Pursuant to the terms of the Reverse Recapitalization, upon the Closing Date, each outstanding option to purchase Old enGene’s common shares issued under the Old Plan’s was exchanged for an option to purchase common shares of the Company, and the number of shares and exercise price of each granted option was adjusted using the exchange ratio of approximately 0.18048. Further, the currency of all exercise prices of the options issued under the Old Plans were converted from CAD to USD using the exchange rate in effect on the day immediately prior to the Closing Date. A retrospective adjustment has been applied to the number of options and exercise price of stock options for all periods presented to reflect the Reverse Recapitalization as discussed further in Note 3.

Old enGene had an employee share option plan (the “ESOP”) and an equity incentive plan (the “EIP”) (collectively, the “ Old Plans”) which was adopted by the Board of Directors, and approved by the shareholders, effective July 5, 2018.

Under the Old Plans, options to purchase non-voting common shares of Old enGene’s shares may be granted to directors, officers, employees, consultants and members of the scientific advisory board. The Old Plans provide for the issuance of stock options up to a maximum of 15% of the aggregate issued and outstanding common shares and non-voting common shares of Old enGene calculated on an as converted and fully diluted basis. The Old Plans were administered by Old enGene’s Board of Directors. Old enGene’s Board of Directors determined the number of options to be granted, the vesting period and the exercise price of new options. It was Old enGene’s policy to establish the exercise price at an amount that approximates the fair value of the underlying shares on the date of grant as determined by Old enGene’s Board of Directors. The options vest in accordance with the vesting terms determined for each grant by Old enGene’s Board of Directors. The vesting terms of Old enGene’s granted stock options with service only conditions are typically 100% vesting immediately upon grant date, or over a three- or four-year service period. Upon the consummation of the Reverse Recapitalization, the Company recognized stock based compensation expense of $0.4 million associated with the acceleration of the vesting for the outstanding awards with service only vesting conditions under the Old Plan. As of April 30, 2024, no unrecognized compensation cost remains for the outstanding awards granted under the Old Plan with service only vesting conditions.

On July 7, 2023, the Board of Directors approved the reservation of an additional 1,046,764 non-voting common shares for issuance under the Company’s employee equity incentive plan, revising the number of shares reserved from 1,775,729 to 2,822,493. Also on July 7, 2023, the Company granted 1,046,764 options to employees at an exercise price of $5.87 CAD ($4.24 USD). These options are not exercisable unless and until the completion of the Reverse Recapitalization and there is an effective registration statement for the shares underlying such granted options and will terminate automatically in the event of the termination of the Merger Agreement. The Company has valued these awards at the grant date using Black-Scholes pricing model in which the fair value of the stock on the grant date was equal to the exercise price of the award. The expected term has been determined using management’s best estimate considering the characteristics of the award, contractual life, the timing of the expected achievement of the performance conditions, the remaining time-based vesting period, if any, and comparison to expected terms used by peers. Upon the grant date, 794,643 of the issued options were fully vested, and the remaining 252,121 options will vest over varying terms up to four years on a pro rata basis. The Company recognizes compensation expense when achievement of the performance condition is deemed probable using an accelerated attribution method, as if each vesting tranche was treated as an individual award. During the year ended October 31, 2023, $2.6 million of stock based compensation expense was recorded associated with the 1,046,764 stock options granted in July 2023 because the Reverse Recapitalization was completed and the Company determined that the filing of the registration statement was probable to occur.

Upon the consummation of the Reverse Recapitalization on October 31, 2023, all options outstanding under the Old Plans were exchanged for 2,706,941 shares options to purchase common shares of the Company based on the Exchange Ratio determined in accordance with the terms of the Merger Agreement. Further, all exercise prices were adjusted by the Exchange Ratio and the currency of the exercise prices was changed from CAD to USD based on the exchange rate in effect on October 30, 2023, the day immediately before the consummation of the Reverse Recapitalization. No incremental compensation cost was recorded as a result of the change in underlying common shares from Old enGene to the Company, or as a result of the change of the exercise prices to reflect the adjustment for the Exchange Ratio and the change in currency from CAD to USD, as it was concluded that the fair value of the awards immediately before and immediately after the modifications did not change. No options remain available for grant under the Old Plans as of October 31, 2023.

On October 31, 2023, upon the completion of the Reverse Recapitalization, the shareholders approved and the Company adopted the enGene Holdings Inc. 2023 Incentive Equity Plan (the "2023 Plan"), which superseded the Old Plans. The 2023 Plan authorizes the award of incentive stock options, or ISOs, non-qualified stock options, or NQSOs, Stock Units, Stock Appreciation Rights, or SARs, and other share-based awards including performance awards and share bonus awards.

The number of shares initially reserved for issuance under the 2023 Plan is 2,607,943 Common Shares, plus 2,706,941 common shares subject to the outstanding grants under the Old Plans, and shall automatically increase on January 1 of each calendar year beginning in 2024 by a number of shares equal to the lesser of 1,946,226 million Common Shares and such lesser number as may be determined by the Board. The Common Shares authorized under the 2023 Plan increased by 1,946,225 on January 1, 2024. As of April 30, 2024, the total number of Common Shares reserved for issuance under the 2023 Plan is 7,261,110, and there are 5,929,643 shares remaining for issuance.

The 2023 Plan is administered by the Board or, at the discretion of the Board, by a committee of the Board. The exercise prices, vesting and other restrictions are determined at the discretion of the Board, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the Common Shares on the date of grant and the term of stock option may not be greater than ten years. Common Shares that are expired terminated, surrendered or cancelled under the 2023 Plan without having been fully exercised will be available for future awards.

On May 15, 2024, the shareholders of the Company approved changes to the 2023 Plan. See Note 18 for additional information.

The assumptions that the Company used to determine the grant-date fair value of stock options during the three and six months ended April 30, 2024 and 2023 are summarized below:


	Three months ended April 30,					Six months ended April 30,
	2024		2023			2024		2023
Expected term (in years)	5.75 - 6.08		6.08			5.75 - 6.08		6.08
Expected volatility	78.30 - 78.92%			81.39	%	78.24 - 78.92%			81.39	%
Risk-free interest rate	4.27 - 4.66%			3.56	%	4.27 - 4.66%			3.56	%
Expected dividend yield		—		—			—		—
Fair value of common shares and exercise price of options (USD)	$ 14.80 - 17.80			1.55		$ 7.66 - 17.80			1.55
Fair value of common shares and exercise price of options (CAD)	N/A		$	2.11		N/A		$	2.11

The following table summarizes the Company’s stock option activity:


	Number of Shares			Weighted- Average Exercise Price (USD)		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of October 31, 2023		2,706,941		$	2.40		8.1	$	52,192
Granted		1,331,700			12.49
Exercised		(56,974	)		0.89
Forfeited or expired		(234	)		0.89
Outstanding as of April 30, 2024		3,981,433		$	5.69	8.4		$	41,181
Vested and exercisable as of April 30, 2024		2,434,737		$	2.10	7.6		$	33,597
Options unvested as of April 30, 2024		1,546,696		$	11.35	9.7		$	7,584

The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the share options and the fair value of the Company’s common share as of each reporting period.

The weighted-average grant-date fair value per share of share options granted during the three and six months ended April 30, 2024 was $11.60 and $8.87, respectively. The weighted-average grant date fair value per share of share options granted during the three and six months ended April 30, 2023 was $1.50.

On February 13, 2024, the Company entered into a Transition and Modified Employment Agreement (the "Transition Agreement") with the Company's Chief Executive Officer, Jason Hanson, which amends and modifies the CEO's Employment Agreement dated November 8, 2023 (the “Amended Employment Agreement”). Under the terms of the Amended Employment Agreement the CEO will be entitled to:

The Transition Agreement further provides that, in the event the CEO resigns upon the appointment by the Company of a new chief executive officer, the CEO will be immediately engaged in a consulting role to provide transition services as a Senior Strategic Advisor to the Company for a period of at least six months following the effective date of resignation (the “Consulting Period”) in exchange for a monthly fee of $25,000 for the initial six-month Consulting Period, and $500 per hour thereafter, provided that the CEO need not devote more than fifteen (15) hours per week to providing such transition services.

As a result of the Transition Agreement, the 1,216,266 stock option awards issued to the CEO were modified to allow for an extended exercise period described above. The modification resulted in an incremental share-based compensation expense of $1.0 million which was recorded upon the effective date of the Transition Agreement.

Pursuant to the Amended Employment Agreement, (a) upon the termination of Mr. Hanson’s employment by the Company without Cause (as defined in the Amended Employment Agreement) or by Mr. Hanson for Good Reason (as defined in the Amended Employment Agreement), in addition to the above severance benefits, Mr. Hanson will also be entitled to 12 months’ base salary continuation or, if such even occurs during a change of control period (as described in the Amended Employment Agreement), 18 months’ base salary continuation.

Share-based compensation expense included in the Company’s consolidated statements of operations and comprehensive loss was as follows:


	Three months ended April 30,				Six months ended April 30,
	2024		2023		2024		2023
Research and development	$	337	$	7	$	530	$	12
General and administrative		1,580	32			1,678	47
Total share-based compensation expense	$	1,917	$	39	$	2,208	$	59

As of April 30, 2024, there was $11.3 million of unrecognized compensation, which is expected to be recognized over a weighted-average period of 3.60 years.