Convertible Notes Payable - Related Party |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 | |||
Convertible Notes Payable - Related Party [Member] | |||
Debt Instrument [Line Items] | |||
Convertible Notes Payable - Related Party |
On April 16, 2021, the Company and Richard E. Uihlein entered into a debt financing arrangement whereby Mr. Uihlein loaned $10,000,000 to Company. In consideration for the loan, the Company issued a convertible promissory note (the “April Note”) in the principal amount of ten million dollars.
The April Note has a maturity date of April 16, 2025,
is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $5.00 per share at the option of the noteholder. The April Note bears interest at the rate of two percent (2%) per annum, compounded annually. For the year ended December 31, 2021, approximately $142,000
of interest expense was accrued and included with the principal in the financial statements.
The April Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent (2.5%) per quarter (10% per annum) (the
“Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the April Note into
the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative
liability and a debt discount on the April Note at its inception. The fair value of the contingent interest derivative liability was $420,000
and $495,000 at note inception (April 16, 2021) and December 31, 2021, respectively, and is recognized as a derivative liability in the
consolidated balance sheet. The change in the fair value of the derivative liability from April 16, 2021 to December 31, 2021 of $75,000
was charged to other expense for the period ended December 31, 2021. The amortization of the debt discount of $420,000 recorded initially
upon note inception of $74,000 was recorded as additional interest expense for the for the year ended December 31, 2021.
On September 17, 2021, the Company and Mr. Uihlein entered into a loan agreement in the aggregate of $20,000,000 (the “Loan Agreement”) to be funded in two closings and evidenced
by two separate unsecured convertible promissory notes. The first of the two promissory notes was also executed and delivered on September 17, 2021, (the “September Note”) to evidence the first loan in the principal amount of $10,000,000. The second closing under the Loan Agreement for the remaining $10,000,000 occurred on December 20, 2021.
The September Note has a maturity date of September 17, 2025,
is prepayable at the option of the Company in whole or in part at any time and is convertible into the Company’s common stock at a conversion price equal to $8.64 per share at the option of the noteholder. The September Note bears interest at the rate of two percent (2%) per annum, compounded annually. For the year ended December 31, 2021, approximately $58,000
of interest expense was accrued and included with the principal in the financial statements.
The September Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent (2.5%) per quarter (10% per annum) (the
“Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the September Note
into the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a
derivative liability and a debt discount on the September Note at its inception. The fair value of the contingent interest derivative liability was $433,000
and $250,000 at note inception (September 17, 2021) and December 31, 2021, respectively, and is recognized as a derivative liability in
the consolidated balance sheet. The change in the fair value of the derivative liability from September 17, 2021 to December 31, 2021 of ($183,000)
was recorded to other expense for the year ended December 31, 2021. The amortization of the debt discount of $433,000 recorded initially
upon note inception of $32,000 was recorded as additional interest expense for the for the year ended December 31, 2021.
On December 20, 2021, the second of the two promissory
notes under the Loan Agreement was executed and delivered, (the “December Note”) to evidence the second loan in the principal amount of $10,000,000.
The December Note has a maturity date of December 20, 2025, is prepayable at the option of the Company in whole or in part at any time
and is convertible into the Company’s common stock at a conversion price equal to $5.43 per share at the option of the noteholder. The
December Note bears interest at the rate of two percent (2%) per annum, compounded annually. For the year ended December 31, 2021,
approximately $7,000 of interest expense was accrued and included with the principal in the financial statements.
The December Note also includes a contingent interest component that requires the Company to pay additional interest at a rate of two and one-half percent (2.5%) per quarter (10% per annum) (the
“Additional Interest”) beginning on the date of issuance of this Note and ending on the maturity date, provided however, that such payment is only required if and only if the noteholder elects to convert the entire balance of the December Note into
the Company’s common stock on or prior to maturity. As the contingent event is not based on creditworthiness, such feature is not clearly and closely related to the host instrument and accordingly must be bifurcated and recognized as a derivative
liability and a debt discount on the December Note at its inception. The fair value of the contingent interest derivative liability was $415,000
and $385,000 at note inception (December 20, 2021) and December 31, 2021, respectively, and is recognized as a derivative liability in
the consolidated balance sheet. The change in the fair value of the derivative liability from December 20, 2021 to December 31, 2021 of ($30,000)
was recorded to other expense for the year ended December 31, 2021. The amortization of the debt discount of $415,000 recorded initially
upon note inception of $3,000 was recorded as additional interest expense for the for the year ended December 31, 2021.
The Company’s contractual cash obligations related to the outstanding convertible notes payable is a repayment of the April Note of the $10,000,000 plus accrued interest on April 16, 2025 and a repayment of the September Note of the $10,000,000 plus accrued interest on September 17, 2025 and a repayment of the December Note of the $10,000,000 plus accrued interest on December 30, 2025, unless converted at the option of the noteholder.
|