Annual report pursuant to Section 13 and 15(d)

LOAN PAYABLE, RELATED PARTIES

v3.24.0.1
LOAN PAYABLE, RELATED PARTIES
12 Months Ended
Dec. 31, 2023
LOAN PAYABLE, RELATED PARTIES  
LOAN PAYABLE, RELATED PARTIES

NOTE 5 - LOAN PAYABLE, RELATED PARTIES

 

Payne Bridge Loan

 

On April 3, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with the Company’s Chief Executive Officer (the “Subscriber”), pursuant to which the Company, in a private placement (the “Private Placement”), agreed to issue and sell to the Subscriber a 10% promissory note with a principal amount of $1 million (the “Payne Note”) and a warrant (the “Payne Warrant”) to purchase 65,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”).  The Company had the ability to prepay all or a portion of the outstanding Payne Note principal and accrued and unpaid interest without any prepayment fee.

 

Each warrant is exercisable for a period of three years from issuance at a per-share exercise price equal to $17.46. The exercise price and number of the shares of our Common Stock issuable upon exercising the Payne Warrant will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization, or similar transaction, as described therein.

 

The allocation of fair value between the Payne Note and the Payne Warrant was recorded at the issuance date using a relative fair value allocation method. The Company determined the fair value of the Payne Warrants as of April 3, 2023 using the Black-Scholes option pricing model and applying the following assumptions as of April 3, 20233 not adjusted for the subsequent 1-6 Stock Split in October 2023:

 

Fair value of common stock

 

$ 3.11

 

Expected term (in years)

 

 

3

 

Risk-free interest rate

 

 

3.73 %

Dividend yield

 

 

-

 

Volatility

 

 

99.89 %

As a result, $439,594 or the proceeds were allocated to the Payne Warrant and the debt discount. The Payne Warrant, which qualified for the derivatives scope exception, met equity classification, and were recognized as a component of permanent stockholders’ equity within additional paid-in-capital and as a debt discount on the consolidated balance sheet.

 

The Payne Note matured on October 2, 2023, and bore interest at an annual rate of 10.0%. The debt discount was amortized using the effective interest rate method over the term of the Payne Note. The effective interest rate on the Payne Note, including the amortization of the discount was 49.0% as of October 2, 2023. In the year ended December 31, 2023, the Company recorded $489,594 of interest expense related to the Note, which included $439,594 of non-cash amortization of the loan discount. The Payne Note was satisfied in full on October 2, 2023. 

 

HEP Investments, LLC

 

On November 16, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with the HEP Investments, LLC a greater than 10% shareholder of the Company (the “November Subscriber”), pursuant to which the Company, in a private placement (the “Private Placement”), agreed to issue and sell to the November Subscriber a 10% promissory note with a principal amount of $150,000 (the “November Note”).  The Company had the ability to prepay all or a portion of the outstanding November Note principal and accrued and unpaid interest without any prepayment fee.

 

On December 5, 2023 the Company repaid the principal in full and $784 of accrued interest to satisfy the November Note in full.

 

As of December 31, 2023, there were no Loans Payable to related parties.