Notes Payable

6 Months Ended

Jun. 30, 2024

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 12 – NOTES PAYABLE

Notes payable as of June 30, 2024 and December 31, 2023 were as follows:

	June 30,			December 31,
	2024			2023
SBA Disaster Relief Loans	$	450,000		$	450,000
1800 Diagonal Note Payable III, August 2023		—			97,279
Yorkville Note Payable III, November 2023		113,400			302,400
1800 Diagonal Note Payable III, December 2023		63,669			162,131
Yorkville Note Payable III, December 2023		81,000			189,000
1800 Diagonal Note Payable IV, April 2024		162,287			—
Face value of notes payable		870,356			1,200,810
Less: unamortized discounts		(77,613	)		(166,487	)
Notes payable, total		792,743			1,034,323
Less: long term portion		(450,000	)		(450,000	)
Notes payable, current portion	$	342,743		$	584,323

Government Notes Payable

During June, July and August 2020, the Company and its subsidiaries received an aggregate of $450,000 in Disaster Relief Loans from the SBA. The loans bear interest at 3.75% per annum and mature 30 years from issuance. Mandatory principal and interest payments were originally scheduled to begin 12 months from the inception date of each loan and were subsequently extended by the SBA until 30 months from the inception date. Installment payments, which are first applied to accrued but unpaid interest and then to principal, began in 2023.

Interest accrued on SBA loans as of June 30, 2024 and December 31, 2023 was $22,376 and $27,628, respectively. Interest expense (income) recognized on the loans was $1,860 and ($11,001) in the three months ended June 30, 2024 and 2023, respectively, and $7,906 and ($6,783) in the six months ended June 30, 2024 and 2023, respectively. Payments against interest were $6,579 and $9,834 in the three months ended June 30, 2024 and 2023, respectively, and $13,158 and $14,951 in the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, remaining principal payments were $450,000 and $450,000, respectively, and the net carrying value was $450,000 and $450,000, respectively.

Other Notes Payable

On July 19, 2022, pursuant to a Note Purchase Agreement between the Company and Yorkville, dated July 5, 2022, the Company issued to Yorkville a promissory note (the “Promissory Note”) with an initial stated principal amount equal to $550,000 at a purchase price equal to the principal amount of the Promissory Note less any original issue discounts and fees. The Promissory Note included a 5% original issue discount, accrues interest at a rate of 0%, and was scheduled to mature on January 19, 2023. The Company received net proceeds of $522,500. Each payment included a 2% payment premium, totaling $561,000 in total cash repayments. At inception, the Company recorded a discount against the note of $38,500, representing the difference between the total required repayments and the net proceeds received, which is being amortized over the repayment period. On November 15, 2022, the Company and Yorkville entered into an Amended and Restated Note (the “Amended Note”) to, among other things, extend the original note’s maturity date of January 19, 2023 to March 15, 2023. Amortization expense related to the discount was $-0- and $4,748 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $-0- in the three months ended June 30, 2024 and 2023, respectively. No payments were made during the three months ended June 30, 2024 or 2023. During the six months ended June 30, 2024 and 2023, the Company made payments of $-0- and $168,300 against the Promissory Note, including $18,765 applied from proceeds of sales of common stock under the SEPA. The Amended Note was repaid in March 2023.

On October 21, 2022, the Company issued a promissory note payable to an investor in the principal amount of $144,760 (the “October 2022 Note”). The October 2022 Note had an original issue discount of $15,510 and fees of $4,250, resulting in net proceeds to the Company of $125,000. The October 2022 Note did not bear interest in excess of the original issue discount and had a maturity date of October 31, 2023. The Company was required to make 10 monthly payments of $16,213 starting November 30, 2022 and ending August 31, 2023. At inception, the Company recorded a discount against the note of $37,131, representing the difference between the total required repayments and the net proceeds received, which was amortized over the repayment period. Amortization expense related to the note discount was $-0- and $10,865 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $21,610 in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $-0- and $48,639 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $81,066 in the six months ended June 30, 2024 and 2023, respectively. The October 2022 Note was repaid in August 2023.

On November 4, 2022, AEU borrowed a gross amount of $41,009 from a third-party lender, receiving net proceeds of $35,800 after fees and discounts (the “AEU Loan”). At inception of the note, the Company recognized a discount of $5,209. Amortization expense related to the note discount was $-0- and $1,621 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $3,988 in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $-0- and $12,762 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $31,393 in the six months ended June 30, 2024 and 2023, respectively. The AEU Loan was repaid in June 2023.

On March 10, 2023, the Company issued a promissory note payable to an investor with a stated principal amount of $116,760 and prepaid interest of $14,011 for total repayments of $130,771 (the “March 2023 Note”). The March 2023 Note had an original issue discount of $12,510 and fees of $4,250, resulting in net proceeds to the Company of $100,000. The March 2023 Note did not bear interest in excess of the original issue discount and matured on March 10, 2024. The Company was required to make 10 monthly payments of $13,077 starting April 30, 2023. At inception, the Company recorded a discount against the note of $30,771, representing the difference between the total required repayments and the net proceeds received, which was being amortized over the repayment period. Amortization expense related to the note discount was $-0- and $8,696 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $10,225 in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $-0- and $26,154 in the three months ended June 30, 2024 and 2023, respectively, and $-0- and $26,154 in the six months ended June 30, 2024 and 2023, respectively. The final installment payment was made in December 2023.

On August 8, 2023, the Company issued a promissory note payable to an investor with a stated principal amount of $144,760 and prepaid interest of $17,371 for total repayments of $162,131 (the “August 2023 Note”). The August 2023 Note had an original issue discount of $15,510 and fees of $4,250, resulting in net proceeds to the Company of $125,000. The August 2023 Note does not bear interest in excess of the original issue discount and matures on June 30, 2024. The Company is required to make 10 monthly payments of $16,213 starting September 30, 2023 and ending on June 30, 2024. At inception, the Company recorded a discount against the note of $37,131, representing the difference between the total required repayments and the net proceeds received, which is being amortized over the repayment period. Amortization expense related to the note discount was $10,365 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $13,098 and $-0- in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $64,852 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $97,279 and $-0- in the six months ended June 30, 2024 and 2023, respectively. The final installment payment was made in April 2024. In connection with the repayment, the Company recognized a loss on extinguishment of debt of $7,631 in the three and six months ended June 30, 2024.

On November 3, 2023, the Company issued to Yorkville a note payable (the “November 2023 Note”) with an initial principal amount equal to $350,000 at a purchase price equal to the principal amount of the November 2023 Note less any original issue discounts and fees. The Company received net proceeds of $317,000. The November 2023 Note is scheduled to mature on September 3, 2024. The November 2023 Note accrues interest at a rate of 0% but was issued with an 8% original issue discount and is scheduled to be repaid in ten equal semi-monthly installments beginning on December 3, 2023, with each payment including an 8% payment premium, totaling $378,000 in cash repayments. At inception, the Company recorded a discount against the note of $61,000, representing the difference between the total required repayments and the net proceeds received, which is being amortized over the repayment period. Amortization expense related to the note discount was $18,200 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $36,400 and $-0- in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $113,400 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $189,000 and $-0- in the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, remaining payments were $113,400 and $302,400, respectively, and the net carrying value was $100,400 and $253,000, respectively. As June 30, 2024, the November 2023 Note was not in default and the Company was in compliance with the stated loan requirements.

On December 12, 2023, the Company issued a promissory note payable to an investor with a stated principal amount of $144,760 and prepaid interest of $17,371 for total repayments of $162,131 (the “December 2023 Note I”). The December 2023 Note I had an original issue discount of $15,510 and fees of $4,250, resulting in net proceeds to the Company of $125,000. The December 2023 Note I does not bear interest in excess of the original issue discount and matures on October 15, 2024. The Company is required to make 10 monthly payments of $16,213 starting January 15, 2024 and ending on October 15, 2024. At inception, the Company recorded a discount against the note of $37,131, representing the difference between the total required repayments and the net proceeds received, which is being amortized over the repayment period. The December 2023 Note I gives the holder a conversion right at a 15% discount to the market price of the Company’s common stock in the event of default. The Company determined that the fair value of the contingent conversion option was immaterial and therefore did not allocate any value related to the option to the proceeds received. Amortization expense related to the note discount was $10,971 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $21,941 and $-0- in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $49,813 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $98,462 and $-0- in the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, remaining payments were $63,669 and $162,131, respectively, and the net carrying value was $50,769 and $127,291, respectively. As June 30, 2024, the December 2023 Note I was not in default and the Company was in compliance with the stated loan requirements.

On December 13, 2023, the Company issued to Yorkville a convertible note (the “December 2023 Note II”) with an initial principal amount equal to $175,000 at a purchase price equal to the principal amount of the December 2023 Note II less any original issue discounts and fees. The Company received net proceeds of $156,000. The December 2023 Note II is scheduled to mature on September 3, 2024. The December 2023 Note II accrues interest at a rate of 0% but was issued with an 8% original issue discount and is scheduled to be repaid in ten equal semi-monthly installments beginning on March 3, 2024, with each payment including an 8% payment premium, totaling $189,000 in cash repayments. The December 2023 Note II is convertible at any time at the holder’s option into shares of Company common stock at a fixed conversion price of $0.05 per share. At inception, the Company recorded a discount against the note of $66,000, representing the fair value of the conversion option and the difference between the total required repayments and the net proceeds received. The discount is being amortized over the repayment period. Amortization expense related to the note discount was $22,664 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $45,328 and $-0- in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $81,000 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $108,000 and $-0- in the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, remaining payments were $81,000 and $189,000, respectively, and the net carrying value was $64,811 and $127,483, respectively. As June 30, 2024, the December 2023 Note II was not in default and the Company was in compliance with the stated loan requirements.

On April 22, 2024, the Company issued a promissory note payable (the “April 2024 Note”) to an investor with a stated principal amount of $161,000 and prepaid interest of $19,320 for total repayments of $180,320. The Company received net proceeds of $118,787 after original issue discount of $21,000, fees of $5,000, and withholding of the final payment due on the August 2023 Note to the same investor in the amount of $16,213. The April 2024 Note does not bear interest in excess of the original issue discount and prepaid interest and matures on February 28, 2025. The Company is required to make 10 monthly payments of $18,032 starting May 30, 2024 and ending on February 28, 2025. The April 2024 Note gives the holder a conversion right at a 15% discount to the market price of the Company’s common stock only in the event of default. The Company determined that the fair value of the contingent conversion option was immaterial and therefore did not allocate any value related to the option to the proceeds received. Amortization expense related to the note discount was $9,795 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $9,795 and $-0- in the six months ended June 30, 2024 and 2023, respectively. The Company made payments against the outstanding balance of $18,032 and $-0- in the three months ended June 30, 2024 and 2023, respectively, and $18,032 and $-0- in the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, remaining payments were $162,288 and $-0-, respectively, and the net carrying value was $126,763 and $-0-, respectively. As June 30, 2024, the April 2024 Note was not in default and the Company was in compliance with the stated loan requirements.