Warrant Liabilities

12 Months Ended

Dec. 31, 2021

NOTE 15 - WARRANT LIABILITIES



	December 31, 2021		December 31, 2020

Derivative warrant liabilities - 2021 Debentures (a)	$	1,868,541	$	–

Derivative warrant liabilities - USD equity financing (b)		6,106,596		–

Warrant liability related to business acquisition (c)		709,835		710,924

Other warrant liability (c)		195,066		–

Total, all current	$	8,880,038	$	710,924

Derivative warrant liabilities

The Company issued warrants in conjunction with debt and equity transactions. Certain of these warrants are classified as derivatives which are recognized as financial liabilities. The estimated fair value of the derivative warrant liabilities has been calculated using the Black-Scholes model. At the issuance date and each reporting date until warrants are exercised, the fair value of the liability is remeasured, with changes in the fair value recorded as gains or losses in the consolidated statements of loss and comprehensive loss.

In conjunction with the USD equity offering described at (b) below, the Company agreed to list the warrants issued as part of the unit offering on the NASDAQ. On February 15, 2022, these warrants commenced trading under the symbol MCLDW (Note 31).

Derivative warrant liabilities are classified as a Level 3 fair value measurement as further described in Note 26. There were no exercises of the warrants described below since issuance.

a) Warrants associated with 2021 Debentures

On August 13, 2021, the Company issued 2,107,787 common share purchase warrants in conjunction with the conversion and extinguishment of the 2021 Debentures (Note 14(b); 19(b)). The common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$6.87 and mature in August 2024. The fair value of the warrants at August 13, 2021 was $5,947,689.

At December 31, 2021, the warrants were remeasured at a fair value of $1,868,541 and the Company recorded a gain on remeasurement since initial recognition of $4,177,825. The Black-Scholes model inputs and assumptions include:



	December 31, 2021		August 13, 2021

Share price at date of valuation	$	6.18	$	6.90

Exercise price	$	8.74	$	8.74

Risk free rate		0.88 %		0.43 %

Expected life (years)		2.62		3.00

Expected volatility 1		45.0 %		71.5 %

Fair value per warrant 2	$	0.89	$	2.82

Expected volatility at December 31, 2021 measured at implied volatility of traded warrants.

Considers a liquidity discount of 20% in determining the fair value per warrant as these warrants are not publicly traded.

b) Warrants associated with USD equity financing

On November 29, 2021, the Company issued 2,415,000 common share purchase warrants in conjunction with the November 2021 USD unit offering (Note 19). The common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$4.75 and mature five years after issuance. The fair value of the warrants at issuance was $5,302,004 (US4,158,396) and at December 31, 2021, the remeasured fair value was $6,106,596. The Black-Scholes model inputs and assumptions include:



	December 31, 2021		November 29, 2021

Share price at date of valuation	$	6.18	$	5.70

Exercise price	$	6.04	$	6.05

Risk free rate		1.25 %		1.18 %

Expected life (years)		4.92		5.00

Expected volatility 1		45.0 %		45.0 %

Fair value per warrant	$	2.53	$	2.19

c)	Other warrant liabilities

Warrant liability related to business acquisition

- Associated with the acquisition of Agnity, the Company assumed a warrant liability whereby the holder of the warrant has the option to convert the warrant into shares of Agnity, not the Company, by April 15, 2022, or receive a cash payment of US$552,250 at any time before the expiry of the warrant. The liability is measured at the Canadian dollar equivalent to its cash redemption amount which varies as a function of movements in exchange rates.

The warrant holder elected to receive cash repayment resulting in the C$ equivalent of the cash payment being reclassed to trade payables and accrued liabilities at June 30, 2022.

Warrant liability related to ATB Financial

- At December 31, 2021, the Company had an obligation to issue warrants to ATB (Note 13). The fair value of the warrants was measured at the date the services were received in the amount of $195,066. On January 17, 2022, the Company issued 183,486 share purchase warrants to ATB to purchase an equivalent number of common shares of the Company at an exercise price of $5.45 per share, maturing one year from date of issuance (Note 31).