Quarterly report pursuant to Section 13 or 15(d)

Convertible Debt Obligations

Convertible Debt Obligations
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Convertible Debt Obligations



The Company’s convertible debt obligations are summarized below:


    June 30, 2020     December 31, 2019  
    Principal     Interest [1]     Total     Principal     Interest [1]     Total  
Convertible Notes   $ 1,358,420     $ 18,956     $ 1,377,376     $              -     $                -     $ -  
Total Convertible Debt Obligations   $ 1,358,420     $ 18,956     $ 1,377,376     $ -     $ -     $ -  


[1] Accrued interest is included as a component of accrued expenses on the accompanying condensed consolidated balance sheets.


During the six months ended June 30, 2020, the Company sold unsecured convertible promissory notes (“Convertible Notes”) in an aggregate amount of $1,358,420 to accredited investors who are all stockholders of the Company. The Convertible Notes mature on December 31, 2020 and bear interest at 7% per annum. Principal and interest outstanding under the Convertible Notes are convertible (i) automatically upon the closing of a firm commitment underwritten public offering registered pursuant to the Securities Act of 1933, as amended (a “Public Offering”, at a conversion price equal to 85% of the price per share of the Company’s common stock sold in the Public Offering (the “Mandatory Conversion Option”), or (ii) at the option of the holder at any time prior to the Public Offering at a conversion price equal to the closing price of the Company’s common stock on the day prior to conversion (the “Holder’s Conversion Option”). The Company incurred total interest expense of $15,595 and $18,956 related to this debt during the three and six months ended June 30, 2020, respectively.


The Company determined that the Holder’s Conversion Option represented a variable conversion feature with no floor. Accordingly, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby the Holder’s Conversion Option and all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.


As of June 30, 2020, the value of Holders’ Conversion Option was de minimis. The contingently adjustable, non-bifurcated beneficial conversion feature associated with the Mandatory Conversion Option of the Convertible Notes will be accounted for, if necessary, at the time the contingency is resolved upon the occurrence of the Public Offering.