Note 8 - Notes Payable |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 | |||
| Notes to Financial Statements | |||
| Debt Disclosure [Text Block] |
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 (“2022 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 2022 Bridge Note is due and payable on the second anniversary of the Stock Exchange Agreement. The Company’s obligations under the 2022 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.
As consideration and partial inducement for Mr. Scott to enter into the 2022 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 2022 Bridge Note. The balance of the debt discount was $536,134 as of March 31, 2023.
Interest expense related to the Bridge Note totaled $142,151 during the three-month period ended March 31, 2023. The principal balance of the 2022 Bridge Note was $2.5 million as of March 31, 2023.
IPFS Corporation
In November 2021, we prepaid $565,760 of insurance premiums through the issuance of a note payable to IPFS Corporation (“IPFS”) with an interest rate of 4.36%. The note was payable in monthly installments of $114,388, with the final payment made in April 2022.
Interest expense related to the IPFS note payable totaled $0 and $3,712 during the three-month periods ended March 31, 2023 and 2022, respectively. The balance of the IPFS note was $0 as of March 31, 2023.
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 $9,362 and $0 during the three-month periods ended March 31, 2023 and 2022, respectively. The balance of the AFCO note was $343,074 as of March 31, 2023, and was included in notes payable, current in the condensed consolidated balance sheets.
Summary
During the three-month periods ended March 31, 2023 and 2022, we recorded interest expense of $151,514 and $3,712, respectively, related to our notes payable. Annual principal maturities of our notes payable are $343,074 and $2.5 million in 2023 and 2024, respectively. |