Convertible debentures [Text Block] | 9. Convertible debentures The Company issues three types of convertible debentures: USD denominated convertible debentures with an equity component, Canadian dollar ("CDN") denominated convertible debentures with an embedded derivative due to variable consideration receivable upon conversion caused by foreign exchange, and USD denominated convertible debentures with an embedded derivative caused by variable conversion prices. Equity component of Convertible debentures Derivative liabilities convertible debentures 2019 2018 2019 2018 2019 2018 (a) $ 2,511,514 $ 2,419,877 $ 204,366 $ 151,918 $ 50,147 $ 70,283 (b) 87,560 56,694 561,059 498,198 - - $ 2,599,074 $ 2,476,571 $ 765,425 $ 650,116 $ 50,147 $ 70,283 (a) All loan principal amounts are expressed in original currency and all remaining dollar amounts expressed in USD. Convertible debentures outstanding as at October 31: USD (equity component) CDN (embedded derivative) 2019 2018 2019 2018 Loan Principal Opening balance $ 931,000 $ 730,000 $ 2,234,294 $ 2,392,860 Issuance during the year - 231,000 165,266 1,035,800 Repayment or conversion - (30,000 ) (128,543 ) (1,194,366 ) Outstanding at year-end $ 931,000 $ 931,000 $ 2,271,017 $ 2,234,294 Terms of Loan Annual interest rate 12% - 24% 12% - 24% 12% - 24% 12% - 24% Effective annual interest rate 24% - 36% 36% - 37% 13% - 645% 23% - 398% Conversion price to common shares $0.04 - $0.07 $0.04 - $0.21 $0.05 - $0.15 $0.05 - $0.15 Remaining life (in months) 1 - 6 0 - 7 0 - 12 0 - 7 Consolidated Statements of Financial Position Carrying value of loan principal $ 906,993 $ 894,838 $ 1,464,416 $ 1,428,616 Interest payable 18,661 15,100 121,444 81,323 Convertible debentures $ 925,654 $ 909,938 $ 1,585,860 $ 1,509,939 Derivative liability $ - $ - $ 204,366 $ 151,918 Equity component $ 50,147 $ 70,283 $ - $ - Consolidated Statements of Operations and Comprehensive Loss Accretion expense $ 118,749 $ 110,469 $ 914,780 $ 1,652,007 Interest expense $ 191,001 $ 168,052 $ 229,673 $ 284,908 Gain on revaluation of derivative liability $ - $ - $ (846,401 ) $ (1,322,507 ) Loss on conversion of debentures $ - $ - $ - $ 6,261 Loss (gain) on extinguishment $ - $ 2,792 $ (2,865 ) $ (401,983 ) Consolidated Statements of Changes in Equity Amount of principal converted to common shares $ - $ - $ - $ 19,023 Amount of interest converted to common shares $ - $ - $ - $ 60,634 Number of common shares issued on conversion of convertible debentures - - - 770,962 Consolidated Statements of Cash Flows Amount of principal repaid in cash $ - $ 30,000 $ 96,598 $ 632,080 Amount of interest repaid in cash $ 187,440 $ 161,424 $ 159,801 $ 161,506 (b) During the year ended October 31, 2019, the Company has incurred $72,476 (2018 - $40,414; 2017 - $nil) financing costs which primarily consist of early repayment premiums and admin fees relating to the convertible debentures, of which $21,000 (2018 - $nil; 2017 - $nil) was converted into common shares. Convertible debentures outstanding as at October 31: (i) (ii) 2019 2018 2019 2018 Loan Principal Opening balance $ 213,600 $ - $ 101,250 $ - Issuance during the year 563,600 278,600 307,250 142,750 Conversion (397,600 ) (65,000 ) (287,500 ) (41,500 ) Repayment (75,600 ) - - - Outstanding at year-end $ 304,000 $ 213,600 $ 121,000 $ 101,250 Terms of Loan Annual interest rate 4% 12% 10% 10% Effective annual interest rate 139% - 5044% 4380% - 4932% 4338% - 5368% 3873% - 5658% Conversion price to common shares (i) (i) (ii) (ii) Remaining life (in months) 6 - 11 4 - 12 3 - 12 6 - 8 Consolidated Statements of Financial Position Carrying value of loan principal $ 39,993 $ 772 $ 23,429 $ 262 Interest payable 10,953 12,973 13,185 4,238 Convertible debentures $ 50,946 $ 13,745 $ 36,614 $ 4,500 Derivative liability $ 370,759 $ 190,274 $ 190,300 $ 89,328 Consolidated Statements of Operations and Comprehensive Loss Accretion expense $ 57,111 $ 2,496 $ 165,753 $ 264 Interest expense $ 27,053 $ 11,769 $ 21,916 $ 4,670 Loss on revaluation of derivative liability $ 196,842 $ 8,690 $ 294,673 $ 16,332 Loss on conversion of debentures $ 49,738 $ 3,652 $ 52,181 $ 10,513 Loss on extinguishment $ 2,219 $ - $ - $ - Consolidated Statements of Changes in Equity Amount of principal converted to common shares $ 397,600 $ 65,000 $ 287,500 $ 41,500 Amount of interest converted to common shares $ 23,100 $ - $ 21,969 $ 6,400 Number of common shares issued on conversion of convertible debentures 29,106,847 2,456,707 33,421,726 982,921 - Consolidated Statements of Cash Flow Amount of principal repaid in cash $ 75,600 $ - $ - $ - Amount of interest repaid in cash $ 5,973 $ - $ - $ - (i) (ii) (b) Convertible debentures outstanding as at October 31: (iii) (iv) 2019 2018 2019 2018 Loan Principal Opening balance $ - $ 100,200 $ 308,000 $ 343,000 Issuance during the year - 175,800 - 308,000 Conversion - (276,000 ) (308,000 ) (343,000 ) Outstanding at year-end $ - $ - $ - $ 308,000 Terms of Loan Annual interest rate n/a 12% 5% 5% Effective annual interest rate n/a 264% - 6002% 5234% 160% - 5242% Conversion price to common shares (iii) (iii) (iv) (iv) Remaining life (in months) n/a n/a n/a 1 - 5 Consolidated Statements of Financial Position Carrying value of loan principal $ - $ - $ - $ 26,755 Interest payable - - - 11,694 Convertible debentures $ - $ - $ - $ 38,449 Derivative liability $ - $ - $ - $ 218,596 Consolidated Statements of Operations and Comprehensive Loss Accretion expense $ - $ 61,453 $ 261,042 $ 212,655 Interest expense $ - $ 14,816 $ 22,443 $ 20,563 Loss (gain) on revaluation of derivative liability $ - $ 19,375 $ 11,451 $ 183,392 Loss on conversion of debentures $ - $ 43,426 $ - $ - Loss on extinguishment $ - $ - $ - $ - Consolidated Statements of Changes in Equity Amount of principal converted to common shares $ - $ 276,000 $ 308,000 $ 343,000 Amount of interest converted to common shares $ - $ 10,145 $ 18,339 $ 12,554 Number of common shares issued on conversion of convertible debentures - 6,076,094 19,510,390 5,934,267 (iii) (iv) (c) The fair value of the derivative liabilities is determined in accordance with the Black Scholes or binomial option-pricing models, depending on the circumstances. The underlying assumptions are as follows: 2019 2018 Share price $0.02 $0.03 Exercise price $0.01 - $0.11 $0.02 - $0.11 Volatility factor (based on historical volatility) 173% - 321% 168% - 297% Risk free interest rate 1.67% - 1.69% 1.74% - 2.22% Expected life of conversion features (in months) 0 - 12 0 - 12 Expected dividend yield 0% 0% CDN to USD exchange rate (as applicable) 0.7582 0.7609 Call value $0.00 - $0.02 $0.00 - $0.02 Volatility was estimated using the historical volatility of the Company's stock prices for common shares. |