CONVERTIBLE LOANS

6 Months Ended

Jun. 30, 2024

NOTE 3:

CONVERTIBLE LOANS

On February 21, 2019, the Company received a convertible loan from third party (“February 2019 Lender”), with a two-year term, in the principal amount of $550, which bears 10% annual interest rate (“February 2019 Loan”).

The Company at its option shall have the right to redeem, in part or in whole, outstanding principal amount and interest under this loan agreement prior to the maturity date. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding principal amount being redeemed plus outstanding and accrued interest.

The February 2019 Lender shall be entitled to convert at its option any portion of the outstanding and unpaid principal or accrued interest into fully paid and nonassessable of shares of common stock, at the lower of the fixed conversion price then in effect or the market conversion price. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the fixed conversion price of $20.00 or (z) 80% of the lowest the volume-weighted average price of the Company’s shares of common stock during the 30 trading days immediately preceding the conversion date.

The Company accounted for the February 2019 Loan in accordance with ASC 470-20, Debt with conversion and other Options. As of June 30, 2024, the BCF was revalued at $645.

On December 10, 2023, the Loan agreement as extended until June 30, 2024.

The February 2019 Loan is included in the convertible loans in current liabilities as of June 31, 2024, in the amount of $377, and $361 as of December 31, 2023.

On October 15, 2019, the Company received a convertible loan from a third party (“October 2019 Lender”) in the principal amount of $1,100 that bears an annual 10% interest rate (“October 2019 Loan”). The October 2019 Loan has a two-year term. Prior to the maturity date of the October 2019 Loan, the Company, at its option, has the right to redeem, in cash, in part or in whole, the amounts outstanding provided that as of the date of the redemption notice (i) the volume-weighted average price of the Company’s ordinary shares is less than $12.50 and (ii) there is no equity condition failures as defined therein. In the event that the Company wishes to redeem any amount under the convertible loan, the Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding amount being redeemed in addition to outstanding and accrued interest.

The October 2019 Lender shall be entitled to convert the principal loan and the outstanding interest (the “Conversion Amount”) into such number of ordinary shares determined by dividing (x) such Conversion Amount by (y) the fixed conversion price of $12.50 or (z) 80% of the lowest the volume-weighted average price of the Company’s ordinary shares during the 10 trading days immediately preceding the conversion date.

The Company accounted for the October 2019 Loan in accordance with ASC 470-20, Debt with conversion and other Options. As of June 30, 2024, the BCF was revalued at $1,915.

On January 2023, the Company paid accrued interest of the October 2019 Loan in the amount of $100.

On December 10, 2023, the Loan agreement as extended until June 30, 2024.

Conversion feature

In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market at each reporting period with the resulting gains or losses shown in the statements of operations.

The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $1,915 was calculated with the following parameters:

Schedule of assumptions used for conversion feature
	June 30, 2024
Share price	$	0.327
80% of the lowest the volume-weighted average price	$	0.136

The October 2019 Loan is included in the convertible loans in current liabilities as of June 30, 2024, in the amount of $1,363, and $1,314 as of December 31, 2023.

During the six months ended June 30, 2024, the Company recorded interest and financial expenses related to October 2019 Loan in the amount of $1,584, and financial income in the amount of $678 in the six months ended June 30, 2023.

On August 7, 2020, the Company received a convertible loan from a third party (“August 2020 Lender”) in the amount of $200 (the “August 2020 Loan”). Per the terms of the Agreement, the August 2020 Loans has a maturity date of August 7, 2022, (“Maturity Date”) and accrues annual interest at a rate of 10%

The August 2020 Loan is convertible by the August 2020 Lender into Shares, at their discretion, at the lower of a fixed price of $1.02 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).

On December 10, 2023, the Loan agreement as extended until June 30, 2024

The Company also granted the August 2020 Investor warrants to purchase 50,000 shares of common stock of the Company at an exercise price of $2.00 per share, such exercise price is subject to any future price-based anti-dilution adjustments. Accordance with ASU 2017-11 the warrants were classified in shareholders equity.

The fair value of the warrants granted was $35 using the Black-Scholes-Merton option pricing model using the following assumptions:


	August 2020
Share price	$	0.86
Dividend yield		0%
Risk-free interest rate		0.21%
Expected term (in years)		5
Volatility		176.96%

The Company accounted for the August 2020 Loan in accordance with ASC 470-20, Debt with conversion and other Options. The combined intrinsic value of the BCF for the August 2020 Loan was calculated and valued at $249 as of August 7, 2020, and the Company allocated $249 to the BCF as a liability. As of June 31, 2024, the BCF was revalued at $390 ($190 as of December 31, 2023).

As of June 30, 2023, the Company has defaulted on the August 2020 Loan. On July 31, the August 2020 Loan agreement was extended until December 30, 2023.

The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $390 was calculated with the following parameters:


	June 30, 2024
Share price	$	0.327
80% of the lowest the volume-weighted average price	$	0.136

The August 2020 Loan is included in the convertible loans in short term liabilities as of June 30, 2024 in the amount of $259, and $249 as of December 31, 2023.

During the six months ended June 30, 2024, the Company recorded interest and financial expenses related to August 2020 Loan in the amount of $209, and interest and financial income in the amount of $100 in the six months ended June 30, 2023.

From November 2020 through to December 31, 2020, the Company received $425 from third party investors from the issuance of convertible promissory notes (“2020 Promissory Notes”). The Promissory Notes bear no interest, are convertible into Shares based on a fixed conversion price of $1.00 per share and mature between 6 and 24 months from the issuance date. Pursuant to the 2020 Promissory Notes, one of the investors received warrants to purchase 33,000 Shares at an exercise price of $1.50 through to December 17, 2021. (“2020 Promissory Warrants”)

From January 2021 through to February 16, 2021, the Company received an additional $530 from third party investors from the issuance of Promissory Notes (“2021 Promissory Notes). One of the investors received 33,000 warrants (“2021 Promissory Warrants”). The 2021 Promissory Warrants have the same terms as the 2020 Promissory Notes. During December 2021 the 2020 Promissory Warrants and the 2021 Promissory Warrants were extended to December 31, 2023.

During the year ended December 31, 2021, Promissory Notes in the amount of $830 have been converted into shares. On December 14, 2023, Promissory Notes in the amount of $100 were repaid to the investors.

On July 31, 2020, the Company received a convertible loan from Mr. Shmuel Yannay (a third party at that time, and a director of the Company as of October 28, 2021) in the amount of $100 (“Director Loan”). The loan has a maturity date of July 31, 2022 (“Maturity Date”) and accrues annual interest at a rate of 10%

The Director Loan is convertible into Shares, at his discretion, at the lower of a fixed price of $1.02 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).

The Company also granted the Mr. Yannay warrants to purchase 25,000 shares of common stock of the Company at an exercise price of $2.00 per share, such exercise price is subject to any future price-based anti-dilution adjustments. Accordance with ASU 2017-11 the warrants were classified in shareholders equity.

The fair value of the warrants granted was $18 using the Black-Scholes-Merton option pricing model using the following assumptions:


	August 2020
Share price	$	0.86
Dividend yield		0%
Risk-free interest rate		0.21%
Expected term (in years)		5
Volatility		176.96%

The Company accounted for the director’s loan in accordance with ASC 470-20, Debt with conversion and other Options. The combined intrinsic value of the BCF for the August 2020 Loan was calculated and valued at $129 as of July 31, 2020, and the Company allocated $129 to the BCF as a liability. As of June 30, 2024, the BCF was revalued at $162 ($182 as of December 31, 2023).

The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $162 was calculated with the following parameters:


	June 30, 2024
Share price	$	0.327
80% of the lowest the volume-weighted average price	$	0.136

During the six months ended June 30, 2024, the Company recorded interest and financial income related to Director Loan in the amount of $16, and interest and financial expenses in the amount of $56 in the six months ended June 30, 2023.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481544/470-10-50-6

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481544/470-10-50-6

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)(2)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)(1)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/470/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 835
-SubTopic 30
-Name Accounting Standards Codification
-Section 45
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482925/835-30-45-2

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1C

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1C

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1C

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1E

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1I

Reference 20: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1I

Reference 21: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1I

+ Details

SATIVUS TECH CORP. 10-Q