Company: FTII
Filing Date: 2025-02-14
Form Type: S-4
Source: 0001493152-25-006997
Chunk: 566

Company: FutureTech II Acquisition Corp.
Filing Date: 2025-02-14
Form: S-4
Chunk 566
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 has been recorded to interest expense in the three and nine months ended September 30, 2024, respectively.

First Modification

On January 25, 2023, the Company entered into an Assignment, Assumption and Note Conversion Agreement (“Convertible Note Agreement”) with FutureTech Partners and FutureTech Capital, LLC (“FutureTech Capital”) whereby FutureTech Partners agreed to assign to FutureTech Capital all promissory notes then outstanding, which had an aggregate principal balance of $2,450,000 as of the date of the Convertible Note Agreement, as well as any future promissory notes to be issued. In addition, the parties to the Convertible Note Agreement agreed that the promissory notes that were outstanding as of January 25, 2023, and any promissory notes that would be issued subsequently, will convert into shares of the Company’s common stock upon written notice from the Company but in any event immediately prior to closing of the Acquisition Transactions and Business Combination (see Note 7).

The modification to the promissory notes was evaluated in accordance with FASB Accounting Standards Codification (“ASC”) 470-50, Debt – Modifications and Extinguishmentsand was determined to be recognized as an extinguishment as the modification in the Convertible Note Agreement added a substantive conversion feature to the promissory notes. The Company calculated the fair value of the debt on the date of modification to be $8,651,403 and recognized a loss on extinguishment of $6,201,403. The Company analyzed the modified promissory notes in accordance with ASC 470-20, Debt – Debt with Conversion and Other Options, and determined that the conversion feature did not required bifurcation as it did not meet the definition of a derivative in accordance with ASC 815-10, Derivatives and Hedging. The conversion feature does not meet the definition of a derivative as the net settlement criteria is not met because the underlying shares cannot be readily converted to cash within 32 days following exercise of the conversion feature. However, the promissory notes with the modified conversion feature were initially recorded on the modification date at a substantial premium over the amount due at maturity. As a result, the Company recognized $2,450,000 as note payable-related party related to the principal amount of the promissory notes and $6,201,403 to additional paid in capital representing the substantial premium.

The Company determined the fair value of the promissory notes on the date of modification in accordance with ASC 820