BriaCell Therapeutics Corp. Debt Disclosure

NOTE 4: LOANS

 

(a) Short-terms loans

 

During the year ended July 31, 2021, the Company received seven unsecured loans from directors and an officer in the total amount of $27,469. The loans all bore interest at 2.5% annually and were repayable on or before July 31, 2021.

 

During March 2021, all the above mentioned short-term loans and accrued interest were repaid.

 

Total interest expense in respect to all short-term loans for year ended July 31, 2022 and 2021 is nil and $5,429, respectively.

 

(b) Government grants

 

On April 24, 2020, the Company received a $32,560 (CAD$40,000) loan from the Canada Emergency Business Account (“CEBA Loan”). The CEBA Loan bears 0% interest until December 31, 2022. If the balance is not paid by December 31, 2022, the remaining balance will be converted to a 3-year term loan at 5% annual interest, paid monthly, effective January 1, 2023. The full balance must be repaid by no later than December 31, 2025. No principal payments required until December 31, 2022. Principal repayments can be voluntarily made at any time without fees or penalties. $8,140 loan forgiveness is available, provided the carrying value of $25,986 at December 31, 2020, and $24,420 is paid back between January 1, 2021 and December 31, 2022. The loan was recognized at the fair value based on an estimated market interest rate of 15%.

 

On December 13, 2021, the Company repaid the CEBA loan in the amounts of $24,420 and the balance was forgiven and recorded as a gain on the statements of operations and comprehensive loss.

 

For the year ended July 31, 2022 and 2021, the Company recorded an interest expense of nil and $3,650, respectively, being the interest accretion on the CEBA Loan.

 

On May 1, 2020 the Company received $127,030 as a loan from the Paycheck Protection Program in the United States (the “Program”) The terms of the Program provide that a portion of the loan may be forgiven, to the extent that the amounts spent during the eight week period following the first disbursement of the loan are incurred as follows: (i) payroll costs, (ii) interest payments on mortgages incurred before February 15, 2020, (iii) rent payments on leases in effect before February 15, 2020, and (iv) utility payments for which service began before February 15, 2020 (“Program Expenses”). The unforgiven part of the loan must be repaid within two years and bears interest at 1% per annum. The Company used the entire proceeds to pay program expenses and in August 2021, the loan was forgiven and amounts were set off against the related general and administrative expenses in the consolidated statements of operations and comprehensive loss.

 

For the year ended July 31, 2022 and 2021, the Company recorded an interest expense of nil and $3,300, respectively, being the interest accretion on the program.

 

 

BriaCell Therapeutics Corp

Notes to the Consolidated Financial Statements

For the Years Ended July 31, 2022 and 2021

(Expressed in US Dollars, except share and per share data and unless otherwise indicated)

 

NOTE 4: LOANS (Cont.)

 

(c) 2020 Convertible Loan

 

On November 16, 2020 (“Closing Date”), the Company closed a brokered private placement of an unsecured convertible debenture unit of the Company (the “Debenture Unit”) to a single subscriber, purchased at a price of $305,250, less an original discount of approximately 29.33%, for aggregate gross proceeds of $215,710.

 

The Debenture Unit was comprised of (A) $305,250 principal amount (“Principal Amount”) of a 5.0% convertible unsecured debenture of the Company (the “Debenture”), due on the earlier of (i) 5 years from the issue date; (ii) the Company receiving $1,628,000 or more by way of private placement or public offering; or (iii) such earlier date as the principal amount hereof may become due, subject to extension upon mutual agreement of the Company and the holder of the Debenture; and (B) 69,188 common share purchase warrants of the Company (“Debenture Warrants”).

 

The Debenture was convertible, at the option of the holder thereof, from the period beginning on May 16, 2021, until the repayment of the Debenture in full, into that number of Shares computed on the basis of the principal amount of the Debenture divided by the conversion price of $4.41 per Share. Each Debenture Warrant entitles the holder thereof to purchase one Share for a period of five (5) years from the Closing Date at a price of $4.41 per Debenture Warrant, subject to adjustment as set forth in the Warrants. Each Debenture Warrant may also be exercised by presentation and surrender of the Debenture Warrant to the Company with a written notice of the Subscriber’s intention to effect a cashless exercise.

 

In consideration for the services rendered by ThinkEquity, a division of Fordham Financial Management, Inc. (the “Broker”), the Broker received a cash commission of $21,571. As additional consideration, the Company also issued to the Broker, 4,890 non-transferable compensation warrants (the “Broker Warrants”). Each Broker Warrant is exercisable to acquire one Share at an exercise price of $4.41 at any time in whole or in part for a period of five (5) years from the Closing Date.

 

The Company has determined that the Debenture Unit contained the following freestanding financial instruments: The term loan and the warrants. The warrants and the Broker Warrants are not indexed to the Company’s own stock and were classified as liabilities, initially measured at fair value, and subsequently measured at fair value through earnings.

 

The Company has determined that the term loan contained embedded derivatives required to be bifurcated from the host debt instrument pursuant to ASC 815-15. In addition, since the conversion feature was not bifurcated, the Company concluded that the term loan also includes a beneficial conversion feature which was accounted for as an equity component.

 

As such, the proceeds were allocated to the warrants, bifurcated embedded derivatives and the equity component. The residual proceeds were allocated to the liability component. The cash commission and Broker Warrants were expensed in the statement of operations and comprehensive loss.

 

The Debenture’s net proceeds were $188,672. The value of the Broker Warrants was $14,838. The amount allocated to the warrants and embedded derivatives was $51,084 and $10,905, respectively. The amount allocated to the equity component was $127,156. The residual proceeds in the amount of $11,597 were allocated to the liability component. Total expenses relating to the Debenture were $26,907. The liability is carried at amortized cost using the effective interest method with an effective interest rate of 19.97% per annum. The fair value of the embedded derivatives, Debenture Warrants and the Broker Warrants issued with the Debentures were valued using the Black-Scholes option pricing model based on the following assumptions: volatility of 100% using the historical prices of the Company, risk-free interest rate of 0.49%, expected life of 5 years and share price of $4.25. During the year ended July 31, 2021, the Company recorded interest and accretion of expenses of $53,878, which were recorded as finance expense in the consolidated statements of operations and comprehensive loss. The fair value of the Debenture Warrants and the Broker warrants are recorded as liabilities and revalued at each reporting date.

 

On March 1, 2021, the Debenture was repaid and the Company recorded a charge in the consolidated statements of operations and comprehensive loss of $79,717 on the extinguishment of the Debenture.