Notes Payable and Line of Credit

6 Months Ended

Jun. 30, 2023

Notes Payable and Line of Credit

Notes Payable and Line of Credit

Note 5: Notes Payable and Line of Credit

A summary of Notes Payable are as follows:

	June 30, 2023			December 31, 2022
SBA loan May 2020	$	143,352		$	144,739
Note payable September 2021		625,384			635,658
Note Payable September 2022		-			52,475
Total notes payable		768,736			832,872
Less: discount and deferred finance costs		-			(94,095	)
Less: current portion		(629,027	)		(158,672	)
Long-term portion of notes payable	$	139,709			580,105

On June 2, 2020, the Company received $150,000 under the Small Business Administration’s Economic Injury Disaster Loan. The loan bears interest at a fixed rate of 3.75%, and matures on May 26, 2050, payable monthly with payments of $731 beginning twelve months after issuance. The loan gives the Small Business Administration a security interest in all assets of the Company. As of June 30, 2023 and December 31, 2022, the Company owed a principal amount of $143,352 and $144,739 under this loan.

On September 29, 2021, the Company entered into a Revenue Loan and Security Agreement (the “RSLA) with an investor for up to a total amount of $1,000,000. Upon drawing from the facility and continuing thereafter until maturity or earlier prepayment in full, the Company shall pay monthly to the lender an amount equal to the product of (i) all revenue of the Company for the immediately preceding month multiplied by (ii) an applicable revenue percentage. On September 29, 2021, the Company borrowed $750,000 under the agreement and received initial cash proceeds of $727,500. The Company also paid an additional $5,000 in fees to the investor to secure the loan for total deferred financing fees of $27,500. On November 12, 2021, the Company issued a total of 843,750 shares of common stock to a lender in connection with the note payable issued. These shares had a fair value of $100,744 and were recorded as deferred finance costs.

On March 13, 2023, the Company entered into an Amendment to the RSLA (the “Amended RSLA”) whereby, the lender agreed to a limited forbearance on the loan as a result of the existing defaults if the company were to meet certain criteria. As of June 30, 2023, the Company did not meet the criteria as outlined in the Amended RSLA, and therefore the Company is in default on the loan and the lender has the right to demand full repayment of the loan. As a result, the remaining deferred finance cost was amortized to interest expenses and the full amount of the loan is classified as a current liability.

As of June 30, 2023 and December 31, 2022, the Company owed a principal amount of $625,384 and $635,658 under this loan, with remaining unamortized discount of $0 and $94,095, respectively.

In December 2022, the Company received cash proceeds of $52,475 under an unsecured short term financing agreement. The Company repaid the loan in full during the six months ended June 30, 2023.

On March 30^th, 2023, the Company entered into a line of credit agreement with a principal amount of $50,000, which was drawn in full as of June 30, 2023. The line of credit is unsecure, bears interest at 10% and matures on June 30, 2023. The Company paid $1,000 in financing costs associated with the loan. This loan has been extended and the Company is in discussion with the creditor to finalize a new maturity date.

The Company amortized $95,095 and $49,980 of debt discount and deferred finance costs to interest expense related to notes payable and the line of credit during the six months ended June 30, 2023 and 2022, respectively.

Accrued interest on notes payable was $240,122 and $169,855 as of June 30, 2023 and December 31, 2022, respectively.