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Note Payable
 3 Months Ended
Mar. 31, 2025
Note Payable [Abstract]  
NOTE PAYABLE

NOTE 7 - NOTE PAYABLE

 

The following table summarizes the balance of the note payable as of:

 

   March 31,
2025		   December 31,
2024		 
Principal - Note Payable  $5,000,000   $5,000,000 
Aggregate interest to be paid   638,000    638,000 
Interest payments made   (94,000)   (41,000)
    5,544,000    5,597,000 
Less current portion of interest   213,000    213,000 
Notes Payable – long-term  $5,331,000   $5,384,000 

 

On October 25, 2024 (“Exchange Date”), the Company, its direct and indirect subsidiaries, as applicable and the Lender entered into a Debt Repayment and Exchange Agreement (the “DRE Agreement”), Loan, Guaranty and Security Agreement (the “New Loan Agreement”), the Pre-funded Warrants (as defined below) and the $1.50 Warrants (as defined below) (collectively, the “Agreements”) to extinguish and terminate the Amended BTC Note (the “Exchange”).

 

Pursuant to the Agreements, the following consideration was exchanged with the Lender for the settlement of the Amended BTC Note:

 

●Approximately $9,117,000 of the Amended BTC Note principal balance was converted into shares of the Company’s common stock (the “Shares Exchanged”), at an ascribed value of $1.10 per share resulting in the issuance of 8,287,984 shares of common stock to Lender, at a fair market value of $0.612 per share (the quoted market price of the Company’s common stock on the Restructuring Date), or an aggregate value of approximately $5,072,000.

 

●Warrants to purchase 3,530,198 shares of common stock, which warrants are exercisable immediately, have a ten-year term and an exercise price of $0.01 per share (the “Prefunded Warrants”), at a fair market value of $0.612 per share (the quoted market price of the Company’s common stock on the Restructuring Date), or an aggregate value of approximately $2,160,000.

 

●Warrants to purchase 2,000,000 shares of common stock at an exercise price of$1.50 per share (the $1.50 warrants) which will expire in five-years from the date of the transaction for a total fair value of approximately $888,000 based on the Black Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility of ll5.0%, the fair value of common stock $0.612 estimated life of 5.0 years, risk-free rate of 4.07% to 4.72% and dividend rate of nil.

 

●A $5,000,000 note payable (the “Note Payable”) pursuant to the New Loan Agreement.
   
●A director specified by Lender was added to the board of directors.

The terms of the Note Payable include the following:

 

●The outstanding principal and interest are denominated in dollars (as opposed to the original Bitcoin Loan that was denominated in bitcoin).
   
●One-time payment of in the amount of $5,000,000 on October 25, 2027
   
●Annual interest rate of 4.25% payable monthly.
   
●The Lender has been given a first priority lien on all the Company and its subsidiaries’ assets.
   
●The Lender may convert half of the outstanding principal at a price of $1.10 per share of common stock and the remaining half at a price of $1.50 per share of common stock (for purposes of classifying the Restructured Loan, it was concluded that the conversion option did not meet the requirements to be bifurcated and classified as a derivative, nor was there a large premium paid that would be classified as an addition to paid-in capital so the conversion option is included in the value of the host instrument).
   
●The Note Payable cannot be converted or exercised if the Lender and its affiliates would beneficially own more than 19.99% of the number of shares of common stock as of the date of the agreement after giving effect to such conversion or exercise without the approval of the Company’s stockholders, for which the Company is required to seek such approval at its next annual meeting of stockholders.