11. COMMON STOCK

[a] Authorized

150,000,000 authorized common voting shares, par value of $0.001, and 5,000,000 preferred shares, par value of $0.001.

[b] Issued and outstanding shares

Purchase Agreement and Financing with Lincoln Park Capital

On September 14, 2017 we and Lincoln Park Capital Fund, LLC, or LPC, entered into a share and unit purchase agreement, which was amended on March 12, 2020, or the LPC Purchase Agreement, pursuant to which we have the right to sell to LPC up to $11.0 million in shares of our common stock, par value $0.001 per share, subject to certain limitations and conditions set forth in the Purchase Agreement. On May 22, 2018, we obtained the requisite stockholder authorization to sell shares of our common stock to LPC in excess of 20% of our outstanding shares of common stock (as of the date we entered into the LPC Purchase Agreement) in order to be able to sell to LPC the full amount remaining under the LPC Purchase Agreement. 

Pursuant to the LPC Purchase Agreement, LPC initially purchased 1,644 of our units, or the LPC Units, at a purchase price of $608 per unit, with each LPC Unit consisting of (a) one share of our common stock and (b) one warrant to purchase one-quarter of a share of common stock at an exercise price of $699.20 per share, or LPC Warrant.  Each LPC Warrant became exercisable six months following the issuance date until the date that is five years and six months after the issuance date and is subject to customary adjustments.  The LPC Warrants were issued only as part of the LPC Units in the initial purchase of $1.0 million and no warrants shall be issued in connection with any other purchases of common stock under the LPC Purchase Agreement.

After the initial purchase, if our stock price is above $1.00, as often as every other business day over the 54-month term of the LPC Purchase Agreement, and up to an aggregate amount of an additional $10.0 million (subject to certain limitations) of shares of common stock, we have the right, from time to time, in our sole discretion and subject to certain conditions to direct LPC to purchase up to 7,500 shares of common stock. The purchase price of shares of common stock pursuant to the LPC Purchase Agreement will be based on prevailing market prices of common stock at the time of sales without any fixed discount, and we will control the timing and

amount of any sales of common stock to LPC. As consideration for entering into the LPC Purchase Agreement, we issued to LPC 617 shares of common stock in September 2017 and, in connection with the amendment of the LPC Purchase Agreement in March 2020, we agreed to pay to LPC $0.1 million as an expense reimbursement. The consideration of 617 shares of our common stock were fair valued based on the closing price of our common stock as at the transaction date and recognized as part of offering expenses.

During the year ended December 31, 2022, we offered and sold zero shares of our common stock pursuant to the LPC Purchase Agreement with LPC. From inception of the LPC Purchase Agreement on September 14, 2017 to its expiration on March 14, 2022, we offered and sold an aggregate of 27,868 shares of our common stock, including the 1,644 shares that were part of the initial purchase of LPC Units. These aggregate sales resulted in gross proceeds to us of approximately $4.4 million and offering expenses of $0.5 million.

April 2020 Private Placement

On April 27, 2020 and April 28, 2020, we entered into subscription agreements with certain accredited investors pursuant to which we sold to the purchasers in a private placement approximately 280,782 units, or the April 2020 Units, each consisting of (i) one share of common stock, and (ii) a warrant, or April 2020 Warrant, to purchase 0.75 shares of common stock at an offering price of $6.60 per April 2020 Unit, for aggregate gross proceeds of approximately $1.9 million. The placement agent received a cash commission on the gross proceeds from the sale of the April 2020 Units and was issued a five year warrant upon substantially similar terms as the April 2020 Warrants to purchase 25,270 shares of common stock at an initial exercise price of $7.59 per share. The net proceeds to us, after deducting placement agent expenses and commissions and offering expenses was approximately $1.6 million.

Each April 2020 Warrant became exercisable on October 27, 2020, the six-month anniversary of the initial closing date of the offering, through April 27, 2025, which is the five-year anniversary of the initial closing date of the offering. The April 2020 Warrants issued pursuant to subscription agreements executed on April 27, 2020 are exercisable at a price per share of common stock of $7.24, subject to adjustment, and the April 2020 Warrants issued pursuant to subscription agreements executed on April 28, 2020 are exercisable at a price per share of common stock of $7.32, subject to adjustment. Additionally, subject to certain exceptions, if, after the initial exercise date, (i) the volume weighted average price of the common stock for each of 30 consecutive trading days, or the April 2020 Measurement Period, which, April 2020 Measurement Period commenced on the closing date, exceeds 300% of the exercise price (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such April 2020 Measurement Period exceeds $500,000 per trading day and (iii) certain other equity conditions are met, and subject to a beneficial ownership limitation, then we may call for cancellation of all or any portion of the April 2020 Warrants then outstanding.

Placement agent expenses and commissions and offering expenses have been charged against the gross proceeds.

July 2020 Registered Direct Offering

On July 1, 2020, we completed a registered direct offering, pursuant to which we sold 731,707 shares of our common stock at a price of $8.20 per share.

The registered direct offering raised total gross proceeds of approximately $6.0 million, and after deducting approximately $0.7 million in placement agent fees and offering expenses, we received net proceeds of approximately $5.3 million.

The placement agent fees and offering expenses have been charged against the gross proceeds.

August 2020 Public Offering

On August 6, 2020, we completed an underwritten public offering of our securities, pursuant to which we sold an aggregate of (a) 569,043 shares of our common stock, including 92,856 shares subject to the underwriter’s option to purchase additional shares, or the August 2020 Shares, and (b) pre-funded warrants to purchase 142,857 shares of our common stock, or the August 2020 Pre-Funded Warrants, to the underwriter. The August 2020 Shares were sold at the public offering price of $10.50 per share. The August 2020 Pre-Funded Warrants were sold at a public offering price of $10.499, which represents the per share public offering price for the August 2020 Shares less a $0.001 per share exercise price for each such August 2020 Pre-Funded Warrant.

The August 2020 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of August 2020 Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. A holder of August 2020 Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99%, by providing at least 61 days’ prior notice to us.

The underwritten public offering raised total gross proceeds of approximately $7.5 million and after deducting approximately $0.7 million in underwriting discounts and commissions and offering expenses, we received net proceeds of approximately $6.8 million. The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

December 2020 Public Offering

On December 7, 2020, we completed an underwritten public offering of our securities, pursuant to which we sold an aggregate of 2,472,500 shares of our common stock, including 322,500 shares subject to the underwriter’s option to purchase additional shares, or the December 2020 Shares. The December 2020 Shares were sold at the public offering price of $7.00 per share.

We also issued a warrant to purchase 50,000 shares of common stock to the representative of the underwriters, the Representative’s Warrant, as a portion of the underwriting compensation payable in connection with this offering. The Representative’s Warrant became exercisable beginning on May 31, 2021, with an exercise price of $8.75 per share and a term of five years. Under ASC 260, the fair value of the Representative’s Warrant of $0.3 million was charged against Additional Paid-In Capital.

The underwritten public offering raised total gross proceeds of approximately $17.3 million and after deducting approximately $1.5 million in underwriting discounts and commissions and offering expenses, we received net proceeds of approximately $15.8 million. The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

May 2021 Public Offering

On May 27, 2021, we completed an underwritten public offering of our securities, pursuant to which we sold an aggregate of 3,285,714 shares of our common stock, including 428,571 shares subject to the underwriter’s option to purchase additional shares, or the May 2021 Shares. The May 2021 Shares were sold at the public offering price of $7.00 per share.

The underwritten public offering raised total gross proceeds of approximately $23.0 million and after deducting approximately $1.7 million in underwriting discounts and commissions and offering expenses, we received net proceeds of approximately $21.3 million. The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

At-the-Market Sales Agreement

On December 21, 2021, we entered into an At-the-Market Offering Sales Agreement, or ATM, with Virtu Americas, LLC, as sales agent, pursuant to which we may sell shares of common stock with an aggregate offering price of up to $25 million.

During the year ended December 31, 2022, we sold 200,000 shares of our common stock pursuant to the ATM, which resulted in gross proceeds of $1.5 million. Since entry into the ATM, from December 21, 2021 through December 31, 2022, we offered and sold an aggregate of 200,000 shares of our common stock. These aggregate sales resulted in gross proceeds to us of approximately $1.5 million. As of December 31, 2022, shares of our common stock having an aggregate value of approximately $23.5 million remained available for sale under the ATM.

November 2022 Private Placement

In November 2022, we entered into subscription agreements with certain accredited investors pursuant to which we sold to the purchasers in a private placement transaction approximately 4,093,141 units at a purchase price of $4.625 per unit, with each unit consisting of two shares of common stock and a common stock purchase warrant to purchase one share of common stock, or the November 2022 Warrants.

The November 2022 Warrants are exercisable at a price per share of common stock of $4.50, subject to adjustment. The November 2022 Warrants are exercisable beginning on the six-month anniversary of the initial closing date of the private placement offering, May 18, 2023, or the Initial Exercise Date, and will expire on the seven year anniversary of the initial closing date of the private placement offering, or November 18, 2029. The November 2022 Warrants cannot be exercised by a warrant holder if, after giving effect thereto, such warrant holder would beneficially own more than 19.99% of our outstanding common stock. Additionally, subject to certain exceptions, if, after the Initial Exercise Date, (i) the volume weighted average price of our common stock for each of 30 consecutive trading days, or the November 2022 Measurement Period, which November 2022 Measurement Period commenced on November 18, 2022, exceeds 300% of the exercise price (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such November 2022 Measurement Period exceeds $500,000 per trading day and (iii) certain other equity conditions are met, and subject to a beneficial ownership limitation, then we may call for cancellation of all or any portion of the November 2022 Warrants then outstanding.

We received approximately $17.9 million in net proceeds from the private placement after deducting placement agent expenses and commissions and offering expenses

Equity Award Issuances and Settlements

During the year ended December 31, 2022, we did not issue any shares of common stock to satisfy stock option exercises and issued 26,625 shares of common stock to satisfy restricted stock unit settlements, compared with the issuance of no shares of common to satisfy stock option exercises and 231 shares of common stock to satisfy restricted stock unit settlements for the year ended December 31, 2021.  

[c] Stock options

2018 Equity Incentive Plan

As of December 31, 2022, we had reserved, pursuant to the 2018 Equity Incentive Plan, or the 2018 Plan, 967,152 common shares for issuance upon exercise of stock options and settlement of restricted stock units by employees, directors, officers and consultants of ours, of which 714,155 were reserved for options currently outstanding, 252,875 for restricted stock units currently outstanding, and 122 were available for future equity grants.

Under the 2018 Plan, we may grant options to purchase common shares or restricted stock units to our employees, directors, officers and consultants. The exercise price of the options is determined by our board of directors but will be at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option is set by our board of directors with a maximum expiry date of ten years from the date of grant. In addition, the 2018 Plan allows for accelerated vesting of outstanding equity awards in the event of a change in control. The terms for accelerated vesting, in the event of a change in control, is determined at our discretion and defined under the employment agreements for our officers and certain of our employees.

New Employee Inducement Grants

We grant stock options as a material inducement to new employees for entering into employment agreements with us in accordance with Nasdaq Listing Rule 5635(c)(4). The stock options approved under the inducement grant were issued pursuant to a stock option agreement on terms substantially similar to our 2018 Equity Incentive Plan. The exercise price of the options is determined by our board of directors but will be at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors. The expiry date for each option is set by our board of directors with a maximum expiry date of ten years from the date of grant. For the year ended December 31, 2022 we granted 50,000 stock options to new employees. As of December 31, 2022, 95,000 stock options granted as new employee inducement grants were outstanding.

2017 Equity Incentive Plan

As of December 31, 2022, we had reserved, pursuant to the 2017 Equity Incentive Plan, or the 2017 Plan, 13,156 common shares for issuance upon exercise of stock options, currently outstanding, by employees, directors and officers of ours. Upon the effectiveness of our 2018 Plan, we ceased granting equity awards under our 2017 Plan.

Under the 2017 Plan, we granted options to purchase common shares or restricted stock units to our employees, directors, officers and consultants. The exercise price of the options was determined by our board of directors but was at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option was set by our board of directors with a maximum expiry date of ten years from the date of grant. In addition, the 2017 Plan allows for accelerated vesting of outstanding equity awards in the event of a change in control. The terms for accelerated vesting, in the event of a change in control, is determined at our discretion and defined under the employment agreements for our officers and certain of our employees.

2010 Performance Incentive Plan

As of December 31, 2022, we had reserved, pursuant to the 2010 Performance Incentive Plan, or the 2010 Plan, 204 common shares for issuance upon exercise of stock options, currently outstanding, by employees, directors, officers and consultants of ours.

Under the 2010 Plan we granted options to purchase common shares and restricted stock units to our employees, directors, officers and consultants. The exercise price of the options was determined by our board of directors and was at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option is set by our board of directors with a maximum expiry date of ten years from the date of grant. In addition, the 2010 Plan allows for accelerated vesting of outstanding equity awards in the event of a change in control. The terms for accelerated vesting, in the event of a change in control, is determined at our discretion and defined under the employment agreements for our officers and certain of our employees.

ASC 718 Compensation – Stock Compensation

We recognize expense related to the fair value of our stock-based compensation awards using the provisions of ASC 718. We use the Black-Scholes option pricing model as the most appropriate fair value method for our stock options and recognize compensation expense for stock options on a straight-line basis over the requisite service period. In valuing our stock options using the Black-Scholes option pricing model, we make assumptions about risk-free interest rates, dividend yields, volatility and weighted average expected lives, including estimated forfeiture rates of the options.

The expected life was calculated based on the simplified method as permitted by the SEC’s Staff Accounting Bulletin 110, Share-Based Payment. We consider the use of the simplified method appropriate because of the lack of sufficient historical exercise data. The computation of expected volatility was based on the historical volatility of comparable companies from a representative peer group selected based on industry and market capitalization. The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options. In addition to the assumptions above, as required under ASC 718, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. Forfeiture rates are estimated using historical actual forfeiture rates. These rates are adjusted on a quarterly basis and any change in compensation expense is recognized in the period of the change. We have never paid or declared cash dividends on our common stock and do not expect to pay cash dividends in the foreseeable future.

The estimated fair value of stock options granted in the respective periods was determined using the Black-Scholes option pricing model using the following weighted average assumptions:

The weighted average fair value of stock options granted during the year ended December 31, 2022 was $6.79.  

The results for the periods set forth below included stock-based compensation expense in the following expense categories of the consolidated statements of loss (in thousands):

Stock option transactions and the number of stock options outstanding are summarized below:

The following table summarizes information about stock options outstanding at December 31, 2022 regarding the number of ordinary shares issuable upon: (1) outstanding options and (2) vested options.

(1) Number of common shares issuable upon exercise of outstanding options:

(2) Number common shares issuable upon exercise of vested options:

As at December 31, 2022, and December 31, 2021, the total unrecognized compensation expense related to stock options granted was $3.2 million and $3.4 million, respectively, each of which is expected to be recognized into expense over a period of approximately 1.97 years.

The aggregate intrinsic value of options exercised was calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock as of the date of exercise. No options were exercised for the years ended December 31, 2022, 2021 and 2020. At December 31, 2022, the aggregate intrinsic value of the outstanding options was zero and the aggregate intrinsic value of the exercisable options was zero.

[d] Restricted Stock Unit Awards

We grant restricted stock unit awards that generally vest and are expensed over a four-year period. We also grant restricted stock unit awards that vest in conjunction with certain performance conditions to certain executive officers and key employees. At each reporting date, we are required to evaluate whether achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon our assessment of accomplishing each performance provision. For the years ended December 31, 2022, 2021 and 2020, $1.1 million, $0.4 million and $0.1 million, respectively, of stock based compensation expense was recognized related to these awards.

The following table summarizes our restricted stock unit award activity during the year ended December 31, 2022:

As of December 31, 2022, we had approximately $1.2 million in total unrecognized compensation expense related to our restricted stock unit awards which is to be recognized over a weighted-average period of approximately 0.62 years.

Our board of directors and stockholders approved the 2017 Employee Stock Purchase Plan, or ESPP, in August 2017. Contributions are made by eligible employees, subject to certain limits defined in the ESPP. The maximum number of shares authorized to be purchased under the ESPP is 0.2 million shares. All shares purchased under the ESPP are new share issuances. For the year ended December 31, 2022, 28,892 shares were purchased under the ESPP.

We recognize non-employee stock-based compensation expense over the period of expected service by the non-employee. As the service is performed, we are required to update our valuation assumptions, re-measure unvested options and restricted stock units and record the stock-based compensation using the valuation as of the vesting date. This differs from the accounting for employee awards where the fair value is determined at the grant date and is not subsequently adjusted. This re-measurement may result in higher or lower stock-based compensation expense in the consolidated statements of loss and comprehensive loss. As such, changes in the market price of our stock could materially change the value of an option or restricted stock unit and the resulting stock-based compensation expense.

[g] Common Stock Warrants

The following is a summary of outstanding warrants to purchase common stock at December 31, 2022:

*The pre-funded warrants do not have an expiration date. 

The agreements governing the above warrants include the following terms:

For the year ended December 31, 2022, warrants to purchase 3,709 shares, issued in the December 2019 financing, were exercised at a per unit price of $6.60, for proceeds of $24,480. For the year ended December 31, 2021, warrants to purchase 47,084 shares, issued in the December 2019 financing, were exercised at a per unit price of $6.60, for proceeds of $0.3 million, and warrants to purchase 3,750 shares issued in the April 2020 financing were exercised for a per unit price of $7.32, for proceeds of $27,450. As at December 31, 2022, all of our outstanding warrants are classified as equity.     

[h] 401(k) Plan

We maintain a 401(k) plan. Our securities are not offered as an investment option. Our shares are prohibited for inclusion in our 401(k) plan, as well as any match of our shares to employee contributions.

[i] Loss per common share

The following table presents the computation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share and share amounts):

As of December 31, 2022, a total of 6.4 million options, restricted stock units and warrants, respectively, have not been included in the calculation of potential common shares as their effect on diluted per share amounts would have been anti-dilutive. Additionally, the outstanding Convertible Debt due December 2023 is included in the calculation of diluted per share amounts only if its inclusion is dilutive for periods during which the notes were outstanding. As of December 31, 2022, the outstanding Convertible Debt was not included in the calculation of diluted per share amounts as its effect would have been anti-dilutive.