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:
SCHEDULE
OF CONVERTIBLE NOTES PAYABLE TO SHAREHOLDERS
| |
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. |
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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. |
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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. |
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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). |
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