Notes Payable

3 Months Ended

Mar. 31, 2023

The Company entered into notes payable as follows as of March 31, 2023 and December 31, 2022:


	March 31, 2023		December 31, 2022
Note payable at 7% originally due November 2023, maturing September 30, 2024	$	5,600,000	$	5,600,000
Note payable at 10% interest dated February 28, 2022 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note including the successful completion of an equity offering of at least $15,000,000 (a)	400,000		400,000
Convertible note payable, convertible at $1.60 per share, at 7%, maturing April 4, 2023 (b)	—		890,000
Convertible note payable, convertible at $1.20 per share, at 10%, maturing February 13, 2024 (b)	840,000		—
Term note payable, at prime plus 3% interest, applied on a deferred basis (7.75% at March 31, 2023 and 6.25% at December 31, 2022) maturing August 11, 2024	2,010,245		2,324,236

Total Notes Payable	8,850,245		9,214,236
Less: Debt Discount	(911,162)		(840,398)
	$	7,939,083	$	8,373,838

(a)On February 28, 2022, the Company was obligated to issue 125,000 shares of common stock as further consideration for making this loan to the Company. The shares were issued in April 2022.

(b)On February 13, 2023, the Company entered into a series of transactions with Crom Cortana Fund LLC (“Crom”), the primary purpose of which is related to the GTMR acquisition entered into on March 22, 2023. In connection therewith, the Company and Crom entered into an agreement to pay off the amount owed to Crom under the terms of the convertible promissory note in the original principal amount of $1,050,000 due April 4, 2023 ("Prior Crom Note"). In consideration of a $300,000 cash payment and 556,250 shares of common stock representing conversion of the remaining principal balance of the Company’s obligations under the Prior Crom Note are deemed satisfied reducing the balance to zero; we induced conversion of the debt, which effectively extinguished the debt. Simultaneously therewith, the parties entered into the Securities Purchase Agreement (the “2023 SPA”) pursuant to which Crom purchased (a) a convertible promissory note in the principal amount of $840,000 (the “2023 Note Payable”), which matures February 13, 2024 and bears interest at a per annum rate equal to 10% to be paid monthly, and (b) a warrant pursuant to which Crom has the right to purchase up to 700,000 shares of the Company’s common stock (the “2023 Warrant”) at an exercise price of $1.38 which expire 60 months from the date of issuance. The proceeds of the 2023 Note Payable were used primarily to fund the GTMR acquisition, as well as fund the aforementioned debt repayment.

Interest expense which includes amortization of discount for the three months ended March 31, 2023 and 2022 was $485,000 and $268,576, respectively. Accrued interest on the notes payable as of March 31, 2023 is $16,388.

Each note discussed above will reach maturity during 2024. Future principal payments will be $1,046,796 and $7,803,449 in 2023 and 2024, respectively.