Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Stock-Based Compensation

Stock-Based Compensation

10.    STOCK-BASED COMPENSATION

On May 23, 2022, the Company’s stockholders approved the Helius Medical Technologies, Inc. 2022 Equity Incentive Plan (“2022 Plan”), which had been adopted by the Company’s Board of Directors on February 16, 2022. The 2022 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of the Company’s affiliates. Vesting and the term of an option is determined at the discretion of the Company’s Board of Directors. Initially, a maximum of 1,121,272 shares of common stock may be issued. The automatic increase provision in the 2022 Plan provides for an annual increase to the maximum number of authorized shares on January 1 of each year beginning on January 1, 2023 through January 1, 2027, to an amount equal to (i) 20% of the fully diluted number of shares of common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or (ii) a lesser number of shares determined by the Board prior to the date of the increase. The maximum number of shares of common stock that may be issued on the exercise of ISOs under the 2022 Plan is 11,212,720. Effective with the approval of the 2022 Plan, the Company ceased granting awards under the 2018 Omnibus Incentive Plan. However, outstanding stock options granted prior to the effective date of the 2022 Plan are still governed by the respective predecessor plan under which they were granted, which are described more fully in the 2021 10-K. As of September 30, 2022, the remaining shares available for grant were 256 shares under the 2022 Plan and 22,500 shares under the Helius Medical Technologies, Inc. 2021 Inducement Plan.

During the nine months ended September 30, 2022, the Company granted 595,170 stock options at a weighted average exercise price of $3.03 per share. The following table includes the weighted-average grant-date fair values of stock options granted during the periods indicated and the related weighted-average assumptions used in the Black-Scholes option pricing model:

	Three Months Ended			Nine Months Ended
	September 30, 2022			September 30, 2022
Risk-free interest rate		3.56	%		2.86	%
Expected volatility		75.75	%		74.94	%
Expected term (years)		5.74			5.65
Expected dividend yield		0.00	%		0.00	%
Fair value per option	$	0.36		$	1.09

During the nine months ended September 30, 2022, the Company’s non-employee directors received a grant of 24,196 restricted stock units at a weighted average grant date fair value of $1.40 per share. Share-based compensation expense for the nine months ended September 30, 2022 includes a grant to an officer of the Company of 8,011 shares of unrestricted common stock valued at $34 thousand.

As of September 30, 2022, there were an aggregate of 1,174,320 stock options outstanding with a weighted average exercise price of $17.76 per share and 14,112 unvested restricted stock units outstanding with a weighted average grant date fair value of $1.40 per share.

Compensation expense related to all stock-based compensation, net of forfeitures, was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Cost of sales	$	4	$	2	$	11	$	5
Selling, general and administrative		1,367		582		1,837		3,351
Research and development		70		156		174		540
Total stock-based compensation expense	$	1,441	$	740	$	2,022	$	3,896

There were no tax benefits recognized related to stock-based compensation expense during these periods.

In conjunction with the public offering discussed in Note 9, certain performance criteria were achieved for performance-based stock options. For the three months and nine months ended September 30, 2022, the Company recognized additional share-based compensation expense of $1,184 thousand associated with the vesting of the performance-based stock options.

As of September 30, 2022, the unrecognized compensation cost related to non-vested time-based stock options and restricted stock units was $1.5 million which will be recognized over a weighted-average remaining vesting period of approximately 2.4 years. Compensation cost is not adjusted for estimated forfeitures, but instead is adjusted upon an actual forfeiture of an award.