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Notes Payable – Unrelated Parties
 12 Months Ended
Dec. 31, 2023
Nonrelated 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 December 31, 2023 and 2022, respectively with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.”

 

   December 31, 2023   December 31, 2022 
2022 Unrelated Notes  $2,364,500   $2,364,500 
2020 Notes   -    980,450 
Total notes payable  $2,364,500   $3,344,950 
Less unamortized debt issuance costs   (155,258)   (300,904)
Less unamortized debt discount   -    (22,045)
Less current portion, net   -    (936,966)
Long-term portion of notes payable  $2,209,242   $2,085,035 

 

Subordinated Notes Payable  Issue Date  Interest Rate  Interest Due   Principal Due
2022 Unrelated Notes  April 1, 2022  12%   Quarterly   March 30, 2025

 

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

 

As of December 31,  Amount 
2025  $2,364,500 
Total  $2,364,500 

 

As of December 31, 2023 and 2022, 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 December 31, 2023 and 2022, unamortized debt issuance costs and unamortized debt discount were reflected within short and long term liabilities on the 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 years ended December 31, 2023 and 2022 was $514,480 and $737,949, 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 were initially due and payable on March 30, 2025. On March 13, 2024, we agreed with the note holders to amend the Unrelated Notes to extend the maturity date to December 31, 2025, for $1,519,500 of the $2,364,500 in 2022 Unrelated Notes. Principal in the amount of $845,000 remains 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 were initially due and payable on February 28, 2023. On December 1, 2022, we paid the note holders an amount totaling $1,019,550 as a prepayment of principal. In December 2022, a majority of the note holders signed an amendment to extend the maturity date for $717,500 of the remaining $980,450 in 2020 Notes to August 31, 2023, and the outstanding principal and unpaid interest was paid on their respective due dates of February 28, 2023 and August 31, 2023. Interest on the 2020 Notes accrued at the rate of 12% per annum, payable quarterly in cash, beginning on June 30, 2021. 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 was recognized over the life of the 2020 Notes as interest expense, for the years ended December 31, 2023 and 2022 was $22,045 and $102,400, respectively.