Notes Payable

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Notes Payable

Note 5 – Notes Payable

Notes payable at March 31, 2023 and December 31, 2022 consisted of the following:

	March 31,			December 31,
	2023			2022
Note Payable – Terren Peizer. 0% Interest, secured by common stock purchase warrant		1,600,000			600,000
Notes payable to a finance company, interest at LIBOR plus 10% per annum; monthly principal payments of 0.4166% of principal balance beginning August 1, 2022, with unpaid principal due on July 9, 2026 (A)		7,250,000			7,343,750
Total notes payable		8,850,000			7,943,750
Unamortized debt discount		(879,929	)		(953,256	)
Notes payable, net discount		7,970,071			6,990,494
Less current portion		(625,000	)		(531,250	)
Long-term portion	$	7,345,071		$	6,459,244

(A) On July 9, 2021 (the “Closing Date”), the Company entered into a Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”) with EICF Agent LLC (“EICF”), as agent for the lenders, and Energy Impact Credit Fund I, LP, as lender (the “Lender”), providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million, consisting of a $7.5 million closing date term loan facility (the “Closing Date Term Loan”) and up to $7.5 million of borrowings under a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”). The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of certain conditions precedent specified in the Term Loan Agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the London Interbank Offered Rate, plus a margin of 10.0%. As a condition precedent to the Agent and the Lender entering into the Term Loan Agreement, the Company issued to the Lender a common stock purchase warrant, dated as of the Closing Date (the “Warrant”), which grants the Lender the right to purchase up to 1.5 million shares of the common stock of the Company, at an exercise price of $2.10, subject to adjustment as set forth in the Warrant. The Warrant is subject to vesting, with 450,000 shares of common stock exercisable as of the Closing Date and the remainder exercisable only in the event that the Company borrows under the Delayed Draw Term Loan Facility or fails to consummate a qualifying equity transaction on or before October 7, 2021. The Warrant has no expiration date. In addition, in October 2021, the Company was required to issue to Lender a warrant for 900,000 shares of common stock at an exercise price of $0.93 per share as a penalty since the Company was unable to raise equity capital within 90 days of the date of this agreement.

EVmo, Inc.

Notes to Consolidated Financial Statements

For Three Months Ended March 31, 2023 and 2022 (unaudited)

In connection with the issuance of this note payable, the Company also issued a warrant to purchase 450,000 shares of its Common Stock at an exercise price of $2.10 per shares. The aggregate relative fair value of these warrants was $778,697 and was recorded as a discount on the note payable and as additional paid in capital. In addition, the Company incurred $600,000 of cost related to this note payable. The total discount of $1,378,697 is being amortized over the term of the notes payable. In addition, after the public offering and conversion of most of the Series B preferred stock, the two warrants issued to Energy Impact Credit Fund I, LP in 2021 for 450,000 shares and 900,000 shares of common stock, respectively, were subject to adjustment according to their terms. The warrant for 450,000 shares has been adjusted to one for 711,656 shares at an exercise price of $1.33 and the warrant for 900,000 shares has been adjusted to one for 1,174,311 at an exercise price of $0.71 per share.

On February 16, 2023, the Company received correspondence from EICF constituting a notice of events of default and reservation of rights (the “Notice of Default”) under the Term Loan Agreement. The Notice of Default purports that certain events of default under the Term Loan Agreement have occurred and are continuing, including a failure by the Company to: (i) timely deliver a required financial report, (ii) timely deliver a required liquidity certificate, (iii) maintain the maximum net leverage ratio required under a financial covenant, and (iv) maintain the minimum liquidity required under a financial covenant. EICF has informed the Company in the Notice of Default that EICF and the lenders are now entitled to exercise any and all default-related rights and remedies, that any delay in doing so should not be construed as a consent to or waiver of any of the purported events of default, and that any outstanding amounts under the Term Loan Agreement, including the principal of $7.5 million and any accrued but unpaid interest, may become due or payable. Further, EICF may realize the collateral pledged under the Term Loan Agreement, which consists of substantially all of the property and assets of the Company.

On February 10, 2023, Mr. Peizer, agreed to provide short-term liquidity financing to the Company in the amount of $1,000,000. As consideration for Mr. Peizer’s action, the Company issued to Acuitas Group Holdings, LLC, a California limited liability company and the personal investment vehicle of Mr. Peizer (“Acuitas”), a secured promissory note in the principal amount of $1,600,000 (the “Note”), which was then exchanged for an earlier promissory note in the principal amount of $600,000, issued by the Company to Mr. Peizer on September 30, 2022, which earlier note was then cancelled. The Note is convertible into shares of Common Stock, at the option of Mr. Peizer, at a conversion price of $0.1156 per share. In addition, the Company issued to Acuitas a Common Stock purchase warrant for 13,840,830 common shares, which is exercisable at a price of $0.1156 (the “Peizer Warrant”). The Note and the Peizer Warrant were issued in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

A rollforward of notes payable from December 31, 2022 to March 31, 2023 is below:

Notes payable, December 31, 2022	$	6,990,494
Adjusted Note Payable – Terren Peizer		1,000,000
Repayments		(93,750	)
Amortization of debt discounts		73,327
Notes payable, March 31, 2023		7,970,071

Future payments under note payable obligations are as follows:

Years ending December 31,
2023	$	437,500
2024		750,000
2025		750,000
2026		5,312,500
2027		1,600,000
Thereafter		0
	$	8,850,000