Bridge Note from John K. Scott, Jr.

On April 10, 2022, the Company entered into a Stock Exchange Agreement with John K. Scott, Jr., pursuant to which Mr. Scott agreed to make a loan to the Company in the principal amount of up to $2.5 million, of which $1.5 million was funded on the closing date and $1.0 million was funded on July 1, 2022. The outstanding balance of the loan, which is evidenced by a Bridge Note, bears interest at a rate of 8% per annum, with payments of interest only to be made monthly over a period of two years. All outstanding principal and accrued and unpaid interest under the Bridge Note is due and payable on the second anniversary of the Stock Exchange Agreement. The Company’s obligations under the Bridge Note are secured by a first priority security interest in all of the Company’s assets and personal property pursuant to a Security Agreement. See Note 13.

As consideration and partial inducement for Mr. Scott to enter into the Bridge Note, the Company exchanged all 50,000 shares of Mr. Scott’s Series E Preferred Stock for 1,740 shares of Series F Preferred Stock and 3,260 shares of Series G Preferred Stock. In accordance with current accounting guidance, the Company recorded a debt discount of $835,876 including $821,250 related to the difference in the value of Mr. Scott’s Series E Preferred Stock and the Series F and Series G Preferred Stock and $14,626 of debt issuance costs. The debt discount is being amortized as non-cash interest expense using the effective interest method over the term of the Bridge Note. The balance of the debt discount was $628,285 as of December 31, 2022.

Interest expense related to the Bridge Note totaled $334,592 during the year ended December 31, 2022. The principal balance of the Bridge Note was $2.5 million as of December 31, 2022.

IPFS Corporation

In November 2020, we prepaid $442,041 of insurance premiums through the issuance of a note payable to IPFS Corporation (“IPFS”) with an interest rate of 3.5%. The note was payable in seven monthly installments of $63,888, with the final payment made in June 2021. In November 2021, we prepaid $565,760 of insurance premiums through the issuance of a note payable to IPFS with an interest rate of 4.36%. The note was payable in five monthly installments of $114,388, with the final payment made in April 2022.

Interest expense related to the IPFS notes payable totaled $4,126 and $5,938 during the years ended December 31, 2022 and 2021, respectively. The balance of the IPFS note was $453,427 as of December 31, 2021, and was included in notes payable, current in the consolidated balance sheets.

AFCO Premium Credit LLC

In November 2022, we prepaid $608,275 of insurance premiums through the issuance of a note payable to AFCO Premium Credit LLC (“AFCO”) with an interest rate of 7.85%. The note is payable in nine monthly installments of $69,967, with the final payment due in August 2023.

Interest expense related to the AFCO note payable totaled $5,306 during the year ended December 31, 2022. The balance of the AFCO note was $543,613 as of December 31, 2022, and was included in notes payable, current in the consolidated balance sheets.

Paycheck Protection Program

The CARES Act was enacted on March 27, 2020. Among the provisions contained in the CARES Act was the creation of the PPP that provides for SBA Section 7(a) loans for qualified small businesses. PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. On May 18, 2020, the Lender funded the PPP Loan in the amount of $366,000. In accordance with the loan forgiveness requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, rent and utilities. On February 23, 2021, the Lender notified the Company that the entire PPP Loan amount of $366,000 had been forgiven. The forgiveness was recorded as a gain on extinguishment of debt on the consolidated statement of operations.

Summary

During the years ended December 31, 2022 and 2021, we recorded interest expense of $344,024 and $5,938, respectively, related to our notes payable. Annual principal maturities of our notes payable are $543,613 and $2.5 million in 2023 and 2024, respectively.