Notes Payable

6 Months Ended

Jun. 30, 2022

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4: NOTES PAYABLE

Notes Payable- Unrelated Parties

On September 6, 2018, the Company issued the Amended and Restated Secured Promissory Note in the principal amount of $582,260 (the “A&R Note”). The principal amount of the A&R Note represents (i) $500,000 which Healthier Choices Management Corp. (“HCMC) loaned to the Company on September 6, 2018, and (ii) $82,260, which represents the aggregate amount owed by the Company under the Original Notes as of September 6, 2018. The A&R Note, which has a maturity date of September 6, 2021, had the effect of amending and restating the Note and bears interest at the rate of 7% per annum. Pursuant to the terms of the A&R Note, the Company agreed to pay HCMC 155 weekly payments of $4,141, commencing on September 14, 2018 and ending on September 14, 2021, and a balloon payment for all remaining accrued interest and principal in the 156th week. The Company at its option has the right, by giving 15 business days’ advance notice to HCMC, to prepay a portion or all amounts outstanding under the A&R Note without penalty or premium. The balance of the note as of June 30, 2022 and December 31, 2021 was $218,959 and $247,924, respectively.

On September 17, 2019, the Company issued a promissory note in the principal amount of $100,000 (the “Kabbage Note”) to Kabbage, Inc. The principal amount due under the Kabbage Note bears interest at an annual rate of 37%, and requires monthly payments of principal and interest of $10,083 through maturity in September 2020. The Kabbage Note is unsecured. The balance of the note as of June 30, 2022 and December 31, 2021 was $7,682 and $20,324, respectively.

On September 24, 2019, the Company entered into a working capital account agreement with Paypal Working Capital (“Paypal Note”), pursuant to which the Company borrowed $37,000, requiring repayment in amounts equal to 30% of sales collections processed through Paypal, but no less than $4,143, every 90 days, until the total amount of payments equals $41,430. The balance of the loan as of June 30, 2022 and December 31, 2021 was $21,797.

In August 2021, the Company entered into a purchase and sale agreement with BRMS, LLC (“BRMS Note”), pursuant to which the Company received proceeds of $250,000 for the sale of future receivables totaling $308,750, to be remitted to BRMS, LLC in 52 weekly amounts totaling $5,913. The balance of the note as of June 30, 2022 and December 31, 2021 was $44,230 and $167,308, respectively.

Payroll Protection Program Loan

The Company’s long-term debt is comprised of promissory notes pursuant to the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”) (see below), under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) enacted on March 27, 2020 and revised under the provisions of the PayCheck Protection Flexibility Act of 2020 on June 5, 2020 and administered by the United States Small Business Administration (“SBA”).

In March 2021, the Company received a loan (the “March 2021 PPP Loan” and together with April 2020 PPP Loan, the “PPP Loans”) in the amount of $190,057 under the PPP. The March 2021 PPP Loan accrues interest at a rate of 1% and has an original maturity date of two years which can be extended to five years 2 by mutual agreement of the Company and SBA. The March 2021 PPP Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.

Under the terms of the PPP Loans, a portion or all of the PPP Loans are forgivable to the extent the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven. The Company utilized the proceeds of the PPP loan in a manner which enabled qualification as a forgivable loan. The balance on the PPP loan was $190,057 as of December 31, 2021 and has been classified as a long-term liability in notes payable, less current portion on the accompanying balance sheets. In May 2022, the PPP loan was forgiven.

Economic Injury Disaster Loan

On July 9, 2020 and June 24, 2020, the Company received an EIDL in the aggregate amount of $159,900, payable in monthly installments of principal and interest totaling $731 over 30 years beginning in June 2021. The note accrues interest at an annual rate of 3.75%. The EIDL is secured by all tangible and intangible property. The Company received forgiveness of $10,000 of EIDL principal during the six months ended June 30, 2022, which is included in loan forgiveness in the accompanying statements of operations. The balance on this EIDL was $149,900 as of June 30, 2022 and has been classified as a long-term liability in notes payable, less current portion on the accompanying balance sheets.

Daiagi Note

On May 18, 2022, the Company issued a promissory note in the principal amount of $250,000 (the “Daiagi Note”) to Mike Daiagi. The principal amount due under the Daiagi Note bears interest at the rate of 18% per annum payable monthly. The principal amount and accrued but unpaid interest is due and payable on the third anniversary of the issue date. The Daiagi Note and the amounts payable thereunder are unsecured obligations of the Company and shall be senior in right of payment and otherwise to all indebtedness, as provided in the Daiagi Note. The balance of the Daiagi Note was $250,000 as of June 30, 2022.

The following is a summary of notes payable activity for the six months ended June 30, 2022:

Balance at December 31, 2021	$	807,310
Issuance of note payable		250,000
PPP loan and EIDL forgiveness		(200,057	)
Repayments of notes payable		(164,684	)
Balance at June 30, 2022	$	692,569
Current portion		(292,669	)
Notes payable, less current portion	$	399,900