| CONVERTIBLE DEBENTURES AND DEFERRED FINANCING COSTS [Text Block] |
| 14. |
CONVERTIBLE DEBENTURES AND DEFERRED FINANCING COSTS
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Year ended November 30, 2014
$1,398,592
(CAD $1,549,000) Convertible Debentures
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On August 6, 2014, the Company issued $1,398,592
(CAD $1,549,000) face value
12% convertible debentures with a term to August 6, 2017 (the “Maturity Date”). At any time while the debentures are outstanding, the holder has the option to convert the outstanding principal of the debentures into common shares of the Company at a fixed conversion price of CAD $0.50
per share. At any time after February 6, 2015, the Company has the right to force the conversion of the debentures into common shares at a price of at least CAD$0.65
per common share for a period of at least
20
consecutive trading days. If the common shares do not trade on any trading day and the bid price of the common Shares is CAD $0.65
or greater, the common shares shall be deemed to have traded at a price of at least CAD $0.65
on that trading day. Additionally, the Company has the right to redeem the debentures, in whole or in part, (a) during the
12
months ending August 6, 2015, at a premium of
15% to the principal amount being redeemed plus any accrued interest, (b) during the
12
months ending August 6, 2016, at a premium of
5% to the principal amount being redeemed plus any accrued interest, (c) during the
12
months ending August 6, 2017, at a premium of
2% to the principal amount being redeemed plus any accrued interest. In connection with the financing, the Company issued warrants to placement agents to purchase
151,900
shares of common stock at an exercise price of CAD $0.50
per share. Additionally, the Company incurred $157,293
(CAD $174,209) in financing fees.
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The Company has evaluated the terms and conditions of the convertible debentures and placement agent warrants under the guidance of ASC 815. The conversion feature met the definition of conventional convertible for purposes of applying the conventional convertible exemption. The definition of conventional contemplates a fixed number of shares issuable under the arrangement. The instrument was convertible into a fixed number of shares and there were no down round anti-dilution protection features contained in the contracts. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The debentures did not result in a BCF because the conversion price was not in the money on the inception date. There were no terms or features contained in the warrant agreement that would preclude the warrants from achieving equity classification.
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The following table reflects the allocation of the purchase on the financing date:
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Convertible Debentures Face Value |
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$1,398,342
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Proceeds |
$ |
(1,279,773
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Deferred financing costs |
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(190,876
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) |
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Paid in capital (warrants) |
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33,583
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Prepaid expenses |
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16,681
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Accrued expenses |
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21,793
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Convertible debentures |
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1,398,592
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The warrants were valued at $33,583
and were recorded as a component of deferred financing costs. Interest expense related to the debentures amounted to $73,540
for the period ended November 30, 2014. Of the $73,540, $53,338
related to accrued interest and the remaining $20,202
related to the amortization of deferred financing costs.
Year ended November 30, 2013
During the six month period ended May 31, 2013 the Company issued
1,801,480
common shares for conversion of convertible debentures having face value of $500,000
and accrued interest of $40,444. The total debt for $540,444
was converted into
1,801,480
common shares at $0.30
per share.
On August 27, 2013, upon completion of the Offering, $700,000
face value of convertible debentures along with $97,716
of interest was converted to
2,297,044
Common Shares, resulting in the discharge of those debentures. In addition, the Company repaid the balance of $30,000
face value of convertible debenture not converted along with accrued interest of $3,877
and also repaid interest of $3,024
not converted to common shares.
This resulted in the complete discharge of all convertible debt.
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