SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2021

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

NOTE 12 SHAREHOLDERS’ EQUITY

Equity Issuances

Amendment to the Articles of Incorporation

On June 30, 2021, the Company filed Articles of Amendment to its Amended and Restated Articles of Incorporation with the Colorado Secretary of State providing for an increase in its authorized capital to increase the number of shares of common stock that the Company can issue from 500,000,000 to 675,000,000. The Amendment was approved by the Company’s shareholders at the annual meeting held on June 28, 2021.

Equity Financing

On February 9, 2021, the Company completed a registered direct offering of common stock with several existing and new institutional investors and issued 30,000,000 shares priced at $1.05 per share for gross proceeds of $31.5 million. The purpose of this financing was to fund the continued development of the Froome deposit, which is part of the Fox Complex in Timmins, Ontario, and to strengthen the Company’s balance sheet and working capital position. Total issuance costs amounted to $1.7 million for net proceeds of $29.9 million.

Flow-Through Shares Issuance – Canadian Development Expenses (“CDE”)

On January 29, 2021, the Company issued 12,600,600 flow-through common shares priced at $1.01 per share for gross proceeds of $12.7 million. The purpose of this offering was also to fund the continued development of the Froome deposit. The total proceeds were allocated between the sale of tax benefits and the sale of common shares. The total issuance costs related to the issuance of the flow-through shares were $0.7 million, which were accounted for as a reduction to the common shares. The net proceeds of $12.0 million were allocated between the sale of tax benefits in the amount of $1.2 million and the sale of common shares in the amount of $10.8 million.

The Company is required to spend these flow-through share proceeds on flow-through eligible CDE as defined by subsection 66.2(5) of the Income Tax Act (Canada). As of September 30, 2021, the Company had reached the total $12.7 million CDE spend requirement.

Flow-Through Shares Issuance – Canadian Exploration Expenditures (“CEE”)

On December 31, 2020, the Company issued 7,669,900 flow-through common shares priced at $1.28 per share for gross proceeds of $9.8 million. The purpose of this offering was to fund exploration activities on the Company’s properties in the Timmins region of Canada. No issuance costs were incurred as part of this issuance. Proceeds of $9.8 million were allocated between the sale of tax benefits in the amount of $2.1 million and the sale of common shares in the amount of $7.7 million.

On September 10, 2020, the Company issued 6,298,166 flow-through common shares priced at $1.65 per share for gross proceeds of $10.4 million. The purpose of this offering was to fund exploration activities on the Company’s properties in the Timmins region of Canada. The total issuance costs related to the issuance of the flow-through shares were $0.6 million, which are accounted for as a reduction to the common shares. The net proceeds of $9.8 million were allocated between the sale of tax benefits in the amount of $2.0 million and the sale of common shares in the amount of $7.8 million.

The Company is required to spend these flow-through share proceeds on flow-through eligible CEE as defined by subsection 66.1(6) of the Income Tax Act (Canada). As of September 30, 2021, the Company had incurred a total of $11.2 million in eligible CEE ($1.9 million in 2020 and $9.3 million as of Q3 2021). The Company expects to fulfill its CEE commitments by the end of 2022.

All 21,706,250 and 8,064,516 warrants issued under the November 2019 and March 2019 offerings remain outstanding and unexercised as at September 30, 2021.

Stock Options

The Company’s Amended and Restated Equity Incentive Plan (“Plan”) allows for equity awards to be granted to employees, consultants, advisors, and directors. The Plan is administered by the Compensation Committee of the Board of Directors (“Committee”), which determines the terms pursuant to which any award is granted. The Committee may delegate to certain officers the authority to grant awards to certain employees (other than such officers), consultants and advisors.  On April 16, 2021, the Board approved an amendment to the Plan, which increased the number of shares of common stock reserved for issuance by 12.5 million shares to a maximum of 30.0 million shares. This includes shares issued under the Plan before it was amended, with no more than 0.5 million shares subject to grants of options to an individual in a calendar year. The Plan provides for the grant of incentive options under Section 422 of the Internal Revenue Code (the “Code”), which provides potential tax benefits to the recipients compared to non-qualified options.

During the three months ended September 30, 2021, 850,000 stock options were granted to officers, directors, and certain employees at a weighted average exercise price of $1.21. At September 30, 2021, 6,460,050 options were outstanding under the Plan (September 30, 2020 – 8,808,001 awards).

No stock options were exercised during the nine months ended September 30, 2021. During the same period in 2020, the Company issued 60,000 shares of common stock for proceeds of $0.1 million upon the exercise of the same number of stock options at a weighted average exercise price of $1.06 per share.

Shareholders’ Distributions

Pursuant to the ARCA (Note 11), the Company is prevented from paying any dividends on its common stock, so long as the loan is outstanding.