10. Capped Call Derivative

​

The Capped Call is expected generally to reduce the potential dilution to the common shares upon any conversion of Convertible Notes and/or offset any potential cash payments that the Company is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call.

​

The Company’s functional currency is the Canadian dollar and because the Capped Call’s floor and ceiling exercise prices are priced in U.S. dollars, relative to the Company’s functional currency, US GAAP requires the Capped Call to be accounted for as a stand-alone derivative instrument (the "Capped Call Derivative"). The Capped Call Derivative matures in January 2031, and is recorded at fair value on the Company’s consolidated balance sheets and mark-to-market changes in fair value are recorded in earnings.  Using Level 2 inputs of the fair value hierarchy under US GAAP, the Capped Call Derivative is measured and recorded at fair value using the Black-Scholes model described below as there is no active market for the Capped Call.

​

The fair value of the Capped Call Derivative asset was $16.3 million and $15.1 million as of March 31, 2026 and December 31, 2025, respectively, which resulted in a $1.2 million mark-to-market gain for the three months ended March 31, 2026.  The Capped Call Derivative fair value was determined using a fair value model with the following assumptions:

​

​