Outstanding Debt | Note 5 - Outstanding Debt Convertible Notes The table below summarizes outstanding convertible notes as of August 31, 2021 and November 30, 2020 (amounts are rounded to nearest thousand): August 31, 2021 November 30, 2020 Convertible Notes Payable: Principal value of 2020 Debenture $ 300,000 $ — Fair value of bifurcated contingent put option 39,000 — Debt discount (35,000) — Carrying value of 2020 Debenture 304,000 — Principal value of 2021 Debenture 1,306,000 — Fair value of bifurcated contingent put option 391,000 — Debt discount (811,000) — Carrying value of 2021 Debenture 886,000 — Principal value of 2019 August Debenture — 100,000 Debt discount — (8,000) Carrying value of 2019 August Debenture — 92,000 Total carrying value of convertible notes payable $ 1,190,000 $ 92,000 2020 Debenture On December 23, 2020, the Company issued a debenture for $0.5 million (the “2020 Debenture”) pursuant to a securities purchase agreement with an accredited investor (the “Holder”). The debenture has a maturity date of the earlier of (a) June 23, 2021, or (b) the closing of the next financing transaction, or series or transactions, pursuant to which the Company raises net proceeds of at least $1.0 million, or as may be extended at the option of the Holder. The 2020 Debenture may be converted at any time on or prior to maturity at the lower of $2.70 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the 2020 Debenture, the conversion price may never be less than $1.00. The debenture bears interest at the rate of 5.5% per annum, and on issuance, the Company paid to the holder a commitment fee equal to 2% of the amount of the debenture. On July 22, 2021, the Company entered into an amendment agreement to the securities purchase agreement with the Holder, pursuant to which, the floor price of the 2020 Debenture was reduced to $0.50 per share. Additionally, the maturity date of the 2020 Debenture was extended to December 31, 2021. The amendment was recognized as a debt extinguishment, resulting in a gain on debt extinguishment of approximately $15,000. 2021 Debentures February Debenture On February 12, 2021, the Company issued a debenture for $0.5 million (the “February Debenture”) pursuant to a securities purchase agreement with an accredited investor dated February 12, 2021. The February Debenture may be converted at any time on or prior to maturity at the lower of $1.15 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the 2020 Debenture, the conversion price may never be less than $1.00. The debenture has a maturity date of February 12, 2022, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The debenture bears interest at the rate of 5.5% per annum, and on issuance, the Company paid to the holder a commitment fee equal to 2% of the amount of the debenture. July Debenture On July 26, 2021, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “July Debenture”) in the principal amount of $806,250 and a warrant to purchase up to 645,000 shares of common stock (the “Warrant”) for a total purchase price of $750,000. The July Debenture has a maturity date of April 26, 2022, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The July Debenture carries an interest rate of 10% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 15% per annum from the due date until payment (the “Default Interest”). The Company may prepay the Debenture at 120% of the outstanding aggregate principal amount within the first 60 days of issuance and at 130% of the sum of the outstanding principal amount, the accrued and unpaid interest on the unpaid principal amount and any Default Interest from 61 to 180 days after issuance. The holder may convert the July Debenture in its sole discretion at any time on or prior to maturity at the lower of $1.00 or 85% of the average of the four (4) lowest VWAPs during the 20 Trading Days prior to the date of such calculation. The Warrant has an exercise price of $1.25 and may be exercised in cash or via cashless exercise, exercisable for five (5) years from issuance. The grant date relative fair value of the Warrant was estimated to be $253,000 as determined based on the relative fair value allocation of the proceeds received. The Warrant were valued using the Black-Scholes option pricing model using the following inputs: Strike price $ 1.25 Terms (years) 5.0 Volatility 112 % Risk-free rate 0.7 % Dividend yield 0 % Upon issuance of the 2020 Debenture and 2021 Debentures, the Company recognized a debt discount of approximately $978,000, resulting from the recognition of issuance costs of $170,000, beneficial conversion feature of $291,000, relative fair value of the Warrant of $253,000, and bifurcated embedded derivatives of $264,000. The contingent share-settled redemption feature and contingent prepayment provision within the 2020 Debenture and the 2021 Debenture are both contingent put options that are required to be separately measured at fair value, with subsequent changes in fair value recognized in the Condensed Consolidated Statement of Operations. The fair value estimate is a Level 3 measurement. The Company estimated the fair value of the prepayment provision by estimating the probability of the occurrence of a Triggering Date and applying the probability to the discounted maximum redemption premium for any given payment with the following key inputs: July 26, 2021 February 12, 2021 December 23, 2020 Strike price $ 1.00 $ 1.15 $ 2.70 Terms (years) 0.8 1.0 0.5 Volatility 62 % 92 % 92 % Risk-free rate 0.1 % 0.1 % 0.1 % Dividend yield 0 % 0 % 0 % The fair value of the contingent put option in all outstanding debentures with the feature are revalued as of August 31, 2021 based on the following weighted average key inputs: August 31, 2021 Strike price $ 1.36 Terms (years) 0.5 Volatility $ 0.66 Risk-free rate 0.1 % Dividend yield 0 % The following table presents changes in Level 3 liabilities measured at fair value for nine months ended August 31, 2021. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (amounts are rounded to nearest thousand). Balance – December 1, 2020 $ — Additional derivative liability 326,000 Debt extinguishment (25,000) Change in fair value 129,000 Balance – August 31, 2021 $ 430,000 Notes Payable – Related Parties On April 16, 2021, the Company entered into two unsecured promissory notes agreement (the “Notes”) with certain management personnel for an aggregate principal amount of $30,000. The Notes bear interest at 5% per annum and are payable by August 31, 2021. During the quarter ended August 31, 2021, the Company made full repayment of $30,000 to the management personnel, including all outstanding interest. Interest expense Interest expense, included in the accompanying Condensed Consolidated Statements of Operations, is comprised of the following for each period presented (amounts are rounded to nearest thousand): For the three months ended For the nine months ended August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020 Interest expense based on the coupon interest rate of the outstanding debt $ 21,000 $ 6,000 $ 46,000 $ 156,000 Accretion of debt discount 78,000 3,000 188,000 136,000 Total interest expense $ 99,000 $ 9,000 $ 234,000 $ 292,000 |