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CONVERTIBLE DEBT
 3 Months Ended
Mar. 31, 2025
CONVERTIBLE DEBT  
CONVERTIBLE DEBT

NOTE 9. CONVERTIBLE DEBT

 

In October and November 2023, we entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors (collectively, the “Investors”) pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the “Private Placement”) in one or more closings up to an aggregate principal amount of $5,000,000 of Convertible Notes (the “Notes”). In October and November 2023, we sold and issued an aggregate of $2,600,000 of Notes that are convertible into 2,080,000 shares of common stock at a conversion price of $1.25 per share.

 

The Notes mature and are due on the fifth anniversary of the issuance date in October and November of 2028. The Notes bear simple interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible into shares of our Common Stock, at the option of the holder, at an initial conversion price of $1.25 per share, which shall not exceed $1.55 per share. In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a “fundamental change” occurs (as defined in the Securities Purchase Agreement). The Notes are unsecured and senior to other indebtedness subject to certain exceptions. Interest expense related to these Notes for the three months ended March 31, 2025 and 2024 were $78,000 and $78,000, respectively.

 

In March 2025, we entered into Securities Purchase Agreements (the “SPA”) with certain accredited investors (collectively, the “Investors”) pursuant to which we agreed to sell and issue to the Investors in a private placement transaction (the “Private Placement”) in one or more closings up to an aggregate principal amount of $3,000,000 (the “Notes”). Pursuant to the SPA and as of March 31, 2025, we sold and issued convertible promissory notes (the “Notes”) to purchase an aggregate of 228,000 shares of common stock at an exercise price of $1.25 per share in exchange for aggregate gross proceeds of $285,000.

 

The Notes mature and are due on the fifth anniversary of the issuance date in 2030. The Notes bear simple interest at a rate of 12% per annum, payable in equal monthly installments. The Notes are convertible into shares of our Common Stock, at the option of the holder, at a conversion price of $1.25 per share, which shall not exceed $1.55 per share. In addition, we can require Investors to convert the Notes at the then current conversion price at any time after 90 days from the issue date if the Common Stock has a closing bid price of $1.55 per share or higher on any twenty (20) days within a thirty (30) day period of consecutive trading days, or if a “fundamental change” occurs (as defined in the Securities Purchase Agreement). The Notes are unsecured and senior to other indebtedness subject to certain exceptions. Interest expense related to these Notes for the three months ended March 31, 2025 was $2,850.

 

Amortization of deferred financing costs were $16,271 and $15,620 for the three months ended March 31, 2025 and 2024, respectively which has been included with interest expense on the statement of operations. Additions to deferred financing costs totaled $39,058 during the quarter ended March 31, 2025 and are being amortized on a straight-line basis over the life of the notes.

 

Convertible notes consist of the following at:

 

 

 

March 31, 2025

 

 

December 31, 2024

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Convertible notes

 

$2,885,000

 

 

$2,600,000

 

Less: Debt issuance costs

 

 

(351,456)

 

 

(312,398)

Accumulated amortization

 

 

89,163

 

 

 

72,892

 

Convertible notes, net

 

$2,622,707

 

 

$2,360,494