Quarterly report pursuant to Section 13 or 15(d)

Notes Payable & PPP Loans

v3.22.2
Notes Payable & PPP Loans
3 Months Ended
Jun. 30, 2022
Notes Payable & PPP Loans  
Notes Payable & PPP Loan

4.     Notes Payable & PPP Loans

Convertible Loans

Between June 9, 2022, and June 10, 2022, the Company issued convertible promissory notes (the “Notes”) and borrowed an aggregate of $500,000 from an affiliate of Remi Gaston-Dreyfus, a director of the Company ($200,000); an affiliate of André-Jacques Auberton-Hervé, the Chairman of the Board of Directors of the Company ($100,000); and an existing investor and shareholder of the Company ($200,000). The Company intends to use the net proceeds from the Notes for the Company's working capital and general corporate purposes. The Notes bear interest at a fixed rate of 1% per month, computed based on a 360-day year of twelve 30-day months and will be payable, along with the principal amount, in shares on the two-year anniversary of the issue date (the “Maturity Date”).

The Notes will be convertible into equity of the Company upon the following events on the following terms: (a) On the Maturity Date without any action on the part of the Holders, the outstanding principal and accrued and unpaid interest under the Notes will be converted into shares of common stock at a conversion price equal to the closing price of the Company’s common stock on the Maturity Date and (b) upon the consummation of the next equity or equity linked round of financing of the Company for cash proceeds (the “Qualified Financing”), without any action on the part of the Holder, the outstanding principal and accrued and unpaid interest under the Note will be converted into the securities (or units of securities if more than one security are sold as a unit) issued by the Company in one or more tranches in the context of the Qualified Financing, based upon the issuance (or conversion) price of such securities.

Interest expense associated with these loans for the three months ended June 30, 2022 was $3,467. There was no interest expense associated with these loans for the three months ended June 30, 2021.

During the year ended March 31, 2022, the Company commenced a refinancing of its existing indebtedness and launched a new secured convertible promissory note offering of up to $10.0 million (the “2021 Offering”). Pursuant to the terms of the 2021 Offering, the Company offered for sale up to $10.0 million in convertible promissory notes (the “2021 Notes”) to accredited investors and non-U.S. persons. As a result, the Company issued an aggregate of $8.3 million in principal of 2021 Notes of which an aggregate of $5.0 million was purchased for cash and the remainder was issued as a result of consolidating existing debt.

Under the Company’s then-existing term loan and security agreement as well as the existing shareholder loan as mentioned below, a portion of the outstanding principal and unpaid interest were used as consideration to acquire 2021 Notes in the 2021 Offering and, as a result and with the option exercises described below, the term loan agreement and the existing shareholder loan were deemed paid in full and terminated. Accordingly, an aggregate of $1.1 million in outstanding principal and accrued unpaid interest under the term loan agreement was used to purchase a like amount of 2021 Notes in the 2021 Offering and an aggregate of $2.2 million in outstanding principal and accrued and unpaid interest under the shareholder loan was used to purchase a like amount of 2021 Notes in the 2021 Offering. The remaining $0.6 million of the outstanding principal and accrued and unpaid interest under the term loan agreement was applied towards the purchase price to exercise outstanding options of certain debtholders.

Pursuant to the terms of the 2021 Offering, the Company issued an aggregate of $5.0 million in principal of additional 2021 Notes, which was purchased for cash. The Company used the net cash proceeds from the 2021 Offering for the Company’s working capital requirements. The 2021 Notes bore interest at a fixed rate of 1% per month, computed based on a 360-day year of twelve 30-day months and would be payable, along with the principal amount, on the earlier of (the “Maturity Date”): (a) March 31, 2022 and (b) the consummation of the 2021 Offering, provided that the Company raises in one or more tranches aggregate gross proceeds of no less than $10,000,000.

On March 31, 2022 the 2021 Notes were converted into 946,194 shares of common stock of the Company in accordance with their terms.

There was no interest expense associated with the 2021 Notes for the three months ended June 30, 2022 and June 30, 2021.

Shareholder Loans

On March 23, 2020, the Company received a $2.0 million loan from an existing shareholder. The promissory note evidencing the loan bore interest at a fixed rate of 1% per month and had a maturity date of the earlier of (i) March 31, 2022 and (ii) the date of receipt of a minimum of $5.0 million from a “Subsequent Financing.” The accrued interest was payable in cash commencing on June 30, 2021 for the previous quarter. Half of the interest accrued during the first three payment dates (3-month, 6-month and 9-month anniversaries of the issue date), was rolled into the term loan and security agreement as mentioned above. The remaining half of the interest accrued was to be paid upon the maturity date. As noted above, this debt was consolidated into the Company's 2021 notes and this loan converted into shares of the common stock of the Company on March 31, 2022.

On February 24, 2021, and in addition to the shareholder loan above, the Company entered into a term loan and security agreement dated February 12, 2021 where Bionik may borrow up to $3.0 million from lenders from time to time. Pursuant to the terms of the agreement, the loan bore interest at a fixed rate of 1% per month. The principal amount and interest on the loan would be due and payable on the earlier of (i) February 12, 2023 and (ii) the date of receipt by the Company of a minimum of $3.0 million in equity. As of March 31, 2021, the Company has taken out $1.0 million against this term loan. As noted above, on July 15, 2021, this indebtedness was consolidated into the Company’s 2021 Notes, pursuant to which an aggregate of $3.3 million in outstanding principal and accrued unpaid interest was used to purchase a like amount of 2021 Notes in the 2021 Offering. The remaining $0.6 million of the outstanding principal and accrued and unpaid interest was applied towards the purchase price to exercise options held by the debtholders.

There was no interest expense associated with these loans for the three months ended June 30, 2022. Interest expense associated with these loans for the three months ended June 30, 2021 was $0.1 million.

Paycheck Protection Program Loan

In May 2020, the Company signed a promissory note for $0.5 million pursuant to the federal Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act, which is administered by the U.S. Small Business Administration. The loan is unsecured, bears interest of 1% per annum and a deferment period of 6 months. The loan is to be used primarily for payroll related costs, lease, and utility payments. The Company had applied for forgiveness and as such forgiveness was granted in May 2021. The forgiveness of the PPP loan is recorded in the statement of operations as other income for the three months ended June 30, 2021.