Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

v3.23.2
Notes Payable
 6 Months Ended
Jun. 30, 2023
Notes Payable [Abstract]  
Notes Payable

7. Notes Payable

 

Notes payable consisted of the following:

 

    June 30,
2023		     December 31,
2022		  
Convertible secured debentures   $ 36,530,320     $ 36,530,320  
Total     36,530,320       36,530,320  
Less: debt discount, net     (18,729,826 )     (20,608,202 )
Less: current portion    
-
      
-
  
Total notes payable – long-term   $ 17,800,494     $ 15,922,118  

 

Upon closing of the Business Combination, we issued to the SPA Parties the Debentures, which featured a 2% original issue discount, in an aggregate principal amount of $36,530,320, together with 2,922,425 Original SPA Warrants, for gross proceeds of $35,800,000. The fair value of the Original 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, subject to certain adjustments including full ratchet anti-dilution price protections. 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 Original SPA Warrants, upon issuance, were initially exercisable, at the holder’s option, at $20.00 per share over their 10-year term and featured the same anti-dilution provisions as those included in the Debentures. See Note 12 for more information regarding the SPA Warrants.

 

The debt discount is being accreted to interest expense over the four-year term of the Debentures. We recorded $970,511 and $1,878,376 of debt discount accretion for the three and six months ended June 30, 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%.