v3.25.3
DEBENTURES
 9 Months Ended
Sep. 30, 2025
Debt Disclosure [Abstract]  
DEBENTURES

9. DEBENTURES

 

On June 30, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreements”) with arm’s length accredited institutional investors (the “Investors”) for the sale of debentures, which are convertible into the Company’s common shares in an aggregate principal amount of up to $47,025,000 with a 10% original issue discount. Om June 30, 2022, the Company consummated the closing for the sale of (i) the initial debenture in the principal amount of $14,025,000 for gross proceeds of $12,750,000, after considering the 10% original issue discount (“First Tranche Debentures”). In addition, the Investors received 91 warrants at a strike price of $12,210.00, which expire on December 31, 2025 (the “First Tranche Warrants”). The First Tranche Warrants and First Tranche 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 First Tranche Warrants strike price, and the First Tranche Debenture conversion price will be adjusted down to the effective conversion price of the issued equity instruments. The transaction costs incurred in relation to first tranche were $1,634,894. The Debentures are senior to all other indebtedness or claims in right of payment, other than indebtedness secured by purchase money security interests.

 

The Investors had the right to purchase additional tranches of $5,000,000 each, up to a total additional principal amount of $33,000,000.

 

From January 2023 thru May 2024, the Investors purchased additional tranches under the Purchase Agreements under similar terms as the First Tranche for an aggregate principal amount of $13,059,923.

 

The details of each of these seven tranches are summarized in the table below:

 

Description  Date  Face Amount   OID   Gross Proceeds   Conversion Price   Principal Payment Starting Date *  # of Warrants   Exercise Price   Expiration Date  Transaction Costs 
1st Tranche  06/30/22   14,025,000    10%   12,750,000    11,100.000   09/01/22   91    12,210.000   12/31/25   1,634,894 
2nd Tranche  01/17/23   5,076,923    10%   4,615,385    6,200.000   07/01/23   59    6,200.000   12/31/25   325,962 
3rd Tranche  10/18/23   2,750,000    10%   2,500,000    2,358.000   01/01/24   689    2,358.000   04/18/27   31,915 
4th Tranche  11/30/23   2,750,000    10%   2,500,000    810.000   05/01/24   2,207    810.000   05/30/27   30,040 
5th Tranche  02/21/24   1,100,000    10%   1,000,000    192.600   08/01/24   3,712    211.860   08/21/27   50,000 
6th Tranche  04/11/24   550,000    10%   500,000    146.700   10/01/24   2,437    162.000   10/11/27   31,309 
7th Tranche  05/22/24   833,000    10%   750,000    90.000   11/01/24   6,016    11.000   11/22/27   3,154 

 

* -principal payments due be made in 25 equal installments

 

Interest rates - 5% for the 1st 12 months; and 8% thereafter.

 

These debentures 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 12th month, at the rate of 8% per annum.

 

On January 16, 2025, the Company entered into a Securities Purchase Agreement (the “2025 Purchase Agreements”) with arm’s length accredited institutional investors (the “Investors”) for the sale of debentures, which are convertible into the Company’s common shares in an aggregate principal amount of up to $50.0 million in debentures with a 10% original issue discount. On January 16, 2025, the Company consummated the closing for the sale of (i) the initial debenture in the principal amount of $7,700,000 for gross proceeds of $7,000,000, after considering the 10% original issue discount (“January 2025 Tranche Debenture”). In addition, the Investors received 212,256 warrants at a strike price of $25.938 (the “January 2025 Warrants”). The issuance of the additional tranche triggered the round down provision, adjusting the exercise price of the First, Second, Third, Fourth, Fifth, Sixth, and Seventh Tranche Debentures and First, Second, Third, Fourth, Fifth, Sixth, and Seventh Tranche Warrants to $23.58.

 

From March 2025 thru July 2025, the Investors purchased additional tranches under the 2025 Purchase Agreements under similar terms as the January 2025 Tranche for an aggregate principal amount of $2,263,334.

 

The details of each of these five tranches are summarized in the table below:

 

Description  Date  Face Amount   OID   Gross Proceeds   Conversion Price   Principal Payment Starting Date *  # of Warrants   Exercise Price   Expiration Date  Transaction Costs 
Jan-25 Tranche  01/16/25   7,700,000    10%   7,000,000    23.580   04/01/25   212,256    25.938   07/16/28   290,000 
Mar-25 Tranche  03/21/25   1,320,000    10%   1,188,000    1.990   07/01/25   47,906    17.910   09/21/28   - 
May-25 Tranche  05/21/25   110,000    10%   100,000    17.910   09/01/25   4,889    17.910   11/21/28   - 
Jul-25 Tranche  07/21/25   833,334    10%   750,000    0.749   10/21/25   723,189    0.749   01/21/29   - 
Sep-25 Tranche  09/25/25   550,000    10%   495,000    2.410   12/21/25   148,340    2.650   09/25/29   - 

 

*-principal payments due be made in 25 equal installments

 

Interest rates - 5% for the 1st 12 months; and 8% thereafter.

 

These debentures 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 12th month, at the rate of 8% per annum.

 

 

On April 22, 2025, the Company issued a promissory note (the “April 2025 Note”) with an arm’s length accredited investor (the “Holder”) for $290,000 in debentures with a $40,000 original issue discount for gross proceeds of $250,000. The interest rate is 12% applied on the issuance date to the principal amount of $290,000.

 

The following table summarizes our outstanding debentures as of the dates indicated:

 

Description  Maturity  Interest Rate   September 30, 2025   December 31, 2024 
Principal (First Tranche Debentures)  12/31/2024   5.00% - 8.00 %   25,000    25,000 
Principal (Second Tranche Debentures)  07/17/2025   5.00% - 8.00 %   25,000    25,000 
Principal (Fourth Tranche Debentures)  06/01/2026   5.00% - 8.00 %   7,767    1,485,714 
Principal (April 2025 Note)  04/15/2026   12.00%   290,000    - 
Principal (May 2025 Tranche Debentures)  5/21/2026   5.00%   110,000    - 
Principal (July 2025 Tranche Debentures)  5/21/2026   5.00%   833,333    - 
Principal (September 2025 Tranche Debentures)  7/21/2026   5.00%   550,000    - 
Debt issuance costs and discounts           (468,421)   (92,505)
Total Debentures (current)           1,372,679    1,443,209 

 

During the nine months ended September 30, 2025, the Investors converted $10,537,304 of the Debentures into shares of the Company. The conversions were determined to be an extinguishment of the existing debt and issuance of new debt. As a result, the Company recorded a loss on debt extinguishment in the amount of $10,119,711. During the nine months ended September 30, 2025, the Company incurred $2,320,917 in accretion interest and made 110,000 of cash repayments.

 

During the nine months ended September 30, 2024, the Investors converted $10,952,357 of principal and $196,802 of interest into shares of the Company resulting in a $1,627,858 loss on the conversion of convertible debentures. During the nine months ended September 30, 2024, the Company incurred $2,672,765 in accretion interest and made 802,282 of cash repayments.