12.         Share-Based Compensation

2019 Omnibus Incentive Plan

The DiaMedica Therapeutics Inc. 2019 Omnibus Incentive Plan (2019 Plan) was adopted by the Board of Directors (Board) in March 2019 and approved by our shareholders at our annual general and special meeting of shareholders held on May 22, 2019. The 2019 Plan permits the Board, or a committee or subcommittee thereof, to grant to the Company’s eligible employees, non-employee directors and consultants non-statutory and incentive stock options (ISO), stock appreciation rights (SAR), restricted stock awards (RSA), restricted stock units (RSU), deferred stock units (DSU), performance awards, non-employee director awards and other stock-based awards. We grant options to purchase common shares under the 2019 Plan at no less than the fair market value of the underlying common shares as of the date of grant. Options granted to employees and non-employee directors have a maximum term of ten years and generally vest in approximately equal quarterly installments over one to four years. Options granted to non-employees have a maximum term of five years and generally vest in approximately equal quarterly installments over one year. Subject to adjustment as provided in the 2019 Plan, the maximum number of the Company’s common shares authorized for issuance under the 2019 Plan is 2,000,000 shares. As of December 31, 2021, there were options to purchase 1,418,690 common shares were outstanding and 50,326 common shares were reserved for issuance upon settlement of DSUs under the 2019 Plan.

2021 Employment Inducement Incentive Plan

On December 3, 2021, the Board adopted the DiaMedica Therapeutics Inc. 2021 Employment Inducement Incentive Plan (Inducement Plan), to facilitate the granting of equity awards as an inducement material to new employees joining the Company. The Inducement Plan was adopted without shareholder approval pursuant to Nasdaq Listing Rule 5635(c)(4) and is administered by the Compensation Committee of the Board of Directors. The Board reserved 1,000,000 common shares of the Company for issuance under the Inducement Plan, which permits the grant of non-statutory options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock-based awards, to eligible recipients. The only persons eligible to receive awards under the Inducement Plan are individuals who are new employees and satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as applicable. Also on December 3, 2021, the Compensation Committee adopted a form of notice of option grant and option award agreement for use under the Inducement Plan, which contains terms substantially identical to the form of notice of option grant and option award agreement for use under the shareholder-approved 2019 Plan. The Inducement Plan has a term of 10 years. The share reserve under the Inducement Plan may be increased at the discretion of and approval by the Board. As of December 31, 2021, no options or other equity awards had been granted under the Inducement Plan. However, subsequent to year end, options to purchase an aggregate of 325,000 common shares were granted to two qualifying new employees under the Inducement Plan.

Prior Stock Option Plan

The DiaMedica Therapeutics Inc. Stock Option Plan, Amended and Restated November 6, 2018 (Prior Plan), was terminated by the Board in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the Prior Plan remain outstanding in accordance with and pursuant to the terms thereof. Options granted under the Prior Plan have terms similar to those used under the 2019 Plan. As of December 31, 2021, options to purchase 477,910 common shares were outstanding under the Prior Plan.

Prior Deferred Share Unit Plan

The DiaMedica Therapeutics Inc. Amended and Restated Deferred Share Unit Plan (Prior DSU Plan) was terminated by the Board in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the DSU Plan remain outstanding in accordance with and pursuant to the terms thereof. As of December 31, 2021, there were 17,333 common shares reserved for issuance upon settlement of DSUs outstanding under the Prior DSU Plan. On December 16, 2021, we settled 3,850 DSUs held by our former director, Zhenyu Xiao, Ph.D, pursuant to the terms of the Prior DSU Plan and the award agreement evidencing the grant of such DSUs.

Prior to December 31, 2018, all options granted under the Prior Plan were priced in Canadian dollars. Options granted after December 31, 2018 under the 2019 Plan and the Prior Plan have been priced in United States dollars.

Share-based compensation expense for each of the periods presented is as follows (in thousands):

We recognize share-based compensation based on the fair value of each award as estimated using the Black-Scholes option valuation model. Ultimately, the actual expense recognized over the vesting period will only be for those shares that actually vest.

A summary of option activity is as follows (in thousands except share and per share amounts):

A summary of the status of our unvested shares underlying options during the year ended and as of December 31, 2021 is as follows:

Information about stock options outstanding, vested and expected to vest as of December 31, 2021, is as follows:

The cumulative grant date fair value of employee options vested during the years ended December 31, 2021 and 2020 was $1.3 million and $1.4 million, respectively. Total proceeds received for options exercised during the years ended December 31, 2021 and 2020 were $244,000 and $45,000, respectively.

As of December 31, 2021, total compensation expense related to unvested employee stock options not yet recognized was $1.8 million, which is expected to be allocated to expenses over a weighted-average period of 2.6 years.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021 and 2020 was $132,000 and $41,000, respectively.

The assumptions used in calculating the fair value under the Black-Scholes option valuation model are set forth in the following table for options issued by the Company for the years ended December 31, 2021 and 2020:

Deferred Stock Units and Restricted Stock Units

Under our non-employee director compensation program, non-employee directors may elect to receive RSUs or DSUs in lieu of all or a portion of the annual cash retainers payable to such director. Each RSU or DSU represents the right to receive one share of our common stock. These recipients receive a number of DSUs equal to the amount of the elected portion of the annual cash retainers divided by the 10-trading day average closing sale price of the common stock as determined on the third (3^rd) business day prior to the anticipated grant date of the award. Vesting for these annual RSU and DSU grants is quarterly over one year, conditioned on continuous service. The cost of DSUs is measured and recognized base on the fair market value of our common shares on the date of grant. RSUs will be settled immediately upon vesting and DSU awards will be settled following a separation from service by such director.

There were approximately 68,000 and 47,000 vested DSUs and no RSUs outstanding under our share-based compensation plans as of December 31, 2021 and 2020, respectively. During 2021, 3,850 common shares were issued upon settlement of 3,850 DSUs held by a former non-employee director. There were no unvested DSUs as of December 31, 2021 and 2020.