CONVERTIBLE BRIDGE LOANS - AT FAIR VALUE |
9 Months Ended |
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Mar. 31, 2023 | |
CONVERTIBLE BRIDGE LOANS - AT FAIR VALUE | |
CONVERTIBLE BRIDGE LOANS - AT FAIR VALUE | NOTE 7 – CONVERTIBLE BRIDGE LOANS – AT FAIR VALUE
Between January 13, 2023 and March 31, 2023, the Company issued convertible bridge loans with an aggregate face value of $270,000. The notes have a coupon rate of 10% and a maturity date of one year. If the Company has a Liquidity Event (i.e. the Company a public offering of Common Stock (or units consisting of Common Stock and warrants to purchase Common Stock), resulting in the listing for trading of the Common Stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange), the notes and any accrued interest automatically convert into common stock. The Liquidity Event Conversion Price is the lesser of (a) $0.09 and (b) the product of (x) the Liquidity Event Price multiplied by (z) 75%. In the event a Liquidity Event does not occur, the Holder has the option to convert the Notes on the maturity date at a conversion price of $0.09.
In addition to the Notes, the holders received an aggregate 2,700,000 warrants. The warrants have an exercise price of $0.09 per share and have a five-year exercise term.
The Company analyzed the Convertible Bridge Loans to determine if they were within the scope of ASC 480 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Contract embodies a conditional obligation to transfer a variable number of shares in which the monetary value of the obligation is based solely or predominantly on, among other things, a fixed monetary amount known at inception. Additionally, the obligation is, in substance, a “traditional” debt arrangements, with the stock of the issuer used as the form of currency for repayment. As a result, the instruments are recorded at fair value pursuant to ASC 480-10-30-7. As of March 31, 2023 and June 30, 2022, the fair value of the Convertible Bridge Loans were $185,810 and $0, respectively. During the nine months ended March 31, 2023 and 2022, the Company recorded $3,258 and $0 in interest expense related to these loans, respectively. During the nine months ended March 31, 2023 and 2022, the Company recorded $817 and $0 in decrease in fair value of Convertible Bridge Loans, respectively.
The Company evaluated the detachable warrants under the requirements of ASC 480 and concluded that the warrants do not fall within the scope of ASC 480. The Company next evaluated the notes under the requirements of ASC 815 “Derivatives and Hedging” and concluded the warrants meet equity classification. The warrants were valued using Black-Scholes Merton (“BSM”) and were determined to have a value of $121,316, which is recorded in the Statement of Stockholders’ Equity. |