SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2021

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

NOTE 13 SHAREHOLDERS’ EQUITY

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 Issuances

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 December 31, 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 an additional 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. The total proceeds were allocated between the sale of tax benefits and the sale of common shares. 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 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 was $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 flow-through share proceeds on flow-through eligible Canadian exploration expenditures (“CEE”) as defined by subsection 66(15) of the Income Tax Act (Canada). To date, the Company has incurred a total of $12.7 million in eligible CEE. The Company expects to fulfill its CEE commitments by the end of 2022.

June 2020 Amended and Restated Credit Agreement

Pursuant to the ARCA executed on June 25, 2020, the Company issued 2,091,700 shares of common stock to the lenders as consideration for the maintenance, continuation, and the extension of the maturity date of the loan. The Company valued the shares at $1.9 million.

Shares Issued for Acquisition of Mineral Property Interests

The Company did not issue any shares toward the acquisition of mineral property interests during the year ended December 31, 2021. During the year ended December 31, 2020, the Company issued a total of 53,600 shares of common stock for the acquisition of mineral interests adjacent to Gold Bar, valued at $0.1 million. During the year ended December 31, 2019  the Company issued 353,570 shares of common stock for the acquisition of mineral interests adjacent to Gold Bar.

November 2019 Offering

On November 20, 2019 (the “November Offering”), the Company issued 37,750,000 Units at $1.325 per Unit, for net proceeds of $46.6 million (net of issuance costs of $3.5 million). Each Unit consisted of one share of common stock and one-half of one warrant. Each whole warrant is exercisable at any time for one share of common stock of the Company at a price of $1.7225, subject to customary adjustments, expiring five years from the date of issuance.  The warrants provide for cashless exercise under certain conditions. The warrants under the November Offering are listed for trading on an over the counter market.

The Company concluded that both common stock and warrants are equity-linked financial instruments and should be accounted for permanently in the shareholders’ equity section in the Consolidated Balance Sheets, with no requirement to subsequently revalue any of the instruments. Of the net proceeds of $46.6 million, $37.3 million was allocated to common stock and $9.3 million was allocated to warrants, based on their relative fair values at issuance.

The Company used the Black-Scholes pricing model to determine the fair value of warrants issued in connection with the November Offering using the following assumptions:

	November 20, 2019
Risk-free interest rate		1.55	%
Dividend yield		0.00	%
Volatility factor of the expected market price of common stock		60	%
Weighted-average expected life		5 years
Weighted-average grant date fair value	$	0.52

All 21,706,250 warrants issued under the November Offering remain outstanding and unexercised as at December 31, 2021.

March 2019 Offering

On March 29, 2019, the Company issued 14,193,548 Units at $1.55 per Unit, for net proceeds of $20.3 million (net of issuance costs of $1.7 million). Each Unit consisted of one share of common stock and one-half of one warrant.  Each whole warrant is exercisable at any time for one share of common stock at a price of $2.00, subject to customary adjustments, expiring three years from the date of issuance.  The warrants issued under the offering are not listed for trading.

On March 29, 2019, the Company also issued 1,935,484 Subscription Receipts at $1.55 per Subscription Receipt to certain executive officers, directors, employees and consultants. Upon shareholder and NYSE approval on May 23, 2019, the Subscription Receipts were converted into 1,935,484 Units for net proceeds of $2.6 million (net of issuance costs of $0.4 million). All Units issued under the offering have identical terms.

At-the-Market (“ATM”) Offering

Pursuant to an equity distribution agreement dated November 8, 2018, the Company was permitted to offer and sell from time to time shares of its common stock having an aggregate offering price of up to $90.0 million, with the net proceeds to fund working capital and general corporate purposes. During the three months ended March 31, 2019, the Company issued an aggregate of 1,010,545 shares of common stock for proceeds of $1.9 million. The Company terminated the agreement on March 13, 2019.

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.  The number of shares of common stock reserved for issuance thereunder is 17.5 million shares, including shares issued under the Plan before it was amended, with no more than 1 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 provide potential tax benefits to the recipients compared to non-qualified options.

During the year ended December 31, 2021, 950,000 stock options were granted to officers, directors, and certain employees at a weighted average exercise price of $1.22. As at December 31, 2021, 6,171,167 options were outstanding under the plan (December 31, 2020 – 7,012,334)

During the year ended December 31, 2021, no stock options were exercised under the Plan and no shares were issued. During the year ended December 31, 2020, 135,000 shares were issued upon the exercise of stock options at a weighted average exercise price of $1.02 per share for proceeds of $0.1 million.

Shareholder Distributions

During the year ended December 31, 2021 and December 31, 2020 the Company did not make any shareholder 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.

Stock-Based Compensation

The following table summarizes information about stock options outstanding under the Plan at December 31, 2021:

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Life (Years)	Value
	(in thousands, except per share and year data)
Balance at December 31, 2018	4,243	$	2.33	2.0	$	1,475
Granted	3,050		1.73	—		—
Exercised	(535)		1.01	—		419
Forfeited	(700)		2.56	—		—
Expired	(789)		2.90	—		—
Balance at December 31, 2019	5,269	$	2.00	3.0	$	364
Granted	5,097		1.22	—		—
Exercised	(135)		1.02	—		10
Forfeited	(1,968)		2.18	—		2
Expired	(1,251)		1.19	—		—
Balance at December 31, 2020	7,012	$	1.55	4.2	$	53
Granted	950		1.22	—		—
Exercised	—		—	—		10
Forfeited	(1,589)		1.46	—		2
Expired	(202)		7.10	—		—
Balance at December 31, 2021	6,171	$	1.34	4.2	$	53
Exercisable at December 31, 2021	2,265	$	1.47	2.6	$	—

Stock options have been granted to key employees, directors and consultants under the Plan.  Options to purchase shares under the Plan were granted at or above market value of the common stock as of the date of the grant.  During the year ended December 31, 2021, the Company granted stock options to certain employees and directors for an aggregate of 1.0 million shares of common stock (2020 – 5.1 million, 2019 – 3.1 million) at a weighted average exercise price of $1.22 per share (2020 – $1.22, 2019 – $1.73). The options vest equally over a three-year period if the individuals remain affiliated with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of five years from the date of grant.

The fair value of the options granted under the Plan was estimated at the date of grant, using the Black-Scholes option-pricing model, with the following weighted-average assumptions:

		2021		2020		2019
Risk-free interest rate		0.519% to 0.873%		0.157% to 0.322%		1.45% to 1.87%
Dividend yield		0.00%		0.00%		0.00%
Volatility factor of the expected market price of common stock		63%		59%		58%
Weighted-average expected life of option		3.5 years		3.5 years		3.5 years
Weighted-average grant date fair value	$	1.22	$	1.22	$	1.73

During the year ended December 31, 2021, the Company recorded stock option expense of $0.84 million (2020 – $0.6 million, 2019 – $0.7 million) while the corresponding fair value of awards vesting in the period was $0.8 million (2020 – $0.1 million and 2019 – $0.4 million).  

At December 31, 2021, there was $0.6 million (2020 – $1.4 million, 2019 - $1.0 million) of unrecognized compensation expense related to 3.9 million (2020 – 6.1 million, 2019 – 3.0 million) unvested stock options outstanding. This cost is expected to be recognized over a weighted-average period of approximately 1.4 years (2020 – 1.6 years, 2019 – 1.5 years).

The following table summarizes the status and activity of non-vested stock options for the year ended December 31, 2021, for the Company’s Plan and the replacement options from the acquisition of Lexam:

		Weighted Average
		Grant Date
	Number of	Fair Value
	Shares	Per Share
	(in thousands, except per share amounts)
Non-vested, beginning of year	6,093	$	0.44
Granted	950	$	0.44
Cancelled/Forfeited	(1,339)	$	0.46
Vested	(1,799)	$	0.45
Non-vested, end of year	3,906	$	0.43