| EQUITY | 9. EQUITY The Company has authorized an unlimited number of both Common and Preferred Shares. As of June 30, 2022 and December 31, 2021, the Company had 7,195,529 issued and outstanding Common Shares and 70,000,000 and 0 issued outstanding Common Shares reserved for future issuance consists of the following: June 30, December 31, 2022 2021 Warrants 1,560,588 1,560,588 Series 1 Convertible Preferred Shares 1,166,667 — Convertible debt — 1,166,667 Options issued and outstanding under stock option plan 834,691 738,037 Deferred share units 1,061 1,061 Common Shares available for grant under stock option plan 185,144 281,798 Total Common Shares reserved for future issuance 3,748,151 3,748,151 The rights of the Common Shares are as follows: Voting Subject to any special voting rights or restrictions, holders of Common Shares entitled to vote shall have one vote per share. Dividends The Company’s Board of Directors may from time to time declare and authorize payment of dividends, if any, as they may deem advisable and need not give notice of such declaration to any shareholder. Subject to the rights of common shareholders, if any, holding shares with specific rights as to dividends, all dividends on Common Shares shall be declared and paid according to the number of such shares held and paid in Canadian dollars. Liquidation Rights In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of the Company’s assets for the purpose of winding up the Company’s affairs, after the payment of dividends declared but unpaid, the holders of Common Shares shall be entitled pari passu Series 1 Convertible Preferred Shares On June 17, 2022, the directors of the Company authorized the issuance of 70,000,000 Series 1 Convertible Preferred Shares (“Preferred Shares”) with the following preferences, privileges and rights: Dividends If the Company declares, pays or sets aside any dividends on shares of any other class or series of capital stock the holders of the Preferred Shares shall receive a dividend on each outstanding share of Preferred Share in an amount equal to that dividend per share of the Preferred Share as would equal the product of the dividend payable as if all shares of such series had been converted into Common Shares. Liquidation In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares shall be entitled to be paid out of the assets of the Company available for distribution to the shareholders an amount per share equal to $6.00, plus any dividends declared but not paid. If, upon any such liquidation event, the assets available for distribution to the shareholders are insufficient to pay the holders of the Preferred Shares, the holders of the Preferred Shares shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Voting The Preferred Shares do not confer any voting rights or privileges. Redemption The Preferred Shares are not subject to mandatory redemption or other redemption provisions for which the events resulting in redemption are not within the Company’s control. Optional Conversion Preferred Shares are convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable Common Shares as is determined by dividing $0.10 by the applicable conversion price in effect at the time of conversion. The Conversion Price was initially equal to $0.10 and, following the Reverse Share Split on June 28, 2022, is equal to $6.00, such that 60 Preferred Shares are convertible into 1 Common Share. Mandatory Conversion All outstanding Preferred Shares shall automatically convert into Common Shares, at the effective conversion rate upon the closing of one or more sales of equity securities resulting in at least $30 million of gross proceeds to the Company. Equity Transactions In August 2021, the Company announced the closing of a public offering of 2,096,354 Common Share units at a price of US$9.60 per unit for gross proceeds of $20,125,000. The Company incurred $3,067,604 of share issuance costs in conjunction with the public offering. Each Common Share unit (“ Unit one one The Company determined the allocation of the US$9.60 Unit issue price to the Common Shares and the one Monte Carlo As of June 30, 2022, the fair value of the warrants was calculated using the Monte Carlo model with the following parameters: risk free interest rate of 2.39%; annual volatility of 94.00%; and expected life of 4.4 years. The balance as of June 30, 2022 was $1,605,020. June 30, 2022 Balance at December 31, 2021 $ 1,871,687 Change in fair value of the warrant liability (267,742) Foreign exchange loss 1,075 Balance at June 30, 2022 $ 1,605,020 December 31, 2021 Balance at December 31, 2020 $ — Warrant liability at issuance 2,739,221 Change in fair value of the warrant liability (840,555) Foreign exchange gain (26,979) Balance at December 31, 2021 $ 1,871,687 |
