Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

v3.23.2
Notes Payable
 3 Months Ended
Mar. 31, 2023
Notes Payable [Abstract]  
Notes Payable

7. Notes Payable

 

Notes payable consisted of the following:

 

    March 31,
2023		     December 31,
2022		  
Convertible secured debentures   $ 36,530,320     $ 36,530,320  
Total     36,530,320       36,530,320  
Less: debt discount, net     (19,700,337 )     (20,608,202 )
Less: current portion    
-
      
-
  
Total notes payable – long-term   $ 16,829,983     $ 15,922,118  

 

Upon closing of the Business Combination, we issued Debentures having an aggregate gross principal amount of $36,530,320 together with 2,922,425 SPA Warrants for proceeds of $35,800,000 inclusive of a 2% original issue discount. The fair value of the SPA Warrants was estimated to be $20,949,110 using a Monte Carlo valuation model incorporating future projections of the various potential outcomes and any exercise price adjustments based on future financing events. This amount was recorded as a warrant liability and, together with the original issue discount, was recognized as a debt discount upon issuance totaling $21,679,716.

 

The Debentures may be converted at each holder’s option at 120% of the principal amount at a conversion price of $15.00 or 2,922,425 shares of Common Stock. The conversion price may be adjusted downward for certain events including the issuance by the Company of dilutive instruments below the current conversion price. Interest accrues on the outstanding principal amount of the Debentures at 5% per annum, payable quarterly. The Debentures are secured by first priority interests, and liens on, all our assets, and mature on the fourth anniversary of the date of issuance, September 9, 2026.

 

The SPA Warrants contain similar anti-dilution provisions and are exercisable initially at $20 per share over their ten-year term at the holders’ option (further terms of the SPA Warrants are discussed in Note 12).

 

The debt discount is being accreted to interest expense over the four-year term of the Debentures. We recorded $907,865 of debt discount accretion for the three months ended March 31, 2023, and is included as part of interest expense in the condensed consolidated statements of operations. The Debentures effective interest rate is approximately 25.2%.