XML 22 R12.htm IDEA: XBRL DOCUMENT v3.21.2
NOTE 6 — Secured Subordinated Convertible Notes Payable
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
NOTE 6 — Secured Subordinated Convertible Notes Payable

NOTE 6 — Secured Subordinated Convertible Notes Payable

 

On August 31, 2020, the Company completed a secured subordinated convertible note financing of $1,530,000, including $1,350,000 from officers, directors, and their family members. Because the financing involved such parties related to the Company, a special committee of the Board comprising the Board’s disinterested directors approved the financing.

 

The funds raised are used to increase the Company’s working capital balances. The secured subordinated convertible notes (the “Notes”) have a three-year term that accrue interest at 10% per annum and mature on August 30, 2023. The interest on the Notes is payable quarterly in cash. The holder of each Note may require the Company to repay the principal amount of the Note plus accrued interest at any time after August 31, 2021. The principal amount of each note is convertible at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $1.46 per share, which was the market closing price of the common stock on August 28, 2020. The Notes did not contain a beneficial conversion feature because the conversion price is higher than the market closing price on the date of issuance of the Notes . The Notes are secured by the assets of the Company and are subordinated to amounts outstanding under the Company’s working capital bank line of credit with Western Alliance Bank.

 

 

SOCKET MOBILE, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2021

 

Total issuance costs associated with the financing are $96,515, and the costs are presented in the balance sheet as a direct deduction from the original notes payable balance of $1,530,000 as a contra-liability. The issuance costs are amortized over three years, the term of the Notes , and the amortization expense is reported as interest expense. The amortization of debt discount for nine months ended September 30, 2021 was $24,819. The remaining debt discount of $63,424 will be amortized through August 31, 2023.

 

During the nine months ended September 30, 2021, two noteholders elected to convert Note principal of $130,000 into shares of the Company’s common stock at the conversion price.

 

Total interest expense recognized related to the Notes for the three and nine months ended September 30, 2021 was $43,560 and $131,281, respectively.