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Convertible debentures | 12 Months Ended
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May 31, 2022
Debt Instruments [Abstract] |
Convertible debentures |
17. | Convertible debentures
The following table sets forth the net carrying amount of the convertible debentures:
|  | May 31, 2022 |  |  | May 31, 2021 |
5.25% Convertible Notes ("APHA 24") |  | $ | 216,753 |  |  | $ | 399,444 |
5.00% Convertible Notes ("TLRY 23") |  |  | 185,196 |  |  |  | 268,180 |
Total |  | $ | 401,949 |  |  | $ | 667,624 |
APHA 24
|  | May 31, 2022 |  |  | May 31, 2021 |
5.25% Contractual debenture |  | $ | 350,000 |  |  | $ | 350,000 |
Debt settlement |  |  | (90,760 | ) |  |  | (90,760 | )
Fair value adjustment |  |  | (42,487 | ) |  |  | 140,204 |
Net carrying amount of APHA 24 |  | $ | 216,753 |  |  | $ | 399,444 |
The APHA 24 convertible debentures, were entered into in April 2019, in the principal amount of $350,000, bears interest at a rate of 5.25% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, and matures on June 1, 2024, unless earlier converted. The APHA 24 is an unsecured obligation and ranks senior in right of payment to all indebtedness that is expressly subordinated in right of payment to APHA 24. The APHA 24 will rank equal in right of payment with all liabilities that are not subordinated. The APHA 24 is effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness. Holders of the APHA 24 may convert all or any portion of their Notes, in multiples of one thousand dollars principal amount, at their option at any time between December 1, 2023 to the maturity date. The initial conversion rate for the APHA 24 will be 89.31162364 shares of common stock per one thousand dollars principal amount of Notes, which will be settled in cash, common shares of Aphria or a combination thereof, at Tilray’s election. This is equivalent to an initial conversion price of approximately $11.20 per common share, subject to adjustments in certain events. In addition, holders of the APHA 24 may convert all or any portion of their Notes, in multiples of one thousand dollars principal amount, at their option at any time preceding December 1, 2023, if any of the following:
| (a) | the last reported sales price of the common shares for at least 20 trading days during a period of 30 consecutive trading days immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
| (b) | during the five-business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per one thousand dollars principal amount of the APHA 24 for each trading day of the measurement period is less than 98% of the product of the last reported sale price of the Company’s common shares and the conversion rate on each such trading day;
| (c) | the Company calls any or all of the APHA 24 for redemption or;
| (d) | upon occurrence of specified corporate event.
The Company may not redeem the APHA 24 prior to June 6, 2022, except upon the occurrence of certain changes in tax laws. On or after June 6, 2022, the Company may redeem for cash all or part of the APHA 24, at its option, if the last reported sale price of the Company’s common shares has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on and including trading day immediately preceding the date on which the Company provides notice of redemption. The redemption of the APHA 24 will be equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date. The Company elected the fair value option under ASC 825 Fair Value Measurements for the APHA 24. The APHA 24 was initially recognized at fair value on the balance sheet. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss). The overall change in fair value of the APHA 24 during the year ended May 31, 2022 was a decrease of $163,670 with a foreign exchange impact of $19,021 (2021 – increase of $170,453 and $32,586), which included contractual interest of $13,600 (2021 - $13,600). As at May 31, 2022, there was $259,400 principal outstanding (2021 - $259,400). TLRY 23
|  | May 31, |  |  | May 31, |
|  | 2022 |  |  | 2021 |
Opening balance |  | $ | 277,856 |  |  | $ | — |
Principal amount issued (paid) |  |  | (88,026 | ) |  |  | 277,856 |
Unamortized discount |  |  | (4,634 | ) |  |  | (9,676 | )
Net carrying amount |  | $ | 185,196 |  |  | $ | 268,180 |
The TLRY 23 bears interest at a rate of 5.00% per annum, payable semi-annually in arrears on April 1 and October 1 of each year. Additional interest may accrue on the TLRY 23 in specified circumstances. The TLRY 23 will mature on October 1, 2023, unless earlier repurchased, redeemed or converted. There are no principal payments required over the five-year term of the TLRY 23, except in the case of redemption or events of defaults. The TLRY 23 is an unsecured obligation and ranks senior in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the TLRY 23; equal in right of payment with any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations) of the Company’s current or future subsidiaries. The TLRY 23 includes customary covenants and sets forth certain events of default after which the convertible notes may be declared immediately due and payable, including certain types of bankruptcy or insolvency involving the Company. To the extent the Company so elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants, for the first 365 days after such event of default, consist exclusively of the right to receive additional interest on the notes. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election (the “cash conversion option”). The initial conversion rate for the convertible notes is 5.9735 shares of common stock per one thousand dollar principal amount of notes, which is equivalent to an initial conversion price of approximately $167.41 per share of common stock, which represents approximately 1,659,737 shares of common stock, based on the $277,856 aggregate principal amount of convertible notes outstanding as of May 31, 2022 (2021 - $nil). Throughout the term of the TLRY 23, the conversion rate may be adjusted upon the occurrence of certain events. Prior to the close of business on the business day immediately preceding April 1, 2023, the TLRY 23 will be convertible only under the specified circumstances. On or after April 1, 2023 until the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their TLRY 23, in multiples of one thousand dollars principal amount, at the option of the holder regardless of the aforementioned circumstances. The Company may from time to time seek to retire or purchase its TLRY 23, in open market purchases, privately negotiated transactions or otherwise. Such purchases or exchanges, if any, will depend on prevailing market conditions, the company's liquidity requirements, contractual restrictions and other factors. During the year, the Company purchased $88,026 of its TLRY 23. As of May 31, 2022, the TLRY 23 is not yet convertible. The convertible notes will become convertible upon the satisfaction of the above circumstances. The remaining unamortized debt discount related to the convertible notes as of May 31, 2022 will be accreted over the remaining term of the TLRY 23, which is approximately 16 months. As of May 31, 2022, the Company was in compliance with all the covenants set forth under the TLRY 23. During the year ended May 31, 2022, the Company recognized total interest expense of $18,860 (2021 – $1,585), which included contractual interest coupon of $14,684 (2021 - $1,158) and amortization of the discount of $4,176 (2021 - $427).

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