Extract to table

Whether the stated interest payable on the Notes constitutes "qualified stated interest" under the applicable Treasury Regulations or, alternatively, is required to be treated as OID, with the attendant accrual and reporting consequences for both the Company and the Purchasers

The Notes include a most favored nation provision providing that if the Company issues any subsequent convertible note or Simple Agreement for Future Equity ("SAFE") on terms that are more favorable to the purchaser thereof than the terms of the Notes, the holders of the Notes shall have the right to amend the terms of their Notes to incorporate such more favorable terms

This classification is critical because it determines whether the Company is entitled to deduct interest payments, whether holders must accrue original issue discount, and whether the conversion of the Notes into equity is treated as a recapitalization or as a taxable exchange

Even a cash-method holder must include OID in income as it accrues, irrespective of whether cash payments are received

Each Purchaser (holder) must accrue OID into income over the life of its Note using the constant-yield method prescribed by Section 1272(a)

This accrual is required regardless of the holder's overall method of accounting; even cash-method holders must include OID in gross income as it accrues