| CONVERTIBLE DEBT | NOTE 4 — CONVERTIBLE DEBT Convertible Debt The Convertible Notes are
separated into seven groups — A, B, C, D, E, F and BlinkBio — per the table below: June 30, December 31, Conversion Carrying Carrying Group Rate Maturity Collateral Rate Amount Amount A 10% 10/31/2024 None 80% – 87.5% $ 1,153,993 $ 1,151,032 B 6% 10/31/2024 None 80% $ 5,154,000 $ 5,154,000 C 6% 10/31/2024 None 80% $ 3,945,020 $ 3,873,417 D 6% 10/31/2024 None 50% $ 2,000,000 $ 1,950,160 E 6% 10/31/2024 None 50% $ 1,100,000 $ 1,100,000 F 6% 10/31/2024 None 50% $ 3,095,218 $ 1,381,732 Blink Bio 10% 3/15/2022 None 100% $ — $ — Group A Commencing in July 2018 through
November 2021, the Company entered into an unsecured Subordinated Convertible Promissory Note Agreement (the “Agreements”)
with certain lenders (together, the “Holders” or individually, the “Holder”). Interest on the unpaid principal
balance accrues at a rate of 10% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.
Unless earlier converted into shares of Equity Securities, the principal and accrued interest will be due and payable by the Company on
demand by the Holders at any time after the earlier of (i) the Maturity Date (as defined in each Agreement) and (ii) the closing
of the Next Equity Financing (as defined below). The stated Maturity Date was extended in October 2023, under the same terms, until October
31, 2024. The Notes will automatically
convert into the type of Equity Securities issued in the Next Equity Financing upon closing. The number of shares of such Equity Securities
to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest due on the Note
on the date of conversion of 80 – 87.5% of the price paid per share for Equity Securities by the investors in the Next
Equity Financing. Equity Securities refers to Company’s common stock or preferred stock and Next Equity Financing refers to the
next sale (or series of related sales) by the Company of its equity securities from which the Company receives gross proceeds of not less
than $3,000,000 (including the aggregate amount of debt securities converted into Equity Securities upon conversion or cancellation of
promissory notes) or $5,000,000, depending upon the signed agreement terms. In the event that the Company
raises aggregate additional cash proceeds of at least $3,000,000 or $5,000,000 through the sale of the Company’s equity securities,
excluding the sales or conversions of Notes under the Agreement, the outstanding principal amount due will automatically, and without
any action on part of the holder, be converted into fully paid and non-assessable units of the Company’s equity stock sold in such
qualified financing at 12.5% of the equity stock conversion price. The Company, at its option, may pay all accrued, but unpaid, interest
and other charges in cash or by the issuance of additional equity stock at a rate of the applicable conversion price. The Company evaluated the Notes
in accordance with ASC 480, Distinguishing Liabilities from Equity The convertible debt balance
at June 30, 2024 and December 31, 2023 is summarized as follows:
As of As of
June 30, December 31,
Debt A 2024 2023
Principal amount outstanding $ 1,154,000 $ 1,154,000
Less: discounts (issuance, redemptions) (184,614 ) (185,224 )
Amortization of discounts 184,607 182,256
Carrying value 1,153,993 1,151,032
Less Related Party Portion (100,000 ) (100,000 )
Convertible Notes – A $ 1,053,993 $ 1,051,032 Group B Commencing in May 2020,
the Company entered into an unsecured Subordinated Convertible Promissory Note Agreement (the “Agreements”) with certain
lenders (together, the “Holders” or individually, the “Holder”), pursuant to which the Company issued a Subordinated
Convertible Promissory Note (individually the “Note” or together the “Notes”) to the Holders, principally the
Investors brought in by an investment bank. Interest on the unpaid principal balance accrues at a rate of 6% per annum, computed on the
basis of the actual number of days elapsed and a year of 365 days. Unless earlier converted into shares of Equity Securities,
the principal and accrued interest will be due and payable by the Company on demand by the Holders at any time after the earlier of (i) the
Maturity Date (as defined in each Agreement) and (ii) the closing of the Next Equity Financing (as defined below). The
stated Maturity Date was extended in October 2023, under the same terms, until October 31, 2024. The Notes will automatically
convert into the type of Equity Securities issued in the Next Equity Financing upon closing. The number of shares of such Equity Securities
to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest due on the Note
on the date of conversion of 80% of the price paid per share for Equity Securities by the investors in the Next Equity Financing. No such
Next Equity Financing has occurred through June 30, 2024. Equity Securities refers to Company’s common stock or preferred stock
and Next Equity Financing refers to the next sale (or series of related sales) by the Company of its equity securities from which the
Company receives gross proceeds of not less than $10,000,000 (including the aggregate amount of debt securities converted into Equity
Securities upon conversion or cancellation of promissory notes). In the event that the Company
raises aggregate additional cash proceeds of at least $10,000,000 through the sale of the Company’s equity securities, excluding
the sales or conversions of Notes under the Agreement, the outstanding principal amount due will automatically, and without any action
on part of the holder, be converted into fully paid and non-assessable units of the Company’s equity stock sold in such qualified
financing at 12.5% of the equity stock conversion price. The Company, at its option,
may pay all accrued, but unpaid, interest and other charges in cash or by the issuance of additional equity stock at a rate of the applicable
conversion price. The Company evaluated the Notes
in accordance with ASC 480, Distinguishing Liabilities from Equity The convertible debt balance
at June 30, 2024 and December 31, 2023 is summarized as follows:
As of As of
June 30, December 31,
Debt B 2024 2023
Principal amount outstanding $ 5,154,000 $ 5,154,000
Less: discounts (issuance, redemptions, warrants) (1,818,939 ) (1,818,939 )
Amortization of discounts 1,818,939 1,818,939
Carrying value $ 5,154,000 $ 5,154,000 Group C Commencing in July 2021,
the Company entered into an unsecured Subordinated Convertible Promissory Note Agreement (the “Agreements”) with certain
lenders (together, the “Holders” or individually, the “Holder”), pursuant to which the Company issued a Subordinated
Convertible Promissory Note (individually the “Note” or together the “Notes”) to the Holders, principally the
Investors brought in by an investment bank. Interest on the unpaid principal balance accrues at a rate of 6% per annum, computed on the
basis of the actual number of days elapsed and a year of 365 days. Unless earlier converted into shares of Equity Securities,
the principal and accrued interest will be due and payable by the Company on demand by the Holders at any time after the earlier of (i) the
Maturity Date (as defined in each Agreement) and (ii) the closing of the Next Equity Financing (as defined below). The stated Maturity
Date was extended in October 2023, under the same terms, until October 31, 2024. The Notes will automatically
convert into the type of Equity Securities issued in the Next Equity Financing upon closing. The number of shares of such Equity Securities
to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest due on the Note
on the date of conversion of 80% of the price paid per share for Equity Securities by the investors in the Next Equity Financing. No such
Next Equity Financing has occurred through June 30, 2024. Equity Securities refers to Company’s common stock or preferred stock
and Next Equity Financing refers to the next sale (or series of related sales) by the Company of its equity securities from which the
Company receives gross proceeds of not less than $10,000,000 (including the aggregate amount of debt securities converted into Equity
Securities upon conversion or cancellation of promissory notes). In the event that the Company
raises aggregate additional cash proceeds of at least $10,000,000 through the sale of the Company’s equity securities, excluding
the sales or conversions of Notes under the Agreement, the outstanding principal amount due will automatically, and without any action
on part of the holder, be converted into fully paid and non-assessable units of the Company’s equity stock sold in such qualified
financing at 12.5% of the equity stock conversion price. The Company, at its option,
may pay all accrued, but unpaid, interest and other charges in cash or by the issuance of additional equity stock at a rate of the applicable
conversion price. The Company evaluated the Notes
in accordance with ASC 480, Distinguishing Liabilities from Equity The convertible debt balance
at June 30, 2024 and December 31, 2023 is summarized as follows:
As of As of
June 30, December 31,
Debt C 2024 2023
Principal amount outstanding $ 3,945,020 $ 3,945,020
Less: discounts (issuance, redemptions, warrants) (1,088,223 ) (1,063,223 )
Amortization of discounts 1,088,223 1,016,620
Carrying value $ 3,945,020 $ 3,873,417 Group D Commencing in November 2022,
the Company entered into an unsecured Subordinated Convertible Promissory Note Agreement (the “Agreements”) with certain
lenders (together, the “Holders” or individually, the “Holder”), pursuant to which the Company issued a Subordinated
Convertible Promissory Note (individually the “Note” or together the “Notes”) to the Holders, principally the
Investors brought in by an investment bank. Interest on the unpaid principal balance accrues at a rate of 6% per annum, computed on the
basis of the actual number of days elapsed and a year of 365 days. Unless earlier converted into shares of Equity Securities,
the principal and accrued interest will be due and payable by the Company on demand by the Holders at any time after the earlier of (i) the
Maturity Date (as defined in each Agreement) and (ii) the closing of the Next Equity Financing (as defined below). The stated Maturity
Date was extended in October 2023, under the same terms, until October 31, 2024. The Notes will automatically
convert into the type of Equity Securities issued in the Next Equity Financing upon closing. The number of shares of such Equity Securities
to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest due on the Note
on the date of conversion of 50% of the price paid per share for Equity Securities by the investors in the Next Equity Financing. No such
Next Equity Financing has occurred through June 30, 2024. Equity Securities refers to Company’s common stock or preferred stock
and Next Equity Financing refers to the next sale (or series of related sales) by the Company of its equity securities from which the
Company receives gross proceeds of not less than $10,000,000 (including the aggregate amount of debt securities converted into Equity
Securities upon conversion or cancellation of promissory notes). In the event that the Company
raises aggregate additional cash proceeds of at least $10,000,000 through the sale of the Company’s equity securities, excluding
the sales or conversions of Notes under the Agreement, the outstanding principal amount due will automatically, and without any action
on part of the holder, be converted into fully paid and non-assessable units of the Company’s equity stock sold in such qualified
financing at 50% of the equity stock conversion price. In connection with the Group
D Convertible Notes, the Company agreed to issue an additional 400,000 shares of common stock to the Group D Holders, prorated based on
such Holder’s investment amount, as an inducement for their investment in the Group D Convertible Notes. The Company, at its option,
may pay all accrued, but unpaid, interest and other charges in cash or by the issuance of additional equity stock at a rate of the applicable
conversion price. The Company evaluated the Notes
in accordance with ASC 480, Distinguishing Liabilities from Equity The convertible debt balance
at June 30, 2024 and December 31, 2023 is summarized as follows:
As of As of
June 30, December 31,
Debt D 2024 2023
Principal amount outstanding $ 2,000,000 $ 2,000,000
Less: discounts (issuance, redemptions, warrants) (1,864,654 ) (1,864,654 )
Amortization of discounts 1,864,654 1,814,814
Carrying value $ 2,000,000 $ 1,950,160 Group E Commencing
in February 2023, the Company entered into an unsecured Subordinated Convertible Promissory Note Agreement (the “Agreements”)
with certain lenders (together, the “Holders” or individually, the “Holder”), pursuant to which the Company issued
a Subordinated Convertible Promissory Note (individually the “Note” or together the “Notes”) to the Holders, principally
the Investors brought in by an investment bank. Interest on the unpaid principal balance accrues at a rate of 6% per annum, computed on
the basis of the actual number of days elapsed and a year of 365 days. Unless earlier converted into shares of Equity Securities,
the principal and accrued interest will be due and payable by the Company on demand by the Holders at any time after the earlier of (i) the
Maturity Date (as defined in each Agreement) and (ii) the closing of the Next Equity Financing (as defined below). The Notes will automatically
convert into the type of Equity Securities issued in the Next Equity Financing upon closing. The number of shares of such Equity Securities
to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest due on the Note
on the date of conversion of 50% of the price paid per share for Equity Securities by the investors in the Next Equity Financing. No such
Next Equity Financing has occurred through June 30, 2024. Equity Securities refers to Company’s common stock or preferred stock
and Next Equity Financing refers to the next sale (or series of related sales) by the Company of its equity securities from which the
Company receives gross proceeds of not less than $10,000,000 (including the aggregate amount of debt securities converted into Equity
Securities upon conversion or cancellation of promissory notes). In
the event that the Company raises aggregate additional cash proceeds of at least $10,000,000 through the sale of the Company’s equity
securities, excluding the sales or conversions of Notes under the Agreement, the outstanding principal amount due will automatically,
and without any action on part of the holder, be converted into fully paid and non-assessable units of the Company’s equity stock
sold in such qualified financing at 50% of the equity stock conversion price. In connection
with the Group E Convertible Notes, the Company agreed to issue an additional 220,000 shares of common stock as of June 30,
2024 to the Group E Holders, prorated based on such Holder’s investment amount, as an inducement for their investment in the Group
E Convertible Notes. The
The Company evaluated the Notes
in accordance with ASC 480, Distinguishing Liabilities from Equity The convertible debt balance
at June 30, 2024 and December 31, 2023 is summarized as follows:
As of As of
June 30, December 31,
Debt E 2024 2023
Principal amount outstanding $ 1,100,000 $ 1,100,000
Less: discounts (issuance, redemptions, warrants) (550,000 ) (550,000 )
Amortization of discounts 550,000 550,000
Carrying value 1,100,000 1,100,000
Less related party portion (50,000 ) (50,000 )
Convertible Notes – E $ 1,050,000 $ 1,050,000 Group F Commencing
in June 2023, the Company entered into an unsecured Subordinated Convertible Promissory Note Agreement (the “Agreements”)
with certain lenders (together, the “Holders” or individually, the “Holder”), pursuant to which the Company issued
a Subordinated Convertible Promissory Note (individually the “Note” or together the “Notes”) to the Holders, principally
the Investors brought in by an investment bank. Interest on the unpaid principal balance accrues at a rate of 6% per annum, computed on
the basis of the actual number of days elapsed and a year of 365 days. Unless earlier converted into shares of Equity Securities,
the principal and accrued interest will be due and payable by the Company on demand by the Holders at any time after the earlier of (i) the
Maturity Date (as defined in each Agreement) and (ii) the closing of the Next Equity Financing (as defined below The Notes will automatically
convert into the type of Equity Securities issued in the Next Equity Financing upon closing. The number of shares of such Equity Securities
to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest due on the Note
on the date of conversion of 50% of the price paid per share for Equity Securities by the investors in the Next Equity Financing. No such
Next Equity Financing has occurred through June 30, 2024. Equity Securities refers to Company’s common stock or preferred stock
and Next Equity Financing refers to the next sale (or series of related sales) by the Company of its equity securities from which the
Company receives gross proceeds of not less than $10,000,000 (including the aggregate amount of debt securities converted into Equity
Securities upon conversion or cancellation of promissory notes). In
the event that the Company raises aggregate additional cash proceeds of at least $10,000,000 through the sale of the Company’s equity
securities, excluding the sales or conversions of Notes under the Agreement, the outstanding principal amount due will automatically,
and without any action on part of the holder, be converted into fully paid and non-assessable units of the Company’s equity stock
sold in such qualified financing at 50% of the equity stock conversion price. The
The Company evaluated the Notes
in accordance with ASC 480, Distinguishing Liabilities from Equity The convertible debt balance
at June 30, 2024 and December 31, 2023 is summarized as follows:
As of As of
June 30, December 31,
Debt F 2024 2023
Principal amount outstanding $ 3,433,500 $ 1,932,500
Less: discounts (issuance, redemptions, warrants) (1,212,718 ) (966,250 )
Amortization of discounts 874,436 415,482
Carrying value $ 3,095,218 $ 1,381,732 Redemption Liability The fair value of the redemption
liability is calculated under Level 3 of the fair value hierarchy, is determined based upon a Probability-Weighted of Expected Returns
Model (“PWERM”). This PWERM was determined to be the most appropriate method of estimating the value of possible redemption
or conversion outcomes over time, since the Company has not entered into a priced equity round through June 30, 2024. The fair value of
the redemption liability is calculated using the initial value of the convertible note less the debt discount rate of 12.5% in Group A,
20% in Groups B and C, and 50% in Groups D, E and F. The redemption liability is then amortized over the remaining life of the note,
utilizing the interest rates of 10% and 6% respectively for the groups. The life of each note in Group A is for a set period of 3 years,
and is variable in Groups B, C, D, E and F with a range of 12 months to 3 years. The Company retains the option to negotiate
an extended maturity date for Groups B, C, D, E and F. The new embedded redemption values were $750,500 and $1,541,250 for the periods
ended June 30, 2024 and December 31, 2023, respectively. The redemption liability is
re-measured at each period end and is summarized as follows:
As of As of
June 30, December 31,
2024 2023
New Embedded Redemption Value – Group A 144,250 144,250
New Embedded Redemption Value – Group B 1,130,800 1,130,800
New Embedded Redemption Value – Group C 789,004 789,004
New Embedded Redemption Value – Group D 1,000,000 1,000,000
New Embedded Redemption Value – Group E 550,000 550,000
New Embedded Redemption Value – Group F 1,716,750 966,250
Ending Balance $ 5,330,804 $ 4,580,304 Fees Associated with Convertible Debt Raise The fees associated with the
convertible debt raise are legal and investment fees associated with the issuance of the convertible notes for Groups A, B, C, and
D. There were no related parties who received these fees. The fees are amortized over the life of the convertible note utilizing
an interest rate of 10% for Group A and 6% for Groups B, C, and D. The debt issuance liability is re-measured at each period end and is
summarized in the table below.
As of As of
June 30, December 31,
2024 2023
Debt Issuance
Group A $ — $ —
Group B — —
Group C — 9,133
Group D — —
Total Net Debt Issuance $ — $ 9,133 Make-whole liability — Shares
due Noble Capital In March 2020, the Company
signed a new advisory agreement with Noble Capital, in lieu of cash remuneration and the company agreed to issue 4% of the Company’s
shares, with an anti-dilution clause. The make-whole liability represents the shares earned for the anti-dilution of their stock position
over 2020 and 2021. The 2021 year-end had the Company owing an aggregate of 233,202 shares valued in the amount of $408,413, after issuing
200,000 shares in 2020. In 2021, the Company recorded an associated expense to advisory fees of $152,482 to recognize the share value
earned on the anti-dilution compensation in 2021. In 2022, the Company set aside 70,624 shares to satisfy the anti-dilution clause. In
2022, the Company recorded an associated expense to advisory fees of $282,496 to recognize the share value earned on the anti-dilution
compensation in the 2022. For the six months ended June
30, 2024 and 2023, the Company recorded an additional 0 and 16,672 shares, respectively, with an associated expense to advisory fees of
$0 and $66,688, respectively, on the anti-dilution compensation. On July 1, 2023, the make-whole
liability for Noble Capital was determined to be contractually nullified. The Company unwound the liability, and it is reflected in our
Statement of Stockholders’ Deficit. Make-whole liability — Shares
Officers & Directors In January 2023, 350,000 shares
of Class A common stock were issued to officers, key employees, key advisors and directors, leaving 20,000 shares in the balance to be
issued to Joacim Borg, a director with a value of $80,000. On March 1, 2023, the
Company hired Alan Musso, former CFO, and, as part of his compensation contract, he was awarded 12,500 shares of common stock with a value
of $4.00 per share, the $50,000 in compensation of which is reflected in the make-whole stock liability. Alan resigned on June 30, 2023,
and Christopher Acevedo, current CFO, took his position. Mr. Acevedo will be awarded the balance of Mr. Musso’s shares upon a successful
initial public offering. The Company’s make-whole
share liability is summarized in the table below as of June 30, 2024. Name Position # Shares Value Date Earned Alan Musso Former CFO 3,125 $ 12,500 March 1, 2023 Christopher Acevedo Current CFO 9,375 37,500 Upon IPO Joacim Borg Director 20,000 80,000 July 1, 2022 TOTAL 32,500 $ 130,000 Warrants for Placement Agent — Noble
Capital In March 2020, the Company
signed a new advisory agreement with Noble Capital, in lieu of cash remuneration it was provided a 10% warrant fee, in addition to cash
remuneration on debt raises from Noble procured investments. The terms of the warrants are five The number of warrants earned
in 2020 was 248,855 valued at $248,855. The number of warrants earned in 2021 was 213,782, valued at $427,564. The total warrants earned
as of December 31, 2022 was 162,644, valued at $325,288. No warrants were
earned in 2023 or the Warrants earned in 2022, 2021
and 2020 have been accounted for as a discount to the associated convertible debt with the discounts amortized over the term of the related
debt. The Debt Discount Accretion expense in warrants in the six months ended June 30, 2024 was $49,840 and in the six months ended June
30, 2023 was $147,677. The total unamortized discount of those warrants was $0 and $49,840 as of June 30, 2024 and December 31, 2023,
respectively. Short-Term Loan An investor lent the Company
$100,000 on March 7, 2024. The note is a demand note, carrying interest at 8% and was used for working capital purposes. An investor lent
the Company $150,000 on June 28, 2024. The note is a demand note, carrying interest at 8% and was also used for working capital purposes.
The Company intends to repay these loans in 2024. |
