SHAREHOLDERS' EQUITY

12 Months Ended

Sep. 30, 2022

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

9.     SHAREHOLDERS’ EQUITY

Authorized

Unlimited common shares, without par value.

Unlimited preferred shares, without par value.

February 2021 Financing

On February 22, 2021, the Company completed an underwritten public offering for aggregate gross proceeds of $149,999,985 (the “February 2021 Financing”). The Company issued a total of 5,555,555 common shares of the Company at a public offering price of $27.00 per share, which includes the underwriters having exercised their 30-day option to purchase an additional 724,637 common shares. In connection with the February 2021 Financing, the Company paid cash commissions of $8,999,999 and incurred other transaction costs of $229,451.

Nomination Rights

In connection with a January 2016 private placement of 227,273 Units, a Unit consisting of one common share, one 7-year warrant and one-half of one 2-year warrant, of the Company, Clarus Lifesciences III, L.P. (“Clarus”) acquired 106,061 common shares. Clarus is entitled to nominate two directors to the board of directors of the Company, one of which must be an independent director and preapproved by the Company. These nomination rights will continue for so long as Clarus holds greater than or equal to 53,030 common shares, subject to adjustment in certain circumstances.

Omnibus incentive plans

The Company has adopted an omnibus incentive plan (“Omnibus Plan”) consistent with the policies and rules of Nasdaq. Pursuant to the Omnibus Plan, the Company may issue stock options, share appreciation rights, restricted shares, restricted share units and other share-based awards. As of September 30, 2022, the Company has not issued any instruments other than stock options under the Omnibus Plan.

As of September 30, 2022, the Omnibus Plan has a maximum of 8,410,907 common shares which may be reserved for issuance.

Employee Share Purchase Plan

The Company has adopted an Employee Share Purchase Plan (“ESPP”) under which qualifying employees may be granted purchase rights (“Purchase Rights”) to the Company’s common shares at not less of 85% of the market price at the lesser of the date the Purchase Right is granted or exercisable. The Company currently holds offerings consisting of six-month periods commencing on January 1 and July 1 and ending on June 30 and December 31 of each calendar year. As at September 30, 2022, the ESPP has a maximum of 236,598 (2021 – 252,418) common shares reserved for issuance.

Eligible employees are able to contribute up to 15% of their gross base earnings for purchases under the ESPP through regular payroll deductions. Purchase of shares under the ESPP are limited for each employee at $25,000 worth of the Company’s common shares (determined using the lesser of (i) the market price of a common share on the first day of an applicable purchase period and (ii) the market price of a common share on the purchase date) for each calendar year in which a purchase right is outstanding.

During the year ended September 30, 2022, the Company issued a total of 15,820 (2021 – 15,963) common shares upon the exercise of Purchase Rights. The Company recognizes compensation expense for purchase rights on a straight-line basis over the service period.

	For the year ended
	September 30,
	2022			2021
Research and development expense	$	16,381	$	32,299
General and administrative		13,562		36,132
	$	29,943	$	68,431

The Company measures the purchase rights based on their estimated grant date fair value using the Black-Scholes option pricing model and the estimated number of shares that can be purchased. The following weighted average assumptions were used for the valuation of purchase rights:

	2022		2021
Risk-free interest rate	0.94	%	0.19	%
Expected life of share purchase rights	6 months		6 months
Expected annualized volatility	89.42	%	61.54	%
Dividend	—		—

Stock options

Pursuant to the Stock Option Plan, options may be granted with expiry terms of up to 10 years, and vesting criteria and periods are approved by the Board of Directors at its discretion. The options issued under the Stock Option Plan are accounted for as equity-settled share-based payments.

Stock option transactions are summarized as follows:

		Weighted
	Number	Average
	of Options	Exercise Price*
Balance, September 30, 2020	5,309,584	$	3.42
Options granted	1,889,646		9.87
Options exercised	(323,610)		(3.68)
Options expired/forfeited	(72,390)		(4.46)
Balance, September 30, 2021	6,803,230	$	5.20
Options granted	1,347,500		4.55
Options exercised	(72,910)		(4.41)
Options expired/forfeited	(175,759)		(3.60)
Balance outstanding, September 30, 2022	7,902,061	$	5.13
Balance exercisable, September 30, 2022	4,628,477	$	4.59

* Options exercisable in Canadian dollars as at September 30, 2022 are translated at current rates to reflect the current weighted average exercise price in US dollars for all outstanding options.

At September 30, 2022, options were outstanding enabling holders to acquire common shares as follows:

			Weighted average remaining
	Exercise price	Number of options	contractual life (years)
$	2.39	50,000	9.96
$	3.23	3,629,400	7.02
$	3.59	26,667	7.05
$	3.60	937,500	9.75
$	3.81	185,816	6.36
$	4.00	539,518	5.22
$	4.67	183,511	7.09
$	5.99	190,000	9.56
$	7.00	1,475,146	8.20
$	8.47	120,000	9.04
$	9.76	50,000	9.39
$	13.96	190,000	8.29
$	29.63	100,000	8.58
$	31.62	75,000	8.67
C$	4.90	129,503	4.66
C$	5.06	20,000	6.36
		7,902,061	7.58

Share-based compensation

During the year ended September 30, 2022, the Company granted a total of 1,347,500 (2021 – 1,889,646) stock options with a weighted average fair value of $3.20 per option (2021 – $8.04).

The Company recognized share-based payments expense for options granted and vesting, net of recoveries on cancellations of unvested options, during the years ended September 30, 2022 and 2021 with allocations to its functional expense as follows:

	For the year ended
	September 30,
	2022			2021
Research and development expense	$	4,306,463	$	3,611,083
General and administrative		3,551,679		5,796,599
	$	7,858,142	$	9,407,682

The following weighted average assumptions were used for the Black-Scholes option-pricing model valuation of stock options granted:

	2022		2021
Risk-free interest rate	2.73	%	0.44	%
Expected life of options	10.00	years	10.00	years
Expected annualized volatility	79.11	%	78.16	%
Dividend	—		—

Warrants

Warrant transactions are summarized as follows:

		Weighted
	Number	Average
	of Warrants	Exercise Price
Balance, September 30, 2020	9,272,977	$	1.73
Warrants exercised	(6,038,227)		(0.06)
Balance outstanding and exercisable, September 30, 2021 and September 30, 2022	3,234,750	$	4.84

* Warrants exercisable in Canadian dollars as at September 30, 2022 are translated at current rates to reflect the current weighted average exercise price in US dollars for all outstanding warrants.

At September 30, 2022, warrants were outstanding enabling holders to acquire common shares as follows:

Number
of Warrants		Exercise Price		Expiry Date
227,273	(1)	US$	66.00	January 14, 2023
7,477		US$	42.80	November 18, 2023
80,000		US$	4.00	January 9, 2023
2,920,000		US$	0.0001	August 23, 2024
3,234,750

(1) Detailed terms of the 2016 Warrants are included in Note 8.