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Common Stock and Warrants | 3 Months Ended
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Mar. 31, 2018
Equity [Abstract] |
Common Stock and Warrants | 3. COMMON STOCK AND WARRANTS As of March 31, 2018, the Company’s certificate of incorporation authorized the Company to issue unlimited Class A common shares without par value. Each Class A common share is entitled to have the right to vote at any shareholder meeting on the basis of one vote per share. Each Class A share held entitles the holder to receive dividends as declared by the directors. No dividends have been declared through March 31, 2018. In the event of a liquidation, dissolution or winding-up of the Company other distribution of assets of the Company among its shareholders for the purposes of winding-up its affairs or upon a reduction of capital the holders of the Class A common shares shall, share equally, share for share, in the remaining assets and property of the Company. The Company is subject to a stockholders’ agreement, which places certain restrictions on the Company’s stock and its stockholders. These restrictions include approvals prior to sale or transfer of stock, a right of first refusal to purchase stock held by the Company and a secondary right of refusal to stockholders, right of co-sale whereby certain stockholders may be enabled to participate in a sale of other stockholders to obtain the same price, term and conditions on a pro-rata basis, rights of first offer of new security issuances to current stockholders on a pro-rata basis and certain other restrictions. On October 9, 2015, the Company entered into a $7.0 million funding commitment with A&B (HK) Company Limited (“A&B”), in the form of a convertible promissory note consisting of an initial $2.0 million note and a $5.0 million funding commitment. On October 9, 2015, the Company received the conversion notice on the promissory note and in November 2015, the Company issued 416,666 shares of common stock at a price of $4.80 per share and 208,333 warrants exercisable at $7.20 for a period of three years from the date of issuance. The shares of common stock and the warrants were issued on November 10, 2015. On December 29, 2015, the Company drew down the $5.0 million funding commitment through the issuance of 1,111,111 shares of common stock at a price of $4.50 per share and 555,556 warrants exercisable at $6.75 for a period of three years from the date of issuance. The shares of common stock and the warrants were issued on January 7, 2016. In November 2017, A&B exercised 208,333 warrants at a price of $7.20 and the Company received gross cash proceeds of $1.5 million upon the exercise. During the first quarter of 2018, A&B exercised its remaining 555,556 warrants at a price of $6.75 and the Company received gross cash proceeds of $3.8 million. On April 18, 2016, the Company closed its short form prospectus offering in Canada and a concurrent U.S. private placement (the “April 2016 Offering”) of units (the “Units”) with gross proceeds to the Company of $7.2 million through the issuance of Units at a price of CAD$5.00 per Unit. Each Unit consists of one Class A common share in the capital of the Company (a “Common Share’) and one half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each warrant entitles the holder thereof to acquire one additional Common Share at an exercise price of CAD$7.50 on or before April 18, 2019. Mackie Research Capital Corporation (the “Agent”) acted as agent and sole bookrunner in connection with the April 2016 Offering. The Company paid the Agent a cash commission of $0.3 million and has granted to the Agent compensation options exercisable to purchase 87,210 Units at an exercise price of CAD$5.00 per Unit for a period of 24 months from the closing of the April 2016 Offering. The Company incurred other cash issuance costs of $1.1 million related to this offering. On May 2, 2016, the Company closed the sale of the additional units issued pursuant to the exercise of the over-allotment option granted to the Agent in connection with the April 2016 Offering. The April 2016 Offering was made pursuant to a short form prospectus filed with the securities regulatory authorities in each of the provinces of Canada, except Québec. Pursuant to the exercise of the over-allotment option, the Company issued an additional 218,025 units at a price of CAD $5.00 per unit for additional gross proceeds to the Company of $0.9 million, bringing the total aggregate gross proceeds to the Company under the Offering to $8.1 million. Each over-allotment unit consisted of one Class A common share in the capital of the Company and one half of one Common Share purchase warrant. Each over-allotment warrant entitles the holder thereof to acquire one additional over-allotment Common Share at an exercise price of CAD $7.50 on or before April 18, 2019. In connection with the closing of the over-allotment option, the Company paid the Agent a cash commission of $0.1 million and granted to the Agent compensation options exercisable to purchase 13,081 over-allotment units at an exercise price of CAD $5.00 per unit for a period of 24 months from the closing of this Offering. The warrants issued in each of the April 18, 2016 and May 2, 2016 closings are classified within equity. The proceeds from the Offering were allocated on a relative fair value basis between the Class A common shares and the warrants issued. The compensation options are accounted for as warrants. These warrants represent additional share issuance costs and are recorded within shareholders’ deficit in the Company’s condensed consolidated balance sheets at their fair value. The fair value of the warrants granted in such offering was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
Stock price |  | CAD $5.45 |
Exercise price |  | CAD $7.50 |
Warrant term |  | 3.0 years |
Expected volatility |  |  | 83.83 | %
Risk-free interest rate |  |  | 0.60 | %
Dividend rate |  |  | 0.00 | %
The fair value of the compensation options granted during such offering was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
Stock price |  | CAD $6.80 |
Exercise price |  | CAD $5.00 |
Option term |  | 2.0 years |
Expected volatility |  |  | 126.76 | %
Risk-free interest rate |  |  | 0.61 | %
Dividend rate |  |  | 0.00 | %
On February 16, 2017, the Company completed an underwritten registered public offering and issued an aggregate of 1,311,000 shares of common stock for gross proceeds of $9.2 million. The Company incurred share issuance costs of $1.2 million in connection with this offering. On June 28, 2017, the Company completed a non-brokered private placement of 800,000 shares of common stock for gross proceeds of $5.4 million. The Company incurred approximately $9 thousand in share issuance cost related to the private placement. In December 2017, the Company completed a three-tranche non-brokered private placement (the “December 2017 financing”) of 646,016 units for gross proceeds of approximately $6.3 million. Each unit consisted of one share of Class A common stock of the Company at a price of $9.80 per share, and one share purchase warrant. Each warrant entitles the holder to acquire one additional share of Class A common stock of the Company, exercisable for a period of 36 months following the closing of the private placement at an exercise price of USD$12.25 per warrant share. The first tranche, which closed on December 22, 2017, was for 270,915 units for which the Company received gross proceeds of approximately $2.6 million. The second tranche which closed on December 28, 2017, was for 171,020 units for which the Company received approximately $1.7 million, while the third tranche which closed on December 29, 2017, was for 204,081 units for which the Company received $2.0 million. The Company paid $0.1 million in share issuance costs related to the December 2017 financing. The fair value of the warrants granted in the December 2017 financing were estimated using the Black-Scholes option pricing model with the following weighted average assumptions
|  | December 22, 2017 |  |  | December 28, 2017 |  |  | December 29, 2017 |
Stock price |  | $ | 10.60 |  |  | $ | 12.45 |  |  | $ | 12.32 |
Exercise price |  | $ | 12.25 |  |  | $ | 12.25 |  |  | $ | 12.25 |
Warrant term |  | 3.0 years |  |  | 3.0 years |  |  | 3.0 years |
Expected volatility |  |  | 60.24 | % |  |  | 60.24 | % |  |  | 60.24 | %
Risk-free interest rate |  |  | 2.01 | % |  |  | 2.00 | % |  |  | 1.98 | %
Dividend rate |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
Pursuant to the guidance of ASC 815 Derivatives and Hedging, the Company determined that certain of its warrants issued and outstanding should be accounted for as liabilities because they are not considered to be indexed to the Company’s stock due to the exercise price being denominated in a currency other than the Company’s functional currency. Consequently, the Company determined the fair value of each warrant issuance using the Black-Scholes option pricing model, with the remainder of the proceeds allocated to the common shares. The following table summarizes warrants that the Company accounts for as liabilities for the three months ended March 31, 2018 and 2017:
|  | Three Months Ended March 31, |
|  | 2018 |  |  | 2017 |
Fair value of warrants at beginning of period |  | $ | 6,941 |  |  | $ | 2,857 |
Exercise of warrants |  |  | (2,509 | ) |  |  | — |
Change in fair value of warrants during the period |  |  | (1,954 | ) |  |  | 354 |
Fair value of warrants at end of period |  | $ | 2,478 |  |  | $ | 3,211 |
The warrants are required to be re-valued at the end of each reporting period, with the change in fair value of the liability recorded as a gain or loss in the change of fair value of derivative financial instruments, included in other income (expense) in the Company’s consolidated statements of operations and comprehensive loss. The fair value of the warrants will continue to be classified as a liability until such time as they are exercised, expire or there is an amendment to the respective agreements that renders these financial instruments to be no longer classified as a liability. The fair value of warrants outstanding as of March 31, 2018 and 2017 were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:
|  | March 31, 2018 |  |  | March 31, 2017 |
Stock price |  | $ | 10.11 |  |  | $ | 7.80 |
Exercise price |  | $ | 12.72 |  |  | $ | 8.10 |
Warrant term |  | 2.29 years |  |  | 1.65 years |
Expected volatility |  |  | 63.77 | % |  |  | 94.21 | %
Risk-free interest rate |  |  | 2.26 | % |  |  | 0.75 | %
Dividend rate |  |  | 0.00 | % |  |  | 0.00 | %
The following is a summary of warrant activity during the three months ended March 31, 2018:
|  | Number of Warrants |  |  | Weighted Average Exercise Price |
|  | CAD |  |  | US |  |  | CAD$ |  |  | US$ |
Outstanding as of December 31, 2017 |  |  | 1,011,505 |  |  |  | 1,343,404 |  |  | $ | 7.38 |  |  | $ | 10.25 |
Granted |  |  | 206 |  |  |  | — |  |  |  | 7.50 |  |  |  | — |
Exercised |  |  | (618 | ) |  |  | (555,556 | ) |  |  | 5.83 |  |  |  | 6.75 |
Outstanding as of March 31, 2018 |  |  | 1,011,093 |  |  |  | 787,848 |  |  | $ | 7.38 |  |  | $ | 12.72 |
The warrants outstanding and exercisable as of March 31, 2018 were as follows:
Number of Warrants Outstanding |  |  | Exercise Price |  | Expiration Date
| 90,406 |  |  | US$15.00 |  | April 30, 2018
| 33,546 |  |  | US$15.00 |  | June 26, 2018
| 3,795 |  |  | US$10.75 |  | June 26, 2020
| 12,576 |  |  | US$15.00 |  | July 17, 2018
| 1,509 |  |  | US$10.75 |  | July 17, 2020
| 961,489 |  |  | CAD$7.50 |  | April 18, 2019
| 49,604 |  |  | CAD$5.00 |  | April 18, 2018
| 270,915 |  |  | US$12.25 |  | December 22, 2020
| 171,020 |  |  | US$12.25 |  | December 28, 2020
| 204,081 |  |  | US$12.25 |  | December 29, 2020
| 1,798,941 |  |  |  |  |

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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