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SHARE CAPITAL | 12 Months Ended
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Dec. 31, 2021
SHARE CAPITAL |
SHARE CAPITAL | NOTE 9 - SHARE CAPITAL a. Rights of the Company’s Common Stock The Company’s Common Stock is listed on the NYSE American and on the Tel Aviv Stock Exchange. Each share of Common Stock is entitled to one vote. The holders of shares of Common Stock are also entitled to receive dividends whenever funds are legally available, when and if declared by the Board of Directors. Since its inception, the Company has not declared any dividends. b. Reverse stock split On December 9, 2019, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to, among other things, effect a reverse stock split at a ratio of one-for-ten. The ratio was determined by the Company’s Board of Directors on December 5, 2019 and the reverse stock split became effective at midnight December 19, 2019. All share and per share amounts included in the consolidated financial statements have been adjusted retrospectively to reflect the effect of the reverse stock split. c. Stock based compensation On December 14, 2006, the Board of Directors adopted the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan, as amended (the “Plan”). The Plan has since been amended to, among other things, increase the number of shares of Common Stock available under the Plan to 5,725,171 shares. The grant of options to Israeli employees under the Plan is subject to the terms stipulated by Sections 102 and 102A of the Israeli Income Tax Ordinance. Each option grant made to an Israeli citizen is subject to the track chosen by the Company, either Section 102 or Section 102A of the Israeli Income Tax Ordinance, and pursuant to the terms thereof, the Company is not allowed to claim, as an expense for tax purposes, the amounts credited to employees as a benefit, including amounts recorded as salary benefits in the Company’s accounts, in respect of options granted to employees under the Plan, with the exception of the work-income benefit component, if any, determined on the grant date. For Israeli non-employees, the share option plan is subject to Section 3(i) of the Israeli Income Tax Ordinance. As of December 31, 2021, 1,786,256 shares of Common Stock remain available for grant under the Plan. For purposes of determining the fair value of the options and restricted stock unit granted to employees and non-employees, the Company’s management uses the fair value of the Common Stock. During the three years ended December 31, 2021, the Company granted options and shares of restricted stock to certain employees and non-employees as follows: 1. Options and restricted stock units granted to employees: a) Below is a table summarizing all of the options and restricted stock grants to employees during the three years ended December 31, 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | No. of options or | ​ | ​ | ​ | ​ | ​ | ​ | Fair value | ​ | ​
​ | ​ | restricted stock | ​ | Exercise | ​ | Vesting | ​ | at grant (U.S. dollars | ​ | Expiration
Year of grant | ​ | granted | ​ | price | ​ | period | ​ | in thousands) | ​ | period
2019 | ​ | 160,000 | ​ | $ | 4.69 | ​ | 4 years | ​ | $ | 449 | ​ | 10 years
2019 | ​ | 80,000 | ​ | $ | 2.00 | ​ | 4 years | ​ | $ | 97 | ​ | 10 years
2020 | ​ | 196,995 | ​ | $ | 3.59 | ​ | 4 years | ​ | $ | 482 | ​ | 10 years
2020 | ​ | 760,311 | ​ | $ | 3.66 | ​ | 4 years | ​ | $ | 1,893 | ​ | 10 years
2020 | ​ | 129,771 | ​ | $ | 3.73 | ​ | 4 years | ​ | $ | 329 | ​ | 10 years
2020 | ​ | 694,073 | ​ | $ | n/a | ​ | 4 years | ​ | $ | 2,492 | ​ | 10 years
2020 | ​ | 122,656 | ​ | $ | 3.59 | ​ | 4 years | ​ | $ | 299 | ​ | 10 years
2021 | ​ | 50,000 | ​ | $ | 1.57 | ​ | 4 years | ​ | $ | 55 | ​ | 10 years
​ Set forth below are grants made by the Company to employees (including related parties) during the three-year period ended December 31, 2021 (a portion of such grants appear in the table above): In June 2019, the Company granted to its Chief Executive Officer 10-year options to purchase, in the aggregate, 160,000 shares of Common Stock under the Plan. The options have an exercise price equal to $4.69 per share, vest over a four-year period in 16 equal quarterly increments. Vesting of the options is subject to acceleration in full upon a Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $449,000 based on the following weighted average assumptions: share price equal to $4.69; dividend yield of 0%; expected volatility of 65.3%; risk-free interest rates of 1.8%; and expected life of six years. In September 2019, the Company granted to its Chief Financial Officer 10-year options to purchase, in the aggregate, 80,000 shares of Common Stock under the Plan. The options have an exercise price equal to $2.00 per share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options is subject to acceleration in full upon a Corporate Transaction or a Change in Control, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option pricing model to be approximately $97,000 based on the following weighted average assumptions: share price equal to $2.00; dividend yield of 0%; expected volatility of 66.48%; risk-free interest rates of 1.695%; and expected life of six years. In addition, contingent upon certain conditions, the chief financial officer is entitled to a grant of restricted stock units with an aggregate value of $100,000, on an annual basis. On August 11, 2020, the Company granted the following:
| I. | 447,927 shares of restricted Common Stock to its President and Chief Executive Officer under the Plan. The restricted shares vest over a four-year period in 16 equal quarterly increments and are subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, and are subject to certain other terms and conditions. The Company estimated the fair value of the restricted stock on the date of grant to be approximately $1.6 million.
| II. | 246,146 shares of restricted Common Stock to its Sr. Vice President, Chief Financial Officer under the Plan. Of the shares, 27,855 shares vested on September 22, 2020. The remaining 218,291 of the shares vest in 16 equal, quarterly increments over a four-year period, commencing upon the date of grant and are subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, and are subject to certain other terms and conditions. The Company estimated the fair value of the restricted stock on the date of grant to be approximately $900,000.
| III. | 10-year options to purchase 122,656 shares of Common Stock to the Company’s Sr. Vice President, Operations under the Plan. The options have an exercise price equal to $3.59 per share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options granted to the Sr. Vice President, Operations are subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, and are subject to certain other terms and conditions. The Company’s President and Chief Executive Officer may, in his discretion, grant options to the Company’s Sr. Vice President, Operations to purchase additional shares if the Company effects certain transactions in which it issues additional shares of Common Stock. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $300,000 based on the following weighted average assumptions: share price equal to $3.59; dividend yield of 0%; expected volatility of 80.51%; risk-free interest rate of 0.365%; and expected life of six years.
On July 5, 2020, the Company granted 10-year options to purchase 129,771 shares of Common Stock to the Company’s Vice President, Research and Development under the Plan. The options have an exercise price equal to $3.73 per share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options granted to the Vice President, Research and Development is subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $329,000 based on the following weighted average assumptions: share price equal to $3.73; dividend yield of 0%; expected volatility of 80.60%; risk-free interest rate of 0.395%; and expected life of six years. On June 7, 2020, the Company granted the following:
| I. | 10-year options to purchase 196,995 shares of Common Stock to the Company’s Sr. Vice President and Chief Development Officer under the Plan. The options have an exercise price equal to $3.59 per share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options granted to the Sr. Vice President and Chief Development Officer are subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company’s President and Chief Executive Officer may, in his discretion, grant options to the Company’s Sr. Vice President and Chief Development Officer to purchase additional shares if the Company effects certain transactions in which it issues additional shares of Common Stock. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $500,000 based on the following weighted average assumptions: share price equal to $3.59; dividend yield of 0%; expected volatility of 80.43%; risk-free interest rate of 0.59%; and expected life of six years.
| II. | 10-year options to purchase 760,311 shares of Common Stock, in the aggregate, to certain of the Company’s employees under the Plan. The options granted have an exercise price equal to $3.66 per share and vest over a four-year period in 16 equal quarterly increments. The Company estimated the fair value of the options on the date of grant using the Black-Scholes
option-pricing model to be approximately $1.9 million based on the following weighted average assumptions: share price equal to $3.66; dividend yield of 0%; expected volatility of 80.49%; risk-free interest rate of 0.45%; and expected life of six years. On July 25, 2021, the Company granted to a new employee, with the approval of the Company’s compensation committee, 10-year options to purchase 50,000 shares of Common Stock under the Plan. The options have an exercise price equal to $1.57 per share and vest over a four-year period in 16 equal quarterly increments. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $55,000 based on the following weighted average assumptions: share price equal to $1.57; dividend yield of 0%; expected volatility of 84.30%; risk-free interest rate of 0.88%; and expected life of six years. b) The total unrecognized compensation cost of employee stock options at December 31, 2021 is approximately $1.7 million. The unrecognized compensation cost of employee stock options is expected to be recognized over a weighted average period of 0.9 years. During the three years ended December 31, 2021, there were no exercises of stock options, and the Company did not realize any tax benefit in connection with any exercises. 2. Options granted to directors: On February 3, 2020, the Company granted 10-year options to purchase 240,000 shares of Common Stock to the Chairman of the Company’s Board of Directors under the Plan. The options have an exercise price equal to $3.70 per share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options granted to the Chairman of the Board is subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $593,000 based on the following weighted average assumptions: share price equal to $3.70; dividend yield of 0%; expected volatility of 76.91%; risk-free interest rate of 1.4%; and expected life of six years. On January 20, 2020, the Company granted 10-year options to purchase a total of 200,000 shares of Common Stock to five of the Company’s independent directors under the Plan. The options have an exercise price equal to $3.55 per share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options granted to the directors is subject to automatic acceleration in full upon a Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $475,000 based on the following weighted average assumptions: share price equal to $3.55; dividend yield of 0%; expected volatility of 76.62%; risk-free interest rate of 1.685%; and expected life of six years. 3. A summary of share option plans, and related information, under all of the Company’s equity incentive plans for the year ended December 31, 2021, and the effect of share-based compensation on the statement of operations for the years ended December 31, 2019, 2020 and 2021, is as follows: ​ a) Options granted to employees: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year ended December 31, 2021
​ |  | ​ |  | Weighted
​ | ​ | Number | ​ | average
​ | ​ | of | ​ | exercise
​ | ​ | options | ​ | price
Outstanding at beginning of year |  | 2,087,275 | ​ | $ | 5.66
Changes during the year: |  |  | ​ |  |
Granted |  | 50,000 | ​ |  | 1.57
Forfeited and expired |  | 318,255 | ​ |  | 11.00
Outstanding at end of year |  | 1,819,020 | ​ | $ | 4.61
Exercisable at end of year |  | 961,940 | ​ | $ | 5.47
​
| b) | Restricted stock granted to employees:
​
​ | ​ | ​ | ​
​ | ​ | Year Ended December 31, 2021 | ​
​ | ​ | Number of Restricted Stock | ​
Outstanding at beginning of year | ​ | 624,580 | ​
Changes during the year: | ​ | ​ | ​
Vested | ​ | 166,553 | ​
Non vested at end of year | ​ | 458,027 | ​
​ c) Options granted to consultants, directors, and other service providers: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year ended December 31, 2021
​ | ​ | ​ | ​ | Weighted
​ | ​ | Number | ​ | average
​ | ​ | of | ​ | exercise
​ | ​ | options | ​ | price
Outstanding at beginning of year |  | 464,375 | ​ | $ | 3.74
Changes during the year: |  |  | ​ |  |
Expired |  | 24,375 | ​ |  | 5.60
Outstanding at end of year |  | 440,000 | ​ |  | 3.63
Exercisable at end of year |  | 192,500 | ​ | $ | 3.63
​
| d) | The following tables summarize information concerning outstanding and exercisable options as of December 31, 2021:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2021
​ | ​ | Options outstanding | ​ | Options exercisable
​ |  | Number of |  | Weighted |  | ​ |  | Weighted
​ | ​ | options | ​ | average | ​ | ​ | ​ | average
​ | ​ | outstanding | ​ | remaining | ​ | Number of | ​ | remaining
Exercise | ​ | at end of | ​ | contractual | ​ | options | ​ | contractual
prices | ​ | year | ​ | life | ​ | exercisable* | ​ | life
$1.57 | ​ | 50,000 | ​ | 9.57 | ​ | 3,125 | ​ | 9.57
$2.00 |  | 80,000 |  | 7.73 |  | 45,000 |  | 7.73
$3.55 | ​ | 200,000 | ​ | 8.06 | ​ | 87,500 | ​ | 8.06
$3.59 | ​ | 319,651 | ​ | 8.51 | ​ | 112,203 | ​ | 8.50
$3.66 | ​ | 641,718 | ​ | 7.71 | ​ | 280,835 | ​ | 6.74
$3.70 | ​ | 240,000 | ​ | 8.10 | ​ | 105,000 | ​ | 8.10
$3.73 | ​ | 129,771 | ​ | 8.52 | ​ | 40,553 | ​ | 8.52
$4.69 |  | 160,000 |  | 7.50 |  | 100,000 |  | 7.50
$5.10 |  | 215,030 |  | 5.69 |  | 181,749 |  | 5.50
$5.60 |  | 130,000 |  | 6.71 |  | 105,625 |  | 6.71
$17.20 |  | 92,850 |  | 2.93 |  | 92,850 |  | 2.93
​ |  | 2,259,020 | ​ | ​ |  | 1,154,440 | ​ | ​
​ * As of December 31, 2021, all outstanding, exercisable options had exercise prices that exceed the fair market value of the Common Stock as of such date. ​ e) The following table illustrates the effect of share-based compensation on the statement of operations:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year ended December 31,
(U.S. dollars in thousands) |  | 2019 |  | 2020 |  | 2021
Cost of goods sold | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 269
Research and development expenses | ​ | $ | 513 | ​ | $ | 1,036 | ​ | ​ | 648
Selling, general and administrative expenses | ​ |  | 322 | ​ |  | 2,090 | ​ |  | 1,458
​ | ​ | $ | 835 | ​ | $ | 3,126 | ​ | $ | 2,375
​ d. Private and 144A Offerings On March 18, 2020, the Company completed a private placement to certain existing and new institutional and other accredited investors (the “Purchasers”) in reliance on the exemption from registration set forth in Section 4(2) of the Securities Act. The Company sold approximately 17.6 million unregistered shares of Common Stock to the Purchasers at a price per share of $2.485. The Company generated gross proceeds equal to approximately $43.7 million in the Private Placement. Each share of Common Stock issued was accompanied by a warrant to purchase one share of Common Stock at an exercise price equal to $2.36. During the year ended December 31, 2020, the Company issued 200,000 shares of Common Stock in connection with the cash exercise of a warrant issued in the transaction and generated proceeds equal to $472,000 from such exercises. On June 7, 2021, the Company issued 173,816 shares of Common Stock in connection with the cashless exercise of a warrant to purchase 2,816,901 shares of Common Stock issued in the transaction. The Company did not generate any proceeds from the cashless exercise. e. At-the-Market (ATM) Offering On July 2, 2021, the Company entered into the Sales Agreement with the Agent. Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Agent ATM Shares having an aggregate offering price of up to $20.0 million. The Company has no obligation to sell any of the Shares, and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement in accordance with its terms. The Agent is entitled to a commission of up to 3.0% of the aggregate gross proceeds from the ATM Shares sold. As of December 31, 2021, the Company sold no ATM Shares under the Sales Agreement. During the year ended December 31, 2021, but prior to the termination of the BofA Agreement, the Company sold 1,867,552 shares of Common Stock under the BofA Agreement. The Company generated gross proceeds equal to approximately $8.8 million in connection with such sales. f. Public Offering On February 17, 2021, the Company issued and sold 8,749,999 shares of Common Stock in an underwritten public offering at a price to the public of $4.60 per share for gross proceeds of approximately $40.2 million before deducting the underwriting discount and estimated expenses of the offering. The above included the exercise of the underwriters’ over-allotment option to purchase 1,141,304 shares of Common Stock.

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