Note 7 - Notes Payable and Interest Expense |
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Debt Disclosure [Text Block] |
7. Notes Payable and Related Party Notes Payable
The following table presents details of our notes payable as of December 31, 2022 and 2021:
Principal payments on notes payables are due as follows:
ACOA Note
On November 6, 2017, Livelenz, entered into an amendment of the original agreement dated December 2, 2014 with the Atlantic Canada Opportunities Agency (“ACOA”). Under this agreement the note will mature without interest and repayments began on June 1, 2016, while the commitments will terminate on February 1, 2024. The monthly principal payment amount of $3,000 CAD increased to $3,500 CAD beginning on November 1, 2019, and will increase to $4,000 CAD on August 1, 2021, $4,500 CAD on August 1, 2022 and $2,215 CAD during the remaining term of the agreement. During the twelve months ended December 31, 2021, we repaid $10,485 CAD of principal. Nine months of payments were voluntarily deferred by ACOA due to COVID-19.
During the twelve months ended December 31, 2022 $45,052 CAD in principle was paid toward the ACOA loan.
Wintrust Loan
On November 14, 2018, we entered into a Loan and Security Agreement with Wintrust Bank(the Loan and Security Agreement"). The Loan and Security Agreement provides for a single-term loan to us in the original principal amount of $1,000,000. Interest accrues on the unpaid principal amount at the rate of prime plus 1.5%. The loan is a -year loan and was interest-only payable for the first six months of the loan. Commencing on May 1, 2019, we made monthly payments of principal in the amount of $33,333 in addition to the monthly payment of accrued interest. The loan is secured by all of our assets other than our intellectual property. We used the proceeds of the loan to re-finance a loan in the principal amount of $1,000,000 we assumed as part of the acquisition of the Belly assets.
On August 7, 2020, the Company entered into an amendment of their Loan and Security Agreement with Wintrust Bank. Under this agreement, the covenant calculation was amended to calculate covenants under a borrowing base methodology. The Company had defaulted under the March 31, 2020 and June 30, 2020 covenants, which were waived upon execution of the amendment and there were no defaults after the amendment. During the twelve months ended December 31, 2021, we repaid $400,000 of principal. The loan was paid in full on June 30, 2021.
Chase Loan
On April 10, 2020, we entered into a commitment loan with Chase Bank, N.A. under the CARES act and SBA Paycheck Protection Program, in the principal aggregate amount of $891,103, which is due and payable years after issuance. This loan bears interest on the unpaid balance at the rate of one percent (1%) per annum. The note contains a deferral period of six months, for which no interest or principal payments are due. Forgiveness of the loan may be obtained by meeting certain SBA requirements. The entire loan was forgiven on July 21, 2021, at which time the company recorded a gain on extinguishment of debt in the amount of $891,103.
TD Bank Loan
On April 22, 2020, we entered into a commitment loan with TD Bank under the Canadian Emergency Business Account (“CEBA”), in the principal aggregate amount of $40,000 CAD, which is due and payable on December 31, 2022. This note bears interest on the unpaid balance at the rate of zero percent (0%) per annum during the initial term. Under this note interest or principal payments are due until December 31, 2023. Under the conditions of the loan, thirty-three percent (33%) of the loan will be forgiven if sixty-seven percent (67%) is repaid prior to the initial term date.
Related Party Notes
Secured Promissory Notes
On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with Thomas Akin, one of the Company’s directors (the "Lender"). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $6,000,000 under the Credit Agreement ("the "Credit Facility"). As of December 31, 2021, the Company had drawn a total of $3,478,125 including cash drawn in the amount of $3,206,250 and $271,875 of principal and accrued interest under the 2020 UP Note that was rolled into the Credit Facility and had paid a total of $200,000 toward the principal balance of the loan,
The Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this loan without notice, penalty, or charge. In consideration of the Lender’s agreement to provide the Credit Facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67 per share in connection with the issuance of funds under the Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the corresponding notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the Lender additional warrants entitling the Lender to purchase a number of shares of the Company's common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume-weighted average price over the 30 trading days preceding the advance (the "VWAP"). Each warrant will be exercisable over a -year period at an exercise price equal to the VWAP.
Under the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in 24 equal monthly installments commencing on June 30, 2022, and ending on June 30, 2024. On November 11, 2022, an amendment to the Credit Agreement was signed. The amendment updated the payment terms to the following: "Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances, plus accrued interest thereon, in 24 equal monthly installments commencing on January 31, 2023 and continuing thereafter on the last day of each month (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day. Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum. Interest will be calculated on the basis of 365 days in a year." The amendment raised the maximum amount of the Credit Facility to $6,000,000. In addition, the interest which is accrued monthly between July 1, 2022, and December 31, 2022, will be settled into equity. Common Stock will be issued at the end of each month at a rate of $1.08 per share of common stock in the amount of the interest accrued for each month.
On June 10, 2022, the Company took a draw of an additional $500,000 under the Credit Agreement.
On August 09, 2022 the Company took a draw of an additional $300,000 under the Credit Agreement.
On November 22, 2022 the Company took a draw of an additional $375,000 under the Credit Agreement.
On November 30, 2022 the Company took a draw of an additional $250,000 under the Credit Agreement.
On December 27, 2022 the Company took a draw of an additional $470,000 under the Credit Agreement.
During the year ended December 31, 2022 the Company issued warrants to purchase an aggregate of 338,708 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under the Credit Agreement. The estimated aggregate fair value of the warrants issued is $143,039 using the Black-Scholes option valuation model as of December 31,2022.
As of December 31, 2022, the Company had drawn a total of $5,173,125 and we have accrued interest of $387,918. A total of $151,398 of accrued interest was settled into 140,185 shares of common stock and the Company recorded a loss on debt settlement of interest payable $2,259. A total of $166,432 was accrued and recorded to equity payable of 154,106 shares of common stock and the Company recorded a loss on settlement of interest payable of $44,325.
Unsecured Promissory Note
On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875 with Talkot Fund LP and investor in the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest are due and payable no later than December 31, 2023. We may prepay any of the UP Notes without notice, subject to a two percent (2%) pre-payment penalty. The UP Note offer was conducted by our management and there were no commissions paid by us in connection with the solicitation. The Company issued to Talkot Fund LP warrants to purchase an aggregate of 33,017 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under this Credit Agreement.
On August 13, 2022, the Lender agreed to postpone the 24-month repayment period to a later period commencing on January 31, 2022, and further agreed that interest accrued on the loan between July 1, 2022 and December 31, 2022 is to be settled in shares of the Company’s common stock.
As of December 31, 2022, the Company had a principal balance of $271,875, and accrued interest of $55,530. A total of $10,352 of accrued interest was converted into 9,585 shares of common stock and the Company recorded a loss on settlement of interest payable of $162. A total of $10,423 was accrued and recorded to equity payable of 9,651 shares of common stock and the Company recorded a loss on settlement of interest payable of $2,757.
Interest Expense
The following table summarizes interest expense for the years ended December 31, 2022 and 2021:
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