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SHORT TERM NOTES AND CONVERTIBLE DEBT
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
SHORT TERM NOTES AND CONVERTIBLE DEBT

NOTE  8. SHORT TERM NOTES AND CONVERTIBLE DEBT

 

Promissory Notes Payable

 

In June 2021, the Company issued $2.0 million of promissory notes that matured at the earlier of the consummation of a Qualified Financing or May 31, 2022. The promissory notes incorporated the following major attributes: secured by a lien and security interest on substantially all of the Company’s assets; interest accrues at 33%; holder option to convert the accrued interest into the Company securities being offered in a Qualified Financing at 30% (i.e. 70% discount) of the price being paid by other investors in the Qualified Financing; and automatic conversion in the case of a Qualifying IPO of the accrued interest into the Company securities being offered in the Qualifying IPO at 30% (70% discount) of the price being paid by other investors in the Qualifying IPO. If the promissory notes remained outstanding after May 31, 2022, the Company had the option to extend the promissory notes upon the payment of an extension fee, which consisted of 150,000 warrants (20,080 warrants post-split) with a five-year term, to purchase shares of the Company’s common stock at a price of $ 0.01 per share ($0.0747 post-split).

 

On April 21, 2022, the registration statement for our IPO was declared effective. In connection with the effectiveness of the IPO registration statement, all accrued interest on the Company's outstanding secured promissory notes was converted into (i) 426,768 post-split common shares and (ii) 426,768 post-split common stock warrants, with a $1,299,507 beneficial conversion rate charged to interest expense.

 

On April 27, 2022, the Company used $2 million of the IPO proceeds to retire all outstanding secured promissory notes.

 

Convertible Notes:

 

There were no convertible note purchases for the three months ending March 31, 2023.