Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.21.2
Debt
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Debt Debt
Multi-Draw Credit Agreement- Related Party
The Company’s Debt with Sciences consists of the following:
Conversion
Price		 As of September 30,
2021		 As of December 31,
2020
Total principal value of convertible debt—related party $ 0.40  $ 2,014,500  $ 2,014,500 
Unamortized debt discount (641,987) (1,079,821)
Unamortized debt issuance costs (2,357) (3,576)
Carrying value of total convertible debt - related party 1,370,156  931,103 
Total principal value of non-convertible debt—related party n/a 450,000  450,000 
Total carrying value of advances under the multi-draw credit agreement $ 1,820,156  $ 1,381,103 
On October 5, 2018, the Company entered into the Credit Agreement with Sciences, a related party (See Note 8). On April 29, 2020, the Company entered into the Amended Credit Agreement with Sciences, which amends and restates the Credit Agreement. For all pre-existing and new advances, the Amended Credit Agreement removed the change in control as an event of default. The amendments to the pre-existing advances were accounted for as a modification. For all advances made after the Credit Agreement was amended, advances will be convertible at a reduced conversion price of $0.25 per share of Common Stock, unless Sciences provides notice that the advance will not be convertible.
On March 29, 2021, the Company amended the Amended Credit Agreement to defer interest payments through the earlier of maturity or prepayment of the principal balance. On September 15, 2021, the Company further amended the Amended Credit Agreement to close the disbursement line. The amendments were considered a modification for accounting purposes.
Advances under the Amended Credit Agreement are unsecured, and bear interest at an annual rate of 7% and mature on October 5, 2022. At Sciences’ election, convertible advances and unpaid interest may be converted into common stock at the applicable fixed conversion price of the underlying advance, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc.
The Amended Credit Agreement provides for customary events of default which may result in the acceleration of the maturity of the advances in addition to, but not limited to, cross acceleration to certain other indebtedness of the Company. In the case of an event of default arising from specified events of bankruptcy or insolvency or reorganization, all outstanding advances will become due and payable immediately without further action or notice. If any other event of default under the Amended Credit Agreement occurs or is continuing, Sciences may, by written notice, terminate its commitment to make any advances and/or declare all the advances, including accrued interest, payable due immediately. If any amount under the Amended Credit Agreement is not paid when due, such overdue amount shall bear interest at an annual default interest rate of the applicable rate plus 10%, until such amount is paid in full.
In connection with each advance under the Amended Credit Agreement, the Company has agreed to issue to Sciences warrants to purchase shares of common stock in an amount equal to 50% of the number of shares of common stock that each advance may be converted into. The warrants have a term of five years and are immediately exercisable upon issuance. Under the Amended Credit Agreement, Sciences may issue notice that no warrants will be granted at the time of the advance request. The warrants issued under the Credit Agreement have an exercise price of $0.50 per share and any future warrants issued under the Amended Credit Agreement will have a reduced exercise price of $0.35 per share. The exercise prices are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events or upon any distributions of assets, including cash, stock or other property to the Company’s stockholders (See Note 3).
As of September 30, 2021, the unamortized debt discount on the convertible advances will be amortized over a remaining period of approximately 1.01 years. As of September 30, 2021, the fair value of the shares underlying the convertible advances under the Amended Credit Agreement was $528,806. As of September 30, 2021, the if-converted value did not exceed the principal balance.
PPP Loan
On April 24, 2020, the Company received funding from the PPP Loan Lender pursuant to the PPP of the CARES Act administered by the SBA for a principal amount of $116,700. The PPP Loan had an interest rate of 1.00% per year and funds from the PPP Loan could only be used by the Company for payroll costs, costs for continuing group healthcare benefits, mortgage interest payments, rent, utility and interest on any other debt obligations that were incurred before October 9, 2020.
On April 5, 2021, the Company submitted an application for the full forgiveness of the PPP Loan to the PPP Loan Lender for the full amount of the loan. On May 20, 2021, the Company received notification that the application was accepted and that the full amount of the PPP Loan including accrued interest was forgiven. During the nine months ended September 30, 2021, the Company has recorded a gain on forgiveness of the PPP loan in an amount of $117,953.
Interest Expense
The Company’s interest expense consists of the following:
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2021 2020 2021 2020
Related party interest expense – stated rate $ 44,086  $ 44,087  $ 130,824  $ 117,459 
PPP loan interest expense – stated rate —  294  445  511 
Non-cash interest expense:
Amortization of debt discount
 150,852  137,849  437,834  401,507 
Amortization of transaction costs
 420  384  1,219  1,117 
$ 195,358  $ 182,614  $ 570,322  $ 520,594