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NOTES PAYABLE - CURRENT

12 Months Ended

Dec. 31, 2022

NOTE 5. - NOTES PAYABLE - CURRENT

Notes payable consist of:

	December 31,
	2022		2021
Demand note payable, 10%, secured by software (A)	$	12,500	$	12,500
Convertible promissory note, 8%, (B)		240,902		448,000
Convertible promissory note, 8%, (C)		370,000		0
Convertible promissory note, 8%, (D)		262,453		0
Convertible promissory note, 8%, (E)		355,000		0
Convertible promissory note, 8%, (F)		566,000		0
Financing arrangement on certain accounts receivable (G)		75,838		0
Convertible notes payable, 6% (H)		150,000		150,000
	$	2,032,693	$	610,500
Less: Deferred financing costs (C,D,E,F)		112,000		58,300
Debt discounts - warrants (C,D,E,F)		347,836		168,377
	$	1,572,857	$	383,823

(A)

Demand Note payable, 10%, secured by Software - During 2015, the Company issued a note in connection with the purchase of Software.

(B)	Convertible promissory note, 8%, due November 3, 2022 – During 2021, the Company entered into a convertible promissory note. In exchange for the convertible promissory note, the lender agreed to lend the Company $448,000, which bears interest at a rate of eight percent (8%) per annum. The convertible promissory note is recorded net of a $44,800 original issue discount. Under the terms of the convertible promissory note, monthly payments of principal and interest of $53,760 were due beginning March 3, 2022, and each month thereafter with the final payment due on November 3, 2022. Additionally, in the event of a default as defined in the promissory note agreement, or if the Company elects to pre-pay the convertible promissory note, the lender and the agent has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $7.50 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to the lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The note is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. The promissory note contains customary anti-dilution provisions. The Company evaluated the terms of the conversion feature under ASC 480 and ASC 815 and determined that separate bifurcation of the conversion feature was not required. In addition to the issuance of the convertible promissory note, the Company also granted the lender warrants (Note 9). In exchange for the Promissory Note, the Company accepted an original discount on the Promissory note of $44,800 as noted above, paid a finder’s fee of $20,160, and the lender’s legal fees of $5,000. These deferred financing fees were amortized ratably through October 2022. The Company did not meet the monthly payment obligations; however, on November 23, 2022, the lender waived the default provisions as of November 23, 2022 and extended the maturity date to March 31, 2023 as part of an amendment which increased the balance of the note by $140,000 and the Company repaid the $140,000 five days later. As of the filing date, the Company did not pay off the note. The lender could trigger the default provisions.

(C)	Convertible promissory note, 8%, due February 15, 2023 – During 2022, the Company entered into a convertible promissory note. In exchange for the convertible promissory note, the lender agreed to lend the Company $370,000, which bears interest at a rate of eight percent (8%) per annum. The convertible promissory note is recorded net of a $37,000 original issue discount. Under the terms of the convertible promissory note, monthly payments of principal and interest of $44,400 were due beginning June 16, 2022, and each month thereafter with the final payment due on February 15, 2023. In February 2023, the due date was extended to May 30, 2023. Additionally, in the event of a default as defined in the promissory note agreement, or if the Company elects to pre-pay the convertible promissory note, the lender and the agent has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $7.50 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to the lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The note is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. The promissory note contains customary anti-dilution provisions. The Company evaluated the terms of the conversion feature under ASC 480 and ASC 815 and determined that separate bifurcation of the conversion feature was not required. In addition to the issuance of the convertible promissory note, the Company also granted the lender warrants (Note 9). In exchange for the Promissory Note, the Company accepted an original discount on the Promissory note of $37,000 as noted above, paid a finder’s fee of $14,650, and the lender’s legal fees of $3,000. These deferred financing fees are being amortized ratably through February 2023. The Company did not meet the monthly payment obligations; however, the lender waived the default provisions on February 2, 2023 through February 2, 2023. On February 5, 2023, the lender extended the maturity date to May 30, 2023 as part of an amendment and the Company owed $200,000 by March 31, 2023 or an additional $30,000 would be added to the balance. The Company paid $200,000 of the existing balance on April 3, 2023 and the lender waived the $30,000.

(D)	Convertible promissory note, 8%, due April 12, 2023 – During 2022, the Company entered into a convertible promissory note. In exchange for the convertible promissory note, the lender agreed to lend the Company $296,000, which bears interest at a rate of eight percent (8%) per annum. The convertible promissory note is recorded net of a $29,600 original issue discount. Under the terms of the convertible promissory note, monthly payments of principal and interest of $35,520 were due beginning August 12, 2022, and each month thereafter with the final payment due on April 12, 2023. Additionally, in the event of a default as defined in the promissory note agreement, or if the Company elects to pre-pay the convertible promissory note, the lender and the agent has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $7.50 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to the lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The note is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. The promissory note contains customary anti-dilution provisions. The Company evaluated the terms of the conversion feature under ASC 480 and ASC 815 and determined that separate bifurcation of the conversion feature was not required. In addition to the issuance of the convertible promissory note, the Company also granted the lender warrants (Note 9). In exchange for the Promissory Note, the Company accepted an original discount on the Promissory note of $29,600 as noted above, paid a finder’s fee of $11,320, and the lender’s legal fees of $5,000. These deferred financing fees are being amortized ratably through April 2023. The Company did not meet the monthly payment obligations; however, the lender accepted a settlement for principal and accrued interest in April 2023 for $200,000. The debt was forgiven at that time and approximately $98,000 will be recorded as forgiveness of debt in 2023.

(E)	Convertible promissory note, 8%, due May 26, 2023 – During 2022, the Company entered into a convertible promissory note. In exchange for the convertible promissory note, the lender agreed to lend the Company $355,000, which bears interest at a rate of eight percent (8%) per annum. The convertible promissory note is recorded net of a $35,500 original issue discount. Under the terms of the convertible promissory note, monthly payments of principal and interest of $42,600 were due beginning September 27, 2022, and each month thereafter with the final payment due on May 26, 2023. Additionally, in the event of a default as defined in the promissory note agreement, or if the Company elects to pre-pay the convertible promissory note, the lender and the agent has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $7.50 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to the lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The note is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. The promissory note contains customary anti-dilution provisions. The Company evaluated the terms of the conversion feature under ASC 480 and ASC 815 and determined that separate bifurcation of the conversion feature was not required. In addition to the issuance of the convertible promissory note, the Company also granted the lender warrants (Note 9). In exchange for the Promissory Note, the Company accepted an original discount on the Promissory note of $35,500 as noted above, paid a finder’s fee of $15,975, and the lender’s legal fees of $3,500. These deferred financing fees are being amortized ratably through May 2023. The Company did not meet the monthly payment obligations; however, the lender waived the default provisions through November 2022. However, the Company was in default as of December 31, 2022 and as of the filing date and the lender could trigger the default provisions.

(F)	Convertible promissory note, 8%, due November 22, 2023 – During 2022, the Company entered into a convertible promissory note. In exchange for the convertible promissory note, the lender agreed to lend the Company $566,000, which bears interest at a rate of eight percent (8%) per annum. The convertible promissory note is recorded net of a $56,600 original issue discount. Under the terms of the convertible promissory note, monthly payments of principal and interest of $67,920 were due beginning March 23, 2023, and each month thereafter with the final payment due on November 22, 2023. Additionally, in the event of a default as defined in the promissory note agreement, or if the Company elects to pre-pay the convertible promissory note, the lender and the agent has the right to convert any portion or all of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $3.55 per share. The conversion price is subject to adjustment under certain circumstances, including issuances of Company common stock below the conversion price. The Company is not required to issue additional shares to the lender in the event an adjustment to the conversion price occurs. Except for the option to convert the note in the event of a pre-payment, there is no pre-payment penalty associated with the promissory note. The note is subject to customary events of default, including cross-defaults on the Loan agreements and on other indebtedness of the Company, violations of securities laws (including Regulation FD), and failure to issue shares upon a conversion of the note. Amounts due under the Loan are subject to a 15% penalty in the event of a default. The promissory note contains customary anti-dilution provisions. The Company evaluated the terms of the conversion feature under ASC 480 and ASC 815 and determined that separate bifurcation of the conversion feature was not required. In addition to the issuance of the convertible promissory note, the Company also granted the lender warrants (Note 9). In exchange for the Promissory Note, the Company accepted an original discount on the Promissory note of $56,600 as noted above, paid a finder’s fee of $14,000, and the lender’s legal fees of $5,000. These deferred financing fees are being amortized ratably through November 2023. The Company did not make the first monthly payment. As of the filing date, the lender could trigger the default provisions.

(G)	Financing arrangement on certain accounts receivable - During 2022, the Company entered into a financing arrangement. Pursuant to the financing arrangement, the lender agreed to lend the Company $139,400 with a one--time fixed loan fee of $11,152 for a total obligation of $150,552. Under the terms of the financing arrangement, payments became due on August 15, 2022, and consisted of 25% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform and then due and owing to the Company or $16,728 over a sixty day period, whichever is higher. As of December 31, 2022, the outstanding balance was $75,838. Subsequent payments shall also consist of 25% of the Company’s receivables processed through Stripe, Inc.’s payment processing platform and then due and owing to the Company or $16,728 over a sixty day period, whichever is higher, with the final payment due on February 6, 2024. The loan is subject to customary events of default. No material relationship exists between the Company or its affiliates and Lender, other than in respect to the processing of credit card payments through Stripe, Inc.’s payment processing platform, and the lender’s Loan Agreement.

(H)	Convertible notes payable, 6%, maturity date of December 31, 2016 - At December 31, 2022, the Company was obligated to unrelated third parties for $150,000 ($150,000 - 2021) (“The Notes”). The principal is unsecured and convertible at the option of the holders into shares of common stock at $3.75 per share. The Notes bear interest at 6.0% and is past due. The Notes are convertible into shares of common stock subject to the following limitations. The Notes are not convertible to the extent that shares of common stock issuable upon the proposed conversion would result in a change in control of the Company which would limit the use of its net operating loss carryforwards; provided, however if the Company closes a transaction with another third party or parties that results in a change of control which will limit the use of its net operating loss carryforwards, then the foregoing limitation shall lapse. Prior to any conversion by a requesting note holder, each note holder holding a note which is then convertible into 5% or more of the Company’s common stock shall be entitled to participate on a pari passu basis with the requesting note holder and upon any such participation the requesting note holder shall proportionately adjust his conversion request such that, in the aggregate, a change of control, which will limit the use of the Company’s net operating loss carryforwards, does not occur.

Notes payable - related parties consist of:

	December 31,
	2022		2021
Demand notes payable to director, 6%, unsecured	$	130,000	$	130,000
Demand note payable to employee, 6% unsecured		50,000		50,000
Demand notes payable to officer and director, 6%, unsecured		37,000		37,000
Demand note payable to officer and director, 6%, unsecured		12,000		12,000
	$	229,000	$	229,000