Annual report pursuant to Section 13 and 15(d)

Share Capital

v3.23.1
Share Capital
 12 Months Ended
Dec. 31, 2022
Equity [Abstract]  
Share Capital
Note 10 - 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 year ended December 31, 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.
 
  •  
On October 3, 2022, the Company issued common shares totaling 219,323
 for vested restricted stock units, out of which the
 
Company withheld
61,013
 
shares to satisfy employees’ tax obligations of $
1.8 million.
 
  •  
On December 23, 2022, the Company issued common shares totaling 
273
 for vested restricted stock units.
There were no common share issuances for the year ended December 31, 2021.
(b) Warrants
The following table summarizes certain information in respect of the Company’s warrants:

 
 
  
Year Ended December 31, 2022
 
  
Year Ended December 31, 2021
 
 
  
Units
 
  
Weighted Average
Exercise Price (C$)
 
  
Units
 
  
Weighted Average
Exercise Price (C$)
 
Warrants outstanding, beginning
      22,640      $ 3.56        49,236      $ 4.06  
Granted
      —          —          —          —    
Forfeited
      (17,955 )       2.52        —          —    
Expired
      (4,685 )       7.53        (26,596 )       3.84  
    
 
 
     
 
 
     
 
 
     
 
 
  
Warrants outstanding, ending
   
 
—  
 
   
$
—  
 
   
 
22,640
 
   
$
3.56
 
    
 
 
     
 
 
     
 
 
     
 
 
  
 
As of December 31, 2022 and 2021, w
a
rrants classified as derivative liabilities on the consolidated balance sheets were revalued with the following inputs:
 
    
December 31, 2022
     
December 31, 2021
  
Risk-free interest rate
      —          0.9 % 
Expected dividend yield
      —          0.0 % 
Expected volatility
      —         
93.7 - 297.1
 % 
Expected life
      —          0.9 years  
The Company uses an expected volatility based on its historical trading data.
As p
e
r 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 (December 31, 2021 – less than $0.1 million). As a result of the revaluation, the Company recognized a gain of less than $0.1 million for the year ended December 31, 2022 (December 31, 2021 – gain of $0.2 million), on the consolidated statements of operations.
 
Full share equivalent warrants outstanding and exercisable are as follows:
 
 
  
Year Ended December 31, 2022
 
  
Year Ended December 31, 2021
 
Year of expiration
  
Number
Outstanding
 
  
Weighted Average
Exercise Price (C$)
 
  
Number
Outstanding
 
  
Weighted Average
Exercise Price (C$)
 
2022
      —          —          20,855        3.47  
2023
      —          —          1,785        4.57  
    
 
 
     
 
 
     
 
 
     
 
 
  
Warrants outstanding
   
 
—  
 
   
$
—  
 
   
 
22,640
 
   
$
3.56
 
    
 
 
     
 
 
     
 
 
     
 
 
  
(c) Potentially Dilutive Securities
The following table summarizes potentially dilutive securities, and the resulting common share equivalents outstanding as of December 31, 202
2
and 2021:
 
    
2022
     
2021
  
Common share options
      7,877        10,504  
Restricted stock units
      173,230        —    
Warrants
      —          22,640  
Secured notes
      —          46,458  
Debentures
      —          10,135  
MPX dilutive instruments
(1)
      —          408  
  
 
 
     
 
 
  
Total
   
 
181,107
 
   
 
90,145
 
  
 
 
     
 
 
  
 
(1)
Prior to the MPX Acquisition, MPX had instruments outstanding that were potentially dilutive and as a result of the MPX Acquisition, the Company assumed certain of these instruments which were settled on August 18, 2022 by issuing 408 common shares.
(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 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. As of December 31, 2022, unrecognized compensation costs related to the Original Awards was $Nil (December 31, 2021—$1.9 million). The Replacement Stock Options granted vest over three-years, commencing on July 10, 2020. Share-based compensation expense of $0.2 million was recognized immediately on the consolidated statements of operations for Replacement Stock Options that were vested as of the grant date, and the remaining unrecognized compensation cost of less than $0.1 million will be amortized on a straight-line basis over the remaining weighted average requisite service period of 0.51 years.
 
The related share-based compensation expense for the year ended December 31, 2022 was $2.1 million (December 31, 2021 - $6.5 million), and is presented in selling, general and administrative expenses on the consolidated statements of operations.  
The following table summarizes certain information in respect of option activity under the Company’s stock option plan:
 
 
  
Year Ended December 31, 2022
 
  
Year Ended December 31, 2021
 
 
  
Units
 
 
Weighted
Average
Exercise
Price
(1)
 
  
Weighted
Average
Contractual
Life
 
  
Units
 
 
Weighted
Average
Exercise
Price
(1)
 
  
Weighted
Average
Contractual
Life
 
Options outstanding, beginning
      10,504     $ 3.65        —          11,510     $ 3.59        —    
Granted
      7,877       0.05        —          —         —          —    
Exercised
      —         —          —          —         —          —    
Cancellations
      (7,111 )      3.47        —          —         —          —    
Forfeitures
      (3,152 )      4.32        —          —         —          —    
Expirations
      (241 )      0.89        —          (1,006 )      2.92        —    
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
  
Options outstanding, ending
(2)
   
 
7,877
 
  
$
0.05
 
   
 
7.78
 
   
 
10,504
 
  
$
3.65
 
   
 
6.24
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
  
 
(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$1.3544 to $1.00 as of December 31, 2022 and December 31, 2021.
(2)
As of December 31, 2022, 6,564 of the stock options outstanding were exercisable (December 31, 202
1
—
9,922).
During the year ended December 31, 2022, 7,877 Replacement Stock Options were granted with an exercise price of $0.05 per common share. No stock options were granted during the year ended December 31, 2021.
No stock options were exercised during the year
s
ended December 31, 2022 and 2021.
The aggregate intrinsic value of outstanding options as of December 31, 2022 and 2021, was $Nil and $Nil, respectively.
The Company used the Black-Scholes option pricing model to estimate the fair value of the options at the grant date
using the following ranges of assumptions:
 
 
  
December 31, 2022
 
 
December 31, 2021
 
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
Staff Accounting Bulletin (“
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, RSUs, under the Company’s Omnibus Incentive Plan. 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 shall vest 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 15).
 
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.
During the year ended December 31, 2022, the Company recognized $28.3 million of share-based compensation expense associated with the RSUs (December 31, 2021 - $Nil). Share-based compensation expense is presented in selling, general and administrative expenses on the consolidated statements of operations.
As of December 31, 2022, there was approximately $4.6 million of total unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted-average service period of 1.28 years. The Company withheld 61,013 RSUs with a fair value of $1.8 million for the Company’s employees’ minimum withholding taxes at vesting of such awards during the year ended December 31, 2022.
The following table summarizes certain information in respect of RSU activity during the period:
 
 
  
Year Ended
December 31, 2022
 
  
Year Ended
December 31, 2021
 
 
  
Units
 
  
Weighted
Average
Grant
Price
(1)
 
  
Units
 
  
Weighted
Average
Grant
Price
 
Unvested balance, beginning
      —        $ —          —        $ —    
Granted
      474,557        0.08        —          —    
Vested
      (263,155 )       0.09        —          —    
Forfeited
      (81,731 )       0.10        —          —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Unvested balance, ending
   
 
129,671
 
   
$
0.07
 
   
 
—  
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
  
 
(1)
 
Weighted average grant price is presented in U.S. dollars for the year ended December 31, 2022.