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CONVERTIBLE NOTES PAYABLE – SHAREHOLDERS
3 Months Ended
Mar. 31, 2023
Convertible Notes Payable Shareholders  
CONVERTIBLE NOTES PAYABLE – SHAREHOLDERS

NOTE 7 – CONVERTIBLE NOTES PAYABLE – SHAREHOLDERS

 

Convertible notes payable to shareholders consisted of the following as of March 31, 2023 and December 31, 2022:

 

   March 31,
2023
   December 31,
2022
 
Convertible notes payable - shareholders (a)  $65   $7,838 
Convertible note payable - shareholder (b)       1,500 
Convertible notes payable – shareholders (c)       700 
Convertible notes payable - shareholders (d)       5,369 
           
Convertible notes payable - shareholders   65    15,407 
Less: current portion   (65)   (15,407)
           
Convertible notes payable – shareholders – long - term portion  $   $ 

 

(a) During the years ended December 31, 2011 through 2016, the Company entered into convertible note payable agreements with individuals aggregating to a total amount of $7,988. The notes initially accrued interest at 8% per annum, are unsecured and are convertible into the Company’s Series K preferred stock at $25.73 per share.

 

 

  As of December 31, 2022, the principal amount due on the notes aggregated to $7,838 and total accrued and unpaid interest of $2,890 was owed on the notes. During the three months ended March 31, 2023, $60 of principal and $36 of accrued and unpaid interest were paid on the notes, and the notes accrued interest of $13. On January 30, 2023, the date of the closing of the IPO, total principal of $7,778 and total accrued and unpaid interest of $2,867 was owed on the notes.
   
  Upon the closing of the IPO, all of the principal plus accrued and unpaid interest, except for $65 of principal and $58 of accrued and unpaid interest, automatically converted into 1,554,814 shares of the Company’s common stock based on the conversion price of $6.78 per share.
   
  As of March 31, 2023, total principal of $65 and total accrued and unpaid interest of $58 was owed on the notes. The notes accrue interest at 8% per annum, are unsecured and are past due and payable on demand.

 

(b)

In April 2016, the Company entered into a convertible note payable agreement with a shareholder in the amount of $2,661. The note accrued interest at 11.51% per annum, was unsecured, had an initial maturity date of May 2018 and was convertible into the Company’s common stock at the price of $6.78 per share. Interest payments are due monthly. In May 2018, the note was amended to include a provision under which the loan will accrue $10 per month of loan fees through the date the loan is repaid or is converted into the Company’s common stock. The loan fees can be converted into shares of the Company’s common stock at $6.78 per share.

 

As of December 31, 2022, total principal of $1,500 and total accrued and unpaid loan fees of $560 was owed on the note. During the three months ended March 31, 2023, the note accrued loan fees of $10, and on January 30, 2023, the date of the closing of the IPO, total principal of $1,500 and total accrued and unpaid loan fees of $570 was owed on the notes.

 

Upon the closing of the IPO, all of the principal plus accrued and unpaid loan fees automatically converted into 303,835 shares of the Company’s common stock based on the conversion price of $6.78. As of March 31, 2023, no principal, interest or loan fees was due on the notes. Subsequent to March 31, 2023, the Company may issue the shareholder a stock warrant to purchase up to 55,310 shares of the Company’s common stock at an exercise price of $9.00 (see Note 9).

 

(c)

In April 2018, the Company entered into two convertible note payable agreements with a shareholder under which the Company borrowed an aggregate total of $700. The notes accrue interest at 5.0% per annum, are unsecured, and are convertible into the Company’s common stock at the lesser of $12.00 per share, or 90% of the Company’s IPO price, if it were to occur. The agreements contain a provision that in the case the shareholder converts the notes into shares of the Company’s common stock, the shareholder will receive a warrant to purchase up to 25% of the shares converted, at the exercise price of $10.50 per share. The warrant, if issued, will expire three years from the date of grant.

 

As of December 31, 2022, total principal of $700 and total accrued and unpaid interest of $164 was owed on the notes. During the three months ended March 31, 2023, the notes accrued interest of $3, and on January 30, 2023, the date of the closing of the IPO, total principal of $700 and total accrued and unpaid interest of $167 was owed on the notes.

 

Upon the closing of the IPO, all of the principal plus accrued and unpaid interest automatically converted into 160,563 shares of the Company’s common stock based on the conversion price of $5.40, which was 90% of the IPO closing price. As of March 31, 2023, no principal or interest was due on the notes. Subsequent to March 31, 2023, the Company may issue the shareholder a stock warrant to purchase up to 14,583 shares of the Company’s common stock at an exercise price of $10.50 (see Note 9).

 

 

(d)

During the years ended December 31, 2019 through 2021, the Company entered into convertible note payable agreements with several shareholders under which the Company borrowed an aggregate amount of $5,369. The notes accrue interest at 5.0% per annum, are unsecured, and are convertible into the Company’s common stock at the price of $12.00 per share, or 90% of the Company’s IPO price, if it were to occur. The agreements also contain a provision that in the case a shareholder converts the notes into shares of the Company’s common stock, the shareholder will receive a warrant to purchase up to 25% of the shares converted, at the exercise price of $10.50 per share. The warrants, if issued, will expire three years from the date of grant.

 

As of December 31, 2022, total principal of $5,369 and total accrued and unpaid interest of $758 was owed on the notes. During the three months ended March 31, 2023, the notes accrued interest of $22, and on January 30, 2023, the date of the closing of the IPO, total principal of $5,369 and total accrued and unpaid interest of $780 was owed on the notes.

 

Upon the closing of the IPO, all of the principal plus accrued and unpaid interest automatically converted into 1,134,063 shares of the Company’s common stock based on the conversion price of $5.40, which was 90% of the IPO closing price. As of March 31, 2023, no principal or interest was due on the notes. During the three months ended March 31, 2023, the Company issued the shareholders additional stock warrants to purchase up to 111,828 shares of the Company’s common stock at an exercise price of $10.50 (see Note 11).