Note 7 - Convertible Debentures and Notes Payable

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 7 – CONVERTIBLE DEBENTURES AND NOTES PAYABLE

Convertible debentures

As discussed in Note 9 below, in February 2017, pursuant to a private placement transaction with certain investors, the Company issued 3,433 shares of Series C Preferred Stock and warrants.  In connection with the private placement, two investors holding convertible debentures exchanged aggregate principal totaling $205,000 of the convertible debentures for shares of the Series C Preferred Stock and warrants.

Notes payable

In December 2013, the Company entered into a promissory note agreement with its then Chairman of the Board and one of its major shareholders, pursuant to which the Company borrowed $500,000 (the 2013 Promissory Note). The 2013 Promissory Note is secured and bears interest at 6% per annum and was originally due  June 30, 2014. According to the terms of the 2013 Promissory Note, at any time, the lenders may settle any or all of the principal and accrued interest with shares of the Company’s common stock. In connection with the 2013 Promissory Note, each of the two lenders was issued 5,000,000 Class L warrants to purchase shares of our common stock at an exercise price of $0.06 per share (Class L Warrants). The Class L Warrants were immediately exercisable. The fair value of these warrants issued totaled $384,428 and was recorded as a debt discount amortized over the life of the 2013 Promissory Note. The Company calculated a beneficial conversion feature of $15,464 which was accreted to interest expense over the life of the 2013 Promissory Note. In June 2014, we renegotiated the terms of the 2013 Promissory Note. Pursuant to the modification, the maturity date was extended to  December 31, 2017 and each lender was granted an additional 7,500,000 Class L Warrants to purchase shares of the Company’s common stock at an exercise price of $0.06 per share. The Class L Warrants were immediately exercisable. In February 2017, the 2013 Promissory Note was further modified to extend the maturity date to  December 31, 2020, with all remaining terms unchanged. On December 23, 2018, all 25,000,000 Class L Warrants expired. In December 2019, the 2013 Promissory Note was further modified to extend the maturity date to  December 31, 2021, with all remaining terms unchanged. In January 2022, the 2013 Promissory Note was further modified to extend the maturity date to  December 31, 2023, with all remaining terms unchanged. In February 2024, the 2013 Promissory Note was further modified to extend the maturity date to  March 31, 2026, with all remaining terms unchanged.

At December 31, 2023, accrued interest payable on the 2013 Promissory Note was $301,734.

In April 2018, the Company borrowed $120,000 from its then Chief Executive Officer and Chairman of the Board pursuant to a promissory note (the 2018 Promissory Note). The 2018 Promissory Note accrues interest at 6% per annum, which is payable upon maturity of the 2018 Promissory Note. The 2018 Promissory Note was originally unsecured and originally matured on  August 1, 2018. At any time, the holder of the 2018 Promissory Note may elect to have any or all of the principal and accrued interest settled with shares of our common stock based on the average price of the shares over the previous 20 trading days. In June 2018, the 2018 Promissory Note was modified to extend the maturity date to  March 31, 2019 with all other provisions remaining unchanged. In February 2019, the 2018 Promissory Note was modified to extend the maturity date to  July 31, 2019 with all other provisions remaining unchanged. In July 2019, the 2018 Promissory Note was modified to extend the maturity date to  January 31, 2020 with all other provisions remaining unchanged. In December 2019, the 2018 Promissory Note was modified to extend the maturity date to  December 31, 2021 and the 2018 Promissory Note was modified to become secured by company assets, with all other provisions remaining unchanged. In December 2021, the 2018 Promissory Note was modified to extend the maturity date to  December 31, 2023 with all other provisions remaining unchanged. In December 2023, the 2018 Promissory Note was modified to extend the maturity date to  January 31, 2025. In February 2024, the 2018 Promissory Note was modified to extend the maturity date to  March 31, 2026.

At December 31, 2023, accrued interest on the 2018 Promissory Note totaled $40,970.

On December 20, 2019, the Company entered into a promissory note agreement with four of the Company’s major shareholders (the 2019 Promissory Note). The 2019 Promissory Note authorizes the Company to borrow up to $1,000,000. As of December 31, 2019, the Company had borrowed $675,000 under the 2019 promissory note. In February 2020, the Company borrowed an additional $325,000. The 2019 Promissory Note bears an interest rate of 4% annually and was originally due  December 31, 2022. According to the terms of the 2019 Promissory Note, at any time, the lenders may settle any or all of the principal and accrued interest with shares of the Company’s common stock based on the average closing price of the Company’s common stock for the 20 trading days preceding the payment. In connection with the 2019 Promissory Note, the lenders were issued warrants totaling 30,000,000 warrants to purchase shares of the Company’s common stock at $0.045 per share (Class O Warrants). In January 2023, the 2019 Promissory Note was modified to extend the maturity date to  December 31, 2024, with all remaining terms unchanged. In February 2024, the 2019 Promissory Note was modified to extend the maturity date to  March 31, 2026.

At December 31, 2023, accrued interest on the 2019 Promissory Note totaled $159,131.

Notes payable as of December 31, 2023 and 2022 consist of the following:

	2023			2022
Note payable to related parties bearing interest at 6% all principal and interest due on March 31, 2026, secured	$	120,000		$	120,000
Note payable to related parties bearing interest at 4% all principal and interest due on March 31, 2026, secured		1,000,000			1,000,000
Note payable to related parties bearing interest at 6% all principal and interest due on March 31, 2026, secured		500,000			500,000
Note payable to a financial institution bearing interest at 5.99% monthly installments of $1,046, secured		34,365			44,521
Note payable for purchase contract bearing interest at 5% monthly installments of $4,442, secured		—			13,233
Note payable for purchase contract bearing no interest until the 25th month after the anniversary of the closing interest at 8% thereafter monthly installments of $10,000		392,100
Total notes payable		2,046,465			1,677,754
Less: current maturities		(155,733	)		(643,348	)
Notes payable, net of current installments and debt discount	$	1,890,732		$	1,034,406

Maturities of convertible debt and notes payable, excluding debt discount and debt issuance costs, at December 31, 2023, are as follows:

Years ending December 31,
2024	$	155,733
2025		124,838
2026		1,745,595
2027		20,299
Thereafter		—
	$	2,046,465