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Convertible Debt and Derivative Liability
 6 Months Ended
Jun. 30, 2025
Debt Disclosure [Abstract]  
Convertible Debt and Derivative Liability

Note 5 – Convertible Debt and Derivative Liability

 

Convertible Debt I

 

Between August and December 2021, the Company issued convertible notes (collectively, “Notes I”) totaling $527,650, originally maturing on July 31, 2022, with an interest rate of 1%. Notes I featured an automatic conversion feature upon an IPO into common stock at 70% of the IPO price. Various amendments extended the maturity, ultimately to December 31, 2024, and increased the interest rate to 10%. In December 2024, following a successful IPO, the then outstanding principal and accrued interest totaling $636,852 Notes I converted into 227,447 shares of common stock at $2.80 per share.

 

Convertible Debt II

 

In April 2022, the Company issued a senior secured convertible note (“Note II”) and 514,403 shares of common stock for net proceeds of $977,333 ($1,000,000 less origination costs and an embedded discount). Note II had an original principal of $1,111,111. The original terms of Note II included, among other provisions, penalties and stock conversions at substantial discounts upon default or qualified offerings. Various amendments were executed which extended principal repayment dates and increased repayment premiums resulting in losses on debt extinguishment totaling $887,946 in 2023. In April 2024, Note II was further modified, removing the conversion feature, increasing principal to $1,377,778, and extending the maturity, resulting in a gain on modification of $951,868 and an increase to derivative liability of $407,494. Note II was fully repaid in December 2024 for $2,102,797, which included all outstanding principal and accrued interest.

 

Convertible Debt III

 

In March 2023, the Company issued a convertible note (“Note III”) with a principal amount of $150,000 in connection with an investor relations settlement, maturing February 28, 2026 and a compounding 5% annual interest rate. In December 2024, the then outstanding balance of Note III totaling $178,386 was fully repaid, which included all then outstanding principal and accrued interest.

 

 

JUPITER NEUROSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

 

Note 5 – Convertible Debt and Derivative Liability, continued

 

Interest

 

During the three and six months ended June 30, 2024, interest expense of $37,505 and $44,151, respectively, is included in the accompanying 2024 condensed consolidated statement of operations, related to Notes I, II and III (collectively, the “Notes”), all of which were paid in full in December 2024.

 

Embedded Derivative

 

Based on the terms of the Notes, the Company determined, at the time of issuance, that the conversion option represented an embedded component of a host instrument, the Notes, and was required to be accounted for separately as a derivative financial instrument. Accordingly, the Company recorded the value of the embedded conversion option as a derivative liability with a corresponding discount to the face value of the Notes at the time of issuance. Thereafter, the derivative liability was measured at fair value, as determined using a Monte Carlo valuation model, at each reporting date and changes in fair value were recognized through earnings.

 

During the second quarter of 2024, the terms of Note II were modified including the terms of the conversion option accounted for as a derivative liability. In connection therewith, the fair value of the derivative liability was measured based on the modified terms and as a result of that remeasurement, the Company recorded a gain totaling $951,868, which is included in other income in the accompanying 2024 statement of operations.

 

During the three and six months ended June 30, 2024, the Company recorded a loss totaling $25,431 and $63,142, respectively, relating to the change in the fair value of the derivative liability. There was no such gain or loss during the three or six months ended June 30, 2025 as the Notes were paid in full in December 2024 eliminating the related derivative liability.

 

Significant assumptions utilized in the determination of the fair value of derivative liabilities utilizing a Monte Carlo valuation model were as follows:

 

  

June 30,

2024

 
Dividend Rate   - 
Term   0.13 
Volatility   90%
Risk-free rate   5.0%
Probability of IPO   60%

 

 

JUPITER NEUROSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025