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Note 7 - Common Stock Options

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Text Block]

7. Common Stock Options

On November 11, 2005, the Board of Directors of the Company adopted the XBiotech Inc. 2005 Incentive Stock Option Plan (the “2005 Plan”), and on March 24, 2015, the board of directors of the Company adopted the XBiotech Inc. 2015 Equity Incentive Plan (the 2015 Plan”) pursuant to which the Company may grant incentive stock and non-qualified stock options to directors, officers, employees or consultants of the Company or an affiliate or other persons as the Compensation Committee may approve.

All options under both Plans will be non-transferable and may be exercised only by the participant, or in the event of the death of the participant, a legal representative until the earlier of the options’ expiry date or the first anniversary of the participant’s death, or such other date as may be specified by the Compensation Committee.

The term of the options is at the discretion of the Compensation Committee, but may not exceed 10 years from the grant date. The options expire on the earlier of the expiration date or the date three months following the day on which the participant ceases to be an officer or employee of or consultant to the Company, or in the event of the termination of the participant with cause, the date of such termination. Options held by non-employee Directors have an exercise period coterminous with the term of the options.

The number of common shares reserved for issuance to any one person pursuant to the 2005 Plan shall not, in aggregate, exceed 5% of the total number of outstanding common shares. The exercise price per common share under each option will be the fair market value of such shares at the time of the grant. Upon stock option exercise, the Company issues new shares of common stock.

A summary of changes in common stock options issued under the 2005 Plan and under the 2015 Plan is as follows:

	Options			Exercise Price			Weighted-Average Exercise Price
Options outstanding at December 31, 2018		5,535,439		$2.50	-	$21.99	$	7.30
Granted		2,563,500		5.15	-	19.87		9.36
Exercised		(771,376	)	2.5	-	15		4.62
Forfeitures		(361,833	)	2.50	-	16.50		7.53
Options outstanding at December 31, 2019		6,965,730		$2.71	-	$21.99		6.09
Granted		230,500		8.89	-	21.80		16.85
Exercised		(1,784,763	)	2.71	-	19.09		6.08
Forfeitures		(84,042	)	4.26	-	21.80		8.55
Options outstanding at December 31, 2020		5,327,425		$2.71	-	$21.99		6.09
Granted		809,500		$11.35	-	$20.20		13.47
Exercised		(1,348,374	)	$3.27	-	$15.00		7.78
Forfeitures		(131,874	)	$4.14	-	$21.99		12.23
Options outstanding at December 31, 2021		4,656,677		$2.71	-	$21.74		10.68

The weighted average fair value of the options issued to directors, employees and consultants during the fiscal years ended December 31, 2021, 2020 and 2019, was $9.29, $12.23 and $9.36, respectively. Options with an intrinsic value of $(0.94), $(6.10) and $(10.25), became vested during 2021, 2020 and 2019, respectively. The total intrinsic value of options exercisable and total options outstanding on December 31, 2021 and December 31, 2020 was $3.3 million and $30.0 million respectively. The total fair value of options vested during the years ended December 31, 2021, 2020 and 2019 was $4.8 million, $12.9 million, and $2.0 million, respectively.

As of December 31, 2021, there was approximately $8.4 million of unrecognized compensation cost, related to stock options granted under the Plan which will be amortized to stock compensation expense over the next 1.77 years. The weighted-average remaining contractual term of outstanding options as of December 31,2021 is 6.66 years. Total exercisable stock options as of December 31, 2021 is 3.5 million. The weighted-average exercise price of options exercisable as of December 31, 2021 is $10.21 per share and its weighted-average remaining contractual term is 5.88 years. On December 20, 2021, a member of the Board of Directors completed a cashless exercise with the Company which resulted in the issuance of 36,507 shares of common stock.