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Notes Payable – Unrelated Parties
 9 Months Ended
Sep. 30, 2022
Unrelated Party [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Notes Payable – Unrelated Parties

8. Notes Payable – Unrelated Parties

 

Summary of Notes Payable to Unrelated Parties

 

The table below summarizes all notes payable At September 30, 2022 and December 31, 2021, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.”

 

   September 30, 2022   December 31, 2021 
2022 Unrelated Notes  $2,364,500   $- 
2020 Notes   2,000,000    2,000,000 
Total notes payable  $4,364,500   $2,000,000 
Less unamortized debt issuance costs   (353,741)   (121,029)
Less unamortized debt discount   (44,444)   (124,444)
Less current portion, net   (1,912,331)   - 
Long-term portion of notes payable  $2,053,984   $1,754,527 

 

Future minimum principal payments of the Notes Payable to Unrelated Parties are as follows:

 

As of September 30,  Amount 
2023  $2,000,000 
2025   2,364,500 
Total  $4,364,500 

 

As of September 30, 2022 and December 31, 2021, accrued interest for these notes payable with the exception of the related party notes in Note 9, “Notes Payable - Related Parties,” was $0. As of September 30, 2022 and December 31, 2021, unamortized deferred financing costs and unamortized debt discount were reflected within short and long term liabilities on the condensed consolidated balance sheets, netted with the corresponding notes payable balance.

 

With respect to all notes outstanding (other than the notes to related parties), interest expense, including the amortization of debt issuance costs and debt discount, for the three and nine months ended September 30, 2022 and 2021 was $214,587 and $541,777, respectively, and $113,030 and $339,345, respectively.

 

 

2022 Unrelated Notes

 

On April 1, 2022, we sold $2,364,500 in 12% Subordinated Notes (“2022 Unrelated Notes”) to unrelated accredited investors. The entire outstanding principal and unpaid interest of the 2022 Notes are due and payable on March 30, 2025. Interest on the 2022 Unrelated Notes accrues at the rate of 12% per annum, payable quarterly in cash, beginning on September 30, 2022. Any accrued but unpaid quarterly installment of interest will accrue interest at the rate of 14.0% per annum. Any overdue principal and accrued and unpaid interest at the maturity date will accrue a mandatory default penalty of 20% of the outstanding principal balance and an interest rate of 14% per annum from the maturity date until paid in full. We used a portion of the net proceeds from the private placement offering to finance the acquisition of Yellow Folder and the remaining net proceeds for working capital and general corporate purposes.

 

2020 Notes

 

On March 2, 2020, we sold 2,000 units, at an offering price of $1,000 per unit, to accredited investors in a private placement offering, with each unit consisting of $1,000 in 12% Subordinated Notes (“2020 Notes”) and 40 shares of our common stock, for aggregate gross proceeds of $2,000,000. The entire outstanding principal and unpaid interest of the 2020 Notes are due and payable on February 28, 2023. Interest on the 2020 Notes accrues at the rate of 12% per annum, payable quarterly in cash, beginning on June 30, 2021. Any accrued but unpaid quarterly installment of interest will accrue interest at the rate of 14.0% per annum. Any overdue principal and accrued and unpaid interest at the maturity date will accrue a mandatory default penalty of 20% of the outstanding principal balance and an interest rate of 14% per annum from the maturity date until paid in full. We used a portion of the net proceeds from the private placement offering to finance the acquisitions of Graphic Sciences and CEO Image and the remaining net proceeds for working capital and general corporate purposes. We recognized a debt discount of $320,000 for the 80,000 shares issued in conjunction with the units. The amortization of the debt discount, which will be recognized over the life of the 2020 Notes as interest expense, for the three and nine months ended September 30, 2022 and 2021 was $26,667 and $79,999, respectively.

 

PPP Note

 

On April 15, 2020, we were issued an unsecured promissory note (“PPP Note”) under the Paycheck Protection Program through PNC Bank with a principal amount of $838,700. The term of the PPP Note Payable was two years, with an interest rate of 1.0% per annum deferred for the first six months. We received notice on January 20, 2021 that the Small Business Administration had forgiven the full amount of principal and interest of the PPP Note, and we have recognized a gain on extinguishment of debt of $0 and $845,083 for the three and nine months ended September 30, 2021.