Capital Stock

6 Months Ended

Jun. 30, 2022

Stockholders' Equity Note [Abstract]

Capital Stock

10. Capital stock

Common stock

Authorized: 1,000,000,000 common shares, $0.001 par value.

All references to numbers of common shares and amounts in the condensed consolidated interim statements of changes in stockholder’s equity and in the notes to the condensed consolidated interim financial statements have been retroactively restated to reflect as if the Torchlight RTO had taken place as of the beginning of the earliest period presented.

•The numbers of common shares issued pre-Torchlight RTO have been multiplied by the 1.845 Torchlight conversion ratio.

•The amounts of common shares issued pre-Torchlight RTO were calculated by multiplying the number of shares by 0.001 and the 1.845 Torchlight conversion ratio and the difference were recognized in additional paid in capital.

During the six months ended June 30, 2022, 1,988,617 warrants were exercised to purchase 1,623,700 common shares where most warrant holders elected cashless exercise and consequently, the difference of 364,929 shares was withheld to cover the exercise cost.

During the six months ended June 30, 2022, 1,132,277 stock options were exercised to purchase an equal number of common shares.

During the six months ended June 30, 2022, we issued 9,677,419 common stock as consideration in relation to the PAL acquisition and 26,766,265 as consideration in relation to the Optodot acquisition (note 3).

Registered direct offering

On June 24, 2022, we entered into a securities purchase agreement, as amended and restated on June 27, 2022, with certain institutional investors (the “SPA”) for the purchase and sale in a registered direct offering of 37,037,039 shares of our common stock at a purchase price of $1.35 per share and warrants to purchase 37,037,039 shares at an exercise price of $1.75 per share. This resulted in gross proceeds from the offering of $50 million and net proceeds of $46.3 million.

The gross proceeds were allocated between common stock and accompanying warrants based on their relative fair values. The fair value of common stock was calculated based on the closing share price on June 27, 2022 of $1.15. The fair value of the warrants was estimated using the Black-Scholes option pricing model. Accordingly, we have allocated $27.9 million as the fair value of common stock and $18.5 million as the fair value of warrants.

The warrants are exercisable six months after the date of issuance, expire five and a half years from the date of issuance and have an exercise price of $1.75 per share of common stock. We have evaluated the warrants as either equity-classified or liability-classified instruments based on an assessment of the warrants’ specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. We have concluded that the warrants are considered indexed to our common shares and as such they have been classified as equity.

Warrants

The following table summarizes the changes in our warrants:

	Six months ended
	June 30, 2022
	Number of
	warrants (#)			Amount
Outstanding, December 31, 2021		5,264,959		$	6,957,974
Issued		37,337,039			18,714,297
Exercised		(1,988,617	)		(251,860	)
Expired		(692,462	)		(101,211	)
Outstanding, June 30, 2022		39,920,919		$	25,319,200

On June 27, 2022, we issued 37,037,039 warrants exercisable six months after the date of issuance, expire five and a half years from the date of issuance and have an exercise price of $1.75 per share of common stock as part of the registered direct offering.

On May 10, 2022, our Board of Directors approved a grant to a non-employee of 300,000 fully vested warrants, which have a 5-year term. The warrants have an exercise price of $1.18 per share, based on the closing price of our common stock on May 10, 2022.

Correction of prior period immaterial error

During Q3 2021, we determined that an error had been made in the prior period condensed consolidated interim financial statements for the period ended June 30, 2021. Previously granted warrants issued to an external consultant should have resulted in an expense being recorded (with the corresponding offset being recorded to Additional Paid-in Capital) in the amount of $701,910 in the condensed consolidated interim financial statements for the three and six months ended June 30, 2021.

We have concluded that the error is immaterial to the previously issued condensed consolidated interim financial statements for the three and six months ended June 30, 2021, and have disclosed below the impact of the error to associated financial statement captions:

•General & Administrative expense should have been $3,847,278 and $6,440,162 for the three and six months ended June 30, 2021 (previously reported as $3,145,368 and $5,738,252 respectively);

•Net loss should have been $5,883,303 and $50,041,822 for the three and six months ended June 30, 2021 (previously reported as $5,181,393 and $49,339,912 respectively); and

•Additional Paid-in Capital should have been $454,961,102 (previously reported as $454,259,192).

The fair value of warrants issued were estimated using the Black-Scholes option pricing model and have the following inputs and assumptions:

	Six months ended
	June 30, 2022
Weighted average Grant date fair value		0.53
Weighted average expected volatility	89%
Weighted average risk-free interest rate	3.18%
Weighted average expected life of the warrants		5.00