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DEBT OBLIGATIONS
 9 Months Ended
Sep. 30, 2025
Debt Disclosure [Abstract]  
DEBT OBLIGATIONS

NOTE 5. DEBT OBLIGATIONS

 

Debt obligations are comprised of the following:

  

September 30,

2025

  

December 31,

2024

 
Economic injury disaster loan (EIDL)  $141,948   $144,495 
Unsecured Promissory note – Entertainment Segment   550,000    — 
Secured convertible note   —    — 
Commercial Extension of Credit- Entertainment Segment   —    100,000 
Merchant Advances – Video Solutions Segment   —    1,922,750 
Senior Secured Promissory Notes   806,451    3,600,000 
Unamortized debt issuance costs   (494,668)   (664,719)
Debt obligations   1,003,731    5,102,526 
Less: current maturities of debt obligations   865,292    4,961,443 
           
Debt obligations, long-term  $138,439   $141,083 

 

Debt obligations mature on an annual basis as follows as of September 30, 2025:

   

September 30,

2025

  
2025 (October 1, 2025 to December 31, 2025)   $ 628,811  
2026     237,379  
2027     3,677  
2028     3,817  
2029 and thereafter     130,047  
         
Total   $ 1,003,731  

 

 

2020 Small Business Administration Notes.

 

On May 12, 2020, the Company received $150,000 in loan funding from the SBA under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the recently enacted CARES Act. The EIDL is evidenced by a secured promissory note, dated May 8, 2020, in the original principal amount of $150,000 with the SBA, the lender.

 

Under the terms of the note issued under the EIDL program, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of such note is thirty years, though it may be payable sooner upon an event of default under such note. Monthly principal and interest payments began in November 2022, after being deferred for thirty months after the date of disbursement and total $731 per month thereafter. Such note may be prepaid in part or in full, at any time, without penalty. The Company granted the SBA a continuing interest in and to any and all collateral, including but not limited to tangible and intangible personal property.

 

Unsecured Promissory Note

 

On February 1, 2025, the Company’s Entertainment Segment entered into a $600,000 unsecured promissory note with a third party. The promissory note bears an interest rate of 10.0% per annum, compounded monthly. Payments of principal and interest were originally due on May 5, 2025, however the parties agreed to extend the term for payments of principal and interest to begin July 1, 2025.

 

2024 Commercial Extension of Credit

 

On January 22, 2024, the Company’s Entertainment segment entered an extension of credit in the form of a loan to use in marketing and operating its business in accordance with the Ticket Solution Agreement. The Lender, Ticket Evolution, Inc., agreed to extend, subject to the conditions hereof, and Borrower agreed to take, an advance for a sum of $75,000 with monthly advances of $100,000.

 

The advances made are recoupable from client service fees with no more than $25,000 being recouped in any one week. The Company paid the remaining balance in full during the nine months ended September 30, 2025. The outstanding balance as of September 30, 2025 and December 31, 2024 was $-0- and $100,000, respectively.

 

Merchant Cash Advances – Video Solutions Segment

 

In November 2023, the Company obtained a short-term merchant advance, which totaled $1,050,000, from a single lender to fund operations. These advances included origination fees totaling $50,000 for net proceeds of $1,000,000. The advance is, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis. The Company will repay an aggregate of $1,512,000 to the lender. The loan bears interest at 2.9% per week.

 

During the year ended December 31, 2024, the Company made repayments totaling $1,551,250 and received additional proceeds of $1,144,000 and recorded additional discount of $980,000. The Company refinanced this loan in April 2024 resulting in the additional proceeds received during the year ended December 31, 2024. The refinancing was deemed to be an extinguishment of debt and a loss on extinguishment of debt was recorded during the year ended December 31, 2024 of $68,827.

 

As of December 31, 2024 the outstanding principal balance was $1,922,750 which was paid in full during the nine months ended September 30, 2025. The remaining balance is $-0- as of September 30, 2025.

 

Securities Purchase Agreement and Senior Secured Promissory Notes

 

On November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell to such Purchasers, in a private placement transaction, (i) senior secured promissory notes in aggregate principal amount of $3,600,000 (the “Notes”), and (ii) 404 shares (the “Commitment Shares”) of the Company’s Common Stock, for aggregate gross proceeds of approximately $3.0 million, before deducting placement agent fees and other offering expenses payable by the Company. This private placement closed on November 7, 2024 (the “Closing Date”).

 

Pursuant to the SPA, the Company is required to file within 30 days of the Closing Date a registration statement with the SEC for a public offering and use its reasonable best efforts to pursue and consummate a follow-on financing transaction within 90 days of the Closing Date. The proceeds of the public offering shall be first used for the repayment of the principal amounts of the Notes. The Company is also required to file within 30 days of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then S-1 eligible) providing for the resale by the Purchasers of the Commitment Shares issued under the SPA. The Company is required to use commercially reasonable efforts to cause such registration statement to become effective within 60 days following the filing thereof and to keep such registration statement effective at all times until no Purchaser owns any Commitment Shares.

 

Furthermore, pursuant to the SPA, the Company was required to complete the following: (i) the Company’s board of directors shall approve an amendment to the Company’s bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders entitled to vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.

 

The senior secured promissory notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue no interest unless and until an Event of Default (as defined in the senior secured promissory notes) has occurred, in which case interest shall accrue at a rate of 14% per annum during the pendency of such Event of Default. In addition, upon customary Events of Default, the Purchasers may require the Company to redeem all or any portion of the senior secured promissory notes in cash with a 125% redemption premium. The Purchasers may also require the Company to redeem all or any portion of the senior secured promissory notes in cash upon a Change of Control, as defined in the senior secured promissory notes, at the prices set forth therein. Upon a Bankruptcy Event of Default (as defined in the senior secured promissory notes), the Company shall immediately pay to the Purchasers an amount in cash representing 100% of all outstanding principal, accrued and unpaid interest, if any, in addition to any and all other amounts due under the senior secured promissory notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.

 

 

If the Company engages in one or more subsequent financings while the senior secured promissory notes are outstanding, the Company will be required to use at least 100% of the gross proceeds of such financing to redeem all or any portion of the senior secured promissory notes outstanding. The Company may also prepay the senior secured promissory notes in whole or in part at any time or from time to time. The senior secured promissory notes also contain customary representations and warranties and covenants of each of the parties. Subject to certain exceptions, the senior secured promissory notes are secured by a first lien and continuing security interest in and to the Collateral (as defined in the senior secured promissory notes).

 

The net proceeds of the private placement on November 7, 2024 was $2,669,250 (after $330,750 deduction of costs of the offering). The Company allocated the net proceeds from the private placement of the senior secured promissory notes and the commitment shares based upon their relative fair values as of the date of issuance as follows:

 

   Amount 
     
Allocated to the following:     
      
Senior secured promissory notes  $2,129,795 
      
Commitment shares   539,455 
      
Total  $2,669,250 

 

The Company paid the senior secured promissory notes off in full on February 13, 2025 with funds generated by the February 2025 public equity offering (See Note 12). Following is an analysis of the senior secured promissory notes balance:

 

   Amount 
     
Balance, as of December 31, 2023  $— 
      
Issuance of senior secured promissory notes, at par   3,600,000 
      
Discount recognized at issuance date   (1,470,205)
      
Amortization of discount   805,486 
      
Balance, as of December 31, 2024   2,935,281 
      
Amortization of discount   664,719 
      
Principal payment   (3,600,000)
      
Balance, as of September 30, 2025  $— 

 

Senior Secured Convertible Note and Committed Equity Financing

 

On September 15, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Purchaser”), pursuant to which the Company issued Senior Secured Convertible Notes (the “September 2025 Notes”)with an aggregate original principal amount of $806,451 and detachable common stock purchase warrants to purchase 476,569 shares of the Company’s common stock at an exercise price of $2.124 per share. The September 2025 Notes were issued at a 7% original issue discount, providing gross proceeds of $750,000, and bear interest at 8% per annum.

 

The September 2025 Notes are convertible at the investor’s option at any time at a conversion price equal to a 10% discount to the five-day volume-weighted average price (VWAP) preceding conversion, subject to customary anti-dilution and price-based adjustment provisions. The Company may, subject to certain conditions, redeem all or a portion of the Notes at 110% of the outstanding principal amount. A second closing of $250,000 in additional September 2025 Notes and Detachable Warrants may occur upon the effectiveness of a resale registration statement.

 

The September 2025 Notes are senior secured obligations, ranking senior to all existing and future indebtedness of the Company, except for specified subsidiaries that provide either a second-priority or no security interest. The Notes are secured by substantially all of the Company’s assets and guaranteed by certain subsidiaries. In connection with the transaction, the Company also entered into a Registration Rights Agreement and a Leak-Out Agreement with customary terms and conditions.

 

The Company allocated the proceeds between the debt and equity components of the September 2025 Notes based on their relative fair values, recorded a debt discount for the value of the warrants, conversion feature, and original issue discount, and recognized a derivative liability for the variable conversion feature. The debt discount will be amortized to interest expense over the term of the September 2025 Notes using the effective-interest method, and the derivative liability will be remeasured at each reporting date, with changes in fair value recognized in earnings.

 

 

The net proceeds of the private placement on September 15, 2025 was $610,000 (after $140,000 deduction for the costs of the offering). The Company allocated the net proceeds from the private placement of the September 2025 Notes and the detachable warrants based upon their relative fair values as of the date of issuance as follows:

 

   Amount 
     
Allocated to the following:     
      
Senior secured promissory notes  $290,583 
      
Detachable warrants   319,417 
      
Total  $610,000 

 

Committed Equity Financing (ELOC)

 

On September 15, 2025 (the “Closing Date”), the Company entered into a Common Stock Purchase Agreement (the “ELOC Purchase Agreement”) with an institutional investor (the “ELOC Investor”), providing a committed equity financing facility of up to $25 million (the “Total Commitment”) over a 36-month term. Under the agreement, and subject to certain conditions and limitations, the Company may, at its sole discretion, direct the ELOC Investor to purchase shares of its common stock (“Purchase Shares”) from time to time during the term of the facility.

 

Concurrently with the execution of the ELOC Purchase Agreement, the Company entered into a Registration Rights Agreement (the “ELOC Registration Rights Agreement”) with the investor, pursuant to which the Company agreed to file one or more registration statements under the Securities Act of 1933, as amended, to register the resale of shares issuable under the facility. The initial registration statement must be declared effective before any sales under the facility may occur.

 

Upon effectiveness of the registration statement and satisfaction of other customary conditions (the “Commencement Date”), the Company may, from time to time and at its discretion, deliver written purchase notices (“ELOC Purchase Notices”) directing the ELOC Investor to purchase shares of common stock. The purchase price per share will be equal to 92% of the lowest daily trading price of the Company’s common stock during the three-trading-day valuation period following each ELOC Purchase Notice. Each purchase is subject to specified volume and timing restrictions, including that an ELOC Purchase Notice may not be delivered within twenty-four (24) hours of a prior purchase.

 

The ELOC Investor may not beneficially own more than 4.99% of the Company’s outstanding common stock at any time. Under Nasdaq Capital Market rules, the Company may not issue to the ELOC Investor a number of shares exceeding 19.99% of the Company’s outstanding common stock as of the execution date (the “Exchange Cap”) unless shareholder approval is obtained or certain pricing exceptions are met.

 

As consideration for the ELOC Investor’s commitment, the Company agreed to pay a 3% commitment fee, payable through a combination of (i) shares of common stock valued based on the five-day VWAP following the effectiveness of the resale registration statement and (ii) cash funded from up to 30% of proceeds from future financings, including drawdowns under the ELOC facility. The Company also reimbursed the investor $30,000 for legal expenses.

 

The ELOC Purchase Agreement includes customary restrictions on entering into other variable-rate transactions during its 36-month term and prohibits the investor from engaging in short sales or hedging transactions involving the Company’s common stock. The facility may be terminated upon the earlier of (i) the first day of the month following the 36-month anniversary of the Closing Date, (ii) the aggregate purchase price of $25 million having been reached, or (iii) other termination events specified in the agreement. The Company may also terminate the facility at any time after commencement upon five (5) trading days’ written notice.

 

As of September 30, 2025, the Company has not received shareholder approval of the transactions, nor has the underlying Registration Statement been declared effective and therefore the Company has not sold any shares under the ELOC facility. The Company will record the related commitment fee and transaction costs as deferred equity issuance costs within Additional Paid-In Capital, to be amortized against proceeds from future ELOC drawdowns at such time as the Company has received shareholder approval of the transactions and the underlying Registration Statement has been declared effective. The Company intends to use any future proceeds from sales under the ELOC facility for general corporate and working capital purposes.