LONG-TERM OBLIGATIONS

12 Months Ended

Dec. 31, 2022

NOTES PAYABLE - CURRENT

LONG-TERM OBLIGATIONS

NOTE 6. - LONG-TERM OBLIGATIONS

Notes Payable - Other - Term notes payable - other consist of:

	December 31,
	2022		2021
2016 note payable, 6%, unsecured, due December 31, 2021 (A)	$	0	$	500,000
2022 note payable, 10%, unsecured, due September 30, 2023 (B)		250,000		0
Note payable, 10%, secured, due January 1, 2018 (C)		265,000		265,000
Convertible term note payable,12%, secured, due January 1, 2024 (D)		175,000		175,000
2020 note payable, 6%, unsecured, due August 24, 2024 (E)		166,473		166,473
Convertible term note payable,7%, secured, due January 1, 2024  (F)		100,000		100,000
Convertible notes payable, 6%, due January 1, 2024 (G)		9,000		9,000
Accrued interest due after 2021(H)		8,376		7,836
		973,849		1,223,309
Less: current maturities		515,000		765,000
	$	458,849	$	458,309

(A)  2016 note payable, 6%, unsecured, due December 31, 2021 - On March 14, 2016, the Company entered into an unsecured financing agreement with a third-party lender. At December 31, 2016, the Company was obligated for $500,000. Borrowings bear interest at 6% with interest payments due quarterly. Principal was due on December 31, 2021 and is now past due. Principal and interest may become immediately due and payable upon the occurrence of customary events of default. In consideration for providing the financing, the Company paid the lender a fee of 33,334 shares of its common stock valued at $37,500 on the date of the agreement based upon the closing bid quotation of its common stock on the OTC Bulletin Board on that date. These deferred financing costs are recorded as a reduction of the principal owed and are amortized over the life of the debt. The balance of the note payable was $467,225 at December 31, 2016 consisting of principal due of 500,000 offset by deferred financing costs of $32,775. As of December 31, 2021, the balance was $500,000. This debt was amended by a new note effective as of October 1, 2022 (see Note (B) below). The effect of the transaction was the reduction of accounts receivable by $383,473; the reduction of debt of $250,000, the reduction of accrued interest payable by $72,500 and a non-operating loss of $60,973. 

(B)  2022 note payable, 10%, unsecured, due September 30, 2023 - On March 17, 2023, the Company, entered into an Amended and Restated Line of Credit Note and Agreement effective as of October 1, 2022, which amended and restated the “2016 Note” (see Note (A) above). The note has a principal amount of $250,000 and accrues interest on the unpaid principal amount at a rate of ten percent (10%) per annum. Under the terms of the note, the Company agreed to make a one-time payment of $16,667 for interest accrued on the 2016 Note for the four-month period covering June 2022 through September 2022. The Company has also agreed to make quarterly interest payments of $6,250, commencing on December 31, 2022, and continuing through and including September 30, 2023. If an event of default occurs, the Company has 30 days to cure from the date on which the lender has provided the Company with written notice specifying the event of default. 

(D)  Convertible term note payable, 12%, secured, due January 1, 2024 - The Company entered into a secured loan agreement during 2008 for working capital. The loan bears interest at 12%, which is payable monthly and was due, as modified on August 31, 2018 for an aggregate of $175,000. During 2009, the note was modified for its conversion into common shares at $18.75 per share, which was the closing price of the Company’s common stock on the date of the modification. The note is secured by a subordinate lien on all assets of the Company. 

(E)  2020 note payable, 6%, unsecured, due August 24, 2024 - The Company entered into a promissory note agreement dated August 24, 2020 with a third-party lender. The note represents the negotiated amount owed due to the lender after a payment in the amount of $550,000 was made to settle previous notes and interest held by the Lender. The principal amount of the new note is $166,473. This note becomes due on August 24, 2024. 

(F)  Convertible term note payable, 7%, secured, due January 1, 2024 - The note bears interest at the rate of 7% per annum, payable monthly, and is secured by a subordinate lien on all the Company’s assets. The note’s principal is convertible at the option of the holder into shares of the Company’s common stock at $7.50 per share, which was the price of the Company’s common stock on the closing date of the agreement. 

(G)  Convertible notes payable, 6%, due January 1, 2024 - The Company has a note payable to a former related party in the amount of $9,000. The note’s maturity was extended to January 1, 2024 from January 1, 2021. In consideration for this extension, the Company agreed to issue the borrower 25,000 options with a 3-year term to purchase common stock of Infinite Group Inc. exercisable at $7.50 per share. Principal and accrued interest are convertible at the option of the holder into shares of common stock at $3.75 per share. The note bears interest at 6% at December 31, 2022 and December 31, 2021. The rate is adjusted annually, on January 1st of each year, to the prime rate in effect on December 31st of the immediately preceding year, plus one and one quarter percent, and in no event, shall the interest rate be less than 6% per annum. The rate effective as of January 1, 2023 was 8.75% (January 1, 2022 – 6%). 

(H)  Accrued interest due after 2021 – The accrued interest for items (F) and (G) above is not due until the due date of the respective loan. 

Notes Payable - Related Parties

Notes payable - related parties consist of:

	December 31,
	2022		2021
Note payable, up to $500,000, 7.5%, due August 31, 2026 (A)	$	499,000	$	499,000
2020 Note payable, 6%, due January 1, 2024 (B)		328,000		328,000
Convertible notes payable, 6% (C)		146,300		146,300
Convertible note payable, 7%, due June 30, 2023 (D)		25,000		25,000
Note payable, $100,000 line of credit, 6%, unsecured (E)		90,000		90,000
Note payable, $75,000 line of credit, 6%, unsecured (F)		70,000		70,000
Accrued interest due after 2022 (G)		113,576		116,465
	$	1,271,876	$	1,274,765
Less current maturities		385,000		190,000
	$	886,876	$	1,084,765

(A)   Note payable of up to $500,000, 7.5%, due August 31, 2026 - On May 7, 2019, the Company entered into a note payable agreement for up to $500,000 with a related party. The note has an interest rate of 7.5% and is due on August 31, 2026. The Company borrowed $200,000 during the year ended December 31, 2019, $50,000 during the year ended December 31, 2020, and $249,000 during the year ended December 31, 2021 which remains outstanding at December 31, 2022. 

(B)  2020 Note payable, 6%, due January 1, 2024 - On December 30, 2020, the Company entered into a promissory note agreement with a member of its Board. The interest payments are due quarterly. First payment to be made on April 1, 2021 and every three (3) months thereafter until the note is retired. No interest payments were made in 2022. A principal payment of two hundred thousand dollars ($200,000.00) are to be made on January 1, 2023 and a balloon payment of $128,000 on January 1, 2024. The due dates are currently being negotiated. 

(C)  Convertible notes payable, 6% - The Company has a note payable to a related party of $146,300 maturing on January 1, 2024. This note’s maturity date was extended from January 1, 2020. Principal and accrued interest are convertible at the option of the holder into shares of common stock at $3.75 per share, subject to certain limitations. The notes bear interest at 6% at December 31, 2022 The rate is adjusted annually, on January 1^st of each year, to the prime rate in effect on December 31^st of the immediately preceding year, plus one and one quarter percent, and in no event, shall the interest rate be less than 6% per annum. The rate effective as of January 1, 2023 was 8.75% (6% in 2022). 

The Company executed  collateral security agreements with the note holders providing for a subordinate security interest in all the Company’s assets. Generally, upon notice, prior to the note maturity date, the Company can prepay all or a portion of the outstanding notes. 

(D)  Convertible note payable, 7%, due June 30, 2023 - On February 12, 2015, the Company borrowed $25,000 from a Company officer. The note is unsecured and matured on March 31, 2018 with principal convertible at the option of the holder into shares of common stock at $7.50 per share. In 2019, the Company officer extended the due date to June 30, 2023. 

(E)  Note payable, $100,000 line of credit, 6%, unsecured - On July 18, 2017, the Company entered into an unsecured line of credit financing agreement with an officer and member of its Board. The LOC Agreement provides for working capital of up to $100,000 with interest at 6% due quarterly through July 31, 2023. In consideration for providing the financing, the lender was granted an option to purchase 5,334 shares of common stock at $3.00 per share. The option was exercised in 2022. 

(F)  Note payable, $75,000 line of credit, 6%, unsecured - On September 21, 2017, the Company entered into an unsecured line of credit financing agreement with a related party. The LOC Agreement provides for working capital of up to $75,000 with interest at 6% due quarterly through January 2, 2023. In consideration for providing the financing, the lender was granted an option to purchase 5,334 shares of common stock at $3.00 per share. The option expired on January 2, 2023. 

(G)  Accrued interest due after 2023 – The accrued interest for item (C) above is not due until the due date of the loan.  

 Long-Term Obligations

As of December 31, 2022, minimum future annual payments of long-term obligations and amortization of deferred financing costs are as follows:

	Annual		Annual
	Payments		Amortization		Net
Due Prior to 2023	$	1,111,083	$	0	$	1,111,083
2023		2,033,930		459,884		1,574,046
2024		863,453		0		863,453
2025		0		0		0
2026		499,000		0		499,000
Total long-term obligations	$	4,507,466	$	459,884	$	4,047,582