Convertible Loan |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE LOAN |
NOTE 5 - CONVERTIBLE LOAN:
On March 28, 2017, the Company entered into a convertible loan agreement (the “CLA”) in an aggregate principal amount of up to $ 2,000. Loans under this agreement bear interest of 10% per annum. Following an amendment in March 2022, which was approved by the required majority of the CLA holders, the maturity date of the CLA will be the earlier of (i) January 1, 2023, (ii) event of default (as defined in the Agreement) or (iii) deemed liquidation event (as defined in the Company’s certificate of incorporation), in which the lenders are entitled to receive an amount equal to 300% of the principal amount of the loan. As of December 31, 2021, $1,526 had been received under the CLA.
As of March 31, 2022, and December 31, 2021, the estimated fair value of the borrowings under the CLA (“the CLA”) were based on a hybrid valuation methodology with a weighted average that combined Option Pricing Model (OPM) and Probability Weighted Expected Return Method (PWERM); therefore, they were categorized as Level 3 in accordance with ASC 820. For additional information on the CLA’s term and conditions, see Note 8 in the Company’s financial statements for the year ended on 31 December 2021.
The valuation was performed under a scenario of an IPO and staying private.
The IPO scenario was estimated at 75% (2021: 37.5%) of an IPO occurring in May 2022. Upon consummation of an IPO, the holders of the CLA would have the right to convert the principal amount of the loan into common stock at a conversion price per common stock reflecting a discount of 30% plus an additional 1% for each two calendar months following March 2017.
In addition, the holders of the CLA would be entitled to an additional discount of 40% pursuant to convertible note subscription agreement from January 2022. Under this scenario, as of March 31, 2022, the fair value of the CLA was estimated at the conversion value using a discount of 77.2% (December 31,2021: 77.2%) on the anticipated value of a common stock and a risk adjusted discount rate of 21.4% (2021: 20.8%). The remain private scenario estimated at 25% (2021: 62.5%) probability of remaining private for an expected period of 2.75 years (2021: 3 years) and an equity value of $26.5 million (2021: $24.3 million). The Company applied a volatility of 58% (2021: 58%) and a risk-free rate of 2.41% (2021: 0.97%).
Upon the consummation of the IPO, the CLA was automatically converted into the Company’s common stock based on its contractual terms and conditions. For further information, see Note 1(d) Above.
The following is a roll forward of the fair value:
The Company recorded financial expenses during the three and nine months ended September 30, 2022, and 2021 in the amount of $0, $1,648, $0 and $0, respectively. |
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