Some notes from their most recent financial statements. You can find all this and more at sedar.com
9. Share capital
Authorized
An unlimited number of Common Shares
In the first quarter of fiscal 2016, the Company completed a private placement of 25,000 Common Shares at a price of $4.00 per share for gross cash proceeds of $100,000.
On April 30, 2016, the Company converted a non-refundable $1,000,000 deposit that was previously provided by a prospective investor. Under the terms set out in the letter of interest with this investor, the deposit was converted into 250,000 Common Shares at a price of $4.00 per share. The Company did not incur significant transaction costs for the issuance of these equities.
During the second and third quarter of fiscal 2016, the Company completed private placements of 205,311 Common Shares at a price of $4.50 per share for gross cash proceeds of $923,903. The Company did not incur significant transaction costs for the issuance of these equities. During the third and fourth quarter of fiscal 2016, the Company began a private placement that resulted in 696,705 units at $4.50 per unit generating gross proceeds of $3,135,173. One unit provided the holder with one Common share and one Common Share Purchase Warrant. The Warrant entitled the holder the option to buy a Share at the price of $5.00 for three years from date of issuance. The value of the warrants was estimated using the Black-Scholes option pricing model with the following variables: stock price of $3.41; expected life of three years; $Nil dividends; 64.5% volatility; and risk free interest rate of 0.60%. The value of the warrants was estimated to be $759,409. As a result, the residual value of the Common Shares was calculated to be $2,375,764.
During the fourth quarter of fiscal 2016, the Company raised 82,115 units at $4.50 per unit generating gross proceeds of $369,517. One unit provided the holder with approximately 1.05 Common Shares and one Common Share Purchase Warrant. The total number of Common Shares and Warrants issued, were 86,217 and 82,115, respectively. The Warrant entitled the holder the option to buy a Share at the price of $5.00 for three years from the date of issuance. The value of the warrants is estimated using the Black-Scholes option pricing model with the following variables: stock price of $3.41; expected life of three years; $Nil dividends; 64.5% volatility; and risk free interest rate of 0.60%. The value of the warrants was estimated to be $89,505. As a result, the residual value of the Common Shares was calculated to be $280,012.
Share issue costs relating to the above equity financings amounted to $46,518. $8,868 of the costs are related to 6,569 warrants issued that have a $5.00 exercise price and expire in five years. These warrants were issued to a broker in relation to the sale of 82,115 units. The warrants were valued using the Black-Scholes option pricing model and the following variables: stock price of $3.15; expected life of five years; Nil dividends; 64.5% volatility; and risk free interest rate of 0.69%. $3,635 of the costs related to 4,999 warrants issued that have a $4.50 exercise price and expire in one year. These warrants were issued to a financing consultant in relation to a Finders fee for the sale of 83,312 units. The warrants were valued using the Black-Scholes option pricing model and the following variables: stock price of $3.77; expected life of one year; Nil dividends; 64.5% volatility; and risk free interest rate of 0.69%. In both cases, the warrants issued provide the holders with the option to purchase one Common Share.
As previously described in Note 8 of the July 31, 2016, Financial Statements, “Secured convertible debentures - 2015”, the Company converted debentures into 368,392 units at a price of $4.00 per unit. The gross value of the conversion was $1,473,576. Each unit consisted of a Common Share and one Common Share purchase warrant. Upon conversion the debenture was extinguished and the security has been released. The warrants were valued at $424,448 using the Black-Scholes option pricing model and the following variables: stock price of $3.35; expected life three years; Nil dividends; 64.5% volatility; and risk free interest rate of 0.59%. The residual value of the value converted of $1,126,421 including $77,293 of related contributed surplus was attributed to the common shares. The following warrants are also related to the “Secured convertible debentures - 2015”:
Originating warrants valued at issue date (fiscal 2015) - The warrants were valued at $10,203 using the Black-Scholes option pricing model and the following variables: stock price of $3.00; expected life of two years; Nil dividends; 65% volatility; and risk free interest rate of 0.96% and 0.87%.
Broker warrants valued at issue date (fiscal 2015) - There were also 8,881 broker warrants issued to the broker. Each warrant entitles the broker to acquire one Unit for $4.00 and expire in two years. The value of the warrants was estimated to be $12,726 using the Black-Scholes option pricing model and the following variables: underlying security value price of $4.00; expected life of two years; Nil dividends; 65% volatility; and risk free interest rate of 1.01%. These warrants were exercised in December 2016.
Amendment warrants (fiscal 2016) - On February 19, 2016, prior to the debentures being converted, the Company negotiated an amendment with the holders of the Secured Convertible Debentures to delay the maturity date to December 17, 2016. 60,000 warrants were issued with an exercise price of $4.50 and expire 10 months from the effective date of the amendment. The Warrants were valued at $40,135 using the Black-Scholes option pricing model and the following variables: stock price of $3.83; expected life 10 months; Nil dividends; 64.5% volatility; and risk free interest rate of 0.44%.
As previously described in Note 8 of the July 31, 2016, Financial Statements, “Unsecured convertible debentures – 2015”, the Company repaid and extinguished the debentures after the initial due date. In exchange for the late payment, the company issued Penalty Warrants priced at $4.00 a share exercisable up to December 31, 2017. The Warrants were valued at $6,603 using the Black-Scholes option pricing model and the following variables: stock price of $3.46; expected life of 23 months; Nil dividends; 64.5% volatility; and risk free interest rate of 0.39%.
As described in Note 8, Unsecured convertible debentures, the Company issued unsecured debentures in the third and fourth quarter of fiscal 2016. On July 15, 2016, $66,426 of the debentures held by two individuals were converted into 16,666 common shares at a price of $4.50 per unit.
In April 2016, the Company agreed to issue common shares in exchange for services rendered by two contractors. The Company issued 1,500 shares and the gross value of the share issued totaled $3,250. The fair value of the services provided approximated the value of the shares issued.
During the first quarter of 2017, the Company issued 56,379 Units in a private placement at $4.50 per unit generating gross proceeds of $253,706. A Unit provides the holder with one Common share and one Common Share Purchase Warrant. The Warrant entitles the holder the option to buy a Share at the price of $5.00 for three years from date of issuance. The value of the warrants is estimated using the Black-Scholes option pricing model with the following variables: stock price of $3.41; expected life of three years; $Nil dividends; 64.5% volatility; and risk free interest rate of 0.60%. The value of the warrants was estimated to be $61,453. As a result, the residual value of the Common Shares was calculated to be $192,252.
Share issue costs relating to the equity financings in the first quarter of fiscal 2017 amounted to $6,308. $617 of the costs are related to 444 warrants issued that have a $5.00 exercise price and expire in five years. These warrants were issued to a broker in relation to the sale of 56,379 units. The warrants were valued using the Black-Scholes option pricing model and the following variables: stock price of $3.11; expected life of five years; Nil dividends; 64.5% volatility; and risk free interest rate of 0.60%. $97 of the costs related to 133 warrants issued that have a $4.50 exercise price and expire in one year. These warrants were issued to a financing consultant in relation to a Finders fee for the sale of 2,222 units. The warrants were valued using the Black-Scholes option pricing model and the following variables: stock price of $3.77; expected life of one year; Nil dividends; 64.5% volatility; and risk free interest rate of 0.69%. In both cases, the warrants issued provide the holders with the option to purchase one Common Share.
During the second quarter of 2017, the Company issued 714,286 Common Shares at $3.50 per Common Share for total proceeds of $2,500,001 from a group of private investors (“Investors”). As part of the Private Placement the Investors have the right to nominate up to two Directors supported by an agreement between certain shareholders. The Investors also have a call option to purchase another 714,286 Common Shares at a price of $3.50 prior to May 31, 2017. In connection with the closing of this placement, THC incurred share issuance costs of $147,014 and issued 57,142 broker warrants with an exercise price of $4.50 and a five year term.
During the second quarter, THC completed the Concurrent Financing through Canaccord Genuity (“Agent”) pursuant to which it issued 2,919,507 THC Common Shares at a price of $4.50 per shares for gross proceeds of $13,137,782. In connection with the closing of the Concurrent Financing, THC paid the Agent a cash commission of $803,487, equal to 7% of the gross proceeds from the Concurrent Financing, subject to a reduced commission of 3.5% for certain subscribers on a President’s List of THC, and issued to the Agent warrants exercisable to acquire 178,553 THC Common Shares, being that number of THC Common Shares as was equal to 7% of the number of THC Common Shares sold under the Concurrent Financing, subject to a reduced percentage of 3.5% for certain subscribers on the President’s List of THC, at an exercise price of $4.50 per share and a two year term. Additional transaction costs of $82,329 were included in share issuance costs.
During the second quarter the Company issued the following warrants:
? 33,867 warrants in exchange for services rendered by two service providers:
o The Company issued 20,000 warrants that have a strike price of $4.20 USD and expire in
May 2018. The warrants were valued at $18,760 using the Black-Scholes option pricing model and the following variables: stock price of $4.50; expected life of 18 months; Nil dividends; 73.2% volatility; and risk free interest rate of 1.25%
o The Company issued another 13,867 warrants that have a strike price of 4.50 and expire 3 years. The warrants were valued at $30,184 using the Black-Scholes option pricing model and the following variables: stock price of $4.50; expected life of three years; Nil dividends; 73.2% volatility; and risk free interest rate of 1.25%
? 7,490 broker agent warrants with an exercise price of $4.50 and a two year term. The warrants were valued at $13,576 using the Black-Scholes option pricing model and the following variables: stock price of $4.50; expected life of two years; Nil dividends; 73.2% volatility; and risk free interest rate of 1.25%
As at January 31, 2017, there were 10,275,025 Common Shares outstanding and 2,028,054 warrants outstanding.
The Company has a service agreement under which it may be required to issue up to $178,000 in Common Shares based on the achievement of certain objectives. The Common Shares will be issued at the last price at which they were sold from treasury to arm’s length investors if still a private company, or the volume weighted average price for the Common Shares for the preceding three months if then a public company. As of January 31, 2017, the Company has not accrued anything in relation to the contract.
Stock option plan
The Company has a share option plan (the "Plan") that is administered by the Board of Directors of the Company who establish exercise prices and expiry dates, which are up to 10 years from issuance as determined by the Board at the time of issuance. Unless otherwise determined by the Board, options issued under the Plan vest over a three-year period except for options granted to consultants or persons employed in Investor Relations Activities (as defined in the policies of the Exchange) which vest in stages over 12 months with no more than 1/4 of the options vesting in any three-month period. The maximum number of Common Shares reserved for issuance for options that may be granted under the Plan is 900,000 Common Shares outstanding as at January 31, 2017.
Stock-based compensation
For the six months ended January 31, 2017 the Company recorded $281,473 (January 31, 2016 - $105,315) in stock-based compensation expense related to employee options, which are measured at fairvalueatthedateofgrantandareexpensedovertheoption’svestingperiod. Forthethreemonths ended January 31, 2017 the Company recorded $179,347(January 31, 2016 – $13,232) in stock-based compensation expense related to employee options.
15. Capital management
The Company’s objective is to maintain sufficient capital base so as to maintain investor, creditor and customer confidence and to sustain future development of the business and provide the ability to continue as a going concern. Management defines capital as the Company’s shareholders’ equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather promotes year over year sustainable profitable growth. The Company currently has not paid any dividends to its shareholders.
As at January 31, 2017, total managed capital was comprised of shareholders’ equity of $21,351,995. There were no changes in the Company’s approach to capital management during the period.
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