Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 1 –
Nature of Operations and Basis of Presentation
SeqLL Inc. was incorporated as a Delaware corporation on April 3, 2014.
On April 8, 2014, SeqLL Inc. acquired a 100% ownership interest in SeqLL, LLC (“Subsidiary”), a domestic limited liability
company formed on March 11, 2013 in the State of Massachusetts. SeqLL Inc. is a holding company of the Subsidiary (together the “Company”
or “SeqLL”) and is a life sciences company focused on the development and application of innovative genetic analysis technologies
and the monetization of that technology and related intellectual property. The Subsidiary owns technology to enable the analysis of large
volumes of genetic material by directly sequencing single molecules of DNA or RNA. The Subsidiary’s principal office is located
in Billerica, Massachusetts.
Initial Public Offering
On August
31, 2021, the Company completed its initial public offering (“IPO”) whereby it sold 3,060,000 units, each unit consisting
of one share of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price of $4.25 per
share (the “Warrants”), at a price to the public of $4.25 per unit. The gross proceeds from the IPO were approximately
$13 million and were offset by $3.2 million in offering costs, of which $1.6 million was paid in cash and $1.6 million
was issued in warrants to Maxim Group LLC (“Underwriter”) (see Note 8). In connection with the IPO, all of the outstanding
shares of the Company’s convertible preferred stock automatically converted into 3,130,622 shares of common stock (see
Note 9). Additionally, the outstanding convertible notes converted into 641,895 shares of common stock (see Note 7).
Pursuant to the Underwriting Agreement, the Company granted the Underwriter
a 45-day option to purchase up to 459,000 additional shares of common stock, and/or 459,000 additional Warrants, to cover over-allotments
in connection with the Offering. The Underwriter partially exercised this option and purchased 459,000 Warrants on August 31, 2021, at
$0.01 per Warrant. On September 29, 2021, the Company issued 189,000 shares of common stock to the underwriters at a price of $4.24 per
share from the exercise of the overallotment option, raising the net proceeds of approximately $730,000, net of offering costs.
Notice from the Nasdaq Stock Market
On June 24, 2022, SeqLL received notice from The
Nasdaq Stock Market (“Nasdaq”) indicating that, because the closing bid price for its common stock has fallen below $1.00
per share for 30 consecutive business days, the Company no longer complies with the $1.00 minimum bid price requirement for continued
listing.
The notification of noncompliance has no immediate effect on the listing
or trading of the Company’s common stock or its warrants to purchase common stock under the symbols “SQL” and “SQLLW,”
respectively. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for
a minimum of 10 consecutive business days.
If the Company does not regain compliance by December 18, 2022,
the Company may be eligible for an additional grace period. To qualify, the Company would be required to meet the continued listing
requirements for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with
the exception of the minimum bid price requirement, and provide written notice of its intention to cure the minimum bid price
deficiency during the second compliance period. If the Company meets these requirements, the Nasdaq staff will grant an additional
180 calendar days for the Company to regain compliance with the minimum bid price requirement. If the Nasdaq staff determines that
the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible for such additional compliance
period, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. The Company would have the
right to appeal a determination to delist its common stock, and the common stock would remain listed on The Nasdaq Capital Market
until the completion of the appeal process.
Risks and Uncertainties
The Company is subject to a number of risks similar to other companies
in its industries, including rapid technological change, competition from larger pharmaceutical and biotechnology companies and dependence
on key personnel.
Results of
operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial
markets, many of which are beyond the Company’s control. The Company’s business could be impacted by, among other
things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates, the ongoing effects of
the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military
conflict in the Ukraine. The Company cannot at this time fully predict the likelihood of one or more of the above events, their
duration or magnitude or the extent to which they may negatively impact the Company’s business.
Basis of Presentation
The unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, SeqLL, LLC. All intercompany accounts and transactions have been eliminated in
consolidation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the same basis
as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only
normal recurring adjustments, necessary for the fair presentation of the Company’s condensed consolidated financial position as
of June 30, 2022 and its results of operations for the three- and six-months ended June 30, 2022 and 2021, and changes in shareholders’
equity and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of operations for the three-
and six-months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31,
2022. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 2021 filed with the Securities and Exchange Commission.
Note 2 – Significant Accounting Policies
During the six-month period ended June 30,
2022, there were no changes to the significant accounting policies in relation to what was described in the Annual
Report on Form 10-K for the year ended December 31, 2021, other than the items noted in the Recently Adopted Accounting
Standards section below.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America (“U.S. GAAP”), requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of expenses during the reporting period. Significant estimates include but are not limited to stock-based compensation
expense and research and development accruals. Actual results could differ from those estimates and changes in estimates may occur.
Inventory
Inventory consists of finished goods, work-in-process and raw materials
and is valued at the lower of cost or net realizable value, determined by the first-in, first-out (“FIFO”) method. As the
Company manufactures the finished goods and work-in-process materials, overhead costs are included in inventory. The Company evaluates
the carrying cost of finished goods, work-in-process and raw materials items. To the extent that such costs exceed future demand estimates
and /or exhibit historical turnover at rates less than current inventory levels, the Company reduces the carrying value of the applicable
inventories. Inventory consisted of the following:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Raw materials | |
$ | 117,498 | | |
$ | 91,995 | |
Work in process | |
| 129,246 | | |
| 132,160 | |
Total inventory | |
$ | 246,744 | | |
$ | 224,155 | |
Stock-based Compensation
The Company’s share-based compensation program grant awards include
stock options and restricted stock awards. The fair value of stock option grants is estimated as of the date of the grant using the Black-Scholes
option pricing model. The fair value of restricted stock awards is based on the fair value of the Company’s common stock on the
date of the grant. The fair value of the stock-based awards are then expensed over the requisite service period, generally the vesting
period, for each award.
The Company’s expected stock price volatility assumption is based
on the volatility of comparable public companies. The expected term of a stock option granted to employees and directors (including non-employee
directors) is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the
expected term is the contractual term. The risk-free interest rate is based on the yield of U.S. Treasury securities consistent with the
life of the option. No dividend yield was assumed as the Company does not pay dividends on its common stock. The Company recognizes forfeitures
related to stock-based awards as they occur.
The Company has periodically granted stock options and restricted stock
awards to consultants for services, pursuant to the Company’s stock plans at the fair market value on the respective dates of grant.
Should the Company terminate any of its consulting agreements, the unvested options underlying the agreements would be cancelled. For
awards granted to consultants and non-employees, compensation expense is recognized over the vesting period of the awards, which is generally
the period services are rendered by such consultants and non-employees.
The assumptions used in determining the fair value of share-based awards
granted during the six-months ended June 30, 2022 are as follows:
| |
June 30, 2022 | |
Risk-free interest rate | |
| 1.64% | |
Expected option life | |
| 6 – 6.1 years | |
Expected dividend yield | |
| 0% | |
Expected stock price volatility | |
| 54% | |
Segments
The Company operates in a single business segment that includes the
design, development and manufacturing of genetic analysis technologies.
Leases
In the first quarter of 2022, the Company adopted
ASU No. 2016-02, Leases (Topic 842) . The Company assesses its contracts at inception to determine whether the contract contains
a lease, including evaluation of whether the contract conveys the right to control an explicitly or implicitly identified asset for a
period of time. The Company has recognized right-of-use assets and lease liabilities that represent the net present value of future operating
lease payments utilizing a discount rate corresponding to the Company’s incremental borrowing rate and amortizing over the
remaining terms of the leases. The Company accounts for the leases of less than 12 months as short-term leases. See the Recently
Adopted Accounting Standards below for additional information related to the adoption of this accounting standard.
Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the
weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net
loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined
using the treasury stock and if-converted methods. Dilutive common stock equivalents are comprised of convertible preferred stock, convertible
promissory notes, options outstanding under the Company’s stock option plan and warrants. For all periods presented, there is no
difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities
would be antidilutive.
The following potential shares of common stock were not considered
in the computation of diluted net loss per share as their effect would have been antidilutive:
| |
June 30, | |
| |
2022 | | |
2021 | |
Convertible preferred stock | |
| - | | |
| 5,791,665 | |
Convertible promissory notes | |
| - | | |
| 641,895 | |
Stock options | |
| 2,003,919 | | |
| 818,915 | |
Warrants for common stock | |
| 4,388,185 | | |
| 711,946 | |
Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts
on an entity’s own equity. This ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.
It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because
of specific settlement provisions. In addition, this ASU modifies how particular convertible instruments and certain contracts that may
be settled in cash or shares impact the diluted EPS computation. The amendments in this ASU are effective for the public companies for
fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but
no earlier than fiscal years beginning after December 15, 2020. The Company adopted this standard on January 1, 2022, which had no material
impact to the Company’s condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (“ASU 2016-02”) which establishes new accounting and disclosure requirements for leases. ASU No. 2016-02 requires
recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease
term, generally on a straight-line basis. ASU 2016-02 requires classification of all cash payments within operating activities in the
statement of cash flows. Disclosures are required to provide the amount, timing and uncertainty of cash flows arising from leases. The
Company adopted ASU 2016-02 in the first quarter of 2022 using the effective date approach to recognize and measure leases as of the adoption
date. The Company has elected to utilize the available practical expedient to not separate lease components from non-lease components
as well as the package of practical expedients that allows the Company not to reassess (1) whether any expired or existing contracts as
of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3)
initial direct costs for any existing leases as of the adoption date. At the date of adoption on January 1, 2022, this guidance had no
impact to the Company’s condensed consolidated financial statements.
Recently Issued Accounting Standards
The Company does not believe that other recently
issued but not yet effective accounting pronouncements are expected to have a material effect on the Company’s consolidated financial
statements.
Note 3 – Accrued Expenses
Accrued expenses consisted of the following:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Accrued interest | |
$ | 272,445 | | |
$ | 216,073 | |
Other | |
| 15,245 | | |
| 95,332 | |
| |
$ | 287,690 | | |
$ | 311,405 | |
Note
4 – Fair Value Measurements
The accounting
guidance defines fair value, establishes a consistent framework for measuring fair value and requires disclosure for each major asset
and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing
the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
Level 1: |
Observable inputs such as quoted prices in active markets. |
|
Level 2: |
Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. |
|
Level 3: |
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
As of June
30, 2022, the Company had $5,946,573 of investments in money-market funds, included on its balance sheet within Cash and cash equivalents.
The fair value of these investments was determined with Level 1 inputs through references to quoted market prices.
Liabilities
measured at fair value on a recurring basis at June 30, 2021 are summarized in the table below.
| |
June 30, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Convertible notes | |
$ | - | | |
$ | - | | |
$ | 3,170,422 | | |
$ | - | |
| |
$ | - | | |
$ | - | | |
$ | 3,170,422 | | |
$ | - | |
The table below
presents the changes in Level 3 liabilities measured at fair value on a recurring basis.
| |
Convertible Notes | |
Balance at December 31, 2020 | |
$ | - | |
Issuance of Amended Notes | |
| 3,168,236 | |
Change in fair value of convertible notes | |
| 2,186 | |
Balance at June 30, 2021 | |
$ | 3,170,422 | |
The interest expense
for the period between in the date of the Conversion Agreements related to the Amended Notes (see Note 7) and June 30, 2021 of
$53,543 is included in the change in fair value of the Amended Notes.
There were
no assets or liabilities measured at fair value on a non-recurring basis during the three- and six- months ended June 30, 2022 or 2021.
The carrying
values of financial instruments such as accounts receivable, net, other receivables, accounts payable, and accrued expenses approximated
fair value as of June 30, 2022 and December 31, 2021 due to their short-term maturities.
The carrying value of the Company’s
Non-Convertible Promissory Note approximated its fair value as of June 30, 2022 and December 31, 2021.
Note 5 – Stock Option Plan
The Company’s 2014 Equity Incentive Plan
(the “2014 Plan”) permits the grant of options for its common stock and shares of common stock to its employees, board members
and consultants for up to 3,500,000 shares.
As of June 30, 2022, there were 1,496,081 shares
available for future issuance under the 2014 Plan. Generally, option awards are granted with an exercise price equal to the fair value
of the Company’s stock at the date of grant and vest over a period of three to four years. No option may have a term in excess of
ten years from the option grant date. Certain option and share awards provide for accelerated vesting if there is a change in control
(as defined by the 2014 Plan). The weighted average grant date fair value of options granted in the six-month period ended June 30, 2022
was $0.89 per share. No option awards were granted during the six months ended June 30, 2021.
The stock option activity for the period ended
June 30, 2022 is as follows:
| |
Number of Options | | |
Weighted- Average Exercise Price per Share | | |
Weighted Average Remaining Contractual Term (in Years) | |
Outstanding as of December 31, 2021 | |
| 918,919 | | |
$ | 2.09 | | |
| 5.79 | |
Granted | |
| 1,085,000 | | |
$ | 1.71 | | |
| | |
Outstanding of June 30, 2022 | |
| 2,003,919 | | |
$ | 1.88 | | |
| 7.59 | |
Exercisable at June 30, 2022 | |
| 918,412 | | |
$ | 2.09 | | |
| 5.29 | |
During the three months ended June 30, 2022 and
2021, the Company recorded $66,995 and $3,192, respectively, of stock-based compensation associated with vesting of stock options, of
which $46,393 and $3,192 were included in general and administrative
expenses for the three months ended June 30, 2022 and 2021, respectively, and $20,602 and $0
were included in research and development expenses for the three months ended June 30, 2022 and 2021, respectively.
During the six months ended June 30, 2022 and 2021,
the Company recorded $122,909 and $4,199, respectively, of stock-based compensation associated with vesting of stock options, of which
$85,139 and $4,199 were included in general and administrative
expenses for the six months ended June 30, 2022 and 2021, respectively, and $37,770 and $0
were included in research and development expenses for the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022, there was approximately $844,804
of unrecognized compensation expense related to unvested share-based compensation awards, which will be recognized over a weighted average
period of approximately 1.75 years.
Note 6 – Related Party Transactions
At June 30, 2022 and December 31, 2021, the Company had the following
outstanding payables to its shareholders for past services, which are included within the Company’s accounts payable above:
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Genomic Diagnostic Technologies | |
$ | 11,525 | | |
$ | 23,725 | |
St. Laurent Institute | |
| 245,399 | | |
| 313,679 | |
St. Laurent Realty, Inc. | |
| 7,558 | | |
| 27,913 | |
Total related party payables | |
$ | 264,482 | | |
$ | 365,317 | |
The
above entities are affiliated with (1) William C. St. Laurent, a former member of the Company’s board of directors, (2)
relatives of Mr. St. Laurent or (3) entities controlled by the St. Laurent family, who are controlling shareholders of the Company.
St. Laurent Realty, Inc. and Genomic Diagnostic Technologies assisted the Company by previously providing corporate accounting
support; St. Laurent Institute, a non-for-profit company, provided bioinformatics specialist support for certain sequencing
services.
Note 7 – Notes Payable
The Company
entered into a series of convertible promissory notes (the “Convertible Notes”) through April 8, 2019, with certain preferred
stockholders amounting to $905,000. The Convertible Notes had a one-year term and accrued interest at 10% per annum. The Convertible Notes
were convertible at the lower of $3.10 per share or a 20% discount to the share price paid by the purchasers of equity securities in the
Company’s next Qualified Financing, as defined in the convertible note agreement.
From April
29, 2019, to April 29, 2020, the Company entered into a series of non-convertible promissory notes (the “Promissory Notes”)
with a certain preferred stockholder amounting to $1,375,000. The Promissory Notes had a one-year term with interest accruing at 10% per
annum.
In November
and December 2020, the Company issued senior secured convertible promissory notes to a third-party investor amounting to $200,000. These
notes accrued interest at 10% per annum, were to be repaid at the earlier of December 31, 2022, or the Company’s next qualified
financing of a minimum of $7.5 million (as defined in the notes agreement), and were convertible at $3.75 per share.
On December
31, 2020, the Company issued a non-convertible promissory note to St. Laurent Investments LLC amounting to $426,020 due July 31, 2022,
bearing 10% interest per annum in exchange for the accrued interest on all its notes of the Company outstanding through that date.
From January
to March 2021, the Company issued senior secured convertible promissory notes to investors for total proceeds of $250,000. The Convertible
Notes accrued interest at 10% per annum, matured at the earlier of December 31, 2022, or the Company’s next qualified equity offering
of a minimum of $7.5 million, and were convertible at $3.75 per share.
On February
3, 2021, the preferred stockholder and the holder of $2,910,710 in the Convertible Notes and Promissory Notes of the Company granted the
Company an extension on all its notes of the Company to be repaid on or before July 31, 2022. This amendment was accounted for on a prospective
basis under the troubled debt restructuring guidance.
In March
2021, the Company entered into a series of agreements with the noteholders to automatically convert $786,730 in outstanding Promissory
Notes and $1,305,000 in Convertible Notes (together, “Amended Notes”), to common stock upon the closing of the IPO (“Conversion
Agreements”), of which $1,552,683 was held by St. Laurent Investments, LLC and its affiliates. Under the terms of the conversion
agreements, $826,020 and $1,265,710 in Amended Notes were to be converted at the closing of the IPO based on the $3.75 and $3.10 conversion
prices, respectively. Since the automatic conversion could result in a material benefit to the noteholders, this amendment was deemed
substantive and was accounted for as an extinguishment of debt. Accordingly, the Company recognized a loss on extinguishment of debt totaling
$934,257 in the consolidated statement of operations for the three months ended March 2021, which represented the excess of the fair value
of the Amended Notes totaling $3,118,235 over their carrying value of $2,183,978. The Company elected the option to account for the Amended
Notes at fair value, with the changes in fair value recognized in the statement of operations. The fair value of the Amended Notes was
estimated using probability weighted expected payouts under various settlement scenarios, discounted to their present value based on the
estimated effective rate of return.
On April
29, 2021, the Company entered into an agreement with a noteholder to automatically convert an additional $50,000 in outstanding Amended
Notes, including any accrued interest, to common stock upon the closing of the IPO at the conversion price of $3.75 per share.
At the IPO
date, the Amended Notes automatically converted based on their original terms into 641,895 shares of common stock. The fair value of the
Amended Notes of $3,364,198 immediately prior to the conversion, less a $141,884 cash payment related to the accrued interest, was reclassified
into the additional paid in capital on the condensed consolidated balance sheet. The fair value of the Amended Notes at the conversion
date was estimated based on the fair value of the common stock issued upon the conversion.
The Company
recognized $195,962 loss due to the change in fair value of the Amended Notes between the amendment date and their conversion at the IPO
date.
In October
2021, the Company entered into an agreement with St. Laurent Investments LLC to reduce the interest on $1,375,000 principal amount of
the Promissory Notes from 10% to 5% per year starting on October 1, 2021. The Company accounted for this transaction as a modification
on a prospective basis.
In October
2021, the Company repaid $270,000 of the Promissory Notes to William C. St Laurent in cash.
In connection
with all the Convertible Notes and Promissory Notes issued during 2021 and 2020, the Company issued warrants to noteholders to purchase
the total of 66,665 and 53,333 shares of the Company’s common stock, including 11,466 to the placement agent (see Note 8). The fair
values of these warrants were immaterial at issuance.
In June 2022,
the Company entered into an agreement with St. Laurent Investments LLC to extend the maturity date of the $1,375,000 Promissory Note to
July 31, 2024. The Company accounted for this transaction as a modification on a prospective basis.
For the three months ended June 30, 2022 and 2021,
interest expense was $39,566 and $41,126, respectively.
For the six months ended June 30, 2022 and 2021,
interest expense was $56,372 and $148,927, respectively.
Note 8 – Common Stock Warrants
The following table summarizes information with
regard to outstanding warrants to purchase the Company’s common stock as of June 30, 2022:
Issuance Date | |
Number of Shares Issuable Upon Exercise of Outstanding Warrants | | |
Exercise Price | | |
Expiration Date |
8/30/2018 | |
| 3,088 | | |
$ | 3.10 | | |
8/29/2023 |
9/30/2018 | |
| 60,506 | | |
$ | 3.10 | | |
9/29/2023 |
9/30/2018 | |
| 486,486 | | |
$ | 2.16 | | |
9/29/2023 |
10/17/2018 | |
| 1,157 | | |
$ | 3.10 | | |
10/16/2023 |
11/2/2018 | |
| 964 | | |
$ | 3.10 | | |
11/1/2023 |
11/9/2018 | |
| 964 | | |
$ | 3.10 | | |
11/8/2023 |
11/16/2018 | |
| 964 | | |
$ | 3.10 | | |
11/15/2023 |
11/29/2018 | |
| 964 | | |
$ | 3.10 | | |
11/28/2023 |
12/21/2018 | |
| 964 | | |
$ | 3.10 | | |
12/20/2023 |
12/27/2018 | |
| 964 | | |
$ | 3.10 | | |
12/26/2023 |
1/31/2019 | |
| 1,930 | | |
$ | 3.10 | | |
1/30/2024 |
2/7/2019 | |
| 1,640 | | |
$ | 3.10 | | |
2/6/2024 |
2/21/2019 | |
| 1,640 | | |
$ | 3.10 | | |
2/20/2024 |
3/20/2019 | |
| 3,378 | | |
$ | 3.10 | | |
3/18/2024 |
4/8/2019 | |
| 1,930 | | |
$ | 3.10 | | |
4/6/2024 |
11/19/2020 | |
| 53,333 | | |
$ | 4.10 | | |
6/30/2024 |
11/19/2020 | |
| 8,533 | | |
$ | 4.10 | | |
6/30/2024 |
1/8/2021 | |
| 13,333 | | |
$ | 4.10 | | |
6/30/2024 |
1/11/2021 | |
| 26,666 | | |
$ | 4.10 | | |
6/30/2024 |
2/13/2021 | |
| 13,333 | | |
$ | 4.10 | | |
6/30/2024 |
3/16/2021 | |
| 10,665 | | |
$ | 4.10 | | |
6/30/2024 |
3/16/2021 | |
| 13,333 | | |
$ | 4.10 | | |
6/30/2024 |
8/31/2021 | |
| 3,519,000 | | |
$ | 4.25 | | |
8/31/2026 |
8/31/2021 | |
| 153,000 | | |
$ | 4.675 | | |
8/26/2026 |
9/29/2021 | |
| 9,450 | | |
$ | 4.675 | | |
8/26/2026 |
| |
| 4,388,185 | | |
| | | |
|
During the six-month period ended June 30, 2022,
warrants to purchase 5,211 shares of common stock with an exercise price of $3.10 expired.
Note
9 – Preferred Stock
The Company
had outstanding preferred stock as of December 31, 2020:
| |
Shares authorized | | |
Shares issued | | |
Issuance price per share | |
Series A-1 Convertible Preferred Stock | |
| | | |
| 3,125,000 | | |
$ | 0.32 | |
Series A-2 Convertible Preferred Stock | |
| | | |
| 2,666,665 | | |
$ | 1.68 | |
Series A Preferred stock | |
| 20,000,000 | | |
| 5,791,665 | | |
| | |
The Series
A-1 Preferred Stock (“Series A-1”) and Series A-2 Preferred Stock (“Series A-2”) collectively the Preferred Stock”,
could be converted at any time at the election of the holder into common stock at an initial conversion price determined by dividing the
Series A-1 original issue price of $0.59, as amended, by the Series A-1 conversion price of $0.59; and the Series A-2 original issue price
of $3.10, as amended, by the Series A-2 conversion price of $3.10; both were subject to adjustment for stock splits, stock combinations
and the like, and to a weighted-average adjustment for future issuances of common stock, warrants or rights to purchase common stock or
securities convertible into common stock for a consideration per share that is less than the then-applicable conversion price, subject
to certain exceptions listed in the Charter.
The Preferred
Stock was subject to automatic conversion upon (i) the closing of an initial public offering of the common stock at a price per share
equal to at least $9.25 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalization or the like)
in an underwritten public offering in which the Company raised gross proceeds of at least $10 million or (ii) the consent of holders
of at least a majority of the then-outstanding shares of Preferred Stock voting together as a single class.
In connection
with the IPO, all of the outstanding shares of the Company’s convertible preferred stock, upon the consent of the holders of a majority
of the Preferred Stock, automatically converted into 3,130,622 shares of common stock.
Note 10 – Marketable Securities
In January 2022, the Company sold all of its marketable
securities with the original cost $5,988,462. The Company realized $106,324 loss on the sale of these securities and recorded the unrealized
gain of $54,508 on its investments in marketable securities for the six months ended June 30, 2022.
Note 11 – Commitments and Contingencies
The Company’s office space lease in Woburn,
Massachusetts (the “Woburn Lease”) for the Company’s corporate headquarters was on a month-to-month basis since November
2020 and was terminated in February 2022. The rent expense for this lease was $0 and $50,129 for the three months ended June 30, 2022
and 2021, respectively, and $14,239 and $91,966 for the six months ended June 30, 2022 and 2021, respectively.
On February 2, 2022, the Company entered into a
lease agreement for approximately 15,638 square feet of its new corporate office space in Billerica, Massachusetts (the “Billerica
Lease”). The Billerica Lease has a term of 92 months from its effective date and included access to certain additional office space
until August 1, 2022 (the “Swing Space”). In addition, the Company is required to share in certain taxes and operating expenses
of the Billerica Lease.
The Billerica Lease is
classified as an operating lease. At the inception date of the Billerica Lease, the Company recorded a right-of-use asset of $1,481,646
in operating lease right-of-use asset, as well as a lease liability of $12,222 in current liabilities and $1,547,614 in long-term liabilities.
The operating lease right-of use asset is less than that of the Company’s lease liabilities as of the lease inception date. This
is due to the fact that the Company as part of the Billerica Lease was allowed certain tenant improvement allowances, which amounted to
$78,190 at lease inception. This lease liability represented the net present value of future lease payments for the lease utilizing a
discount rate of 5.98%, which corresponded to the Company’s incremental borrowing rate. As of June 30, 2022, the remaining lease
term was 7.3 years.
The Company recorded expense related to the Billerica Lease in the
amount of $62,289 and $103,816 for the three-and six-months ended June 30, 2022, respectively.
During the three and six months ended June 30, 2022, the Company made
cash payments of $23,550 and $37,568, respectively, for amounts included in the measurement of lease liabilities.
The following table reconciles the undiscounted lease liabilities to
the total lease liabilities recognized on the condensed consolidated balance sheet as of June 30, 2022:
2022 (remaining) | |
$ | 50,799 | |
2023 | |
| 197,307 | |
2024 | |
| 275,875 | |
2025 | |
| 284,151 | |
Thereafter | |
| 1,142,709 | |
Total undiscounted lease liabilities | |
$ | 1,950,841 | |
Less effects of discounting | |
| (390,898 | ) |
Total lease liabilities | |
$ | 1,559,943 | |
| |
| | |
Reported as of June 30, 2022: | |
| | |
Current portion of operating lease liability | |
$ | 47,053 | |
Operating lease liability, less current portion | |
| 1,512,890 | |
Total lease liabilities | |
$ | 1,559,943 | |
Note 12 — Paycheck Protection Program
On May 5, 2021, the Company applied for and
received a loan for $190,100 in connection with the Paycheck Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief,
and Economic Security Act (“CARES”) Act that was signed into law on March 27, 2020.
The loan had a term of 5 years, was unsecured and
was guaranteed by the Small Business Administration (“SBA”). The loan bore interest at one percent per annum. Loan payments
were to be deferred for borrowers who apply for loan forgiveness until the SBA remits the borrower’s loan forgiveness amount to
the lender. If a borrower did not apply for loan forgiveness, payments were to be deferred 10 months after the end of the covered
period for the borrower’s loan forgiveness (between 8 and 24 weeks).
Some or all of the loan could be forgiven if at
least 75% of the loan proceeds were used by the Company to cover payroll costs, including benefits, and if the Company maintained its
employment and compensation within certain parameters during the period following the loan origination date and complied with other relevant
conditions.
The Company elected to account for the PPP loan as an in-substance government
grant by applying the guidance in International Accounting Standards 20 by analogy based on the assessment that it is probable that it
will meet both (a) the eligibility criteria for a PPP loan, and (b) the loan forgiveness criteria for all or substantially all of the
PPP loan. Under this guidance, the Company recorded the loan proceeds in other income in the consolidated statement of operations for
the three and six months ended June 30, 2021.