Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.24.2.u1
Debt
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
Debt Debt
The Company’s convertible debt consists of the following:
As of June 30, 2024 As of December 31, 2023
Total principal value of convertible note - related party, net of discount $ 5,000,000  $ 5,000,000 
Unamortized debt discount (136,616) (610,749)
Unamortized debt issuance costs (3,859) (17,253)
Carrying value of total convertible debt - related party $ 4,859,525  $ 4,371,998 
Convertible Note - Related Party
On August 15, 2023, the Company entered into a Secured Note and Warrant Purchase Agreement with MFDI, LLC (“MFDI”), pursuant to which the Company issued to MFDI a $5,000,000 secured convertible promissory note (the "Convertible Note") and a warrant to purchase 340,000 shares of common stock on August 18, 2023 (the "Convertible Note Financing") (See Note 4). The Convertible Note bears interest at a rate of 10% per annum and matures on August 18, 2024, unless earlier repurchased or converted. MFDI can elect to convert the Convertible Note at any time and the conversion price is fixed at $5.16. Accrued interest is payable quarterly within 30 days of the last day of each calendar quarter. The Company may prepay the principal or interest outstanding under the Convertible Note at any time without penalty. The debt discounts related to the warrants, and debt issuance costs, are being amortized over the term of the Convertible Note using the effective interest rate method. Amortization of the debt discount is recognized as non-cash interest expense in Other (income) expense within the Consolidated Statements of Operations. As of June 30, 2024, the fair value of the Convertible Note approximates its intrinsic value which is equal to $2,761,474. The intrinsic value of the Convertible Note was calculated as the excess fair value of the underlying conversion shares over the principal value of the Convertible Note. The Convertible Note is classified as Level 2 of the fair value hierarchy model based on market prices that can be corroborated with observable market data for the Company's common stock.
For the three and six months ended June 30, 2024, the effective interest rate on the Convertible Note was 31.39%.
Subsequent to June 30, 2024, the conversion option on the Convertible Note was exercised (See Note 10).
Interest Expense
The Company’s interest expense consists of the following:
Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Related party interest expense – stated rate $ 124,658  $ —  $ 249,315  $ 15,952 
Legal judgment interest expense 75,189  182,171  150,146  182,171 
Other interest expense —  4,258  —  6,705 
Non-cash interest expense:
Amortization of debt discount 243,331  —  474,133  — 
Amortization of transaction costs 6,874  —  13,394  — 
$ 450,052  $ 186,429  $ 886,988  $ 204,828