Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Equity and Capital Stock

v3.19.2
Shareholders' Equity and Capital Stock
6 Months Ended
Jun. 30, 2019
Shareholders' Equity and Capital Stock [Abstract]  
Shareholders' Equity and Capital Stock

13.Shareholders’ Equity and Capital Stock

 

Stock options

 

In 2005, the Company’s Board of Directors approved the adoption of the Company's stock option plan (the “Option Plan”). The Option Plan was most recently approved by the shareholders on May 18, 2017. Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of the Option Plan grants of options will vest over a three-year period: 33.3% on the first anniversary, 33.3% on the second anniversary, and 33.4% on the third anniversary of the grant. The term of options remains five years.

 

Activity with respect to stock options is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

average

 

 

 

Options

 

exercise price

 

 

 

#

 

$

 

 

 

 

 

 

Balance, December 31, 2018

 

 

9,731,612

 

0.64

 

 

 

 

 

 

Exercised

 

 

(206,160)

 

0.65

Expired

 

 

(100,000)

 

1.26

 

 

 

 

 

 

Outstanding, June 30, 2019

 

 

9,425,452

 

0.66

 

The exercise price of a new grant is set at the closing price for the shares on the Toronto Stock Exchange (TSX) on the trading day immediately preceding the grant date so there is no intrinsic value as of the date of grant. The fair value of options vested during the six months ended June 30, 2019 was less than  $0.1 million.

 

As of June 30, 2019, outstanding stock options are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

Options exercisable

 

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

average

 

 

 

 

 

average

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

intrinsic

 

Number

 

contractual

 

intrinsic

 

 

price

 

of options

 

life (years)

 

value

 

of options

 

life (years)

 

value

 

Expiry

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.75

 

724,274

 

0.5

 

100

 

724,274

 

0.5

 

100

 

12-Dec-19

0.84

 

200,000

 

0.9

 

12

 

200,000

 

0.9

 

12

 

29-May-20

0.63

 

538,912

 

1.1

 

130

 

538,912

 

1.1

 

130

 

17-Aug-20

0.59

 

928,408

 

1.5

 

255

 

928,408

 

1.5

 

255

 

11-Dec-20

0.54

 

2,411,930

 

2.5

 

767

 

2,411,930

 

2.5

 

767

 

16-Dec-21

0.75

 

300,000

 

2.7

 

41

 

300,000

 

2.7

 

41

 

02-Mar-22

0.54

 

200,000

 

3.2

 

64

 

66,000

 

3.2

 

21

 

07-Sep-22

0.66

 

1,944,916

 

3.5

 

418

 

654,608

 

3.5

 

141

 

15-Dec-22

0.56

 

200,000

 

3.7

 

60

 

66,000

 

3.7

 

20

 

30-Mar-23

0.68

 

1,057,654

 

4.1

 

209

 

8,852

 

4.1

 

 2

 

20-Aug-23

0.67

 

919,358

 

4.5

 

190

 

8,277

 

4.5

 

 2

 

14-Dec-23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.66

 

9,425,452

 

2.7

 

2,246

 

5,907,261

 

2.0

 

1,491

 

 

 

The aggregate intrinsic value of the options in the preceding table represents the total pre-tax intrinsic value for stock options with an exercise price less than the Company’s TSX closing stock price of Cdn$1.24 as of the last trading day in the period ended June 30, 2019, that would have been received by the option holders had they exercised their options as of that date. The total number of in-the-money stock options outstanding as of June 30, 2019 was 9,425,452. The total number of in-the-money stock options exercisable as of June 30, 2019 was 5,907,261.

 

We elect to estimate the number of awards expected to vest in lieu of accounting for forfeitures when they occur.   

 

Restricted share units

 

On June 24, 2010, the Company’s shareholders approved the adoption of the Company’s restricted share unit plan (the “RSU Plan”).  The RSU Plan was approved by our shareholders most recently on May 2, 2019.

 

Eligible participants under the RSU Plan include directors and employees of the Company. RSUs in a grant redeem on the second anniversary of the grant.  Upon RSU vesting, the holder of an RSU will receive one common share, for no additional consideration, for each RSU held.

 

Activity with respect to RSUs is summarized as follows:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

 

 

 

of

 

average grant

 

 

 

RSUs

 

date fair value

 

 

 

 

 

 

Unvested, December 31, 2018

 

 

955,496

 

0.67

 

 

 

 

 

 

Vested

 

 

(9,053)

 

0.68

 

 

 

 

 

 

Unvested, June 30, 2019

 

 

946,443

 

0.70

 

As of June 30, 2019, outstanding RSUs are as follows:

 

 

 

 

 

 

 

 

 

 

Number of

 

Remaining

 

Aggregate

 

 

unvested

 

life

 

intrinsic

Grant date

 

RSUs

 

(years)

 

value

 

 

 

 

 

 

$

December 15, 2017

 

481,456

 

0.46

 

438

August 20, 2018

 

237,210

 

1.15

 

216

December 14, 2018

 

227,777

 

1.46

 

207

 

 

 

 

 

 

 

 

 

946,443

 

0.86

 

861

 

As of March 30, 2018, one of our directors retired.  Under the terms of our RSU Plan, his 62,000 outstanding RSUs automatically vested. On December 17, 2018, 32,000 RSUs were redeemed for Common Shares.  The balance will be redeemed for cash or stock at the compensation committee’s discretion when the RSUs in that grant vest on December 15, 2019.   

 

Warrants

 

On September 25, 2018, the Company issued 13,062,878 warrants to purchase 6,531,439 of our Common Shares at $1.00 per full share (see note 12). The following represents warrant activity during the period ended June 30, 2019:

 

 

 

 

 

 

 

 

 

Number

Number of

 

 

 

 

of

shares to be issued

 

Per share

 

 

warrants

upon exercise

 

exercise price

 

 

 

 

 

$

Outstanding, December 31, 2018

 

13,062,878

6,531,439

 

1.00

 

 

 

 

 

 

Outstanding, June 30, 2019

 

13,062,878

6,531,439

 

1.00

 

 

As of June 30, 2019, outstanding warrants are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

Intrinsic

 

 

price

 

of warrants

 

life (years)

 

Value

 

Expiry

$

 

 

 

 

 

$

 

 

1.00

 

13,062,878

 

2.2

 

 -

 

25-Sep-21

 

Share-based compensation expense

 

Share-based compensation expense was $0.2 million and $0.4 million for the three and six months ended June 30, 2019 and $0.4 million and $0.6 million for the three and six months ended June 30, 2018, respectively.

 

As of June 30, 2019, there was approximately $0.9 million of total unrecognized compensation expense (net of estimated pre-vesting forfeitures) related to unvested share-based compensation arrangements granted under the Option Plan and $0.4 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 1.9 years and 1.1 years, respectively.

 

We received $0.1 million cash from the exercise of stock options for the three and six months ended June 30, 2019 and $0.1 million for the three and six months ended June 30, 2018.

 

Fair value calculations

 

The initial fair value of options and RSUs granted is determined using the Black-Scholes option pricing model for options and the intrinsic pricing model for RSUs. There were no RSUs granted in either the six months ended June 30, 2019 or the six months ended June 30, 2018. There were no options granted during the six months ended June 30, 2019. The assumptions used for the options granted during the six months ended June 30, 2018 were as follows:

 

 

 

 

 

 

Six months ended June 30,

 

2018

Expected option life (years)

3.74

Expected volatility

54.59%

Risk-free interest rate

1.90%

Expected dividend rate

0%

Forfeiture rate

6.0%

 

 

 

The Company estimates expected volatility using daily historical trading data of the Company’s Common Shares, because this is recognized as a valid method used to predict future volatility. The risk-free interest rates are determined by reference to Canadian Treasury Note constant maturities that approximate the expected option term. The Company has never paid dividends and currently has no plans to do so.

 

Share-based compensation expense is recognized net of estimated pre-vesting forfeitures, which results in recognition of expense on options that are ultimately expected to vest over the expected option term. Forfeitures were estimated using actual historical forfeiture experience.