Convertible Debt

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Convertible Debt

Note 6. Convertible Debt

On December 16, 2020, the Company entered into a $20 million convertible debt financing agreement with Pontifax Medison Debt Financing (“Pontifax”), the healthcare-dedicated venture and debt fund of the Pontifax life science funds. Under the terms of the agreement with Pontifax, the Company will have access to up to $20 million in convertible debt financing in three tranches, which will mature on June 15, 2025 and have an interest only period for the first two years with an interest rate of 8.47% on borrowed amounts and an interest rate of 1% on amounts available but not borrowed as an unused line of credit fee. The agreement is secured by a lien covering substantially all of the Company’s assets, other than intellectual property. The agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, including on intellectual property, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. Upon the closing of this transaction, the Company accessed the first tranche of $10 million, and has the option to draw the second tranche of $5 million at any time over the next 12 months and the third tranche of $5 million upon filing of the SGX201 new drug application, subject to certain conditions. Interest expense incurred and paid in 2020 totaled $34,306. Deferred issuance cost incurred were $141,466. The Company amortized $1,205 of issuance costs during the year ended December 31, 2020. The net cost of $140,261 has been recorded as a reduction of the carrying value of the $10,000,000 convertible debt borrowed as of December 31, 2020.

Pontifax may elect to convert the outstanding loan drawn into shares of the Company’s common stock at any time prior to repayment at a conversion price of $4.10 per share. The Company also has the ability to force the conversion of the loan into shares of the Company’s common stock at the same conversion price, subject to certain conditions.

Principal and interest payments due, assuming no conversion over the next five years is as follows:

Year	Principal		Interest		Total
2021	$	-	$	897,000	$	897,000
2022		-		897,000		897,000
2023		4,000,000		769,138		4,769,138
2024		4,000,000		430,338		4,430,338
2025		2,000,000		110,566		2,110,566
Total	$	10,000,000	$	3,104,042	$	13,104,042

F-15

CARES Act Loan

On April 13, 2020, the Company was advised that one of its principal banks, JPMorgan Chase Bank, N.A., had approved a $417,830 loan (the “Loan”) under the PPP pursuant to the Coronavirus Aid, Relief and Economic Security Act that was signed into law on March 27, 2020.

As a U.S. small business, the Company qualified for the PPP, which allows businesses and nonprofits with fewer than 500 employees to obtain loans of up to $10 million to incentivize companies to maintain their workers as they manage the business disruptions caused by the COVID-19 pandemic. The PPP provides for loans for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The PPP loan proceeds may be used for eligible purposes, including payroll, benefits, rent and utilities.

The Loan, has a term of two years, is unsecured, and is guaranteed by the Small Business Administration. The short –term portion of the Loan is $324,979 and the long-term portion of the Loan is $92,851 with accrued interest expense of $2,730 as of December 31, 2020. The Loan bears interest at a fixed rate of 0.98% per annum, with the first ten months of interest and principal deferred. Some or all of the Loan may be forgiven if at least 60% of the Loan proceeds are used by the Company to cover payroll costs, including benefits and if the Company maintains its employment and compensation within certain parameters during the eight-week or twenty-four-week period following the Loan origination date and complies with other relevant conditions. The Company believes that it used the proceeds for purposes consistent with the PPP and expects to meet the conditions when the Company applies for forgiveness of the Loan, although forgiveness is not guaranteed.