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EQUITY | 6 Months Ended
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Jun. 30, 2023
EQUITY |
EQUITY |
6. | EQUITY
The Company has authorized an unlimited number of both Common and Preferred Shares, issuable in series, and 70 million Series 1 Convertible Preferred Shares. As of June 30, 2023 and December 31, 2022, the Company had 8,579,284 issued and outstanding Common Shares and 70,000,000 issued and outstanding Series 1 Convertible Preferred Shares. The Common Shares and Series 1 Convertible Preferred Shares have no par value. Common Shares reserved for future issuance consists of the following: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2022 | ​
Warrants |  | 1,773,549 |  | 1,873,622 | ​
Series 1 Convertible Preferred Shares | ​ | 1,166,667 | ​ | 1,166,667 | ​
Options issued and outstanding under stock option plan |  | 1,041,492 |  | 1,043,025 | ​
Deferred Share Units |  | 1,061 |  | 1,061 | ​
Common Shares available for grant under stock option plan |  | 397,613 |  | 396,080 | ​
Total Common Shares reserved for future issuance |  | 4,380,382 |  | 4,480,455 | ​
​ The preferences, privileges and rights of the Common Shares are as follows: Voting Subject to any special voting rights or restrictions, holders of Common Shares entitled to vote shall have one vote per share. Dividends The Company’s Board of Directors may from time to time declare and authorize payment of dividends, if any, as they may deem advisable and need not give notice of such declaration to any shareholder. Subject to the rights of common shareholders, if any, holding shares with specific rights as to dividends, all dividends on Common Shares shall be declared and paid according to the number of such shares held and paid in Canadian dollars. Liquidation Rights In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of the Company’s assets for the purpose of winding up the Company’s affairs, after the payment of dividends declared but unpaid, the holders of Common Shares shall be entitled pari passu to receive any remaining property of the Company. Series 1 Convertible Preferred Shares On June 17, 2022, the directors of the Company authorized the issuance of 70,000,000 Series 1 Convertible Preferred Shares (“Preferred Shares”) with the following preferences, privileges and rights: Dividends If the Company declares, pays or sets aside any dividends on shares of any other class or series of capital stock the holders of the Preferred Shares shall receive a dividend on each outstanding share of Preferred Share in an amount equal to that dividend per share of the Preferred Share as would equal the product of the dividend payable as if all shares of such series had been converted into Common Shares. Liquidation In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares shall be entitled to be paid out of the assets of the Company available for distribution to the shareholders an amount per share equal to $6.00, plus any dividends declared but not paid. If, upon any such liquidation event, the assets available for distribution to the shareholders are insufficient to pay the holders of the Preferred Shares, the holders of the Preferred Shares shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Voting The Preferred Shares do not confer any voting rights or privileges. Redemption The Preferred Shares are not subject to mandatory redemption or other redemption provisions for which the events resulting in redemption are not within the Company’s control. Optional Conversion Preferred Shares are convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable Common Shares as is determined by dividing $0.10 by the applicable conversion price in effect at the time of conversion. The Conversion Price was initially equal to $0.10 and, following the Reverse Share Split on June 28, 2022, is equal to $6.00, such that 60 Preferred Shares are convertible into 1 Common Share. Mandatory Conversion All outstanding Preferred Shares shall automatically convert into Common Shares, at the effective conversion rate upon the closing of one or more sales of equity securities resulting in at least $30 million of gross proceeds to the Company. As of June 30, 2023, the Company has raised approximately $7.4 million. Equity Transactions In August 2021, the Company announced the closing of a public offering of 2,096,357 Common Share units at a price of $9.60 per unit for gross proceeds of $20,125,000. Each Common Share unit consisted of one Common Share and one-quarter Common Share purchase warrant (“2021 accelerated warrants”). Each whole warrant entitles the holder thereof to purchase one Common Share at an exercise price of $12.60 per share at any time for five years. The warrants contain an acceleration clause allowing the Company to accelerate the expiry date of the warrants to 30 days following a time period during which the Common Share VWAP exceeds a TSX trading price of C$37.80 for ten consecutive trading days. The 2021 accelerated warrants are accounted for as a warrant liability since the exercise price is in US$ while the Company’s functional currency is C$. Due to the existence of the acceleration option, the Company determined it was appropriate to fair value the warrants using a Monte Carlo Simulation model (“Monte Carlo”). As of June 30, 2023, the fair value of the 2021 accelerated warrants was calculated using a Monte Carlo model with the following parameters: risk free interest rate of 4.37%; annual volatility of 85.0%; and expected life of 3.15 years. The fair value of the 2021 accelerated warrants at June 30, 2023 was approximately $599,000. In October 2022, the Company announced the closing of a private offering of 1,383,755 Common Share units at a price of $5.40 per unit for gross proceeds of $7,472,278. Each Common Share unit consisted of one Common Share and one-quarter Common Share warrant (“2022 warrants”). Each whole warrant entitles the holder thereof to purchase one Common Share at an exercise price of $7.50 per share at any time for a period of five years beginning six months from the issuance date. The 2022 warrants are accounted for as a warrant liability since the exercise price is in US$ while the Company’s functional currency is C$. The Company determined it was appropriate to fair value the warrants using Black-Scholes. ​ As of June 30, 2023, the fair value of the 2022 warrants was calculated using Black-Scholes with the following parameters: risk free interest rate of 4.26%; annual volatility of 85.0%; and expected life of 4.3 years. The fair value of the 2022 warrants as of June 30, 2023 was approximately $688,400. ​ A summary of warrant activity for the six-month period ended June 30, 2023 is as follows: ​
​ | ​ | ​ | ​
​ |  | June 30,
​ | ​ | 2023
Balance at December 31, 2022 | ​ | $ | 1,859,374
Change in fair value of the warrant liability | ​ |  | (564,549)
Foreign exchange loss | ​ |  | (7,425)
Balance at June 30, 2023 | ​ | $ | 1,287,400
​ A summary of warrant liability activity for the year ended December 31, 2022 is as follows: ​
​ | ​ | ​ | ​
​ | ​ | December 31,
​ | ​ | 2022
Balance at December 31, 2021 | ​ | $ | 1,871,687
October 2022 PIPE warrant liability at issuance | ​ |  | 1,520,401
Change in fair value of the warrant liability | ​ |  | (1,533,644)
Foreign exchange loss | ​ |  | 930
Balance at December 31, 2022 | ​ | $ | 1,859,374
​

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