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The Company has authorized an unlimited number of both Common and Preferred shares. As of December 31, 2023 and 2022, the Company had 18,885,254 and 8,579,284 issued and outstanding Common Shares, 0 and 70,000,000 issued and outstanding Series 1 Convertible Preferred Shares, and 1,166,667 and 0 issued and outstanding Series 2 Convertible Preferred Shares, respectively. All share classes have no par value.

Common Shares reserved for future issuance consists of the following:

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Common Shares

The preferences, privileges, and rights of the Common Shares are as follows:

Voting

Subject to any special voting rights or restrictions, holders of common shares entitled to vote shall have one vote per share.

Dividends

The Company’s board of directors may from time to time declare and authorize payment of dividends, if any, as they may deem advisable and need not give notice of such declaration to any shareholder. Subject to the rights of common shareholders, if any, holding shares with specific rights as to dividends, all dividends on common shares shall be declared and paid according to the number of such shares held and paid in Canadian dollars.

Liquidation Rights

In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of the Company’s assets for the purpose of winding up the Company’s affairs, after the payment of dividends declared but unpaid, the holders of Common Shares shall be entitled pari passu to receive any remaining property of the Company.

Series 1 Convertible Preferred Shares

In June 2022, the directors of the Company authorized the issuance of 70,000,000 Series 1 Convertible Preferred Shares (“Series 1 Shares”) with the following preferences, privileges and rights:

Dividends

If the Company declares, pays or sets aside any dividends on shares of any other class or series of capital stock the holders of the Series 1 Shares shall receive a dividend on each outstanding share of Series 1 Shares in an amount equal to that dividend per share of the Series 1 Shares as would equal the product of the dividend payable as if all shares of such series had been converted into Common Shares.

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series 1 Shares shall be entitled to be paid out of the assets of the Company available for distribution to the shareholders an amount per share equal to $6.00, plus any dividends declared but not paid. If, upon any such liquidation event, the assets available for distribution to the shareholders are insufficient to pay the holders of the Series 1 Shares, the holders of the Series 1 Shares shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Voting

The Series 1 Shares do not confer any voting rights or privileges.

Redemption

The Series 1 Shares are not subject to mandatory redemption or other redemption provisions for which the events resulting in redemption are not within the Company’s control.

Optional Conversion

Series 1 Shares are convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable Common Shares as is determined by dividing $0.10 by the applicable conversion price in effect at the time of conversion. The Conversion Price was initially equal to $0.10 and, following the Reverse Share Split on June 28, 2022, is equal to $6.00, such that 60 Preferred Shares are convertible into 1 Common Share.

Mandatory Conversion

All outstanding Series 1 Shares shall automatically convert into Common Shares, at the effective conversion rate upon the closing of one or more sales of equity securities resulting in at least $30 million of cumulative gross proceeds to the Company. As of the exchange date for the Series 2 Convertible Preferred Shares, described below, the remaining conversion threshold was approximately $2.0M, which was subsequently raised to $14M as described below.

Series 2 Convertible Preferred Shares

In November 2023, the directors of the Company authorized the issuance of an unlimited number of Series 2 Convertible Preferred Shares (“Series 2 Shares”). In December 2023, the Company entered into an agreement with the Series 1 Shareholders to exchange all 70,000,000 outstanding Series 1 Shares for 1,166,667 Series 2 Shares (an equivalent number of as-converted Common Shares) in exchange for the Series 1 Shareholders waiving their rights under a financing limitation side letter entered into amongst the Company and the Series 1 Shareholders during the August 2023 PIPE. Following the Series 2 exchange, the Company was no longer subject to any financing limitations.

The Series 2 Shares carry the same rights and privileges as the Series 1 Shares, except the mandatory conversion threshold was increased as described below. The Company treated the exchange for Series 2 Shares as a modification of the Series 1 Shares and determined there was no material difference in fair value between the Series 2 Shares and the Series 1 Shares, and as such no deemed dividend was recognized in the consolidated financial statements as a result of the exchange.

The Series 2 Shares have the following preferences, privileges and rights:

Dividends

If the Company declares, pays or sets aside any dividends on shares of any other class or series of capital stock the holders of the Series 2 Shares shall receive a dividend on each outstanding share of Series 2 Shares in an amount equal to that dividend per share of the Preferred Share as would equal the product of the dividend payable as if all shares of such series had been converted into Common Shares.

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series 2 Shares shall be entitled to be paid out of the assets of the Company available for distribution to the shareholders an amount per share equal to $6.00, plus any dividends declared but not paid. If, upon any such liquidation event, the assets available for distribution to the shareholders are insufficient to pay the holders of the Series 2 Shares, the holders of the Series 2 Shares shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Voting

The Series 2 Shares do not confer any voting rights or privileges.

Redemption

The Series 2 Shares are not subject to mandatory redemption or other redemption provisions for which the events resulting in redemption are not within the Company’s control.

Optional Conversion

Series 2 Shares are convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, at ratio of 1 Series 2 Share into 1 Common Share.

Mandatory Conversion

All outstanding Series 2 Shares shall automatically convert into Common Shares, at the effective conversion rate upon the closing of one singular financing, including a financing with multiple tranches in which any subsequent tranches are closed within 18 months of the initial closing, which financing results in at least single sale, executable in one or more tranches, of equity securities resulting in at least $14.0 million of cumulative gross proceeds to the Company.

Equity Transactions

In August 2021, the Company announced the closing of a public offering of 2,096,357 Common Share units at a price of $9.60 per unit for gross proceeds of $20,125,000. The Company incurred $2,109,657 of cash issuance costs in conjunction with the public offering. Each Common Share unit consisted of one Common Share and one-quarter Common Share warrant (“2021 accelerated warrants”). Each whole warrant entitles the holder thereof to purchase one Common Share at an exercise price of $12.60 per share at any time for five years. The warrants contain an acceleration clause allowing the Company to accelerate the expiry date of the warrants to 30 days following a time period during which the common share VWAP exceeds a trading price of C$37.80 for ten consecutive trading days.

The Common Share warrants were accounted for as a warrant liability since the exercise price is in US$ while the Company’s functional currency in 2021 was C$. As of December 31, 2022, the fair value of the 2021 accelerated warrants was calculated using the Monte Carlo model with the following parameters: risk free interest rate of 4.14%; annual volatility of 87.5%; and expected life of 3.65 years. The balance at December 31, 2022 was approximately $931,000.

In October 2022, the Company announced the closing of a private offering of 1,383,755 Common Share units at a price of $5.40 per unit for gross proceeds of $7,472,278. The Company incurred $1,227,357 of cash issuance costs in conjunction with the public offering. Each Common Share unit consisted of one Common Share and one-quarter Common Share warrant (“2022 warrants”). Each whole warrant entitles the holder thereof to purchase one Common Share at an exercise price of $7.50 per share at any time for a period of five years beginning six months from the issuance date.

The Company determined the allocation of the $5.40 Unit issue price to the Common Shares and the one-quarter Common Share purchase warrants based on the relative fair values of the warrants, with the residual charged to equity. The Common Shares were allocated gross proceeds of $5,951,877 and share issue costs of $977,624. The Common Share warrants are accounted for as a warrant liability since the exercise price is in US$ while the Company’s functional currency is C$. The initial balance was calculated using the assumptions below resulting an allocation of gross proceeds of $1,520,401. The Company determined it was appropriate to adjust the warrant amounts to fair value as of each reporting period using Black-Scholes option pricing model . The Common Shares issued were allocated a price of $4.30 per share and the quarter Common Share purchase warrants were allocated a price of $1.10. Assumptions used to determine the value of the Common Share warrants were: a weighted average risk-free interest rate of 4.10%; annual volatility of 94.0%; and expected life of 5.0 years. The issuance costs allocated to the warrants based on the relative fair values of the warrants, amounted to $249,733 and were charged to general and administrative expense in the consolidated statements of operations and comprehensive loss.

As of December 31, 2022, the fair value of the 2022 warrants was calculated using the Black Scholes model with the following parameters: risk free interest rate of 4.00%; annual volatility of 86.0%; and expected life of 4.8 years. The balance at December 31, 2022 was approximately $928,500.

Following the change in functional currency effective July 1, 2023, the Company reassessed the classification of its historical US$ and C$ denominated warrants in accordance with the Company’s accounting policy for warrants. As a result of the reassessment, the Company determined that 870,026 US$ warrants to purchase Common Shares, originally issued in financing transactions in 2021 and 2022, previously classified as warrant liabilities met the criteria under ASC 815-40 for permanent equity classification. The fair value of US$ warrants of $1,287,400, calculated using a Black Scholes calculation as of June 30, 2023, was reclassified from warrant liability to additional paid-in-capital in the accompanying consolidated financial statements. The fair value of the US$ warrants represented the entirety of the Company’s warrant liability as of June 30, 2023. The US$ warrants will not be re-measured prospectively.

As result of the reassessment the Company determined that 687,591 C$ warrants, originally issued in financing transactions between 2018 and 2020, which were previously classified in permanent equity no longer met the criteria for equity classification.  The C$ warrants were remeasured as of July 1, 2023. The C$ warrants have exercise prices between C$12.00 and C$28.80 and expire between January 2024 and November 2025. The Company measured the fair value of the C$ warrants on July 1, 2023 using a Black Scholes calculation and the resulting fair value of $396,375 was recorded as a reclassification from additional paid-in-capital to warrant liability.  The C$ warrant liability was subsequently re-measured at December 31, 2023 to a fair value of $94,185, with the change in fair value of $302,190 reported in other income in the accompanying consolidated statement of operations and comprehensive loss.

The weighted-average values of the significant assumptions used in the Black Scholes valuation of the C$ warrants as of July 1, 2023 included historical volatility of 84.6%, a risk-free rate of 4.54%, exercise price of C$12.80 and an expected term of 2.3 years. The weighted-average values of the significant assumptions used in

the Black Scholes valuation of the C$ warrants as of December 31, 2023 included volatility of 131.5%, a risk-free rate of 3.88%, exercise price of C$10.80 and an expected term of 1.7 years.

A summary of warrant liability activity for the years ended December 31, 2023 and 2022 is as follows:

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Related to the sale of the units in October 2022, the Company paid certain intermediaries $597,780 and issued 69,188 compensation warrants. The compensation warrants are exercisable at any time for five years beginning six months from the issuance date at an exercise price of $6.10 and do not have an acceleration clause. The compensation warrants have been issued as consideration for services provided by the intermediaries. The Company used Black Scholes to determine the fair value of the compensation warrants at the issuance date, which were recorded as equity instruments. The fair value of $317,000 has a net zero impact to additional paid-in capital. Significant assumptions used in Black Scholes included risk free interest rate of 4.10%; historical volatility of 94.0%; and a 5.0 year expiry.

In August 2023, through a private placement (“August 2023 PIPE”), the Company issued 9,945,969 Common Shares, and, in lieu of Common Shares, Pre-Funded Warrants to purchase an aggregate of 954,725 Common Shares, and, in each case, accompanying Common Warrants to purchase an aggregate of up to 10,900,604 additional Common Shares at a unit price of $1.88 per Common Share and accompanying Common Warrant (or $1.87 per Pre-Funded Warrant and accompanying Common Warrant). The private placement resulted in aggregate gross proceeds of $20,483,758 before $2,738,558 of issuance costs. The Common Warrants are exercisable for five years commencing six months after the issuance date at a price of $1.75.

The Company determined the Pre-Funded Warrants and Common Warrants both met the permanent equity criteria classification. The Pre-Funded Warrants and Common Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the Common Shares with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of common shares upon exercise. In addition, the Pre-Funded Warrants and Common Warrants do not provide any guarantee of value or return. The Company used a Black Scholes calculation to determine the fair value of the Common Warrants at issuance and allocated a share of the net proceeds based on the relative fair value of the Common Warrants. Net proceeds allocated to the Common Warrants were $7,972,736, with the remaining net

proceeds of $9,772,464 allocated to the Common Shares. The aggregate net proceeds of the transaction are recorded in additional paid-in-capital.

The Company also issued 327,020 compensation warrants to purchase Common Shares as compensation to a placement agent as part of the August 2023 PIPE.  The compensation warrants have an exercise price of $1.75 and expire in February 2029. The Company used a Black Scholes calculation to determine the fair value of the compensation warrants at the issuance date. The fair value of $466,658 of issuance costs are recorded in additional-paid-in capital, which results in a net zero impact to additional paid-in-capital and issuance costs. Significant assumptions used in the Black Scholes calculation included risk free interest rate of 4.36%; historical volatility of 107.3%; and a 5.5-year expiry.