v3.26.1
DEBENTURES
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
DEBENTURES

9. DEBENTURES

 

In June 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with arm’s-length accredited institutional investors (“Investors”) for the sale of debentures, which are convertible into the Company’s common shares in an aggregate principal amount of up to $47.0 million with a 10% original issue discount (“Debentures”).

 

On June 30, 2022, the Company consummated the closing for the sale of (i) the initial debenture in the principal amount of $14.0 million for gross proceeds of $12.8 million after considering the 10% original issue discount (“First Tranche Debentures”). In addition, the Investors received 8 warrants at a strike price of $146,520, which expired on December 31, 2025 (the “First Tranche Warrants” and the issuance of the First Tranche Debentures and the First Tranche Warrants, the “First Tranche”). 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 $1.6 million. 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 $5.0 million each, up to a total additional principal amount of $33.0 million.

 

From January 2023 through May 2024, the Investors purchased additional tranches under the Purchase Agreement under similar terms as the First Tranche for an aggregate principal amount of $13.1 million.

 

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

 

                   Principal Payment           
Description  Date  Face
Amount		   OID  

Gross

Proceeds

  

Conversion

Price

  

Starting

Date *

 

# of

Warrants

  

Exercise

Price

  

Expiration

Date

 

Transaction

Costs

 
1st Tranche  Jun-22  $14,025    10%  $12,750   $133,200.00   Sep-22   8   $146,520.00   Dec-25  $1,635 
2nd Tranche  Jan-23   5,077    10%   4,615    74,400.00   Jul-23   5    74,400.00   Dec-25   326 
3rd Tranche  Oct-23   2,750    10%   2,500    28,296.00   Jan-24   57    28,296.00   Apr-27   32 
4th Tranche  Nov-23   2,750    10%   2,500    9,720.00   May-24   184    9,720.00   May-27   30 
5th Tranche  Feb-24   1,100    10%   1,000    2,311.20   Aug-24   309    2,542.32   Aug-27   50 
6th Tranche  Apr-24   550    10%   500    1,760.40   Oct-24   203    1,944.00   Oct-27   31 
7th Tranche  May-24   833    10%   750    1,080.00   Nov-24   501    132.00   Nov-27   3 

 

* Principal payments are due to be made in 25 equal installments.

 

Interest rates are 5% for the initial 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.

 

In January 2025, the Company entered into a Securities Purchase Agreement (the “2025 Purchase Agreement”) with arm’s-length accredited institutional investors (“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 $7.7 million for gross proceeds of $7.0 million, after considering the 10% original issue discount. In addition, the Investors received 17,688 warrants at a strike price of $311.256. 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 $282.96.

 

From March 2025 through January 2026, the Investors purchased additional tranches under the 2025 Purchase Agreement under similar terms as the January 2025 Tranche for an aggregate principal amount of $17.5 million. As of June 30, 2026, the Investors had the right to purchase additional tranches in an aggregate principal amount of $24.8 million.

 

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

 

          Original           Principal Payment               
Description  Date  Face
Amount		   Issue Discount  

Gross Proceeds

  

Conversion

 Price

  

Starting

Date *

 

 No. of

Warrants

  

Exercise

Price

  

Expiration

Date

 

Transaction

Costs

 
Jan-25 Tranche  Jan-25  $7,700    10%  $7,000   $282.96   Apr-25   17,688   $311.256   Jul-28  $290 
Mar-25 Tranche  Mar-25   1,320    10%   1,188    214.92   Jul-25   3,992    214.920   Sep-28   - 
May-25 Tranche  May-25   110    10%   100    214.92   Sep-25   407    214.920   Nov-28   - 
Jul-25 Tranche  Jul-25   833    10%   750    80.89   Oct-25   6,696    80.892   Jan-29   - 
Sep-25 Tranche  Sep-25   550    10%   495    28.92   Dec-25   12,362    31.800   Sep-29   - 
Oct-25 Tranche (a)  Oct-25   7,700    10%   6,930    28.92   Dec-25   173,064    28.920   Apr-29   - 
Jan-26 Tranche (b)  Jan-26   7,000    10%   6,300    28.92   Mar-26   251,104    28.920   Jul-29   - 

 

*   Principal payments are due to be made in 25 equal installments.

 

Interest rates are 5% for the initial 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.

 

  (a) The Company received $1.5 million in October 2025 and the additional $5.4 million is held in a DACA account which serves as collateral for the October 2025 tranche.
  (b) The Company received $1.3 million in January 2026 and the additional $5.0 million will be held in a DACA account which will serve as collateral for the January 2026 tranche.

 

The funds held in DACA, related to the October 2025 tranche, are reflected as restricted cash and the funds related to the January 2026 tranche are reflected as escrow receivable in the accompanying unaudited condensed consolidated balance sheets.

 

Debentures consisted of the following for the periods presented (in thousands):

 

Description  Maturity   Interest Rate   June 30, 2026   December 31, 2025 
Principal (First Tranche Debentures)   December 2024    5.00% - 8.00%  $25   $25 
Principal (Second Tranche Debentures)   July 2025    5.00% - 8.00%   25    25 
Principal (Fourth Tranche Debentures)   June 2026    5.00% - 8.00%   8    8 
Principal (May 2025 Tranche Debentures)   May 2026    5%   86    86 
Principal (July 2025 Tranche Debentures)   July 2026    5%   486    833 
Principal (September 2025 Tranche Debentures)   September 2026    5%   550    550 
Principal (October 2025 Tranche Debentures)   October 2026    5%   7,700    7,700 
Principal (January 2026 Tranche Debentures)   January 2027    5%   6,160    - 
Debt issuance costs and discounts             (2,055)   (2,788)
Total Debentures (current)            $12,985   $6,439 

 

During the six months ended June 30, 2026, the Investors converted $79.4 thousand of principal and interest into the Company’s common shares and the conversion was determined to be a modification of the existing debt. In addition, the Company incurred $3.5 million in accretion interest and made cash repayments totaling $1.2 million during the six months ended June 30, 2026, resulting in a loss on extinguishment of debt of $20.8 thousand.

 

During the six months ended June 30, 2025, the Investors converted $2.4 million of principal and interest into the Company’s common shares. The conversion was determined to be an extinguishment of the existing debt and issuance of new debt, resulting in a loss on debt extinguishment of $4.7 million. In addition, the Company incurred $1.9 million in accretion interest and made cash repayments totaling $110.0 thousand during the six months ended June 30, 2025.

 

 

Subsequent to June 30, 2026, the Company completed a restructuring of certain debentures (the “Restructuring”). The Restructuring involved (i) the full repayment, retirement and cancellation of debentures held by two institutional investors and (ii) the reduction in the outstanding principal amount of a debenture held by another institutional investor and the amendment of certain provisions of that investor’s debenture, including a key-person covenant and increasing the covenant governing the minimum amount of cash and bitcoin the Company is required to maintain from $100,000 to $3.5 million. In connection with the Restructuring, the Company reduced the outstanding principal under those debentures by approximately $6.8 million and paid related repayment premiums and accrued interest thereon. The Restructuring was funded with cash on hand and the reduction of the escrow receivable from one of the investors.