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Debt
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block] Convertible Debt
On April 17, 2023, the Company entered into a Securities Purchase Agreement (the “LDA Purchase Agreement”) pursuant to which the Company issued to an investor, LDA Capital Limited (the “Investor”), a senior convertible promissory note having an aggregate principal amount of $1.0 million (the “LDA Note”), as amended April 25, 2023, and a common share purchase warrant (the “LDA Warrant”) to purchase up to 455,927 common shares of the Company (the “LDA Warrant Shares”). The Company received proceeds of approximately $0.8 million, which were net of fees associated with the transaction, on April 18, 2023 (the “Closing Date”), with an additional tranche of up to $2.0 million (the “Second Tranche”) to be provided to the Company, subject to certain conditions precedent, within five business days of the date on which an effective registration statement is filed to cover the resale of the conversion shares (as defined below) and the LDA Warrant Shares. Upon receipt of the Second Tranche, the Company shall issue an additional senior convertible promissory note with a principal amount equal to the amount of the Second Tranche, and a common share purchase warrant.
The LDA Note matures 24 months after issuance, bears interest at a rate of 7.5% per annum and is convertible into the Company's common shares (the “Conversion Shares”), at the Investor's election, at an initial conversion price equal to the greater of (i) $2.0832 per share, or (ii) 85% of the VWAPS (as defined in the LDA Note) during the five trading days prior to delivery of a conversion notice by the Investor, subject to adjustment for certain stock splits, stock combinations and dilutive share issuances. Commencing on the date that is 12 months from the date of issuance, the Company is required to pay the Investor back the amount of the outstanding principal in twelve consecutive monthly installments. The Company may prepay all, but not less than all, of the then outstanding principal amount of the LDA Note plus an additional prepayment amount equal to the greater of (i) the total amount of interest that would have been payable in respect of initial principal amount under the LDA Note from the issuance date through (A) its original maturity date or (B) if the date of applicable prepayment is prior to the date that is 120 days from the issuance date, the date that is 12 months from the issuance date, and (ii) the amount of interest that would have been payable in respect of initial principal amount under the LDA Note from the date of the applicable prepayment through (A) its original maturity date or (B) if the date of applicable prepayment is prior to the date that is 120 days from the issuance date, the date that is 12 months from the issuance date, at any time prior to the maturity date. The LDA Note contains a number of customary events of default. Additionally, the LDA Note is secured by certain property and equipment owned by the Company, pursuant to a security agreement between the Company and the Investor dated as of April 17, 2023. At June 30, 2023, the fair value balance of the LDA Note was $1,051,000.
As of June 30, 2023, the Company was not in compliance with a financial covenant of the LDA Note. Subsequent to June 30, 2023, the Company received a waiver for the financial covenant noncompliance.
The fair value of the LDA Note was estimated based on a pay-off scenario upon maturity using discount rates of 16.2% and 14.0% as of April 17, 2023 and June 30, 2023, respectively. The Company recorded a change in fair value adjustment of $51,000 for both the three and six months ended June 30, 2023.
The LDA Warrant is exercisable at an initial exercise price of $3.29 per share and expires three years from the date of issuance or earlier if the closing of a Fundamental Transaction occurs (defined as merger or consolidation, any sale of substantially all of the Company’s assets, any tender offer or exchange offer pursuant to which common shareholders can tender or exchange their shares for other securities, cash or property, as well as any reclassification of common shares into other securities, cash or property). On the date that is six months from the date of issuance of the LDA Warrant, the exercise price will be adjusted to the lower of (i) $3.29, and (ii) a price equal to 110% of the average of the VWAPS (as defined in the LDA Warrant) of the Company's common shares over five trading days preceding such date. Additionally, the exercise price of the LDA Warrant is subject to adjustment for certain stock splits, stock combinations and dilutive share issuances. Pursuant to the terms of the LDA Purchase Agreement, the Company will reserve for issuance 200% of the maximum aggregate number of common shares as are issuable upon repayment or conversion in full of the LDA Note and exercise in full of the LDA Warrant at any time.
The LDA Warrant contains a contingent put option. In the event of a Fundamental Transaction, the Investor may, at the Investor’s option, require the Company to purchase the LDA Warrant for an amount of cash equal to the Black Scholes value of the remaining unexercised portion of the warrant on the date of consummation of such Fundamental Transaction. The Company has recorded the warrant as a liability and will adjust the warrant liability to fair value each reporting period until settled.
The fair value of the LDA Warrant was measured using a Monte Carlo valuation model with the following assumptions:
April 17, 2023June 30, 2023
Common share price$2.98 $1.94 
Expected volatility120.0 %115.0 %
Risk-free interest rate3.8 %4.5%
On April 17, 2023, upon issuance of the LDA Note and LDA Warrant, which are accounted for as freestanding financial instruments, the Company determined that the aggregate fair value of $2.0 million for the instruments issued exceeds the net proceeds received under the transaction. Accordingly, the excess of the fair value over the proceeds received of $1.0 million was recognized as interest expense.