|12 Months Ended|
Dec. 31, 2022
|Debt Disclosure [Abstract]|
On March 24, 2021, the Company entered into a securities purchase agreement with certain investors for the purchase of $750,000 in principal amount ($600,000 subscription amount) of senior secured debentures originally due June 24, 2021 (the “Bridge Loan”). The imputed interest rate is encompassed within the original issue discount of the debentures and no additional cash interest shall be due. Transaction costs of $69,000 have been recorded in connection with the Bridge Loan.
On June 24, 2021, the due date was extended, for which the Company paid an extension fee of 60,000. The senior secured debentures were repaid in full on July 13, 2021. common shares with a fair value of $
As part of the bridge loan, the debenture holder was issued warrants (the “Bridge Warrants”) to purchase 93,938 common shares for up to three years of the issuance date with a strike price of $3.99 per share.
On June 30, 2022, the Company executed the definitive agreement with certain institutional investors (the “Investors”) for a $14,025,000 principal debentures with a 10% original issue discount (the “Debentures”) for net proceeds of $12,750,000. The interest rates on the Debentures are 5% for the first 12 months, 6% for the subsequent 12 months, and 8% per annum thereafter. Principal repayments will be made in 25 equal monthly installments and began on September 1, 2022. The Debenture may be extended by six months at the election of the Company by paying a sum equal to six months interest on the principal amount outstanding at the end of the 18th month, at the rate of 8% per annum. The Debentures are convertible into common shares at $2.22 per share. The Investors have the right to purchase additional tranches of $5,000,000 each, up to a total additional principal amount of $33,000,000. In addition, the Investors received 4,106,418 warrants at a strike price of $2.442, which expire on December 31, 2025 (the “Debenture Warrants”). The Debenture Warrants and Debentures each have down round provisions whereby the conversion and strike prices will be adjusted downward if the Company issues equity instruments at lower prices. The Debenture Warrants strike price and the Debenture conversion price will be adjusted down to the effective conversion price of the issued equity instruments. Due to the currency of these features being different from the Company’s functional currency the Debenture Warrants and Debentures’ convertible features were classified as derivative liabilities and are further discussed in Note 11. The transaction costs incurred in relation to the Debentures were $1,634,894.
The following table summarizes our outstanding debentures as of the dates indicated:
SCHEDULE OF OUTSTANDING DEBENTURES
During the year ended December 31, 2022, the Investors converted $150,000 of convertible debentures into shares of the Company resulting in a $93,973 gain on the conversion of convertible debentures.
Subsequent to the year end, the Investors purchased an additional tranche of $5,076,923. The convertible debt and warrants were issued with an exercise price of $ . The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the Debentures and the Debenture Warrants to $ .
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef