Note 15. Share-based payments
Accounting policy
The grant-date fair value of share warrants, employee warrants, stock options and free shares granted to employees is recognized as a payroll expense with a corresponding increase in equity, over the vesting period. The amount recognized as an expense is adjusted to reflect the actual number of awards for which the related service conditions are expected to be met.
Determining the fair value of share-based awards at the grant date requires judgment, we use the Black-Scholes option-pricing model to determine the fair value of share options. The determination of the grant date fair value of options using an option-pricing model is affected by our ordinary share fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include the fair value of our ordinary shares, the expected term of the options, our expected share price volatility, risk-free interest rates, and expected dividends, which are estimated as follows:
| • | Fair value of our ordinary shares. We use the closing sales price per ordinary share as quoted on Alternext market of Euronext in Paris on the grant date for Cellectis grants and valuations prepared by third parties for Calyxt grants. |
| • | Expected term. The expected term represents the period that our share-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the ordinary share option awards granted, we have based our expected term on the simplified method, which represents the average period from vesting to the expiration of the award. |
| • | Expected volatility. For Cellectis grants, the expected share price volatility takes into account the Cellectis closing share prices and closing share price of industry peers for the remaining expected term of the ordinary share option grant. For the Calyxt grants, the expected volatility is based on comparable transactions method. |
| • | Risk-free rate. The risk-free interest rate is based on the yields of French government securities with maturities similar to the expected term of the options for each option group for Cellectis grants and US Treasury bonds for Calyxt grants. |
| • | Dividend yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero. |
Service and performance conditions attached to the transactions are not taken into account in determining fair value. If any of the assumptions used in the Black-Scholes model changes significantly, share-based compensation for future awards may differ materially compared with the awards granted previously.
Details of share-based compensation
Share warrants and employee warrants consist of Bon de Souscription d’Action (“BSAs”) and Bon de Souscription de Parts de Créateur d’Entreprise (“BSPCEs”) which are granted to our employees.
Under these programs, holders of vested options are entitled to subscribe to a capital increase of Cellectis at predetermined exercise price.
The following table provides the impact related to these programs in the statement of consolidated operations per fiscal year.
The new instruments issued during the year ended December 31, 2017 are the following:
| • | October 11, 2017, 1,220,000 Cellectis stock options were granted to certain of our employees and officers. Non-cash stock-based compensation expense recorded during the year ended December 31, 2017 was $0.5 million. |
| • | October 11, 2017, 240,000 Cellectis warrants were granted to members of our board of directors. Non-cash stock-based compensation expense recorded the year ended December 31, 2017 was $0.5 million. |
| • | June 14, 2017, 2,119,698 Calyxt Inc. stock options were granted to certain of Calyxt Inc’s and Cellectis S.A.’s and Cellectis Inc.’s employees, officers, members of the board of directors, and consultants. In connection with such stock option grants, non-cash stock-based compensation expense recorded during the year ended December 31, 2017 was $2.0 million. |
| • | June 14, 2017, 1,452,333 Calyxt Inc. restricted stock units were granted to certain of Calyxt Inc.’s and Cellectis S.A.s’ and Cellectis Inc.’s employees, officers, members of the board of directors and consultants. In connection with such restricted stock unit grants, non-cash stock-based compensation expense recorded during the year ended December 31, 2017 was $4.7 million. |
Subsequent to the grant date of these instruments, on July 20, 2017, Calyxt executed a 2.45-to-1 stock-split, which applied to the total number of Calyxt Inc.’s shares of common stock options and restricted stock units. Data presented herein include the impact of this stock-split on the granted stock options and restricted stock units.
Share warrants and employee warrants which are referred to as Bon de Souscription d’Action (“BSAs”) are granted to our board members and consultants.
Holders of vested Cellectis stock options and warrants are entitled to exercise such options and warrants to purchase Cellectis Ordinary shares at a fixed exercise price established at the time of such options and warrants are granted.
The following table provides the expenses related to share-based compensation instruments during the years ended December 31, 2015, 2016 and 2017.
| Non-cash share-based compensation expense |
Free shares 2014 and before |
Free shares 2015 |
Stock options 2015 |
BSA 2015 |
Stock options Calyxt 2015 |
Stock options 2016 |
BSA 2016 |
Stock options Calyxt 2016 |
Stock options 2017 |
BSA 2017 |
Stock options Calyxt 2017 |
RSU Calyxt 2017 |
Total | |||||||||||||||||||||||||||||||||||||||
|
For the year ended |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ in thousands | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
December 31, 2015 |
407 | 4,739 | 25,205 | 2,261 | 790 | — | — | — | — | — | — | — | 33,402 | |||||||||||||||||||||||||||||||||||||||
|
December 31, 2016 |
102 | 7,160 | 29,985 | 3,436 | 321 | 15,616 | 1,224 | 777 | — | — | — | — | 58,622 | |||||||||||||||||||||||||||||||||||||||
|
December 31, 2017 |
1 | 2,618 | 12,588 | 1,571 | 164 | 23,704 | 1,459 | 611 | 546 | 481 | 1,977 | 4,697 | 50,418 | |||||||||||||||||||||||||||||||||||||||
The key terms and conditions related to these BSAs and BSPCEs are provided in the Notes 15.1 to 15.5.
15.1 Detail of Cellectis S.A. BSPCE E
Date of grant: July 27, 2010
The BSPCEs were vested before January 1, 2012 up to 19,702 BSPCEs and vested for post January 1, 2012 on the basis of the following vesting schedule:
| • | Up to 19,702 BSPCE on July 27, 2012 |
| • | Up to 19,704 BSPCE on July 27, 2013 |
|
Date of grant (Board of Directors) |
07/27/2010 | 07/27/2010 | 07/27/2010 | |||||||||
|
Vesting period (years) |
1 | 2 | 3 | |||||||||
|
Plan expiration date |
07/27/2020 | 07/27/2020 | 07/27/2020 | |||||||||
|
Number of BSPCE granted |
19,702 | 19,702 | 19,704 | |||||||||
|
Share entitlement per BSPCE |
1 | 1 | 1 | |||||||||
|
Exercise price (in euros per share) |
8.28 | 8.28 | 8.28 | |||||||||
|
Valuation method used |
Black-Scholes | Black-Scholes | Black-Scholes | |||||||||
|
Grant date share fair value (in euros per share) |
8.28 | 8.28 | 8.28 | |||||||||
|
Expected volatility |
54 | % | 54 | % | 54 | % | ||||||
|
Average life of BSPCE |
5.5 | 6.0 | 6.5 | |||||||||
|
Discount rate |
3.14 | % | 3.14 | % | 3.14 | % | ||||||
|
Expected dividends |
0 | % | 0 | % | 0 | % | ||||||
|
Performance conditions |
NA | NA | NA | |||||||||
|
Fair value per BSPCE (in euros per share) |
5.52 | 5.52 | 5.52 | |||||||||
15.2 Detail of Cellectis S.A. free shares
The free shares are subject to a two-year vesting period for French employees and four years for foreign citizens.
|
Date of grant (Board of Directors) |
09/18/2012 | 03/19/2013 | 03/19/2014 | 01/08/2015 | 05/18/2015 | 05/18/2015 | ||||||||||||||||||
|
Vesting period (years) |
2 | 2 | 2 | 2 | 2 | 4 | ||||||||||||||||||
|
Number of Free shares granted |
102,099 | 102,000 | 100,000 | 50,000 | 426,300 | 24,100 | ||||||||||||||||||
|
Share entitlement per Free share |
1 | 1 | 1 | 1 | 1 | 1 | ||||||||||||||||||
|
Grant date share fair value (in euros per share) |
5.37 | 6.86 | 6.16 | 19.10 | 28.17 | 28.17 | ||||||||||||||||||
|
Expected dividends |
0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||
|
Performance conditions |
n.a | n.a | n.a | n.a | n.a | n.a | ||||||||||||||||||
15.3 Detail of Cellectis S.A. stock options
The stock options are subject to a two-year vesting period for French employees and four years for foreign citizens.
|
Date of grant |
03/24/2015 | 09/08/2015 | 03/14/2016 | 10/28/2016 | 10/11/2017 | |||||||||||||||
|
Vesting period |
Graded | Graded | Graded | Graded | Graded | |||||||||||||||
|
Plan expiration date |
03/24/2025 | 08/09/2025 | 03/14/2026 | 10/28/2026 | 11/10/2027 | |||||||||||||||
|
Number of options granted |
1,892,300 | 1,982,300 | 2,060,602 | 2,773,028 | 1,220,000 | |||||||||||||||
|
Share entitlement per options |
1 | 1 | 1 | 1 | 1 | |||||||||||||||
|
Exercise price (in euros per share) |
38.45 | 27.55 | 22.44 | 17.90 | 22.57 | |||||||||||||||
|
Valuation method used |
Black-Scholes | Black-Scholes | Black-Scholes | Black-Scholes | Black-Scholes | |||||||||||||||
|
Grant date share fair value (in euros per share) |
40.00 | 28.59 | 22.48 | 16.42 | 24.01 | |||||||||||||||
|
Expected volatility |
59.8 | % | 59.9 | % | 62.8 | % | 63.2 | % | 65.6 | % | ||||||||||
|
Average life of options |
6.11 | 6.11 | 6.11 | 6.12 | 6.12 | |||||||||||||||
|
Discount rate |
0.16 | % | 0.42 | % | 0.03 | % | 0.00 | % | 0.03 | % | ||||||||||
|
Expected dividends |
0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||
|
Performance conditions |
n.a | n.a | n.a | n.a | n.a | |||||||||||||||
|
Fair value per options (in euros per share) |
22.02 | 15.86 | 12.65 | 8.96 | 14.30 | |||||||||||||||
15.4 Detail of Cellectis S.A. warrants
The key terms and conditions related to these warrants are provided in the table below.
|
Date of grant |
03/27/2015 | 03/27/2015 | 05/18/2015 | 09/08/2015 | 03/14/2016 | 10/28/2016 | 11/10/2017 | |||||||||||||||||||||
|
Vesting period (years) |
Graded | Graded | Graded | Graded | Graded | Graded | Graded | |||||||||||||||||||||
|
Plan expiration date |
03/27/2025 | 03/27/2025 | 05/18/2025 | 09/08/2025 | 03/14/2026 | 10/28/2026 | 11/10/2027 | |||||||||||||||||||||
|
Number of warrants granted |
130,000 | 50,000 | 50,000 | 274,200 | 229,361 | 188,000 | 240,000 | |||||||||||||||||||||
|
Share entitlement per warrant |
1 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||||||||||||||||
|
Exercise price (in euros per share) |
38.45 | 38.45 | 29.58 | 28.01 | 27.37 | 18.68 | 24.34 | |||||||||||||||||||||
|
Valuation method used |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
||||||||||||||
|
Grant date share fair value (in euros per share) |
32.15 | 28.17 | 28.17 | 28.59 | 22.48 | 16.42 | 24.95 | |||||||||||||||||||||
|
Expected volatility |
59.1 | % | 59.1 | % | 59.1 | % | 60.5 | % | 62.8 | % | 63.1 | % | 64.7 | % | ||||||||||||||
|
Average life of warrant |
6.00 | 5.83 | 6.00 | 6.00 | 6.00 | 6.00 | 6.00 | |||||||||||||||||||||
|
Discount rate |
0.42 | % | 0.94 | % | 0.94 | % | 0.43 | % | 0.04 | % | 0.00 | % | 0.12 | % | ||||||||||||||
|
Expected dividends |
0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||
|
Performance conditions |
n.a | n.a | n.a | n.a | n.a | n.a | n.a | |||||||||||||||||||||
|
Fair value per warrant (in euros per share) |
13.95 | 11.10 | 13.51 | 14.24 | 10.51 | 7.88 | 13.20 | |||||||||||||||||||||
15.5 Detail of Calyxt Inc. stock options
The key terms and conditions related to these options are provided in the table below.
|
Date of grant |
Employees 12/03/2014 (a) |
Managers 12/03/2014 (b) |
09/08/2015 (c) | 04/07/2016 (d) | 06/14/2017 (e) | |||||||||||||||
|
Vesting period |
Graded | Graded | Graded | Graded | Graded | |||||||||||||||
|
Plan expiration date |
12/03/2024 | 12/03/2024 | 09/08/2025 | 04/07/2026 | 06/14/2027 | |||||||||||||||
|
Number of options granted |
71,050 | 159,250 | 113,925 | 1,678,250 | 2,119,698 | |||||||||||||||
|
Share entitlement per options |
1 | 1 | 1 | 1 | 1 | |||||||||||||||
|
Exercise price (in $ per share) |
3.71 | 3.71 | 21.83 | 3.59 | 13.29 | |||||||||||||||
|
Valuation method used |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
|
Black- Scholes |
||||||||||
|
Grant date share fair value (in $ per share) |
3.71 | 3.71 | 21.83 | 3.59 | 13.29 | |||||||||||||||
|
Expected volatility |
48.0 | % | 48.0 | % | 54.3 | % | 30.0 | % | 25.0 | % | ||||||||||
|
Average life of options |
6.16 | 6.04 | 5.53 | 5.74 | 6.57 | |||||||||||||||
|
Discount rate |
1.74 | % | 1.74 | % | 1.65 | % | 1.41 | % | 1.96 | % | ||||||||||
|
Expected dividends |
0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||
|
Performance conditions |
|
Trigger event |
* |
|
Trigger event |
* |
|
Trigger event |
* |
|
Trigger event |
* |
n.a | |||||||
|
Fair value per options (in $ per share) |
1.78 | 1.76 | 10.93 | 1.11 | 4.00 | |||||||||||||||
| * | The plans pursuant to which Calyxt stock options are issued require the occurrence of an IPO or a “triggering event” as a condition for the exercise of vested stock options and, in some circumstances, as a condition to vesting. If the condition is expected to occur during the service period, then it is a non-market performance condition. A triggering event is designed as any transaction that would result in Cellectis losing control of Calyxt Inc. As such, the options to which the IPO or triggering event condition apply were measured at the grant date, but the expense was not recorded until the IPO occurred in 2017. |
| (a) | the options granted on December 3, 2014, shall vest as follows for employees: |
| • | 25% of the total number of shares on April 10, 2015; |
| • | 6.25% of the total number of shares on the last day of each calendar quarter beginning from third quarter of 2015 (or 12.5% of the total number of shares on the last day of each calendar quarter beginning after a triggering event or initial public offering); |
| • | 25% at the date of a triggering event or initial public offering; |
| • | 100% in the event of termination without cause of resignation for good reason in the case of a change of control. |
| (b) | the options granted on December 3, 2014, shall vest as follows for managers and consultants: |
| • | 20% of the total number of shares on January 3, 2015; |
| • | 20% of the total number of shares on April 10, 2015; |
| • | 5% of the total number of shares on the last day of each calendar quarter beginning from third quarter of 2015 (or 10% of the total number of shares on the last day of each calendar quarter beginning after a triggering event or initial public offering); |
| • | 25% at the date of a triggering event or initial public offering; |
| • | 100% in the event of termination without cause of resignation for good reason in the case of a change of control. |
| (c) | the options granted on September 8, 2015, shall vest as follows: |
| • | 20% of the total Number of Shares on September 8, 2015; |
| • | 20% of the total Number of Shares on September 8, 2016; and |
| • | 5% of the Total Number of Shares on the last day of each calendar quarter beginning from the fourth quarter of 2016; |
| • | 25% at the date of a triggering event or initial public offering. |
The vested portion of such options shall only become exercisable in the event that a triggering event or initial public offering occurs prior to the expiration date, in which case, an additional 25% of the total number of shares shall immediately vest. The total of vested options cannot exceed 100% of the number of options initially granted. A triggering event is designed as any transaction that would result in Cellectis losing control of Calyxt Inc.
| (d) | the options granted on April 7, 2016 shall vest as follows: |
| • | C-Level; “VP” and Consultants |
| • | 20% of the total Number of Shares on April 7, 2016; |
| • | 10% of the total Number of Shares on April 7, 2017; |
| • | 5% of the total Number of Shares on the last day of each calendar quarter beginning from the second quarter 2017; |
| • | 25% of additional vesting in case of triggering event or initial public offering; and |
| • | 100% in the event of termination without cause or resignation for good reason in the case of a change of control. |
| • | Heads of department and Analysts |
| • | 20% of the total Number of Shares on April 7, 2017; |
| • | 10% of the total Number of Shares on April 7, 2018; |
| • | 5% of the total Number of Shares on the last day of each calendar quarter beginning from the second quarter 2018. |
| (e) | the Calyxt options granted on June 14, 2017, shall vest as follows: |
| • | C-Level, Directors and Consultants |
| • | 15% of the total Number of Shares on June 14, 2018; |
| • | 15% of the total Number of Shares on June 14, 2019; |
| • | 5% vest each quarter after the second anniversary of the grant. |
| • | CFO and CCO |
| • | 20% of the total Number of Shares on June 14, 2017; |
| • | 10% of the total Number of Shares on June 14, 2018; |
| • | 5% vest each quarter after the first anniversary of the grant. |
| • | Employees |
| • | 15% of the total Number of Shares on June 14, 2018; |
| • | 10% of the total Number of Shares on June 14, 2019; |
| • | 5% vest each quarter after the second anniversary of the grant. |
15.6 Detail of Calyxt Inc. restricted stock unit
The key terms and conditions related to these options are provided in the table below.
|
Date of grant |
06/14/2017 (a) | |||
|
Vesting period |
Graded | |||
|
Number of RSU granted |
1,452,333 | |||
|
Share entitlement per RSU |
1 | |||
|
Grant date share fair value (in $ per share) |
13.29 | |||
|
Expected dividends |
0 | % | ||
|
Performance conditions |
n.a | |||
| (a) | the Calyxt RSU granted on June 14, 2017 shall vest as follows: |
| • | C-Level, Directors and Consultants |
| • | 15% of the total Number of Shares on June 14, 2018; |
| • | 15% of the total Number of Shares on June 14, 2019; |
| • | 5% vest each quarter after the second anniversary of the grant. |
| • | CFO and CCO |
| • | 20% of the total Number of Shares on June 14, 2017; |
| • | 10% of the total Number of Shares on June 14, 2018; |
| • | 5% vest each quarter after the first anniversary of the grant. |
| • | Employees |
| • | 15% of the total Number of Shares on June 14, 2018; |
| • | 10% of the total Number of Shares on June 14, 2019; |
| • | 5% vest each quarter after the second anniversary of the grant. |