Debt

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Debt

Debt

In 2022, the Company issued $20,000,000 of convertible notes payable that, after an extension was negotiated, mature in February 2024 (unless converted) and bear interest at 10% annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest may be converted, at the option of the holder, into common shares of the Company.  The number of shares of common shares received in the conversion will equal the quotient of (i) the outstanding principal and interest as of the date immediately before the completion of the qualified financing event, divided by (ii) an amount equal to the “valuation cap” divided by the “fully diluted basis” (terms as defined in the agreements) and discounted by five (5%) percent. The notes and accrued interest were converted into 2,189,997 common shares with the consummation of the Reverse Recapitalization with Oxus.

In 2022, the Company issued $4,800,000 in convertible notes payable. During 2023, $4,500,000 of these notes matured without conversion and were repaid by the Company. The remaining $300,000 of convertible notes payable bear interest at 10% annually and, after an extension was negotiated, mature in February 2024 (unless converted). The outstanding principal and interest under the remaining convertible notes may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $10,000,000 (“qualified financing event”), either as a single round or a lead round, at 80% of the per share price paid during the qualified financing event. The notes and accrued interest were converted into 40,544 common shares with the consummation of the Reverse Recapitalization of Oxus.

In 2023, the Company issued $27,000,000 of convertible notes payable, of which $27,000,000 matures in 2024 (unless converted) and bear interest at 10% annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest may be converted, at the option of the holder, into common shares of the Company. The number of common shares received in the conversion will equal the quotient of (i) the outstanding principal and interest as of the date immediately before the completion of the qualified financing event, divided by (ii) an amount equal to the “valuation cap” divided by the “fully diluted basis” (terms as defined in the agreements) and discounted by five (5%) percent. The notes and accrued interest were converted into 3,787,585 common shares in connection with the consummation of the Reverse Recapitalization with Oxus.

In 2021, the Company issued a $3,000,000 convertible note that matures in 2026 (unless converted) and bears interest at 3% annually. Accrued interest is payable monthly. The outstanding principal and interest under the convertible note may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $10,000,000 (a “qualified financing event”), either as a single round or round, at 85% of the per share price paid during the qualified financing event. The note holder elected not to convert at the Reverse Recapitalization and therefore the note is due at maturity.

4. Debt (continued)

In January 2024, the Company issued a $3,000,000 convertible note payable that matures in 2024 (unless converted) and bears interest at 10% annually. Accrued interest is payable upon maturity, or converted into equity. The convertible note may be converted into securities, at the option of the holder, based upon a formula considering the outstanding principal and interest and the Company’s value, including a valuation cap. The note was converted into 375,925 common shares with the consummation of the Reverse Recapitalization with Oxus.

During 2023, the Company entered into a $25,000,000 financing agreement with a maturity date in August 2026. Under this agreement, the Company has a $15,000,000 term facility which was used to pay off the existing line of credit. In March 2024, the company entered into an amendment to extend the maturity date of the term facility to March 2028. Under the amendment, payments of $83,000 are due monthly beginning in March 2025 with a lump sum payment of $12,167,000 due at maturity. Interest accrues at the prime rate plus an applicable margin of 4.75% per annum and is payable monthly.

In conjunction with this agreement, loan fees of approximately $931,000 were capitalized in 2023.

Amortization expense of approximately $77,000 and $155,000 was recorded on the fees for the three and six month periods ended June 30, 2024.

In addition to the term facility, the Company obtained a $10,000,000 line of credit to fund working capital needs in support of its growth strategy. Interest accrues at the prime rate plus the applicable margin of 4.50%. Interest is due and payable monthly beginning in September 2023. The line of credit includes an unused line fee of 0.25% per annum beginning on closing date through six months and increases to 0.50% per annum thereafter. As of June 30, 2024 and December 31, 2023 the line of credit had $5,000,000 and $0 drawn upon it, respectively.

In the period leading up to the reverse recapitalization, significant transaction costs were incurred by both parties. In total, four notes payable of $13,035,374 were issued for the transaction debt and mature in 2025. Details for the notes are as follows:

Note 1 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 1 was issued in the original principal amount of $2,138,828. The note matures in February 2025, and bears interest at 10% per annum.

Note 2 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 2 was issued in the original principal amount of $1,314,875. The note matures in February 2025, and bears interest at 10% per annum.

Note 3 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the reverse recapitalization. Note 3 was issued in the original principal amount of $1,980,800. The note matures in February 2025, and bears interest at 8% per annum.

4. Debt (continued)

Note 4 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the reverse recapitalization. Note 4 was issued in the original principal amount of $7,601,661. The note matures in February 2025, is non-interest bearing and payable to a related party.

Debt balances outstanding as of June 30, 2024 are due as follows: $6,267,000 in 2025; $9,000,000 in 2026; $1,000,000 in 2027; and $12,167,000 in 2028.