Quarterly report pursuant to Section 13 or 15(d)

Share Capital

v3.23.3
Share Capital
9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Share Capital

Note 6 - Share Capital

(a)
Share Capital

Authorized: Unlimited common shares. The shares have no par value.

The Company’s common shares are voting and dividend-paying. The following is a summary of the common share issuances for the nine months ended September 30, 2023:

On January 3, 2023, the Company issued common shares totaling 15,628 for vested restricted stock units, out of which the Company withheld 7,776 shares to satisfy employees’ tax obligations with respect thereto of $0.2 million.
On March 3, 2023, the Company issued common shares totaling 27,930 for vested restricted stock units.
On April 20, 2023, the Company issued common shares totaling 9,255 for vested restricted stock units, out of which the Company withheld 3,103 shares to satisfy employees’ tax obligations with respect thereto of less than $0.1 million.
On July 6, 2023, the Company issued common shares totaling 19,439 for vested restricted stock units, out of which the Company withheld 4,818 shares to satisfy employees’ tax obligations with respect thereto of less than $0.1 million.

The following is a summary of the common share issuances for the nine months ended September 30, 2022:

On June 24, 2022, an aggregate of 6,072,580 common shares were issued to the Secured Lenders and Unsecured Lenders in connection with the closing of the Recapitalization Transaction.
On August 18, 2022, 408 common shares were issued to settle shares to be issued with regards to purchase options assumed by the Company on February 5, 2019 as part of MPX Acquisition.
(b)
Warrants

The following table summarizes certain information in respect of the Company’s warrants:

 

September 30, 2023

 

December 31, 2022

 

Units

 

Weighted Average Exercise Price (C$)

 

Units

 

Weighted Average Exercise Price (C$)

Warrants outstanding, beginning

 

 

$

 

22,640

 

$

3.56

Forfeited

 

 

 

 

(17,955)

 

 

2.52

Expired

 

 

 

 

(4,685)

 

 

7.53

Warrants outstanding, ending

 

 

$

 

 

$

As per the terms of the Restructuring Support Agreement, all outstanding warrants were forfeited as of the Closing Date of the Recapitalization Transaction, and warrants classified as derivative liabilities were revalued to $Nil as of December 31, 2022. The Company recognized revaluation gain of $Nil and $Nil, respectively for the three and nine months ended September 30, 2023 (September 30, 2022 $Nil and less than $0.1 million, respectively) on the unaudited interim condensed consolidated statements of operations.

(c)
Potentially Dilutive Securities

The following table summarizes potentially dilutive securities, and the resulting common share equivalents outstanding as of September 30, 2023 and December 31, 2022:

 

 

September 30, 2023

 

December 31, 2022

Common share options

 

7,877

 

7,877

Restricted stock units

 

337,115

 

173,230

Total

 

344,992

 

181,107

(d)
Stock Options
 

All existing options (the “Original Awards”) to purchase common shares of the Company issued to officers were cancelled and extinguished for no consideration on the date of closing the Recapitalization Transaction. On September 19, 2022, the Board awarded stock options to two officers of the Company as replacement awards for the Original Awards under the Company’s Amended and Restated Omnibus Incentive Plan (the “Omnibus Incentive Plan”) dated October 15, 2018. The Original Awards were cancelled on June 24, 2022, as part of the Recapitalization Transaction, and the new stock options were granted on September 19, 2022 (the “Replacement Stock Options”). As the fair value of the Original Awards was $Nil on the modification date, the incremental compensation cost recognized is equal to the fair value of the Replacement Stock Options on the modification date, which shall be recognized over the remaining requisite service period. The Replacement Stock Options granted vested fully after the three-year grant period ended on July 10, 2023. Accordingly, the unrecognized compensation cost is $Nil, having been amortized on a straight-line basis over the weighted average requisite service period of three years.

 

Share-based compensation expense related to stock options for the three and nine months ended September 30, 2023 was less than $0.1 million and less than $0.1 million, respectively (September 30, 2022 - $0.2 million and $2.0 million, respectively), and is presented in selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations.

The following table summarizes certain information in respect of option activity during the period:

.

 

Nine Months Ended September 30, 2023

 

 

Year Ended December 31, 2022

 

 

Units

 

 

Weighted Average
Exercise Price
(1)

 

 

Weighted Average Contractual Life

 

 

Units

 

 

Weighted Average
Exercise Price
(1)

 

Weighted Average Contractual Life

Options outstanding, beginning

 

7,877

 

$

0.05

 

 

7.78

 

 

10,504

 

$

3.65

 

Granted

 

 

 

 

 

 

 

7,877

 

 

0.05

 

Cancellations

 

 

 

 

 

 

 

(7,111)

 

 

3.48

 

Forfeitures

 

 

 

 

 

 

 

(3,152)

 

 

4.33

 

Expirations

 

 

 

 

 

 

 

(241)

 

 

0.89

 

Options outstanding, ending (2)

 

7,877

 

$

0.05

 

 

6.78

 

 

7,877

 

$

0.05

 

7.78

 

(1)
The Original Awards are denominated in Canadian dollars. Exercise prices have been converted to U.S. dollar equivalents using an exchange rate of CAD$1.352 to $1.00 as of September 30, 2023.
(2)
As of September 30, 2023, 7,877 of the stock options outstanding were exercisable (December 31, 2022 - 6,564).

The Company used the Black-Scholes option pricing model to estimate the fair value of the options at the grant date using the following assumptions:

 

 

September 30, 2023

 

December 31, 2022

Risk-free interest rate

 

 

3.8%

Expected dividend yield

 

 

0.0%

Expected volatility

 

 

128.6%

Expected life

 

 

4.3 years

 

The expected volatility was estimated by using the historical volatility of the Company. The expected life in years represents the period of time that options granted are expected to be outstanding. In accordance with SAB Topic 14, the Company uses the simplified method for estimating the expected term. The Company believes the use of the simplified method is appropriate due to the employee stock options qualifying as “plain-vanilla” options under the criteria established by SAB Topic 14. The risk-free rate was based on the United States bond yield rate at the time of grant of the award. Expected annual rate of dividends is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

 

(e)
Restricted Stock Units

On December 31, 2021, the Board approved a long-term incentive program, pursuant to which, on July 26, 2022, the Company issued certain employees of the Company and its subsidiaries, restricted stock units (“RSUs”), under the Company’s Amended and Restated Omnibus Incentive Plan dated October 15, 2018. RSUs represent a right to receive a single common share that is both non-transferable and forfeitable until certain conditions are satisfied. The allocation of RSUs was contingent on the closing of the Recapitalization Transaction and was subject to approval of the Canadian Securities Exchange and the Board.

On December 31, 2021 and June 23, 2022, the Board approved the allocation of 363,921 and 26,881 RSUs, respectively, to Board members, directors, officers, and key employees of the Company. The RSUs granted by the Company vest upon the satisfaction of both a service-based condition of three years and a liquidity condition, the latter of which was not satisfied until the closing of the Recapitalization Transaction. As the liquidity condition was not satisfied until the closing of the Recapitalization Transaction, in prior periods, the Company had not recorded any expense related to the grant of RSUs. Share-based compensation expense in relation to the RSUs is recognized using the graded vesting method, in which compensation costs for each vesting tranche is recognized ratably from the service inception date to the vesting date for that tranche. The fair value of the RSUs is determined using the Company’s closing stock price on the grant date.

Certain RSU recipients were also holders of the Original Awards, which were cancelled upon closing the Recapitalization Transaction. The RSUs granted to these employees have been treated as replacement awards (the “Replacement RSUs”) and are accounted for as a modification to the Original Awards. As the fair value of the Original Awards was $Nil on the modification dates,

the incremental compensation cost recognized is equal to the fair value of the Replacement RSUs on the modification date, which shall be recognized over the remaining requisite service period.

On September 19, 2022, the Board awarded 27,108 RSUs to four Board members. Of the RSUs awarded, 7,843 were fully vested on issuance and 19,265 vested over a one-year period. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a straight-line basis.

On November 23, 2022, the Board awarded 7,317 RSUs to an officer of the Company, which shall vest over a three-year period. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a straight-line basis.

On December 8, 2022, the Board awarded 27,930 RSUs to Julius Kalcevich, a former officer of the Company, for compensation owed under section 4(g) of Mr. Kalcevich’s employment agreement (refer to Note 12). The fair value of the RSUs was determined on the grant date and the award was fully vested upon issuance.

On December 23, 2022, the Board awarded 21,400 RSUs to key employees of the Company, which shall vest over a three-year period. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a straight-line basis.

On May 17, 2023, the Board awarded 25,977 RSUs to employees and one Board member. Of the RSUs awarded, 5,587 were fully vested on issuance and 20,391 shall vest over a period of one to three years. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a straight-line basis.

On June 27, 2023, the Board awarded 12,950 RSUs to an employee. The RSUs shall vest over a period of three years. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a straight-line basis.

On August 31, 2023, the Board awarded 207,194 RSUs to two officers. The RSUs shall vest over a period of three years. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a straight-line basis.

During the three and nine months ended September 30, 2023, the Company recognized $0.5 million and $3.5 million, respectively of share-based compensation expense associated with the RSUs (September 30, 2022—$4.4 million and $25.5 million, respectively). Share-based compensation expense is presented in selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations.

As of September 30, 2023, there was approximately $4.5 million of total unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted-average service period of 2.69 years.

The following table summarizes certain information in respect of RSU activity during the period:

 

 

Nine Months Ended September 30, 2023

 

Year Ended December 31, 2022

 

 

Units

 

 

Weighted
Average
Grant Price
(1)

 

 

Units

 

 

Weighted
Average
Grant Price
(1)

Unvested balance, beginning

 

129,671

 

$

0.07

 

 

 

$

Granted

 

246,121

 

 

0.02

 

 

474,557

 

 

0.08

Vested

 

(97,932)

 

 

0.08

 

 

(263,155)

 

 

0.09

Forfeited

 

(9,983)

 

 

0.07

 

 

(81,731)

 

 

0.10

Unvested balance, ending

 

267,877

 

$

0.02

 

 

129,671

 

$

0.07

 

(1)
Weighted average grant price is presented in U.S. dollars for the nine months ended September 30, 2023, as compared to previously issued financial statements, which present this figure in Canadian dollars.