Shareholders' Equity and Capital Stock
|9 Months Ended|
Sep. 30, 2019
|Shareholders' Equity and Capital Stock [Abstract]|
|Shareholders' Equity and Capital Stock||
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 is five years.
Activity with respect to stock options is summarized as follows:
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 nine months ended September 30, 2019 was less than $0.1 million.
As of September 30, 2019, outstanding stock options are as follows:
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$0.81 as of the last trading day in the period ended September 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 September 30, 2019 was 3,740,338. The total number of in-the-money stock options exercisable as of September 30, 2019 was 3,538,338
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:
As of September 30, 2019, outstanding RSUs are as follows:
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 redeem on December 15, 2019.
As of September 30, 2019, one of our officers retired. Under the terms of our RSU Plan, his 54,431 outstanding RSUs automatically vested. The RSUs will be redeemed for cash or stock at the compensation committee’s discretion in conjunction with the scheduled redemptionof those grants.
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 13). The following represents warrant activity during the period ended September 30, 2019:
As of September 30, 2019, outstanding warrants are as follows:
Share-based compensation expense
Share-based compensation expense was $0.2 million and $0.6 million for the three and nine months ended September 30, 2019 and $0.1 million and $0.7 million for the three and nine months ended September 30, 2018, respectively.
As of September 30, 2019, there was approximately $0.7 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 $0.2 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 1.7 years and 0.9 years, respectively.
We received less than $0.1 million and $0.1 million cash from the exercise of stock options for the three and nine months ended September 30, 2019 and $0.1 and $0.2 million for the three and nine months ended September 30, 2018, respectively.
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 options or RSUs granted during the nine months ended September 30, 2019. We have used assumptions for the mark to market calculations related to the warrant liability. The assumptions used for the options, RSUs and warrants granted during the nine months ended September 30, 2018 as well as the warrant valuation as of September 30, 2019 were as follows:
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.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef