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Stock Options and Performance Share Units
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stock Options and Performance Share Units

17. Stock Options and Performance Share Units

 

Under the Company’s 2015, 2021 and 2022 Equity Incentive Plans, the number of shares of common stock reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding shares of common stock 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.

 

Performance Share Units

 

On May 1, 2023, the Company and Steven Rossi reached an agreement to modify 1,600,000 restricted stock units and 400,000 performance stock units issued on November 11, 2022 and December 29, 2021, respectively, and replace them with 2,000,000 stock options, as described below.

 

 

On November 11, 2022, 700,000 performance stock units (“PSUs”) granted on 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 June 30, 2023, no PSUs have vested, and the Company recognized $101,551 (2022 - $0) in consulting expenses.

 

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 June 30, 2023, no PSUs have vested, and the Company recognized $0 (2022 - $134,457) in consulting expenses.

 

Stock Options

 

The Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date.

 

During the six months ended June 30, 2023, the Company issued 2,000,000 stock options  to Steven Rossi. The stock options have an exercise price of $1.74 and an expiration date of May 1, 2033. The options shall vest in increments of 10% for each dollar that the Company’s stock price increases between $2.00 and $11.00, as measured using the volume weighted average of the Company’s common stock for ten consecutive trading days. The fair value of the options on the grant date was estimated to be $2,821,572. The Company recognized $324,481 in wages and salary during the six months ended June 30, 2023.

 

During the six months ended June 30, 2023, the Company issued 75,000 stock options to an employee with an exercise price of $2.43 and expiring on May 18, 2033. The options shall vest in two installments, 25,000 on May 18, 2024 and 50,000 on August 1, 2024. The fair value of the options on the grant date was estimated to be $182,025. The Company recognized $7,128 in wages and salary expenses during the six months ended June 30, 2023.

 

During the six months ended June 30, 2023, the Company issued 65,000 stock options to employees and a consultant with an exercise price of $1.53 and expiring on March 14, 2033. The options shall vest in two equal installments on March 14, 2024, and 2025. The fair value of the options on the grant date was estimated to be $98,670. During the six months ended June 30, 2023, 15,000 stock options were cancelled upon the departure of employees. The Company recognized $14,578 in wages and salary and consulting expenses during the six months ended June 30, 2023.

 

During the six months ended June 30, 2023, the Company issued 85,106 stock options to an employee with an exercise price of $1.53 and expiring on March 14, 2033. The options shall vest in two installments; a) one fiscal quarter in which the Company generates $3,600,000 in sales with at least 20% unit margin and b) one fiscal quarter in which the Company generates $5,400,000 in sales with at least 30% unit margin. The fair value of the options on the grant date was estimated to be $129,191. The Company recognized $30,541 in wages and salary expenses during the six months ended June 30, 2023.

 

During the six months ended June 30, 2023, the Company issued 300,000 stock options to a consultant with an exercise price of $1.66 and expiring on January 30, 2028. The options shall vest in three equal installments on January 30, 2023, March 1, 2023, and September 1, 2023. The fair value of the options on the grant date was estimated to be $486,600. The Company recognized $343,349 in consulting expenses during the six months ended June 30, 2023.

 

During the six months ended June 30, 2023, the Company issued 360,000 stock options to directors with an exercise price of $1.66 and expiring on January 30, 2033. The options shall vest in six equal installments on January 30, 2023, July 31, 2023, January 30, 2024, July 30, 2024, January 30, 2025, and July 30, 2025. The fair value of the options on the grant date was estimated to be $592,560. The Company recognized $98,056 in consulting expenses during the six months ended June 30, 2023.

 

 

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 were estimated to be $21,780 and $261,400, respectively. The Company recognized $0 (2022 - $283,180) in consulting expenses during the six months ended June 30, 2023.

 

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 value of the options on the grant date was estimated to be $18,725. The Company recognized $9,439 (2022 - $0) in consulting expenses during the six months ended June 30, 2023.

 

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 the grant date was estimated to be $129,480. The Company recognized $0 (2022 - $799) to consulting expenses during the six months ended June 30, 2023.

 

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 the grant date was estimated to be $754,189. The Company recognized $0 (2022 - $5,096) to consulting expenses during the six months ended June 30, 2023.

 

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. 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 the grant date was estimated to be $2,112,000. The Company recognized $87,514 (2022 - $528,064) to consulting expenses during the six months ended June 30, 2023. During the six months ended June 30, 2023, the Company and the stock options holder reached an agreement to cancel all 400,000 stock options in exchange for extending the exercisable period of 300,000 warrants to December 31, 2024.

 

On October 7 and November 2, 2021, the Company granted 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 fully vested on January 1, 2022. The fair value of the options on the grant date was estimated to be $353,230. The Company recognized $0 (2022 - $32,856) to consulting expenses during the six months ended June 30, 2023.

 

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. For each of these three option grants, 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 the grant date was estimated to be $224,280. The Company recognized $37,482 (2022 - $37,482) in consulting expenses during the six months ended June 30, 2023.

 

   June 30, 2023   December 31, 2022 
   Number of stock options   Weighted average price   Number of stock options   Weighted average price 
Balance, beginning of year   785,000   $4.74    712,500   $5.00 
Granted   2,885,106   $1.50    72,500   $2.21 
Cancelled   (415,000)  $(5.18)   -   $- 
Balance, end of period   3,255,106   $1.81    785,000   $4.74 

 

   Range of Exercise prices   Outstanding   Weighted average life (years)   Weighted average exercise price   Exercisable on June 30, 2023 
Stock options   $ 1.53-5.50        3,255,106    8.67   $1.81    797,500 

  

 

As of June 30, 2023 and December 31, 2022, Terravis Energy Inc. has the following options outstanding:

 

   June 30, 2023   December 31, 2022 
   Number of stock options   Weighted average price   Number of stock options   Weighted average price 
Balance, beginning of year   1,350,000   $0.01    -   $- 
Granted   -   $-    1,350,000   $0.01 
Balance, end of period   1,350,000   $0.01    1,350,000   $0.01 

 

   Range of Exercise prices   Outstanding   Weighted average life (years)   Weighted average exercise price   Exercisable on June 30, 2023 
Stock options  $0.01    1,350,000    9.03   $0.01    1,350,000