Annual report pursuant to Section 13 and 15(d)

Note 12 - Unsecured Convertible Debentures

v3.20.2
Note 12 - Unsecured Convertible Debentures
12 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]
12.
Unsecured convertible debentures
 
Concurrently with the public offering described in note
14,
on
February 21, 2017,
the Corporation issued $
1,522
(CAD$
2,000
) aggregate principal amount of unsecured convertible debentures maturing
February 21, 2020
and contingent warrants to acquire up to
1,052,630
Common Shares (the “
Private Placement
”). The debentures were paid in full at maturity.
 
The debentures could have been converted into Common Shares at any time by the holder at a fixed price of CAD
$1.90
per Common Share except if the Corporation paid before the maturity, all or any portion of the convertible debentures. If the Corporation had paid all or any portion of the convertible debenture before maturity, then warrants would have become exercisable at CAD
$1.90
per Common Share for the equivalent convertible debenture amount prepaid. The contingent warrants were exercisable for the remaining term of the convertible debt for the same price as the conversion options. The unsecured convertible debentures were issued at a discount of
3.5%
to the principal amount, for aggregate gross proceeds of
$1,469
(CAD
$1,930
).
 
The convertible debentures provided the Corporation an accelerated conversion right whereby the Corporation could have, at any time at least
four
months after the date of issuance of the convertible debentures, accelerate the conversion of the debentures to Common Shares in the event that the volume weighted average price of the Common Shares on the TSX Venture Exchange was equal to or exceeds
CAD$2.65,
subject to customary adjustment provisions, during
20
consecutive trading days.
 
The interest paid on the convertible debentures under the terms of the agreement was
8%
per annum, payable on a quarterly basis in cash or Common Shares or a combination thereof, commencing on
March 31, 2017.
The decision to pay the interest due in cash or shares was at the discretion of the Corporation and the number of Common Shares to be issued were calculated at the current market price as at the close of business on the day before the interest payment was to be made. Payment in Common Shares would have been at a floor price of
$0.10
per share, with the difference between the amount payable and the amount computed at floor price payable in cash.
 
The proceeds of the Private Placement were split between the liability and the equity at the time of the Private Placement. Both the conversion option and contingent warrants were considered the equity component of the Private Placement. The fair value of the liability component was determined through a discounted cash flow analysis using a discount rate of
20%
that was set based on a similar debt and maturity considering the Corporation’s credit risk, excluding the conversion option and contingent warrants. The amount allocated to the equity component was the residual amount after deducting the fair value of the financial liability component from the fair value of the entire financial instrument. Subsequent to initial recognition, the liability was measured at amortized cost calculated using the effective interest rate method and accreted up to the principal balance at maturity. The interest accretion is presented in financial expenses. The equity component is
not
re-measured. Transaction costs were allocated to the components in proportion to their initial carrying amounts. The portion allocated to the liability was recognized as a reduction of the debt whereas the portion allocated to other equity was recognized as a reduction to other equity.
 
The split between the liability and equity component portions of the Private Placement are summarized below:
 
 
  Liability component       Equity component       Total Private Placement  
  $      
$
     
$
 
Balance at March 31, 2018  
1,255
     
220
     
1,475
 
Effective interest for the year  
156
     
-
     
156
 
Translation effect
 
(87)
     
-
     
(87)
 
Interest payable during the year
 
37
     
 
     
37
 
Balance at March 31, 2019  
1,361
     
220
     
1,581
 
Accretion of interest on convertible debenture
 
145
     
-
     
145
 
Translation effect  
50
     
-
     
50
 
Shares issued upon exercise of warrants  
-
     
(33
)    
(33
)
Payment upon maturity of debentures  
(1,556
)    
-
     
(1,556
)
Balance at March 31, 2020  
-
     
187
     
187