General form of registration statement for all companies including face-amount certificate companies

Note 6 - Convertible Notes Payable 2

v3.24.4
Note 6 - Convertible Notes Payable 2
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Debt Disclosure [Text Block]

6. Convertible Notes Payable

 

To facilitate the ongoing operations of the Company, the Company entered into the following Convertible Notes during the periods ended September 30, 2024:

 

 

Issuance Date

  

Original Issuance

Amount

  

Maturity Date

Interest
Rate

    

Fair Value as

of September

30, 2024

  

Note 1

6/4/2024

   $ 5,000,000  

6/6/2027

SOFR + 2

%

   $ 5,348,754  

Note 2

6/26/2024

     2,500,000  

6/6/2027

SOFR + 2

%

     2,662,842  

Note 3

6/26/2024

     2,500,000  

6/6/2027

SOFR + 2

%

     2,662,842  

Note 4

7/17/2024

     50,000  

6/6/2027

SOFR + 2

%

     53,037  

Note 5

7/17/2024

     50,000  

6/6/2027

SOFR + 2

%

     53,036  

Note 6

7/19/2024

     20,000  

6/6/2027

SOFR + 2

%

     159,047  

Note 7

7/19/2024

     143,000  

6/6/2027

SOFR + 2

%

     151,624  

Note 8

7/19/2024

     100,000  

6/6/2027

SOFR + 2

%

     106,031  

Note 9

7/19/2024

     70,000  

6/6/2027

SOFR + 2

%

     74,222  

Note 10

7/19/2024

     150,000  

6/6/2027

SOFR + 2

%

     21,206  

Note 11

7/22/2024

     700,000  

6/6/2027

SOFR + 2

%

     741,776  

Note 12

7/22/2024

     500,000  

6/6/2027

SOFR + 2

%

     529,840  

Note 13

7/22/2024

     150,000  

6/6/2027

SOFR + 2

%

     158,952  

Note 14

8/20/2024

     500,000  

6/6/2027

SOFR + 2

%

     526,791  
      $ 12,433,000           $ 13,250,000  

 

Total interest expense incurred on the Convertible Notes during the nine months ended September 30, 2024 totaled $249,000. As of and for the three and nine months ended September 30, 2024, the interest rate for the Convertible Notes was 6.80%.

 

Upon a Qualified Financing, defined as either the earlier to occur of a) issuance of shares of preferred stock resulting in aggregate gross proceeds of at least $20,000,000 or b) an initial public offering, in each case on or before the maturity date, the principal and accrued interest on the Convertible Notes shall automatically convert into shares of the Company. In the case of the Qualified Financing being an issuance of preferred stock resulting in aggregate gross proceeds of at least $20,000,000, the Convertible Notes shall convert into shares of preferred stock having identical rights, privileges, preferences and restrictions as those issued to the investors in the Qualified Financing. In the case of the Qualified Financing being an initial public offering, the Convertible Notes shall convert into shares of common stock.

 

The Qualified Financing Conversion Price is equal to the lesser of (a) 80% of the price paid per share by the investors in the Qualified Financing or (b) the price per share as calculated by dividing $126,188,357 by the number of shares of common stock outstanding on an as-converted basis immediately prior to the Qualified Financing. If the Company consummates a reverse merger within 12 months of the issuance date, then the Qualified Financing Conversion Price shall be equal to the lowest cash price per share paid by the purchasers of the equity securities in connection with the private investment in public entity (the “PIPE”) or other related financing transaction consummated concurrently with the reverse merger.

 

Upon a Non-Qualified Financing, defined as any issuance of preferred stock to investors on or before the maturity date with the purpose of raising capital that does not meet the definition of a Qualified Financing, the holders of the Convertible Notes have the option to convert into shares of preferred stock having identical rights, privileges, preferences and restrictions as those issued to the investors in the Non-Qualified Financing.

 

The Non-Qualified Financing Conversion Price is equal to the lesser of (a) 80% of the price paid per share by the investors in the Non-Qualified Financing or (b) the price per share as calculated by dividing $126,188,357 by the number of shares of common stock outstanding on an as-converted basis immediately prior to the Non-Qualified Financing.

 

Upon a Corporate Transaction, as defined as a) the closing of the sale, transfer, or other disposition of all or substantially all of the Company’s assets, b) the consummation of a merger with or into another entity (except for a reverse merger), or c) a liquidation or dissolution of the company, the holders will receive the greater of 1) 1.5 times the outstanding principal and accrued interest, 2) the amount the holders would have been entitled to receive had the outstanding principal and accrued interest been converted into shares of common stock at a price per share as calculated by dividing $126,188,357 by the number of shares outstanding on an as-converted basis immediately prior to the Corporate Transaction or 3) the amount the holders would have been entitled to receive had the outstanding principal and accrued interest been converted into shares of common stock immediately prior to the Corporate Transaction, at a price per share equal to 80% of the cash price per share paid or valued by the counterparty to the Company in a Corporate Transaction.

 

If the shares are neither repaid nor converted in connection with a Qualified Financing, Non-Qualified Financing, or Corporate Transaction, the outstanding principal and accrued interest of the Convertible Notes shall be due and payable within 30 days of the earlier of a) the date the Company receives approval of a new drug Application (NDA) by the United States Food and Drug Administration of QTORIN rapamycin b) September 6, 2027 or c) an event of default.