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Debt
 3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Debt

NOTE 8 – DEBT

Bank Lines of Credit

 

Bressner has three revolving lines of credit with German institutions, including UniCredit Bank and VR Bank with total availability of up to €2,200,000 (US$2,441,041) as of March 31, 2022.  Borrowing under the lines of credit bear interest at a variable rate of Euribor plus a stated rate.  The current rates as of March 31, 2022, for the lines of credit range from 3.10% to 4.0%, with the balances remaining open indefinitely or until occurrence of a defined change of control event.  There were no outstanding lines of credit balances as of March 31, 2022 and December 31, 2021.

Bressner has four term loans outstanding as of March 31, 2022, with an aggregate balance outstanding of €2,000,000 (US$2,219,128) as follows:

 

•

On February 1, 2022, Bressner converted €500,000 of its line of credit from VR Bank into a note payable, which bears interest at 1.95% with interest only payments to be paid on a quarterly basis. The note is due on August 1, 2022. The balance outstanding as of March 31, 2022, is €500,000 (US$554,782);

 

•

On February 16, 2022, Bressner converted €500,000 of its line of credit from UniCredit Bank into a note payable, which bears interest at 1.580% with interest only payments to be paid on a quarterly basis.

 

The note is due on August 16, 2022. The outstanding balance as of March 31, 2022, is €500,000 (US$554,782);

 

•

On June 18, 2021, Bressner converted €500,000 of its line of credit from UniCredit Bank into a note payable, which bears interest at 1.487% with interest only payments to be paid on a quarterly basis. The note was due on December 17, 2021, but has been extended through June 17, 2022, with accrued interest having been paid current as of the original maturity date.  Payment of the principal and all unpaid interest will be due upon maturity in June 2022. The outstanding balance as of March 31, 2022, is €500,000 (US$554,782);

 

•

On June 4, 2021, Bressner converted €500,000 of its line of credit from UniCredit Bank into a note payable, which bore interest at 1.55% with interest only payments to be paid on a quarterly basis.  The note matured on November 30, 2021, with a payment of principal and unpaid interest due upon maturity. The note was paid in full as of December 31, 2021;

 

•

On April 9, 2021, Bressner converted €500,000 of its line of credit from UniCredit Bank into a note payable, which bore interest at 1.60% with interest only payments to be paid on a quarterly basis.  The note was due on September 30, 2021, with a payment of principal and interest due upon maturity.  This loan was paid in full on September 30, 2021 with proceeds from a new note that bears interest at 1.685% with similar terms.  This new note had an original maturity date of March 31, 2022; however, this note was renewed and extended to September 30, 2022.  The balance outstanding on the new note as of March 31, 2022 was €500,000 (US$554,782), and as of December 31, 2021 was €500,000 (US$568,825);

 

•

On June 25, 2020, Bressner converted €500,000 of its line of credit from UniCredit Bank into a note payable, which bore interest at 1.87% interest and matured on June 18, 2021, with a balloon payment of principal and interest due upon maturity.  The amount outstanding was paid in full as of December 31, 2021; and

 

•

On April 9, 2020, Bressner converted €500,000 of its line of credit from UniCredit Bank into a note payable, which bore interest at 1.90% and matured on April 9, 2021, with a balloon payment of principal and interest due upon maturity. The amount outstanding was paid in full as of December 31, 2021.

On April 1, 2019, Bressner entered into a note payable in the amount of €500,000 (US$586,189), which bore interest at 2.25% and matured on March 30, 2021, with monthly payments of principal and interest of €22,232 (US$24,960). The note was paid in full as of December 31, 2021.

Notes Payable

In April 2019, the Company borrowed an aggregate of $350,000 from three individuals for a two-year period at an interest rate of 9.5%, which required the Company to make monthly principal and interest payments of $16,100 per month.  These loans were secured by the assets of the Company.  In connection with these loans, the Company issued to the noteholders warrants to purchase shares of the Company’s common stock in an amount equal to 10% of the original principal at a price per share equal to $2.15.  Accordingly, the Company issued to the noteholders warrants to purchase an aggregate of 16,276 shares of the Company’s common stock at an exercise price of $2.15 per share. The relative fair value of each warrant was $0.90.  The relative fair value of warrants was estimated using Black-Scholes with the following weighted-average assumptions: fair value of the Company’s common stock at issuance of $2.15 per share; five year contractual term; 44.60% volatility; 0.0% dividend rate; and a risk-free interest rate of 2.307%.  The total relative fair value of the warrants issued is $14,037.  These loans have matured, and all balances have been paid in full.  As such, the balances outstanding as of March 31, 2022 and December 31, 2021, were $0.

Notes Payable – Related Parties

In April 2019, the Company borrowed an aggregate of $1,150,000 from three individuals who serve on the Company’s board of directors for a two-year period at an interest rate of 9.5%, which required the Company to make monthly principal and interest payments of $52,900 per month.  These loans were secured by the assets of the Company.  In connection with these loans, the Company issued to the noteholders warrants to purchase shares of the Company’s common stock in an amount equal to 10% of the original principal at a price per share equal to $2.15.  Accordingly, the Company issued to the noteholders warrants to purchase an aggregate 53,490 shares of the Company’s common stock at an exercise price of $2.15 per share. The relative fair value of each warrant was $0.90.  The relative fair value of warrants was estimated using Black-Scholes with the following weighted-average assumptions: fair value of the Company’s common stock at issuance of $2.15 per share; five year contractual term; 42.60% volatility; 0.0% dividend rate; and a risk-free interest rate of 2.3067%.  The relative fair value of warrants issued is $46,121.  These loans have matured, and all balances have been paid in full.  As such, the balances outstanding as of March 31, 2022 and December 31, 2021 were $0.

Debt Discount

 

The relative fair value of warrants issued in connection with the notes payable described above were recorded as debt discount, decreasing notes payable and related-party notes payable and increasing additional paid-in-capital on the accompanying consolidated balance sheets.  The debt discounts are being amortized to interest expense over the term of the corresponding notes payable using the straight-line method, which approximates the effective interest method.  Amortization of debt discounts of $0 and $7,519 were recognized as interest expense for the three month periods ended March 31, 2022 and 2021, respectively.

Paycheck Protection Program Loan

On April 28, 2020, the Company received authorization pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as administered by the U.S. Small Business Administration (the “SBA”) for a “PPP” loan. On May 11, 2020, the loan was funded, and the Company received proceeds in the amount of $1,499,360 (the “PPP Loan”).

The PPP Loan, which took the form of a two-year promissory note (the “PPP Note”), was scheduled to mature on April 28, 2022 and bore interest at a rate of 1.0% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), was initially to commence on October 28, 2020. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The PPP Note provided for customary events of default, including, among others, those relating to failure to make payment, breaches of any term, obligation, covenant, or condition contained in the PPP Note and payment of unauthorized expenses or use of proceeds contrary to CARES Act rules.

The Company submitted an application with the lender to forgive the PPP Loan, in accordance with SBA Procedural Notice, Control No. 5000-20057, effective as of October 2, 2020.  On May 3, 2021, the Company received notification from the SBA that its PPP Loan of $1,499,360, plus accrued interest of $14,994, had been fully forgiven and such amount has been recognized as other income in the consolidated statement of operations.

 

Senior Secured Convertible Note

On April 20, 2020, the Company entered into a Securities Purchase Agreement with an institutional investor, providing for the issuance by the Company of Senior Secured Convertible Promissory Notes with a principal face value of up to $6,000,000.  The notes are, subject to certain conditions, convertible into shares of the Company’s common stock, par value $0.0001 per share, at an initial conversion price per share of $2.50. Notes issued under the Securities Purchase Agreement had a 10% original issue discount.

At the initial closing of this offering, the Company issued notes in the principal amount of $3,000,000 with a 10% original issue discount resulting in an aggregate purchase price of $2,700,000 at the initial closing.  The notes bore no interest rate (except upon event of default) and, unless earlier converted or redeemed, were scheduled to mature on April 1, 2022.

Pursuant to the Securities Purchase Agreement, the Company had the right to consummate additional closings of up to an additional $3,000,000, subject to the prior satisfaction of certain closing conditions. This right expired effective April 20, 2021, and the Company may no longer consummate additional closings under the Securities Purchase Agreement.

The notes were convertible at any time, in whole or in part, at the option of the investors, into shares of Company common stock at the initial conversion price of $2.50 per share. The conversion price was subject to adjustment for the issuances of securities at a price below the conversion price then in effect and for stock splits, combinations or similar events. If immediately following the close of business on the nine month anniversary of the issuance date of each note, the conversion price then in effect exceeded 135% of the volume weighted average price VWAP (the “Market Price”), the initial conversion price under any such note would be automatically lowered to the Market Price.

Commencing July 1, 2020, the Company made monthly amortization payments equal to 1/22nd of the initial principal, any accrued and unpaid interest and late charges and any deferred or accelerated amount, of such note, which may be satisfied in cash at a redemption price equal to 105% of such installment amount (110% of such installment amount on notes issued at additional closings).  The remaining balance of the notes of $2,590,909 was converted into Company common stock on March 31, 2022.

Subject to the satisfaction of certain equity conditions set forth in the notes, installment amounts could be satisfied in shares of our common stock, with such installment conversion at a conversion price equal to the lower of (i) the conversion price then in effect; and (ii) the greater of (x) the floor price of $1.00 (80% of the Nasdaq market price at date of purchase agreement) and (y) the lower of (I) 82.5% the volume weighted average price of our common stock on the trading day immediately before the applicable installment date and (II) 82.5% of the quotient of (A) the sum of the volume weighted average price of our common stock for each of the three (3) trading days with the lowest volume weighted average price of our common stock during the twenty (20) consecutive trading day period ending and including the trading day immediately prior to the applicable installment date, divided by (B) three (3). Shares of our common stock to be issued with respect to any such installment would be pre-delivered on the second trading day after the applicable installment notice date (as defined in the notes) with a true-up on the applicable installment date. The market value of any installment amount below the floor price would be cash settled on the applicable installment date.

Management evaluated the embedded conversion feature to determine whether bifurcation was required as a separate derivative liability.  Management first determined that the conversion feature was not within the scope of ASC 480. It then determined that the embedded derivative should be separated from the host instrument and accounted for as a derivative instrument because it met the criteria of ASC 815-15-25-1, primarily because the contract provides for delivery of an asset that puts the recipient in substantially the same position as net settlement.  However, due in part to the Company’s adoption of ASC 2017-11 on April 1, 2020, which allowed management to disregard the down round provisions of the conversion feature, management determined that a scope exception to derivative accounting existed by satisfying the additional conditions necessary for equity classification specified by ASC 815-10-15-74 and ASC 815-40-25.  As a result of management’s analysis, the conversion feature was not accounted for separately from the debt instrument and the Company will recognize the contingent beneficial conversion feature when, or if, such is triggered.

The original issue discount of 10% on the note was recorded as a debt discount, decreasing the note payable.  This debt discount is amortized to interest expense using the effective interest rate method over the term of the loan.  For the three months ended March 31, 2022 and 2021, total debt discount amortization was $1,161 and $50,928, respectively.  Such amounts are included in interest expense in the accompanying consolidated statements of operations.

Debt issuance costs in the amount of $316,274 related to this indebtedness were deducted from the face value of the note.  Such costs are amortized to interest expense using the effective interest rate method over the term of the loan.  Total debt issuance costs amortized during the three months ended March 31, 2022 and 2021, was $1,223 and $53,690, respectively.  Such amounts are included in interest expense in the accompanying consolidated statements of operations.

A summary of outstanding debt obligations as of March 31, 2022, is as follows:

 

Loan Description

 

Current

Interest Rate

 

 

Maturity

Date

 

Balance

(Euro)

 

 

Balance ($)

 

 

Current

Portion

 

 

Long-term

Portion

 

Domestic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible senior secured

   note

 

10% OID

 

 

April-22

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

€

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Foreign:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Uni Credit Bank AG

 

1.487%

 

 

June-22

 

€

500,000

 

 

$

554,782

 

 

$

554,782

 

 

$

-

 

Uni Credit Bank AG

 

1.580%

 

 

August-22

 

 

500,000

 

 

 

554,782

 

 

 

554,782

 

 

 

 

 

Uni Credit Bank AG

 

1.685%

 

 

September-22

 

 

500,000

 

 

 

554,782

 

 

 

554,782

 

 

 

 

 

VR Bank

 

1.950%

 

 

August-22

 

 

500,000

 

 

 

554,782

 

 

 

554,782

 

 

 

-

 

 

 

 

 

 

 

 

 

€

2,000,000

 

 

$

2,219,128

 

 

$

2,219,128

 

 

$

-

 

 

 

 

 

 

 

 

 

€

2,000,000

 

 

$

2,219,128

 

 

$

2,219,128

 

 

$

-

 

 

Outstanding debt obligations as of March 31, 2022, consist of the following:

 

Period Ended March 31, 2022

 

Convertible

Note

 

 

Foreign

 

 

Total

 

Current portion:

 

 

 

 

 

 

 

 

 

 

 

 

Principal

 

$

-

 

 

$

2,219,128

 

 

$

2,219,128

 

Less discount

 

 

 

 

 

 

-

 

 

 

-

 

Less loan origination costs

 

 

 

 

 

 

-

 

 

 

-

 

Net liability

 

$

-

 

 

$

2,219,128

 

 

$

2,219,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total future principal payments under notes payable and related party notes payable as of March 31, 2022, are as follows:

 

Period Ending March 31, 2023

 

Convertible

Note

 

 

Foreign

 

 

Total

 

 

Discount / Loan

Original Costs

 

Current portion of notes payable

 

$

-

 

 

$

2,219,128

 

 

$

2,219,128

 

 

$

-

 

Total minimum payments

 

$

-

 

 

$

2,219,128

 

 

$

2,219,128

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of notes

   payable

 

 

-

 

 

 

(2,219,128

)

 

 

(2,219,128

)

 

 

-

 

Notes payable, net of

   current portion

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-