CONVERTIBLE NOTE PAYABLE AT FAIR VALUE |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Note Payable At Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONVERTIBLE NOTE PAYABLE AT FAIR VALUE | NOTE 13 — CONVERTIBLE NOTE PAYABLE AT FAIR VALUE
The following is a summary of the Company’s convertible note payable for which it elected the fair value option as of December 31, 2023 and 2022:
The Company recorded interest expense related to this convertible note payable at fair value of $39,472 during each of the years ended December 31, 2023 and 2022. In addition, the Company made cash interest payments amounting to $39,472 during the each of the years ended December 31, 2023 and 2022, related to this convertible note payable at fair value.
March 4th Note
On March 4, 2020, the Company issued a convertible promissory note to a third-party investor and in exchange received $500,000. The Company also agreed to issue a warrant (“Series I Warrant”) to purchase up to 20,000 shares of our common stock at a purchase price of $3.91 per share. The convertible promissory note bears interest at a rate of 8% per annum and matures on March 4, 2030. The Company elected the fair value option to account for the convertible promissory note and determined that the Series I Warrant met the criteria to be accounted for as a derivative liability due to its net cash settlement provision upon a fundamental transaction. As such, the Company recorded the fair value on issuance of the convertible promissory note and Series I Warrant as $460,000 and $40,000, respectively. The balance of the convertible promissory note and any accrued interest may be converted at the noteholder’s option at any time at a purchase price of $3.91 per share of our common stock.
For the years ended December 31, 2023 and 2022, the fair value of the convertible promissory note increased by $11,444 and decreased by $654,579, respectively, which were recognized as current period other income/(expense) in the Company’s consolidated statement of operations for their respective period (as no portion of such fair value adjustment resulted from instrument-specific credit risk).
For the years ended December 31, 2023 and 2022, the fair value of the Series I Warrant decreased by $10,000 and $120,000, respectively, which were recognized as other income in the Company’s consolidated statement of operations for their respective period under the caption “Change in fair value of warrants”.
As of both December 31, 2023 and 2022, the principal balance of the convertible promissory note was $500,000. As of December 31, 2023 and 2022, the fair value of the convertible promissory note of $355,000 and $343,556, respectively, and the fair value of the Series I Warrant of $5,000 and $15,000, respectively, were recorded on the Company’s consolidated balance sheet.
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