Further, the Company determined that the conversion feature of the Notes were not in the money at issuance and thereby did not represent a beneficial conversion feature.
In addition, each Convertible Interest included warrant coverage of 25% of the principal value of the Note, which provided an option to purchase additional Common Interests in cash at the same price as the conversion of the Note. The warrant coverage was exercisable on the conversion date, or within 30 days post conversion. If not exercised within this 30 day period the warrant coverage was forfeited.
The warrant coverage was evaluated to determine whether the arrangements were embedded or free-standing (i.e., to determine whether they needed to be bifurcated and accounted for as a separate financial instrument). However, since the warrants were only exercisable at the time of conversion or within 30 days post conversion of the Convertible Interests, and there were restrictions on transfer, they were considered to be non-detachable and did not require to be accounted for separately from the hybrid instrument.
The Notes were unsecured obligations and did not contain any financial covenants or restrictions on the payments to members, the incurrence of indebtedness, or the issuance or repurchase of securities by the Company.
In connection with the Fourth Offering, investors who acquired Preferred Membership Interests in the Third Offering (Note 7), were offered an option to convert the principal of their Preferred Membership Interests into Convertible Interests. In the first and third round of the Fourth Offering, $540,000 and $705,000, respectively, of Preferred Membership Interests were converted into Convertible Interests.
On July 20, 2020 the first round of the Fourth Offering Notes matured. As a result, the outstanding principle amount of $1,465,000 plus accrued interest of $172,800 converted into membership interests based on the carrying value of the convertible debt with no gain or loss recognized. Accrued interest of $3,000 was paid in cash. None of the outstanding warrants of $366,250 were exercised within the 30-day exercise period post maturity and thus were forfeited.
On November 30, 2020 the second round of the Fourth Offering Notes matured. As a result, the outstanding principle amount of $925,000 plus accrued interest of $111,000 converted into membership interests based on the carrying value of the convertible debt with no gain or loss recognized. No accrued interest was paid in cash. At the Corporate Conversion outstanding warrants of $231,250 were converted into 29,629 exercisable warrants of the Company’s common stock, of which 21,620 warrants were exercised within the 30-day exercise period post maturity and the remaining 8,009 were forfeited.
At the Corporate Conversion, the third round of the Fourth Offering Notes and all rounds of the Fifth Offering Notes matured. As a result, the aggregate outstanding principle amount of $3,279,133 plus accrued interest through the conversion date of December 16, 2020 of $196,769 converted into memberships interests based on the carrying value of the convertible debt, net of unamortized deferred offering costs of $41,445 with no gain or loss recognized. Accrued interest of $9,551 was paid in cash. Warrants totaling $820,033 were converted into 105,044 exercisable warrants of the Company’s common stock, of which 961 warrants were exercised and 104,083 were outstanding as of December 31, 2020. See Note 13 for further information of the exercise and expiration of these remaining warrants subsequent to 2020.
7. Members’ Equity (Deficit)
On May 1, 2020, the Company adopted its Second Amended and Restated Operating Agreement (the “Amended Operating Agreement”). The Amended Operating Agreement changed the Company’s classes of membership from two classes (voting and non-voting) to one class of membership and gave the Board the rights to make all decisions concerning the business, affairs and properties of the Company. Under the Amended Operating Agreement, the members have the right to vote on the dissolution and termination of the Company, the removal of existing directors, the appointment of new directors, and any amendment to the