Annual report pursuant to Section 13 and 15(d)

Note 8 - Warrant Liability

v3.19.1
Note 8 - Warrant Liability
 12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Warrant Liabilities [Text Block]
8.
 
Warrant Liability
 
In
February 2016,
the Company completed, in
two
tranches, a non-brokered private placement of
234,375
units with each unit consisting of
one
common share and
one
half of
one
common share purchase warrant. The Company issued
117,188
warrants. Each warrant entitled the holder to purchase
one
common share at a price of
$5.00
Canadian dollars at any time prior to expiry on
February 18
or
25,
2018
for Tranche
1
and Tranche
2,
respectively.
 
As the warrant exercise price was stated in Canadian dollars and the Company’s functional currency is the U.S. dollar, the warrants were deemed to be derivative instruments, with their estimated fair value classified as a liability on the Company’s consolidated balance sheet. The initial estimated fair value of the warrants was recorded as a warrant liability with subsequent changes in the estimated fair value recognized in the consolidated statements of operations and comprehensive loss. The Company allocated
$281,000
of the net proceeds to the warrant liability and the balance of the proceeds to the common shares. The initial fair value of the warrants was determined using a Black-Scholes pricing model with the following assumptions: expected volatilities of
191.8
–
225.0%,
risk-free interest rates of
0.43
–
0.49%,
and expected life of
2
years.
 
In connection with the offering, the Company issued an aggregate of
10,915
compensation warrants. Each compensation warrant entitled the holder to purchase
one
common share at
$5.00
Canadian dollars for a period of
2
years from the date of issuance. The Company estimated the value of these warrants at
$24,000,
which was included in the issuance costs. The initial fair value of the warrants was determined using a Black-Scholes valuation model with the following assumptions: expected volatilities of
191.8
–
225.0%,
risk-free interest rates of
0.43
 –
0.49%,
and expected life of
2
years.
 
During
February 2018,
121,256
common shares were issued on the exercise of warrants for gross proceeds of approximately
$483,000
and the remaining
4,346
warrants expired.
 
The fair value of the Company’s common share purchase warrant liability was calculated using a Black-Scholes valuation model and is classified as Level
3
in the fair value hierarchy. The fair values at the time of exercise of the warrants were estimated using the following valuation assumptions: expected volatilities of
16.7%,
risk-free interest rates of
1.8%,
and expected life of
0.01
-
0.03
years.
 
The following is a rollforward of the fair value of the warrants (in thousands):
 
   
Warrant Liability
  
Ending balance December 31, 2017
   $
84
  
Change in fair value
    
39
  
Exercises
    
(123
 )
Ending balance December 31, 2018
   $
—