Debt |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Debt Disclosure [Abstract] | |
| Debt Disclosure | DEBT CONVERTIBLE NOTES
On August 21, 2015, the Board of Directors approved the 2015 Note Subscription Agreement (the “2015 Notes”) authorizing financing through the sale and issuance of 2015 convertible promissory notes (the “Financing”) for an aggregate amount not to exceed $1,000,000, with a maturity date of August, 25, 2017, which was derived from the issuance of the first 2015 Note. The Company entered into a series of amendments over the years, of which the most recent during 2021 include the sixth amendment on March 22, 2021, expanding the definition of a Qualified Financing of at least $2,000,000 as defined in the 2015 Notes to include either preferred stock or common stock, followed by the seventh and final amendment on October 7, 2021, increasing the aggregate amount for issuance to $5,500,000. All amendments were updated in accordance with the 2015 Note Subscription Agreements and approved by the Board of Directors. The Company has accounted for the last amendment to the 2015 Notes in accordance with ASC 470-50-40-6, (modifications and exchanges), under modification accounting and there was no impact to the financial statements as a result of the amendment to the 2015 Notes.
The sale and purchase of the 2015 Notes take place at closing on the date of the agreements. At closing, the Company will deliver to the investor the 2015 Note to be purchased by such investor, against receipt by the Company of the corresponding purchase price. The 2015 Notes will be registered in each investor’s name in the Company’s records. The 2015 Notes accrue interest payable at the rate of eight percent (8%) and the conversion price is equal to seventy percent (70%) of the per share price at which shares of preferred stock or common stock is to be sold.
On November 10, 2021, as a result of the completion of the IPO (see Note 5) and as required under the terms of the 2015 Notes, the Company converted the entirety of the outstanding principal of $5,084,000 and interest accrued of $1,204,404 to 1,497,216 shares of common stock at the Conversion Price of $4.20 per share and issued the shares to the 2015 Note holders, fully satisfying the Company’s obligations.
The Company assessed the probability of a Qualified Financing occurring before maturity of the 2015 Notes to be greater than 50% (more likely than not). In accordance with the guidance ASC 480, the Company recorded the amount of the 2015 Notes’ 30% conversion discount of the sum of principal and accrued interest to the earliest of conversion date (if known) or maturity. As of December 31, 2021, the Company recorded approximately $1,886,000 as debt discount. As all of the debt converted at the IPO, the Company fully accreted the debt discount as interest expense as of December 31, 2021.
As of December 31, 2020, the Company had $3,369,000 in 2015 Notes, and $926,000 in accrued interest.
In 2019, the Company incurred financing fees of approximately $64,000. Under guidance ASC 835-30-35, these costs have been amortized and recognized as interest expense over the life of the 2015 Notes. During the year ended December 31, 2020, the Company amortized approximately $28,000 of the remaining balance as interest expense. There was no such expense during the year ended December 31, 2021.
SHORT TERM LOANS
During 2020, the Company settled its short term notes liability of $42,000. As settlement, the Company converted $22,000 into the 2015 Notes and the remaining $20,000, which included the amended $10,000 promissory note, a $6,000 advance and $4,000 in accrued interest, was repaid to the investors.
During 2020, the Company issued a 3% interest promissory note of approximately $30,000 due on December 31, 2021 or earlier under certain events as defined in the promissory note in exchange for a vendor balance in accounts payable. The promissory note plus interest was settled during the year ended December 31, 2021.
On April 21, 2020, the Company received loan proceeds in the amount of approximately $22,000 under the Paycheck Protection Program (“PPP”), which was included in other current liabilities as of December 31, 2020. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provided for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. Following the PPP guidelines, the Company filed for loan forgiveness in February 2021 and on March 4, 2021 the Small Business Administration approved the filing and forgave the loan. The Company recognized the gain on forgiveness in other income on the statements of operations during the year ended December 31, 2021.
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