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Stock Options and Performance Share Units
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Stock Options and Performance Share Units

24. Stock Options and Performance Share Units

 

Under the Company’s 2015 Equity Incentive Plan, the number of common shares reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding common shares of the Company, have a maximum term of 10 years, and vest at the discretion of the Board of Directors.

 

All equity-settled, share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different than that estimated on vesting.

 

 

Worksport Ltd.

Notes to the Consolidated Financial Statements

December 31, 2022 and 2021

 

24. Stock Options and Performance Share Units (continued)

 

Performance Share Units

 

On November 11, 2022, 700,000 performance stock units (“PSUs”) granted December 29, 2021, as described below, were modified to include new terms pertaining to the PSU vesting schedule. The PSUs vest in 5% increments according to the modified schedule that correlates with the Company’s stock price. The first 5% of the PSUs vest upon the Company’s stock price closing at $2.25. 50% will have vested at a closing price of $5.31, and 100% will have vested at a closing price of $13.76. The fair value of the PSUs was estimated to be $1,254,460. As of December 31, 2022, no PSUs have vested, and the Company recognized $35,100 in consulting expense.

 

On December 29, 2021, the Company granted 400,000 and 300,000 performance stock units (“PSUs”) to the Company’s Chief Executive Officer and a director, respectively. The PSUs were to vest in 5% increments according to a schedule that correlates with the Company’s stock price. The first 5% of the PSUs was to have vested upon the Company’s stock price closing at $3.00. 50% was to have vested at a closing price of $16.50, and 100% was to have vested at a closing price of $31.50. The fair value of the PSUs was estimated to be $1,344,570. As of December 31, 2022, no PSUs have vested, and the Company recognized $232,312 (2021 - $0) in consulting expense.

 

Stock Options

 

The Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date. During the year ended December 31, 2022, the Company granted 10,000 and 50,000 options to advisors with an exercise price of $2.19 and $2.37, respectively, expiring on February 7, 2027 and May 5, 2032, respectively. The options vested immediately upon issuance. The fair values of the options on the grant date was estimated to be $21,780 and $261,400, respectively. The Company recognized $283,180 in consulting expense during the year ended December 31, 2022.

 

During the year ended December 31, 2022, the Company granted 12,500 options to a consultant with an exercise price of $1.60 expiring on November 29, 2032. The options are earned in four equal installments on February 27, 2023, May 29, 2023, August 29, 2023 and November 27, 2023. The options shall vest one year after being earned on February 27, 2024, May 29, 2024, August 29, 2024 and November 27, 2024. The fair values of the options on the grant date was estimated to be $18,725. The Company recognized $1,642 in consulting expense during the year ended December 31, 2022.

 

During the year ended December 31, 2022, Terravis Energy, Inc., a subsidiary of the Company, granted an aggregate of 1,350,000 of Terravis Energy, Inc. stock options to its officers and directors. The stock options have an exercise price of $0.01 and will expire on April 12, 2032. The options vested immediately upon issuance. The fair value of the options on the grant date was estimated to be immaterial.

 

On July 23, 2021, the Company granted 15,000 options to a director with an exercise price of $5.50 and an expiry date of July 23, 2026. The stock options vested on January 1, 2022. The fair value of the options on grant date was estimated to be $129,480. The Company recognized $799 (2021 - $128,681) to consulting expense during the year ended December 31, 2022.

 

On August 6, 2021, the Company granted 140,000 options to directors, advisors, and officers with an exercise price of $5.50 and an expiry date of August 6, 2026. The stock options vested on January 1, 2022. The fair value of the options on grant date was estimated to be $754,189. The Company recognized $5,105 (2021 - $749,084) to consulting expense during the year ended December 31, 2022.

 

 

Worksport Ltd.

Notes to the Consolidated Financial Statements

December 31, 2022 and 2021

 

24. Stock Options and Performance Share Units (continued)

 

On September 1, 2021, the Company granted 400,000 options to a consultant with an exercise price of $5.32 and an expiry date of September 1, 2026. The options have a vesting period of 6 months from the initial grant date; 100,000 shall vest on March 1, 2022, 100,000 shall vest on September 1, 2022, 100,000 shall vest on March 1, 2023, and 100,000 shall vest on September 1, 2023. The fair value of the options on grant date was estimated to be $2,112,000. The Company recognized $1,058,917 (2021 - $352,972) to consulting expense during the year ended December 31, 2022. The Consultant has since agreed to forfeit these options; see note 27.

 

On October 7 and November 2, 2021, the Company granted to advisors 5,000 and 62,500 options with exercise prices of $5.50 and $5.24, respectively. The options will expire on October 7, 2026 and November 2, 2026, respectively. The stock options vested on January 1, 2022. The fair value of the options on grant date was estimated to be $353,230. The Company recognized $32,856 (2021 - $320,374) to consulting expense during the year ended December 31, 2021.

 

On December 29, 2021, the Company granted an aggregate of 90,000 options to members of the board with an exercise price of $2.51. The options will expire on December 29, 2026. The options have a vesting period of 1 year from the initial grant date; 10,000 vested on December 29, 2022, 10,000 shall vest on December 29, 2023, and 10,000 shall vest on December 29, 2024. The fair value of the options on grant date was estimated to be $224,280. The Company recognized $73,941 (2021 - $0) in consulting expense during the year ended December 31, 2022.

 

   December 31, 2022   December 31, 2021 
   Number of stock options   Weighted average price   Number of stock options   Weighted average price 
Balance, beginning of year   712,500   $5.00    -   $- 
Granted   72,500   $2.21    712,500   $5.00 
Balance, end of period   785,000   $4.74    712,500   $5.00 

 

   Range of Exercise prices   Outstanding   Weighted average life (years)   Weighted average exercise price   Exercisable on December 31, 2022 
Stock options   $ 1.60 – 5.50    785,000    4.17   $4.74    512,500 

 

As of December 31, 2022, Terravis Energy Inc. had the following options outstanding:

 

   December 31, 2022 
   Number of stock options   Weighted average price 
Balance, beginning of year   -   $- 
Granted   1,350,000   $0.01 
Balance, end of period   1,350,000   $0.01 

 

   Range of Exercise prices   Outstanding   Weighted average life (years)   Weighted average exercise price   Exercisable on December 31, 2022 
Stock options  $0.01    1,350,000    9.28   $0.01    1,350,000 

 

 

Worksport Ltd.

Notes to the Consolidated Financial Statements

December 31, 2022 and 2021