Debt | Note 5 - Debt The table below summarizes outstanding debt as of February 28, 2022 and November 30, 2021 (amounts are rounded to nearest thousand): February 28, 2022 November 30, 2021 Convertible Notes Payable: Principal value of 2021 Debentures $ 3,053,000 $ 3,506,000 Fair value of bifurcated contingent put option 941,000 867,000 Debt discount (698,000) (1,320,000) Convertible notes payable, net 3,296,000 3,053,000 Cash advances 50,000 — Total debt $ 3,346,000 $ 3,053,000 Convertible Notes Payable 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. On January 21, 2022, the Company issued 1,055,000 shares of common stock to convert $0.5 million of outstanding debt and interest. The conversion price was reduced to $0.50. The Company recognized a loss on debt extinguishment of approximately $0.2 million as a result of the reduction of conversion price for the three months ended February 28, 2022. 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. On December 15, 2021, the Company and the holder entered into a Mutual Release Agreement pursuant to which the holder agreed to add the $241,875 to the outstanding principal balance of July Debenture, for no consideration received by the Company, in order to resolve a breach of certain registration provisions of the securities purchase agreement. On February 9, 2022, the Company issued 522,648 shares of common stock to convert $0.2 million of outstanding debt. September Debenture On September 29, 2021, the Company entered into a securities purchase agreement with an accredited investor (“Lender”), pursuant to which the Company sold a convertible debenture (the “September Debenture”) in the principal amount of $2,200,000 with twelve-months term. The September Debenture includes an original issue discount of $185,000 and $15,000 for the payment of the Lender’s legal fees and carries an interest rate of 6% per annum. The Company also incurred other issuance cost of $247,350. On October 26, 2021, the September Debenture maturity date was extended for additional 3 months. The Company may prepay the September Debenture at 105% of the outstanding aggregate principal amount plus accrued interest within the first 60 days of issuance, at 112% of the outstanding aggregate principal amount plus accrued interest from 61-120 days after issuance and at 124% of the outstanding aggregate principal amount plus accrued interest from 121-180 days after issuance. The Debenture may not be prepaid after 180 days. The Lender has the right to convert all or any amount of the outstanding aggregate principal amount at any time at a fixed conversion price of $1.00 per share. The conversion price after six months shall be fixed to $0.50 per share. However, in the event the Company’s Common Stock trades below $0.50 per share for more than ten (10) consecutive trading days, the Lender is entitled to convert all or any amount of the outstanding aggregate principal amount into shares of the Company’s Common Stock at a Conversion Price for each share of Common Stock equal to 85% of the average of the 4 lowest VWAP’s in the prior 20 trading days. The fair value of the contingent put option in all outstanding debentures with the feature are revalued as of February 28, 2022 and November 30, 2021 based on the following weighted average key inputs: February 28, 2022 November 30, 2021 Strike price $ 0.64 $ 0.71 Terms (years) 0.6 0.8 Volatility $ 0.86 $ 0.71 Risk-free rate 0.7 % 0.2 % Dividend yield 0 % 0 % The following table presents changes in Level 3 liabilities measured at fair value for the three months ended February 28, 2022. 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, 2021 $ 867,000 Debt extinguishment (162,000) Change in fair value 236,000 Balance – February 28, 2022 $ 941,000 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 February 28, 2022 February 28, 2021 Interest expense based on the coupon interest rate of the outstanding debt $ 61,000 $ 10,000 Accretion of debt discount 352,000 40,000 Other 1,000 — Total interest expense $ 414,000 $ 50,000 Cash Advances Cash advances include cash provided by vendors or shareholders that is subject to repayment on demand. |