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SHARE CAPITAL, WARRANTS AND OPTIONS | 9 Months Ended
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Sep. 30, 2024
Equity [Abstract] |
SHARE CAPITAL, WARRANTS AND OPTIONS | 11. SHARE CAPITAL, WARRANTS AND OPTIONS The authorized capital of the Company comprises an unlimited number of Common Shares without par value and 100,000,000 Series 1 convertible preferred shares without par value.
a) | Common Shares Issued and Outstanding
During the nine months ended September 30, 2024, 126,259 Common Shares were issued for the net exercise of 278,100 options. No Common Shares were issued from the exercise of options for the nine months ended September 30, 2023. In addition, 36,281,409 Common Shares were issued during the nine months ended September 30, 2024 as a result of the following financing transactions: Notes to the Unaudited Condensed Interim Consolidated Financial Statements For the three and nine months ended September 30, 2024 and 2023 (Expressed in Canadian dollars) On June 14, 2024, the Company closed the first tranche of a non-brokered private placement offering (the “June 2024 Financing”), pursuant to which the Company issued an aggregate 19,234,614 units of the Company (the “Units”) at a price of $0.78 per Unit (the “Issue Price”) for aggregate gross proceeds of $15,002,999. Each Unit is comprised of one Common Share and one common share purchase warrant of the Company (each, a “Warrant”). On June 21, 2024, the Company closed the second tranche of the June 2024 Financing and issued an additional 16,021,795 Units at the Issue Price for gross proceeds of $12,497,000. Each Warrant entitles the holder thereof to acquire one Common Share for a period expiring 60 months following the date of issuance (the “Expiry Date”) at a price of $1.10 per Common Share. If, at any time prior to the Expiry Date, the volume-weighted average trading price of the Common Shares is at least $2.00 per Common Share for a period of 20 trading days, the Company may, at its option, accelerate the Expiry Date with 30 days’ notice to the Warrant holders. All securities issued under the June 2024 Financing are subject to a hold period of four months plus one day from the date of issuance. In connection with the June 2024 Financing, SCP Resource Finance LP (“SCP”), in its capacity as financial advisor to the Company, was paid an advisory fee which the Company has satisfied by issuing to SCP an aggregate of 1,025,000 Units (comprised of 1,025,000 Common Shares and 1,025,000 non-transferable Warrants), and Fort Capital was paid an advisory fee of $250,000, in each case in consideration for providing certain advisory services to the Company in connection with the June 2024 Financing. The fair value of the Warrants issued under the June 2024 Financing, calculated using the Monte Carlo model, was estimated at $12,533,135. Gross proceeds raised of $27,499,999 and related issuance costs of $250,000 in cash, and the value of $1,087,755 for 1,025,000 Units granted to SCP were allocated to the Common Shares and the Warrants based on relative fair values. The key inputs used in the Monte-Carlo model were as follows: SCHEDULE OF FAIR VALUE OF WARRANTS
|  | June 14, 2024 |  |  | June 21, 2024 |
Expected dividend yield |  |  | 0 | % |  |  | 0 | %
Share price |  | $ | 0.81 |  |  | $ | 0.84 |
Expected share price volatility |  |  | 83.17 | % |  |  | 83.71 | %
Risk free interest rate |  |  | 3.23 | % |  |  | 3.30 | %
Expected life of warrant |  |  | 5 years |  |  |  | 5 years |
The volatility was determined by calculating the historical volatility of stock prices of the Company over a 5-year period using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns. During the year ended December 31, 2023, the Company completed the following financing transactions: On February 24, 2023, the Company issued 4,437,184 Common Shares at a price of $1.75 per share for gross proceeds of $7,765,072 upon the closing of a brokered private placement (the “February 2023 Financing”). In connection with the February 2023 Financing, the Company: (a) paid to the agents a cash commission of $473,383 and (b) issued to the agents 221,448 non-transferable broker warrants of the Company (the “Broker Warrants”). Each Broker Warrant is exercisable to acquire one Common Share at an exercise price of $1.75 per Common Share until February 24, 2025. The fair value of the Broker Warrants was estimated at $167,939 using the Black-Scholes Option Pricing Model. Legal fees related to the February 2023 Financing of $133,164 were also recorded as a share issuance cost. Notes to the Unaudited Condensed Interim Consolidated Financial Statements For the three and nine months ended September 30, 2024 and 2023 (Expressed in Canadian dollars) On June 28, 2023, the Company issued 14,772,000 units at a price of $1.10 per unit to EdgePoint for aggregate gross proceeds of $16,249,200 upon the closing of the 2023 Financing Transactions. Each unit comprises one Common Share and 22.5% of one whole common share purchase warrant (each a “Transferable Warrant” and together, the “Transferable Warrants”). The total whole number of Transferable Warrants issuable in the Equity Financing is 3,324,000. Each Transferable Warrant may be exercised by the holder to purchase one Common Share at an exercise price of $1.4375 per Common Share for a period of three years. The fair value of the Transferable Warrants was estimated at $1,898,349 using a proportionate allocation method based on the fair value of each component (Common Shares and warrants). The fair value of the warrants is calculated using the Black-Scholes Option Pricing Model while the fair value of the shares is determined by the share price on the closing date of the Equity Financing times the total number of shares issued. Fort Capital Partners acted as financial advisor to the Company on the equity portion of the 2023 Financing Transactions and was paid cash fees of $812,460. Legal fees related to the 2023 Financing Transactions (Note 7) totaled $736,067, of which $240,596 was recorded as share issuance cost. The fair value of the Transferable Warrants in connection with the February 2023 Financing and the 2023 Financing Transactions were calculated using the following assumptions: SCHEDULE OF FAIR VALUE OF WARRANTS IN CONNECTION WITH FINANCING TRANSACTIONS
|  | February 24, 2023 |  |  | June 28, 2023 |
Expected dividend yield |  |  | 0 | % |  |  | 0 | %
Share price |  | $ | 1.73 |  |  | $ | 1.35 |
Expected share price volatility |  |  | 77.52 | % |  |  | 92.06 | %
Risk free interest rate |  |  | 4.28 | % |  |  | 4.13 | %
Expected life of warrant |  |  | 2 years |  |  |  | 3 years |
The volatility was determined by calculating the historical volatility of stock prices of the Company over a period as the expected life of the Transferable Warrants using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns. On December 14, 2023, the company closed an equity and debt financing package of $21,642,393, comprised of a brokered private placement (the “Private Placement”) and amended Term Loan (Note 7). The Private Placement was entered into by the Company with Cormark Securities Inc. and BMO Capital Markets, as co-lead agents, and Canaccord Genuity Corp., Fort Capital Securities Ltd. and Paradigm Capital Inc. (collectively, the “Agents”). Under the Private Placement, the Company issued an aggregate of 13,133,367 Common Shares at a price of $1.20 per Common Share for aggregate gross proceeds of $15,760,040. In consideration of the services provided by the Agents under the Private Placement, the Company paid to the Agents an aggregate cash commission of $796,983. In connection with the Private Placement, EdgePoint exercised its participation right in respect of the Private Placement (the “Participation Right”) and subscribed for an aggregate of 1,265,800 Common Shares. EdgePoint was granted the Participation Right pursuant to the terms of a subscription agreement between the Company and EdgePoint dated June 28, 2023. Notes to the Unaudited Condensed Interim Consolidated Financial Statements For the three and nine months ended September 30, 2024 and 2023 (Expressed in Canadian dollars)
b) | Warrants
The following summarizes common share purchase warrant activity: SUMMARY OF COMMON SHARE PURCHASE WARRANT ACTIVITY
|  | Nine months ended September 30, 2024 |  |  | Year ended December 31, 2023 |
|  | Number Outstanding |  |  | Weighted Average Exercise Price ($) |  |  | Number Outstanding |  |  | Weighted Average Exercise Price ($) |
Outstanding, beginning of the year |  |  | 6,891,099 |  |  |  | 1.50 |  |  |  | 1,098,786 |  |  |  | 1.96 |
Issued |  |  | 36,281,409 |  |  |  | 1.10 |  |  |  | 6,595,448 |  |  |  | 1.46 |
Exercised |  |  | - |  |  |  | - |  |  |  | (100,000 | ) |  |  | (1.75 | )
Expired |  |  | (645,651 | ) |  |  | (2.05 | ) |  |  | (703,135 | ) |  |  | (1.80 | )
Outstanding, end of the period |  |  | 42,526,857 |  |  |  | 1.15 |  |  |  | 6,891,099 |  |  |  | 1.50 |
At September 30, 2024, the Company had outstanding common share purchase warrants exercisable to acquire Common Shares as follows: SCHEDULE OF DETAILS OF WARRANTS OUTSTANDING
Warrants Outstanding |  |  | Expiry Date |  | Exercise Price ($) |
| 221,448 |  |  | February 24, 2025 |  |  | 1.75 |
| 5,324,000 |  |  | June 28, 2026 |  |  | 1.44 |
| 700,000 |  |  | June 28, 2026 |  |  | 1.44 |
| 20,259,614 |  |  | June 14, 2029 |  |  | 1.10 |
| 16,021,795 |  |  | June 21, 2029 |  |  | 1.10 |
| 42,526,857 |  |  |  |  |  |  |
c) | Stock Options
The Company has a stock option plan (the “Plan”) providing the authority to grant options to directors, officers, employees and consultants enabling them to acquire up to 27,100,000 Common Shares of the Company. Under the Plan, the exercise price of each option shall not be less than the discounted market price on the grant date and as approved by the Board of Directors of the Company. The options can be granted for a maximum term of ten years. The following summarizes the option activity under the Plan: SCHEDULE OF OPTION ACTIVITY
|  | Nine months ended September 30, 2024 |  |  | Year ended December 31, 2023 |
|  | Number Outstanding |  |  | Weighted Average Exercise Price ($) |  |  | Number Outstanding |  |  | Weighted Average Exercise Price ($) |
Outstanding, beginning of the year |  |  | 13,487,921 |  |  |  | 1.39 |  |  |  | 10,407,044 |  |  |  | 1.10 |
Issued |  |  | 3,110,000 |  |  |  | 1.10 |  |  |  | 3,833,277 |  |  |  | 1.75 |
Exercised |  |  | (278,100 | ) |  |  | (0.86 | ) |  |  | (488,900 | ) |  |  | (0.49 | )
Cancelled |  |  | (150,000 | ) |  |  | (1.75 | ) |  |  | (263,500 | ) |  |  | (2.40 | )
Outstanding, end of the period |  |  | 16,169,821 |  |  |  | 1.34 |  |  |  | 13,487,921 |  |  |  | 1.39 |
Notes to the Unaudited Condensed Interim Consolidated Financial Statements For the three and nine months ended September 30, 2024 and 2023 (Expressed in Canadian dollars) During the nine months ended September 30, 2024, the Company granted an aggregate of 3,110,000 stock options to employees, directors, officers and consultants with a term of five years. The options have an exercise price of $1.10 per Common Share and vest annually in equal thirds beginning on the date of grant. During the year ended December 31, 2023, the Company granted an aggregate of 3,833,277 stock options to employees, directors, officers and consultants with a term of five years. The options have an exercise price of $1.75 per Common Share and vest annually in equal thirds beginning on the first anniversary of the date of grant. For the three and nine months ended September 30, 2024, a total of $933,619 (Q3 2023 – Nil) and $1,712,843 (YTD 2023 – Nil), respectively, was recorded as share-based payment expense and credited to additional paid-in capital. The fair value of stock options granted was determined using the following assumptions: SCHEDULE OF FAIR VALUE OF STOCK OPTION GRANTED
|  | Nine months ended September 30, 2024 |  |  | Year ended December 31, 2023 |
Expected dividend yield |  |  | 0 | % |  |  | 0 | %
Expected forfeiture rate |  |  | 0 | % |  |  | 0 | %
Expected share price volatility |  |  | 117.60 | % |  |  | 87.92 | %
Risk free interest rate |  |  | 2.91%-3.23% |  |  |  | 4.28-4.68% |
Expected life of options |  |  | 2.5-3.5 years |  |  |  | 3-4 years |
Details of options outstanding as at September 30, 2024 are as follows: SCHEDULE OF DETAILS OF OPTIONS OUTSTANDING
Options Outstanding |  |  | Options Exercisable |  |  | Expiry Date |  | Exercise Price ($) |
| 660,000 |  |  |  | 660,000 |  |  | February 24, 2025 |  |  | 0.80 |
| 240,000 |  |  |  | 240,000 |  |  | August 19, 2025 |  |  | 0.45 |
| 3,320,100 |  |  |  | 3,320,000 |  |  | January 26, 2026 |  |  | 0.39 |
| 495,000 |  |  |  | 495,000 |  |  | February 25, 2026 |  |  | 1.60 |
| 1,185,750 |  |  |  | 1,185,750 |  |  | September 29, 2026 |  |  | 0.91 |
| 998,794 |  |  |  | 998,794 |  |  | October 25, 2026 |  |  | 2.00 |
| 2,476,900 |  |  |  | 2,476,900 |  |  | January 20, 2027 |  |  | 2.40 |
| 3,683,277 |  |  |  | 1,227,759 |  |  | August 8, 2028 |  |  | 1.75 |
| 3,110,000 |  |  |  | 1,036,666 |  |  | August 14, 2029 |  |  | 1.10 |
| 16,169,821 |  |  |  | 11,640,869 |  |  |  |  |  |  |
d) | DSU Plan
The Company has a deferred share unit plan (the “DSU Plan”) that enables the Company to grant DSUs to eligible non-management directors upon approval by the Board of Directors. The DSUs credited to the account of a director may only be redeemed following the date upon which the holder ceases to be a director. Depending upon the country of residence of a director, the DSUs may be redeemed at any time prior to December 15th in the calendar year following the year in which the holder ceases to be a director and may be redeemed in as many as four installments. Upon redemption, the holder is entitled to a cash payment equal to the number of units redeemed multiplied by the five-day volume weighted average price of the Common Shares on that date. The Company may elect, in its sole discretion, to settle the value of the DSUs redeemed in Common Shares on a one-for-one basis, provided shareholder approval has been obtained on or prior to the relevant redemption date. Notes to the Unaudited Condensed Interim Consolidated Financial Statements For the three and nine months ended September 30, 2024 and 2023 (Expressed in Canadian dollars) The following is a continuity of the DSUs: SCHEDULE OF DSU GRANTED
|  | Number Outstanding |  |  | Market Price (1) ($) |  |  | Fair Value ($) |
DSUs outstanding at December 31, 2022 |  |  | 200,000 |  |  |  | 1.49 |  |  |  | 298,000 |
Granted |  |  | 600,951 |  |  |  | 1.33 |  |  |  | 798,122 |
Redeemed |  |  | (69,976 | ) |  |  | 1.19 |  |  |  | (83,527 | )
Fair value adjustment |  |  | - |  |  |  |  |  |  |  | (128,114 | )
DSUs outstanding at December 31, 2023 |  |  | 730,975 |  |  |  | 1.21 |  |  |  | 884,481 |
Granted |  |  | 1,116,269 |  |  |  | 0.79 |  |  |  | 882,410 |
Fair value adjustment |  |  | - |  |  |  |  |  |  |  | (473,820 | )
DSUs outstanding at September 30, 2024 |  |  | 1,847,244 |  |  |  | 0.70 |  |  |  | 1,293,071 |
Note:
(1) | Under the DSU Plan, Market Price is the volume weighted average price on the TSXV for the last five trading days immediately preceding the grant date or redemption date.
During the three and nine months ended September 30, 2024, the DSU compensation, net of fair value adjustments, was $164,193 (Q3 2023 - $252,119) and $408,590 (YTD 2023 - $558,524), respectively, and was recorded as share based compensation expense. The DSUs are classified as a derivative financial liability measured at fair value, with changes in fair value recorded in profit or loss. The fair value of the DSUs was determined by the volume weighted average price on the TSXV for the last five trading days of each reporting period. As at September 30, 2024, the Company reassessed the fair value of the DSUs at $1,293,071 and recorded the amount as a DSU liability (December 31, 2023 - $884,481).

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