Share-Based Payments

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Share-based payments

11. Stock-based payments

On December 3, 2021, our shareholders approved the 2021 Equity Incentive Plan to utilize the 3,500,000 shares reserved and unissued under the Torchlight 2015 Stock Option and Grant Plan and the 6,445,745 shares reserved and unissued under the MMI 2018 Stock Option and Grant plan to set the number of shares reserved for issuance under the 2021 Equity Incentive Plan at 34,945,745 shares.

The 2021 Equity Incentive Plan allows the grants of non-statutory stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance units and performance shares to employees, directors, and consultants.

DSU Plan

On March 28, 2013, we implemented a Deferred Stock Unit (DSU) Plan for our directors, employees and officers. Directors, employees and officers are granted DSUs with immediate vesting as a form of compensation. Each unit is convertible at the option of the holder into one common share. Eligible individuals are entitled to receive all DSUs (including dividends and other adjustments) no later than December 1st of the first calendar year commencing after the time of termination of their services.

As of June 30, 2022, there were 3,647,026 outstanding DSUs. There were no new DSUs issued, no DSUs exercised and no DSUs expired during the six months ended June 30, 2022.

RSU Plan

Each unit is convertible at the option of the holder into one common share of our shares upon meeting the vesting conditions.

Total stock-based compensation expense related to RSUs included in the condensed consolidated interim statements of operations was as follows:

	Three months ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of sales	$	157,818		-	$	208,471		-
Selling & marketing		114,707		-		130,200		-
General & administrative		396,997		-		517,162		-
Research & development		1,096,021		-		1,193,232		-
	$	1,765,543		-	$	2,049,065		-

The following table summarizes the change in outstanding RSUs:

	Number of RSUs (#)			Weighted Average grant date fair value
Outstanding, December 31, 2021		300,000		$	6.43
Granted		6,445,652			1.50
Awards forfeited		(97,468	)		1.77
Outstanding, June 30, 2022		6,648,184		$	1.72
Vested, June 30, 2022		960,235		$	2.83

Employee Stock Option Plan

Each stock option is convertible at the option of the holder into one common share upon payment of exercise price.

Total stock-based compensation expense related to stock options included in the condensed consolidated interim statements of operations and comprehensive loss was as follows:

	Three months ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Selling & marketing	$	60,622	$	9,690	$	65,015	$	20,959
General & administrative		985,932		104,727		4,269,400		348,617
Research & development		815,669		110,507		1,239,727		282,142
	$	1,862,223	$	224,924	$	5,574,142	$	651,718

The following table summarizes the change in our outstanding stock options:

	Number of Options (#)			Weighted Average exercise price per stock option		Weighted Average exercise remaining contractual term (years)		Aggregate intrinsic value
Outstanding, December 31, 2021		21,404,641		$	0.36	$	7.34	$	56,924,556
Granted		11,193,297			1.74
Forfeited		(56,201	)		0.27
Exercised		(1,132,277	)		0.27
Outstanding, June 30, 2022		31,409,460		$	0.86	$	9.02	$	14,395,531
X
Exercisable, June 30, 2022		21,820,803		$	0.80	$	8.29	$	11,540,092

Below is a summary of the outstanding options as of June 30, 2022 and December 31, 2021:

		June 30,				December 31,
		2022				2021
Exercise price		Number outstanding #		Number exercisable #		Number outstanding #		Number exercisable #
$	0.12		518,112		518,113		518,112		518,112
	0.15		369,000		369,000		369,000		369,000
	0.27		17,879,051		14,121,894		19,067,529		10,893,918
	1.00		375,000		375,000		375,000		325,000
	1.17		1,730,138		367,843		—		—
	1.21		1,219,120		552,752		—		—
	1.51		741,987		741,987		—		—
	1.58		5,107,941		1,305,103		—		—
	1.97		1,894,111		1,894,111		—		—
	2.00		1,075,000		1,075,000		1,075,000		1,125,000
	3.47		200,000		200,000		—		—
	7.96		300,000		300,000		—		—
			31,409,460		21,820,803		21,404,641		13,231,030

The fair value of options granted was estimated at the grant date using the following weighted-average assumptions:

	Six months ended
	June 30, 2022
Grant date fair value	0.92
Weighted average expected volatility	83%
Weighted average risk-free interest rate	2.16%
Weighted average expected life of the options	4.67 years

Where possible, we use the simplified method to estimate the expected term of employee stock options. We do not have adequate historical exercise data to provide a reasonable basis for estimating the expected term for the current share options granted. The simplified method assumes that employees will exercise share options evenly between the period when the share options are vested and ending on the date when the options would expire.

The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.