| Share capital and reserves | 9. Share capital and reserves
a) Authorized and issued Unlimited common shares –
12,989,687 issued at December 31, 2021 (2020 - 6,914,758).
b) Issuances Year ended December 31, 2021: On
February 9, 2021, the Company closed a private placement with the issuance of 2,085,687 units at a subscription price of $2.935
per unit for gross proceeds of $6,121,572. Each unit comprised one common share and one common share purchase warrant. Each warrant
entitles the holder, on exercise, to purchase one additional common share in the capital of the Company, at a price of $4.70 for
a period of five years from the issuance of the units, provided, however, that, if, at any time following the expiry of the statutory
four month hold period, the closing price of the common shares is greater than $14.09 for 10 or more consecutive trading days,
the warrants will be accelerated upon notice and the warrants will expire on the 30th calendar day following the date of such notice.
In addition, the Warrants will also be subject to typical anti-dilution provisions and a ratchet provision that provides for an
adjustment in the exercise price should the Company issue or sell common shares or securities convertible into common shares at
a price (or conversion price, as applicable) less than the exercise price such that the exercise price shall be amended to match
such lower price. The
proceeds were allocated $5,358,000 to the derivative warrant liability (Note 9(g)) and the residual $763,572 was allocated to common
shares In
connection with the private placement, the Company paid $171,347 in cash commissions, incurred additional issuance costs of $7,897
and issued 58,288 finders’ warrants with a fair value of $150,000 (Note 9(e)). Each finders’ warrant is exercisable
into one common share at a price of $4.70 and having the same expiry, acceleration and anti-dilution provisions as the warrants
included in the private placement. The costs were allocated between common shares and derivative warrant liability in proportion
to their initial carrying amounts with $41,068 recorded as a reduction of equity and $287,946 recorded as transaction costs on
derivative warrant liability. On
October 15, 2021, the Company listed its common shares on the Nasdaq Stock Market (“Nasdaq”) under the symbol “XRTX”
and closed an underwritten public offering of 2,906,000 units (the “US IPO Offering”), with each unit consisting of
one common share, no par value, and one warrant to purchase one common share at a public offering price of US$4.13 per Unit, for
gross proceeds of $14,851,850 (US$12,001,780). The warrants have an initial exercise price of US$4.77 per share and have a term
of five years. In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 435,900 common
shares and/or warrants to purchase up to an additional 435,900 common shares at the US IPO Offering price less the underwriting
discounts. On October 15, 2021, the underwriter exercised its option to purchase additional warrants to purchase up to an additional
435,900 common shares. On
November 8, 2021, the underwriter partially exercised its 45-day option for 355,000 common shares at US$4.13 per share, resulting
in additional gross proceeds to the Company of $1,825,159 (US$1,466,150) which increased the US IPO Offering to 3,261,000 common
shares and 3,341,900 warrants. The
proceeds were allocated $7,425,000 to the derivative warrant liability (Note 9(g)) and the residual $7,426,850 was allocated to
common shares. In
connection with the US IPO Offering, the Company incurred issuance costs of $2,300,549 and issued 145,300 finders’ warrants
with a fair value of $371,251. The costs were allocated between common shares and derivative warrant liability in proportion to
their initial carrying amounts with $1,336,066 recorded as a reduction of equity and $1,335,734 recorded as transaction costs on
derivative warrant liability. The
Company issued 51,106 common shares for the exercise of options in the amount of $84,000. A value of $65,172 was transferred from
reserves to share capital as a result. The
Company issued 651,583 common shares for the exercise of warrants in the amount of $2,430,083. A value of $32,387 was transferred
from reserves to share capital and a value of $425,900 was transferred from the derivative warrant liability to share capital as
a result. Pursuant to the terms of a consulting
agreement, the Company issued 25,553 common shares with a fair value of $75,000 in exchange for services. Year ended December 31, 2020: On February 28, 2020, the Company
closed a private placement, through the issuance of 1,555,314 units for gross proceeds of $2,556,320, of which $900,000 was received
in cash, $50,000 represented the conversion of certain outstanding payables into units and $1,606,320 (US$1,200,000 at the then
current exchange ratio) was issued to Prevail Partners LLC, who have agreed to provide certain services to the Company in exchange
for units. The 977,318 units issued to
Prevail Partners LLC were measured by reference to their fair value on the issuance date, which is equal to $1.64 per unit in the
concurrent private placement. Each unit comprised one common
share and one common share purchase warrant exercisable at $2.94 for a period of one year from the issuance of the units. However,
if at any time following the expiry of the statutory four-month hold period, the closing price of the common shares is greater
than $4.11 for 10 or more consecutive trading days, the Company may notify the holder, by way of a news release, that the warrants
will expire on the 20 th The Company paid $59,434 in
cash share issuance costs and issued 11,896 finders’ warrant units valued at $11,066, with each finder’s warrant unit
being exercisable at $1.64 for a period of 12 months from the closing of the private placement. Each finders’ warrant unit
comprised one common share and one common share purchase warrant exercisable at $2.94 for a period of one year from the closing
date of the private placement. The warrants are subject to the same acceleration provision as the warrants issued in the private
placement. As at December 31, 2019, $70,000
of the cash proceeds were received and held in trust by the Company’s lawyer and recorded as share subscriptions received
in advance. The amount was reclassified to share capital during the year ended December 31, 2020, upon closing of the private placement.
c) Escrow Shares Following the closing of the
RTO, the Company had an aggregate of 441,946 common shares held in escrow pursuant to an escrow agreement dated January 9, 2018.
The shares are subject to a 10% release on January 25, 2018, with the remaining escrowed securities being released in 15% tranches
every 6 months thereafter. As at December 31, 2021, there were nil shares (2020 - 66,292) remaining in escrow.
9. Share capital and reserves (continued)
d) Common Share Purchase Warrants A summary of the changes in
warrants for the years ended December 31, 2021 and 2020 is presented below:
Number of Exercise
Balance, December 31, 2019 341,119 $ 9.39
Granted – February 28, 2020 1,555,317 $ 2.94
Expired – January 10, 2020 (341,119 ) $ 9.39
Balance, December 31, 2020 1,555,317 $ 2.94
Granted – February 9, 2021 2,085,687 $ 4.70
Granted – October 15, 2021 3,341,900 *US$4.77
Exercised (640,012 ) $ 3.34
Expired (1,215,816 ) $ 2.94
Balance, December 31, 2021 5,127,076 $ 5.58
*$6.05 as at December 31, 2021 The weighted average contractual
remaining life of the unexercised warrants was 4.56 0.16 The following table summarizes
information on warrants outstanding at December 31, 2021:
Exercise Price Number Expiry
date Average Remaining
$ 4.70 1,785,176 February 9, 2026 4.11
US$ 4.77 3,341,900 October 15, 2026 4.79
e) Finders’ Warrants A summary of the changes in
finders’ warrants for the years ended December 31, 2021 and 2020 is presented below:
Number of Exercise
Balance, December 31, 2019 — —
Granted – February 28, 2020 – finders’ warrants 11,896 $ 1.64
Balance, December 31, 2020 11,896 $ 1.64
Granted – February 9, 2021 – finders’ warrants 58,288 $ 4.70
Granted – October 15, 2021 – finders’ warrants 145,300 US$4.77
Exercised (11,571 ) $ 1.87
Expired (1,193 ) $ 1.64
Balance, December 31, 2021 202,720 $ 5.66 *$6.05 as at December 31, 2021 The weighted average contractual
remaining life of the unexercised finders’ warrant was 4.60 years (2020 - 0.16 years). The following table summarizes
information on finders’ warrants outstanding at December 31, 2021:
Exercise Price Number Expiry
date Average Remaining
$ 4.70 57,420 February 9, 2026 4.11
US$ 4.77 145,300 October 15, 2026 4.79 The fair value of finders’
warrant units issued on February 28, 2020 was estimated at $ 11,066 1.0 99.76 The fair value of the finders’
warrants issued on February 9, 2021 was estimated at $ 150,000 5.0 100 The fair value of the finders’
warrants issued on October 15, 2021 was estimated at $ 371,251 5.0 100
f) Stock Options The Company has an incentive
Stock Option Plan (the “Plan”) for directors, officers, employees and consultants, under which the Company may issue
stock options to purchase common shares of the Company provided that the amount of incentive stock options which may be granted
and outstanding under the Plan at any time shall not exceed 10% of the then issued and outstanding common shares of the Company. The fair value of stock options
granted was estimated on the date of grant using the Black-Scholes model with the following data and assumptions:
2021 2020
Dividend yield Nil Nil
Annualized volatility 100 151.64 152.24
Risk-free interest rate 0.36 1.19 0.33
Expected life 5 5 The risk-free interest rate
is the yield on zero-coupon Canadian Treasury Bills of a term consistent with the assumed option life. The expected life of the
option is the average expected period to exercise. Volatility is based on available historical volatility of the Company’s
share price or historical share price of comparable companies, excluding specific time frames in which volatility was affected
by specific transactions that are not considered to be indicative of the Company’s expected share price volatility. The Company
has not declared dividends in the past. The share-based payment expense
recognized was $ 499,158 293,443 26,317 A summary of the changes in
stock options for the years ended December 31, 2021 and 2020 is presented below:
Number of Exercise
Balance, December 31, 2019 183,124 $ 5.87
Granted – June 23, 2020 268,307 $ 1.64
Granted – August 25, 2020 12,776 $ 2.82
Balance, December 31, 2020 464,207 $ 3.29
Granted – January 11, 2021 59,624 $ 3.29
Granted – May 12, 2021 42,588 $ 1.88
Granted – June 16, 2021 21,294 $ 1.76
Granted – July 14, 2021 63,882 $ 2.41
Granted – December 21, 2021 86,495 $ 2.54
Exercised (51,106 ) $ 1.64
Expired (80,917 ) $ 3.40
Balance, December 31, 2021 606,067 $ 3.10
Vested and exercisable, December 31, 2021 482,683 $ 3.38 The weighted average contractual
remaining life of the unexercised options was 3.42 3.64 The following table summarizes
information on stock options outstanding at December 31, 2021:
Exercise Price Number Outstanding Number Exercisable Average remaining Contractual Life
$5.87 127,760 127,760 1.21 years
$5.87 21,294 21,294 1.85 years
$1.64 170,354 114,991 3.48 years
$2.82 12,776 12,776 3.66 years
$3.29 59,624 59,624 4.03 years
$1.88 42,588 27,801 4.36 years
$1.76 21,294 21,294 4.46 years
$2.41 63,882 10,648 4.54 years
$2.54 86,495 86,495 4.98 years
606,067 482,683
g) Derivative Warrant Liability Private
Placement Warrants During the year ended December
31, 2021, the Company issued 2,085,687 The warrants issued as part
of the unit contain a ratchet provision that provides for an adjustment in the exercise price if shares or securities convertible
to shares are sold at a price lower than the exercise price. Therefore, since the warrants (not including compensation warrants)
may be settled other than by the exchange of a fixed amount of cash, they meet the definition of a derivative financial liability. The fair value of the warrants
was estimated at $ 5,358,000 3.64 5.0 100 During
the year ended December 31, 2021, 640,012 of these warrants were exercised and a value of $ 425,900 4,460,000 During the year ended December
31, 2021, the Company issued warrants for the Company’s common shares pursuant to the US IPO Offering discussed above. These
warrants were recorded as a derivative financial liability as the exercise price of the units is denominated in a currency other
than the functional currency of the Company and therefore may be settled other than by the exchange of a fixed amount of cash.
The fair value of the warrants was estimated at $ 7,425,000 4.77 5.0 100 1.50 0 The balance of the derivative warrant
liabilities (level 3) is as follows:
December 31 2021
Balance at December 31, 2019 and 2020 $ —
Warrants issued February 9, 2021 5,358,000
Warrants exercised (425,900 )
Fair value adjustment (472,100 )
Fair value reclassified to reserves (4,460,000 )
Warrants issued October 15, 2021 7,425,000
Fair value adjustment (2,827,668 )
Balance at December 31, 2021 $ 4,597,332 Significant assumptions used
in determining the fair value of the derivative warrant liabilities at December 31, 2021 are as follows:
December 31, 2021
Share price $ 2.05
Risk-free interest rate 1.23 %
Dividend yield 0 %
Expected volatility 100 %
Remaining term (in years) 4.8 The fair value is classified
as level 3 as expected volatility is determined using historical volatility and is therefore not an observable input.
h) Share Consolidation On September 23, 2021, the Company
completed a share consolidation of the common shares on a basis of 1 post-consolidation common share for 11.74 pre-consolidation
common shares (the “Consolidation”). As required by IAS 33, Earnings per Share, all information with respect to the
number of common shares and issuance prices for time periods prior to the Consolidation have been restated to reflect the Consolidation. |
