Convertible Note Receivable – Augmenta

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

CONVERTIBLE NOTE RECEIVABLE – AUGMENTA

NOTE 6 - CONVERTIBLE NOTE RECEIVABLE – AUGMENTA

Effective January 1, 2023, the Company and Augmenta entered into a convertible note purchase agreement pursuant to which a receivable due from Augmenta in connection with the JDA was converted into the Augmenta Note (see Note 5). Under the terms of the Augmenta Note, Augmenta agreed to pay the principal amount of $1,812,975 to the Company. The Augmenta Note accrues interest at a rate of 6% per annum and has a maturity date of the earlier of (i) January 1, 2026 (“Maturity Date”), or (ii) upon the occurrence and during the continuance of an event of default. Accrued interest shall be payable at maturity.

The Company has the following optional conversion rights under the Augmenta Note:

● The Company may convert, at any time and at its option, all outstanding principal and accrued and unpaid interest into shares of Augmenta common stock at a price per share equal to an amount obtained by dividing $15,000,000 by the number of outstanding shares of Augmenta common stock on a fully diluted basis (“Conversion Price”).

● If Augmenta completes a private placement sale of its preferred stock in the amount less than $15,000,000, the Company may convert, at its option, all outstanding principal and accrued and unpaid interest into shares of the same security in such financing at a per share price equal to the lower of the Conversion Price or the price per share sold in the financing.

In addition, the outstanding principal and accrued and unpaid interest under the Augmenta Note will automatically convert in the following scenarios:

● If Augmenta completes a financing with gross proceeds of at least $15,000,000 (“Qualified Financing”) on or before the Maturity Date, then the outstanding principal and accrued and unpaid interest shall automatically convert into the same security at a price per share equal to the lower of the Conversion Price or the price per share sold in the Qualified Financing.

● If Augmenta completes an underwritten public offering with gross proceeds of at least $35,000,000 (“Qualified IPO”) on or before the Maturity Date, then the outstanding principal and accrued and unpaid interest shall automatically convert into the same security at a price per share equal to the lower of the Conversion Price or the price per share sold in the Qualified IPO.

● If a change of control occurs prior to the payment in full of the principal amount of the Augmenta Note, then the Company will be paid all outstanding principal and accrued and unpaid interest, plus a premium of 100% of the outstanding principal.

The Company has elected to measure the Augmenta Note at fair value in accordance with ASC 825 (see Note 7).