, incentives for such persons to exert maximum efforts for the success of the Company and provide a means by which employees may benefit from increases in value of the common shares. There were 523,000 options granted and outstanding under the 2021 Inducement Plan during the nine-month period ended September 30, 2022. The options were granted at a weighted average exercise price of $6.37.  

On July 15, 2022, the Company offered an ESPP, in which participation is available to substantially all of our employees in the United States and Canada who meet certain service eligibility requirements.  As of September 30, 2022, the Company has 1,121,076 common shares available under the ESPP with no common shares issued under this plan.

The total outstanding and exercisable options from the 2011 Plan, 2019 Plan and Inducement Plan as of September 30 were as follows:

	2022
							Weighted
	Number						average
	of shares						exercise
	2019 Plan		Inducement Plan	2011 Plan		Total	price
Outstanding at beginning of year - 2011 Plan	$	—	—	$	1,995,971	1,995,971	$	2.07
Outstanding at beginning of year - 2019 Plan		3,759,834	—		—	3,759,834		9.51
Granted - 2019 Plan		1,748,700	—		—	1,748,700		5.78
Granted - Inducement Plan		—	523,000		—	523,000		6.37
Expired - 2011 Plan		—	—		(1,121)	(1,121)		0.96
Exercised - 2011 Plan		—	—		(114,225)	(114,225)		1.38
Exercised - 2019 Plan		(15,089)	—		—	(15,089)		3.92
Forfeited - 2019 Plan		—	—		—	—		8.56
Cancelled - 2011 Plan		—	—		(19,387)	(19,387)		9.42
Cancelled - 2019 Plan		(17,950)	—		—	(17,950)		14.31
Outstanding at end of period	$	5,475,495	523,000		1,861,238	7,859,733	$	6.70
Outstanding at end of period - Weighted average exercise price	$	8.32	6.37	$	2.04
Exercisable at end of period		2,219,125	—		1,831,482	4,050,607	$	6.28
Exercisable at end of period - Weighted average exercise price	$	9.79	—	$	2.01

	2021
							Weighted
	Number						average
	of shares						exercise
	2019 Plan		Inducement Plan	2011 Plan		Total	price
Outstanding at beginning of year - 2011 Plan	$	—	—	$	2,080,097	2,080,097	$	2.15
Outstanding at beginning of year - 2019 Plan		1,706,190	—		—	1,706,190		13.55
Granted - 2019 Plan		2,065,200	—		—	2,065,200		6.24
Forefeited - 2019 Plan		(13,882)	—		—	(13,882)		12.81
Cancelled - 2019 Plan		(1,167)	—		—	(1,167)		21.48
Exercised - 2011 Plan		—	—		(40,538)	(40,538)		0.97
Exercised - 2019 Plan		(1,250)	—		—	(1,250)		3.74
Outstanding at end of period		3,755,091	—		2,039,559	5,794,650	$	6.94
Outstanding at end of period - Weighted average exercise price	$	9.53	—	$	2.18
Exercisable at end of period		938,433	—		1,764,146	2,702,579	$	5.39
Exercisable at end of period - Weighted average exercise price	$	11.61	—	$	2.08

The weighted average remaining contractual life was 7.8 and 8.0 years for outstanding options as of  September 30, 2022 and 2021, respectively. The weighted average remaining contractual life was 6.7 and 6.9 years for vested options, as of September 30, 2022 and 2021, respectively.

There was $18.6 million and $17.3 million total unrecognized compensation cost related to non-vested share options as of September 30, 2022 and 2021, respectively. The share options are expected to be recognized over a remaining weighted average vesting period of 2.5 years and 2.6 years as of September 30, 2022 and 2021, respectively.

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 non-vested options as of September 30 were as follows:

	2022
	Number							Weighted
	of options							average
	2019 Plan		Inducement Plan		2011 Plan		Total	fair value
Non-vested share options at beginning of year - 2011 Plan		—		—		200,639	200,639	$	1.86
Non-vested share options at beginning of year - 2019 Plan		2,665,518		—		—	2,665,518		6.39
Granted - 2019 Plan		1,748,700		—		—	1,748,700		4.37
Granted - Inducement Plan		—		523,000		—	523,000		4.81
Vested, outstanding 2011 Plan		—		—		(170,883)	(170,883)		1.76
Vested, outstanding 2019 Plan		(1,149,117)		—		—	(1,149,117)		5.99
Forfeited - 2019 Plan		(8,731)		—		—	(8,731)		6.27
Non-vested share options at end of period		3,256,370		523,000		29,756	3,809,126	$	5.34
Non-vested share options at end of period - Weighted average fair value	$	5.45	$	—	$	2.44

	2021
	Number							Weighted
	of options							average
	2019 Plan		Inducement Plan		2011 Plan		Total	fair value
Non-vested share options at beginning of year - 2011 Plan		—		—		543,192	543,192	$	1.81
Non-vested share options at beginning of year - 2019 Plan		1,438,026		—		—	1,438,026		10.28
Granted - 2019 Plan		2,065,200		—		—	2,065,200		4.71
Vested, outstanding 2011 Plan		—		—		(267,789)	(267,789)		1.64
Forfeited - 2019 Plan		(13,882)		—			(13,882)		9.18
Vested, outstanding 2019 Plan		(672,686)		—		—	(672,686)		9.17
Non-vested share options at end of period		2,816,658		—		275,403	3,092,061	$	6.07
Non-vested share options at end of period - Weighted average fair value	$	6.47	$	—	$	1.98

There were 523,000 options granted, outstanding and non-vested under the 2021 Inducement Plan during the nine month period ended September 30, 2022. The options were granted at a weighted average fair value price of $4.81.  

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 for the 2011 Plan, 2019 Plan and 2021 Inducement Plan were estimated using the Black-Scholes option pricing model, resulting in the following weighted average assumptions for the options granted:

	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Exercise price	$	6.94		$	5.96		$	5.91		$	6.24
Share price	$	6.94		$	5.96		$	5.91		$	6.24
Volatility		93	%		94	%		91	%		94	%
Risk-free interest rate		2.94	%		0.94	%		2.41	%		1.04	%
Expected life		5.75			6.08			6.03			6.01
Dividend		0	%		—	%		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 U.S. 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:

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Administration	$	1,891	$	863	$	3,683	$	2,186
Research and development		349		821		2,302		2,226
Commercial activities		140		340		920		892
Total	$	2,380	$	2,024	$	6,905	$	5,304