Notes Payable

9 Months Ended

Sep. 30, 2024

Notes Payable

Notes Payable

6. Notes Payable

Convertible Notes Payable

In March 2024, the Company issued convertible notes payable (“March 2024 Convertible Notes”) totaling $21,063,748 and received aggregate cash of $20,550,000. One of the notes totaling $513,748 was issued to the placement agent in lieu of cash issuance costs. Issuance costs paid in cash totaling $521,423 and the value of the note issued upon issuance to the placement agent were expensed in selling, general and administrative costs in the condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2024.

In June 2024, the Company issued additional convertible notes payable (“June 2024 Convertible Notes”) totaling $5,494,395 and received aggregate cash of $5,386,228. One of the notes totaling $108,167 was issued to the placement agent in lieu of cash issuance costs and was expensed in selling, general and administrative costs in the condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2024. Issuance costs paid in cash were negligible. The March 2024 Convertible Notes and the June 2024 Convertible Notes are collectively the “Convertible Notes”.

The Convertible Notes are payable on demand in March 2029 and bear an annual interest rate of 6% through March 7, 2025 and 8% thereafter. Upon a qualified financing event the Convertible Notes convert into the shares issued in that qualified financing event at a price per share equal to 80% of the share price issued subject to a valuation cap. Upon a qualified transaction, the noteholders may elect to receive either 1.5x the principal and accrued interest balance in cash or convert into common shares.

The Convertible Notes are recorded on the condensed consolidated balance sheet at their fair values. The fair value of the March Convertible Notes on the date of issuance was $21,063,748. The fair value of the June Convertible Notes on the date of issuance was $5,494,395. The fair value of the Convertible Notes as of September 30, 2024 has been determined to be $31,778,742 and the resultant change in fair value of $5,220,599 has been recorded in other income and expense in the condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2024. The resultant change in fair value for the three months ended September 30, 2024 of $2,692,073 has been recorded in other income and expense in the consolidated statement of operations and comprehensive loss. The fair value of the Convertible Notes as of June 30, 2024 has been determined to be $29,086,669 and the resultant change in fair value of $2,528,526 has been recorded in other income and expense in the condensed consolidated statement of operations comprehensive loss for the six months ended June 30, 2024. As of September 30, 2024, the total principal and accrued interest of the Convertible Notes is $27,380,563 of which $822,420 is from the interest.

Promissory Note Payable

During 2021, the Company executed a promissory note payable with an aggregate principal balance of $33,500 (25,000 GBP). The note was due after a period of two months, followed by mutually agreed upon monthly extensions, and does not bear interest. As of September 30, 2024 and December 31, 2023, the promissory note payable balance was $33,446 and $31,827, respectively, and continues to be automatically extended on a monthly basis.

In November 2023, the Company executed a promissory note payable with a finance company to fund its directors and officers insurance policy for $526,282. This note bore interest at an annual rate of 8.74% with six monthly payments beginning in December

2023. The note was repaid in full in May 2024. For the nine months ended September 30, 2024, the Company recorded interest expense of $11,247. As of December 31, 2023, the promissory note payable balance was $438,569.