6. SHARE CAPITAL

Common stock

Common stock: 180,000,000 authorized; $0.001 par value. As of June 30, 2022 and December 31, 2021, there were 12,919,666 and 12,918,866 shares of common stock issued and outstanding, respectively.

Reverse Share Split

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During September 2021, the total number of shares of common stock authorized by the Company was reduced from 900,000,000 shares of common stock, par $0.001, to 180,000,000 shares of common stock, par $0.001, and the number of shares of common stock held by each stockholder of the Company were consolidated automatically into the number of shares of common stock equal to the number of issued and outstanding shares of common stock held by each such stockholder immediately prior to the reverse split divided by five (5): effecting a five (5) old for one (1) new reverse stock split.

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No fractional shares were issued in connection with the reverse split and all fractional shares were rounded up to the next whole share.  

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Additionally, all options, warrants and other convertible securities of the Company outstanding immediately prior to the reverse split were adjusted by dividing the number of shares of common stock into which the options, warrants and other convertible securities are exercisable or convertible by five (5) and multiplying the exercise or conversion price thereof by five (5), all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share.

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All shares of common stock, options, warrants and other convertible securities and the corresponding price per share amounts have been presented to reflect the reverse split in all periods presented within this Form 10-Q.

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Stock options

During November 2021, the Company has adopted and approved the 2021 Stock Incentive Plan and the 2021 Employee Stock Purchase Plan. The intent of the Company and the Board is that while the Amended 2020 Stock Option Plan and the 2020 Equity Incentive Plan will continue in existence in relation to the options and awards previously granted thereunder, the Board will not grant future options or awards thereunder. Instead, only the 2021 Stock Incentive Plan will be used for the grant of options and awards to eligible participants thereunder.

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As of June 30, 2022, an aggregate of 1,870,000 shares of common stock were available for issuance under the 2021 Stock Option Plan. As of June 30, 2022, no transactions have occurred under the 2021 Employee Stock Purchase Plan.

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Options under the Plan are granted from time to time at the discretion of the Board of Directors, with vesting periods and other terms as determined by the Board of Directors.

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A summary of the stock option activity is presented below:

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The following table summarizes information about stock options outstanding and exercisable under the Company’s Stock Option Plan at June 30, 2022:

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The Company uses the Black-Scholes option pricing model to determine the estimated fair value of options. The fair value of each option grant is determined on the date of grant and the expense is recorded on a straight-line basis and is included as a component of general and administrative expense in the consolidated statements of operations. The assumptions used in the model include expected life, volatility, risk-free interest rate, dividend yield and forfeiture rate. The Company’s determination of these assumptions is outlined below.

Expected life — The expected life assumption is based on an analysis of the Company’s historical employee exercise patterns.

Volatility — Volatility is calculated using the historical volatility of the Company’s common stock for a term consistent with the expected life.

Risk-free interest rate — The risk-free interest rate assumption is based on the U.S. Treasury rate for issues with remaining terms similar to the expected life of the options.

Dividend yield — Expected dividend yield is calculated based on cash dividends declared by the Board for the previous four quarters and dividing that result by the average closing price of the Company’s common stock for the quarter. The Company has not declared a dividend to date.

Forfeiture rate — The Company does not estimate a forfeiture rate at the time of the grant due to the limited number of historical forfeitures. As a result, the forfeitures are recorded at the time the grant is forfeited.

The following assumptions were used to value the awards granted during the six months ended June 30, 2022 and 2021:

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Stock-based compensation expense for the three months ended June 30, 2022 and 2021 was $249 thousand and $327 thousand, respectively. Stock-based compensation expense for the six months ended June 30, 2022 and 2021 was $572 thousand and $607 thousand, respectively. As of June 30, 2022, there was approximately $1.3 million of total unrecognized compensation cost related to 510,859 unvested stock options that is expected to be recognized over a weighted-average remaining vesting period of 3.3 years.

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Derivative Liability

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Stock options granted to consultants that have an exercise price this is stated in a different currency than the Company’s functional currency are treated as a liability and are revalued at the end of each reporting period for the term of the vesting period. Any change in the fair value of the stock option after the initial recognition is recorded as a component of other income, net in the consolidated statements of operations.

Changes in the Company’s stock option liability for the six months ended June 30, 2022 was as follows (stated in thousands):

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The assumptions used for the Black-Scholes Option Pricing Model to revalue the stock options granted to consultants as of June 30, 2022 and December 31, 2021 were as follows:

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There were no stock options granted to consultants during the six months ended June 30, 2022 and 2021 that required recurring fair value adjustments.

Warrants

As of June 30, 2022 and December 31, 2021, there were 3,940,006 warrants outstanding.

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The following table summarizes warrants issued by transaction type:

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