Quarterly report pursuant to Section 13 or 15(d)

Note 11 - Stock-based Compensation

v3.22.2
Note 11 - Stock-based Compensation
6 Months Ended
Jun. 30, 2022
Notes to Financial Statements  
Share-Based Payment Arrangement [Text Block]

11.

Stockbased compensation:

 

 

 (a)

 Stock option plan and employee stock purchase plan

 

Effective June 1, 2021, the Company adopted a new stock incentive plan (New Incentive Plan) and an employee stock purchase plan (ESPP).

 

The New Incentive Plan authorizes the Board of Directors to administer the New Incentive Plan to provide equity based compensation in the form of stock options, stock appreciation rights., restricted stock, restricted stock units and Dividend Equivalents.

 

The Corporation currently maintains its existing Share Option Plan and 2015 Stock Incentive Plan (2015 SIP). Effective June 1, 2021 no further grants will be made under the Share Option Plan or 2015 SIP, though existing grants under the Share Option Plan will remain in effect in accordance with their terms.

 

The aggregate number of our common shares, no par value, that may be issued under all awards under the New Incentive Plan is (i) 9,343,242, plus (ii) any of our common shares subject to any outstanding award under our prior plans that, after June 1, 2021, are not purchased or are forfeited or reacquired by us, or otherwise not delivered to the participant due to termination, cancellation or cash settlement of such award subject to the share counting provisions of the New Incentive Plan.

 

Under both the Share Option Plan and the New Incentive Plan, the exercise price of each option equals the closing trading price of the Company’s stock on the day prior to the grant if the grant is made during the trading day or the closing trading price on the day of grant if the grant is issued after markets have closed. Vesting is provided for at the discretion of the Board of Directors and the expiration of options is to be no greater than 10 years from the date of grant.

 

The Company uses the fair value-based method of accounting for employee awards granted under both plans. The Company calculates the fair value of each stock option grant using the Black-Scholes option pricing model at the grant date. The stock-based compensation cost of the options is recognized as stock-based compensation expense over the relevant vesting period of the stock options using an estimate of the number of options that will eventually vest.

 

The ESPP allows eligible employees of the Company with an opportunity to purchase Common Shares through accumulated payroll deductions up to a maximum 15% of eligible compensation.  The ESPP was implemented by consecutive offering periods with a new offering period commencing on the first trading day on or after February 1 and August 1 each year, or on such other date as the Board of Directors will determine, and continuing thereafter until terminated in accordance with the Plan.  Unless the Board of Directors provides otherwise, the purchase price will be equal to eighty five percent (85%) of the fair market value of a Common Share on the offering date or the exercise date, whichever is lower.  The maximum number of Common Shares available for sale under the ESPP is 1,700,000 Common Shares. The first six month offering period began on February 1, 2022 and there were no Common Shares issued under the ESPP as of June 30, 2022 ( December 31, 2021 – nil).

 

 


Stock option transactions for the six months ended June 30, 2022 and June 30, 2021, are summarized as follows:

 

Option numbers are in (000s)

                       
           

Six months ended

June 30, 2022

         
   

Options

   

Weighted average

exercise price

   

Weighted average remaining

contractual

life (years)

 
                         

Outstanding, beginning of period

    15,112     $ 4.61          

Granted

    5,625       1.23          

Exercised

    (14 )     1.08          

Forfeited

    (1,567 )     2.87          

Outstanding, end of the period

    19,156       3.76       6.5  

Exercisable, end of the period

    10,656       4.65       4.8  

Vested and expected to vest, end of period

    17,879       3.83       6.4  

 

 

Option numbers are in (000s)

                       
           

Six months ended

June 30, 2021

         
   

Options

   

Weighted average

exercise price

   

Weighted average remaining

contractual

life (years)

 
                         

Outstanding, beginning of period

    11,942     $ 4.97          

Granted

    3,156       4.55          

Exercised

    (67 )     2.39          

Forfeited

    (800 )     5.67          

Outstanding, end of the period

    14,231       4.88       6.9  

Exercisable, end of the period

    8,001       4.60       5.7  

Vested and expected to vest, end of period

    13,296       4.85       6.8  

 

As of June 30, 2022, there was $5.48 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over an estimated weighted-average period of 1.6 years. As of June 30, 2022, total compensation cost not yet recognized related to grants under the ESPP was approximately $3 thousand, which is expected to be recognized over one month.

 

The following table presents the weighted average assumptions that were used in the Black‑Scholes option pricing model to determine the fair value of stock options granted during the period, and the resultant weighted average fair values:

 

   

Six months ended

June 30, 2022

   

Six months ended

June 30, 2021

 
                 

Risk-free interest rate

    2.07 %     0.43 %

Expected dividend yield

    -       -  

Expected volatility

    82.9 %     80.8 %

Expected life of options (in years)

 

5

   

5

 

Grant date fair value

  $ 0.82     $ 2.91  

 


The Company uses historical data to estimate the expected dividend yield and expected volatility of its common shares in determining the fair value of stock options. The expected life of the options represents the estimated length of time the options are expected to remain outstanding.

 

The following table presents the vesting terms of options granted in the period:

 

Option numbers are in (000s)

 

Six months ended
June 30, 2022

   

Six months ended
June 30, 2021

 
   

Number of options

   

Number of options

 

Cliff vesting after one year anniversary

    -       -  

3 year vesting (50%-25%-25%)

    425       430  

4 year vesting (50%-16 2/3%-16 2/3%-16 2/3%)

    5,200       2,726  

Total stock options granted in the period

    5,625       3,156  

 

 

During the six months period ended June 30, 2022, the option agreements of one officer were modified as part of a separation and release agreement.    Vested options of 851,053, with exercise prices ranging from $1.34 to $6.91, were allowed to continue to be exercisable for an additional 12 month period, and also 477,166 options that would have expired under the original terms, were allowed to continue to vest for a 12 month period.    As there was no service requirement, the company recorded $67 thousand additional compensation in the current period related to these modifications.

 

During the six months period ended June 30, 2021, the option agreements of one officer were modified as part of a separation and release agreement. Vested options of 1,679,169, with exercise prices ranging from $1.03 to $7.44, were allowed to continue to be exercisable for an additional 12 month period, and also 504,833 options that would have expired unvested, were allowed to continue to vest for a 12 month period. As there was no service requirement, the company recorded $1.6 million additional compensation related to these modifications.

 

 

(b)

Share-based payment expense

 

The Company recorded share-based payment expense related to stock options and RSUs as follows:

 

   

Three months ended

June 30,

   

Six months ended

June 30,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Research and development

  $ 537     $ 998     $ 1,483     $ 2,376  

General and administrative

    242       1,166       1,810       6,431  
    $ 779     $ 2,164     $ 3,293     $ 8,807