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NOTES PAYABLE | 12 Months Ended
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Dec. 31, 2024
Debt Disclosure [Abstract] |
NOTES PAYABLE | 24. NOTES PAYABLE Notes payable at December 31, 2024 and 2023, were comprised of the following:
Schedule of notes payable |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Collateral |  | Guarantors |  | Interest rate |  | Effective rate(1) |  | Due date |  | December 31, 2024 |  |  | December 31, 2023 |
AGREE secured construction loans (in default) |  | AGREE hotels |  | - |  | 7.0% |  | 8.8% |  | March 31, 2026 |  | $ | 68,750,000 |  |  | $ | 67,632,000 |
Circle 8 revolving credit facility |  | Circle 8 cranes with a book value of $29.6 million |  | - |  | 8.4% |  | 8.4% |  | December 16, 2025 |  |  | 13,126,000 |  |  |  | 15,907,000 |
16% promissory note |  | - |  | Ault & Company and Milton C. Ault, III |  | 16.0% (default rate of 24.0%) |  | - |  | - |  |  | - |  |  |  | 2,572,000 |
Circle 8 equipment financing notes |  | Circle 8 equipment with a book value of $4.3 million |  | - |  | 10.5% |  | 10.5% |  | September 15, 2025 through June 15, 2027 |  |  | 2,826,000 |  |  |  | 5,629,000 |
15% term notes (in default) |  | - |  | Milton C. Ault, III |  | 15.0% (default rate of 22.99%) |  | 48.0% |  | October 31, 2024 |  |  | 3,777,000 |  |  |  | - |
8% demand loans |  | - |  | - |  | 10.0% (12.0% default rate) |  | - |  | Upon demand |  |  | - |  |  |  | 950,000 |
Sentinum note payable |  | - |  | - |  | 12.5% |  | - |  | - |  |  | - |  |  |  | 1,067,000 |
ROI promissory note (in default) |  | - |  | - |  | 15.0% (default rate of 18.0%) |  | 67.2% |  | April 30, 2024 |  |  | 2,367,000 |  |  |  | - |
Other ($3.4 million in default) |  | - |  | - |  | - |  |  |  | - |  |  | 5,826,000 |  |  |  | 3,808,000 |
Total notes payable |  |  |  |  |  |  |  |  |  |  |  | $ | 96,672,000 |  |  | $ | 97,565,000 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unamortized debt discounts |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | (453,000 | )
Total notes payable, net |  |  |  |  |  |  |  |  |  |  |  | $ | 96,672,000 |  |  | $ | 97,112,000 |
Less: current portion |  |  |  |  |  |  |  |  |  |  |  |  | (95,768,000 | ) |  |  | (11,692,000 | )
Notes payable – long-term portion |  |  |  |  |  |  |  |  |  |  |  | $ | 904,000 |  |  | $ | 85,420,000 |
| (1) | Includes forbearance and extension fees and OID costs that are amortized to interest expense over the life of the notes.
During the year ended December 31, 2023, the holders of $8.4 million 10% secured promissory notes exchanged their notes and accrued interest for preferred stock liabilities. The Company recorded a loss on extinguishment of debt of $0.1 million related to the transaction. When the preferred stock liabilities converted to Series A Common stock, the Company recorded a loss on extinguishment of $1.5 million. During the year ended December 31, 2023, the holders of $10.5 million 10% demand promissory notes and $1.1 million 12% demand promissory notes exchanged their notes for notes from Ault & Company (see Note 22), resulting in a loss on extinguishment of debt of $0.4 million. In connection with the December 2023 Series C Preferred Stock offering (see Note 29), the Company paid $20.4 million to pay the $20.2 million outstanding balance of the 8% senior secured promissory notes, plus $0.2 million accrued interest payable. The 8% senior secured promissory notes had an unamortized debt discount of $3.2 million outstanding, which was recorded as a loss on extinguishment of debt. The Company recorded a $2.0 million loss on extinguishment of debt related to the April 2023 restructuring related to one of the 16% promissory notes payable. OID Only Term Note On July 2, 2024, the Company entered into a term note agreement with institutional investors for the sale of up to $2.6 million in term notes, of which the principal amount of $1.8 million was immediately funded. A term note was issued at a discount, with net proceeds to the Company of $1.5 million. The term note does not accrue any interest. The term note was scheduled to mature on August 2, 2024. The term note is guaranteed by Mr. Ault. The term note maturity was extended to September 30, 2024, and an extension fee of $0.2 million accrues monthly until the term note is paid in full. The term note is currently in default and is included in “Other” in the table above. ROI 15% Term Note On February 9, 2024, ROI entered into a $1.77 million term note agreement with an institutional investor bearing interest of 15%. The term note was issued at a discount, with net proceeds to ROI of $1.75 million. The term note was scheduled to mature February 14, 2024. This note has been guaranteed by Ault & Company and Mr. Ault. The term note was subsequently amended to increase the principal amount due to $2.4 million, increase the interest rate to 18% and extend the maturity date to April 30, 2024. The term note is in default as of May 1, 2024. In February 2025, term note was amended to increase the principal amount due to $2.6 million, increase the interest rate to 18% and extend the maturity date to May 15, 2025. 15% Term Notes Between April 29, 2024 and August 29, 2024, the Company entered into note agreements totaling $6.0 million with an institutional investor bearing interest of 15%. The term notes were issued at a discount, with net proceeds to the Company of $5.1 million. The term notes were amended to extend the maturity dates to October 31, 2024. The notes are in default as of November 1, 2024. In December 2024, Ault Lending had a fees receivable from the institutional investor in the amount of $2.2 million related to Ault Lending’s profit participation rights in an investment made by the institutional investor to Alzamend. On December 31, 2024, the Company and the institutional investor agreed to offset $2.2 million of the term notes payable against the fees receivable. This transaction was accounted for as a non-cash settlement of financial instruments and had no impact on the Company’s consolidated statement of operations. In February 2025, the Company entered into an exchange agreement with the institutional investor, pursuant to which the Company issued to the investor a convertible promissory note in the principal face amount of $1.9 million in exchange for the cancellation of one of the outstanding 15% term notes issued by the Company to the institutional investor that had outstanding principal and accrued but unpaid interest of $1.9 million. In March 2025, the Company entered into an exchange agreement with the institutional investor, pursuant to which the Company issued to the investor a convertible promissory note in the principal face amount of $4.2 million in exchange for the cancellation of the outstanding 15% term notes issued by the Company to the institutional investor that had outstanding principal and accrued but unpaid interest of $4.2 million. The note will mature on June 30, 2025. The note is convertible into shares of the Company’s Class A common stock at a conversion price equal to the greater of (i) $0.40 per share (the “Floor Price”), which Floor Price shall not be adjusted for stock dividends, stock splits, stock combinations and other similar transactions and (ii) the lesser of 75% of the VWAP (as defined in the note) of the Class A common stock during the five trading days immediately prior to (A) the date of issuance of the note or (B) the date of conversion into shares of Class A common stock. The Company may not issue shares to the extent such issuances would result in an aggregate number of shares of Class A common stock exceeding 19.99% of the total shares of Class A common stock issued and outstanding as of the date of issuance of the note, in accordance with the rules and regulations of the NYSE unless the Company first obtains stockholder approval. $20 Million Credit Agreement On June 4, 2024 the Company entered into a Loan Agreement (the “Credit Agreement”) with two institutional investors (collectively, the “Lender”). The Credit Agreement provides for an unsecured, non-revolving credit facility with an aggregate draw limit of $20.0 million. However, the Company is restricted to having no more than $2.0 million in principal amount of outstanding advances at any given time under the Credit Agreement. As of December 31, 2024, $2.0 million has been advanced, exclusive of a $0.4 million OID. All loans under the Credit Agreement will be evidenced by a promissory note. The Lender made an advance to the Company of $1.5 million on the execution date. The advances were due December 4, 2024, however, per the terms of the Credit Agreement as the Company had executed an equity line of credit agreement relating to the sale of shares of the Company’s 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock (the “Series D Preferred Stock”), has an effective registration statement relating thereto, the maturity date was automatically extended until June 4, 2025. The Lender is not obligated to make any further advances under the Credit Agreement after the maturity date. Advances under the Credit Agreement will include the addition of an OID of 20% to the amount of each advance and all advances will bear interest at the rate of 15.0% per annum and may be repaid at any time without penalty or premium. Amounts outstanding under the Credit Agreement are included in “Other” in the table above. The obligations of the Company under the Credit Agreement are secured by a guaranty provided by Milton C. Ault, the Executive Chairman of the Company. Circle 8 Revolving Credit Facility On October 16, 2024, Circle 8 was in default related to reporting requirements under the terms of their revolving credit facility. Circle 8 was able to obtain waivers to cure the event of default and defer the requirements until May 31, 2025. Amendment to AGREE Secured Construction Loans The AGREE secured construction loans with an original due date of January 1, 2025, were amended on February 2, 2025, whereby AGREE agreed to pay monthly installments of interest only based on an annualized interest rate of Term SOFR plus 4.75%. In addition, AGREE agreed to make principal payments of $1.0 million in June 2025 and $2.0 million in September 2025 and December 2025 with the balance due March 1, 2026. AGREE has defaulted by failure to make timely payments per the amended payment terms. Notes Payable Maturities Principal maturities of the Company’s notes payable, assuming the exercise of all extensions that are exercisable solely at the Company’s option, as of December 31, 2024 were:
Schedule of maturities |  |  |  |
Year |  |  |
2025 |  | $ | 95,768,000 |
2026 |  |  | 794,000 |
2027 |  |  | 110,000 |
|  | $ | 96,672,000 |
Interest Expense Interest expense includes amounts incurred on notes payable, convertible notes payable, and notes payable to related parties. The components of interest expense for the years ended December 31, 2024 and 2023 were as follows:
Schedule of interest expense |  |  |  |  |  |  |  |
|  | For the Year Ended |
|  | December 31, |
|  | 2024 |  |  | 2023 |
Contractual interest expense |  | $ | 11,925,000 |  |  | $ | 17,338,000 |
Forbearance fees |  |  | 2,214,000 |  |  |  | 5,469,000 |
Amortization of debt discount |  |  | 5,532,000 |  |  |  | 21,507,000 |
Total interest expense |  | $ | 19,671,000 |  |  | $ | 44,314,000 |

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