NOTE 9. NOTES PAYABLE

RELATED PARTIES

Related party notes payable consist of the following:

Total interest expense for related party notes was none and $90,338 for the nine-month periods ended September 30, 2024, and 2023, respectively. Total interest expense for related party notes was none for the three-month periods ended September 30, 2024, and 2023.

Non-Convertible Note Payable

The Company has one non-convertible note payable to a related party that has a principal balance of $11,810 as of September 30, 2024, and December 31, 2023. The note carries an interest rate of 0%. The note payable had a due date of December 31, 2012, and is currently in default.

NON-RELATED PARTIES 

Notes payable to non-related parties consist of the following:

Total interest expense for non-related party notes was $70,078 and $522,042 for the nine-month periods ended September 30, 2024, and 2023, respectively. Total interest expense for non-related party notes was $5,593 and $178,699 for the three-month periods ended September 30, 2024, and 2023, respectively.

Convertible Notes Payable with Warrants - 2023 Debt Offering

On March 7, 2023, the Company entered into a Debt Offering (the “2023 Debt Offering”) pursuant to a Purchase Agreement (the “Agreement”) and Registration Rights Agreement with institutional investors. The 2023 Debt Offering closed on March 9, 2023. The 2023 Debt Offering includes 15% Original Issue Discount Convertible Notes (the “Notes”) and Common Stock Purchase Warrants (the “Warrants”).  Under the terms of the Agreement, the Company received $3,000,001 from the Purchasers and in exchange issued the Notes in principal amounts of $3,529,412 and Warrants to purchase up to 3,519 shares of the Company’s common stock. The Notes are convertible voluntarily by the Purchaser at any time the principal amounts are outstanding into shares of our common stock at a conversion price $250.80. The Notes are due March 10, 2025, and accrue interest quarterly at 5% per annum. The accrued interest is payable by way of inclusion in the convertible amount and is compounded quarterly. The Warrants are exercisable at any time through March 9, 2028, into shares of the Company’s common stock at an exercise price of $277.20 per share. The Company received approximately $2,500,000 of net proceeds from the 2024 Debt Offering after offering-related costs.

On May 10, 2023, noteholders elected to convert a total of $341,999 (the “Conversion Amount”) pertaining to the 2023 Debt Offering into 1,364 shares of the Company’s common stock at $250.80 per share. As provided for in the Agreement, the Conversion Amount included original Note principal of $309,688, as well as accrued interest of $32,311. 

On March 4, 2024, the Company entered into inducement offer letter agreements (the “Inducement Letters”) with each holder (collectively, the “Holders”, and individually, a “Holder”) of the Notes issued on March 9, 2023.

Pursuant to the Inducement Letters, the Holders agreed to convert some or all of the Applicable Notes at a reduced conversion price equal to $68.20 per share (such reduced conversion price, the “Notes Conversion Price”). Simultaneously with the execution of the Inducement Letters, the Company received conversion notices from such Holders for the conversion of approximately $804,000 aggregate principal amount of the Applicable Notes, representing approximately 25% of the aggregate principal amount of the Applicable Notes. In connection with such conversion, the Notes Conversion Price was permanently reduced to $68.20. The Company recognized conversion expense of $585,875 for the induced conversion.

In addition, pursuant to the Inducement Letters, the exercise price in the Common Stock Purchase Warrants issued on March 9, 2023 (the “Applicable Warrants”) currently held by Holders was permanently reduced to $68.20 per share (such reduced exercise price, the “Warrants Exercise Price”).

In March, May, and June 2024 noteholders elected to convert an aggregate total of $3,556,233 (the “Conversion Amount”) pertaining to the 2023 Debt Offering into 52,145 shares of the Company’s common stock at $68.20 per share. As provided for in the Agreement, the Conversion Amount included original Note principal of $3,219,724, as well as accrued interest of $336,509.

Convertible Notes Payable

The Company has two convertible notes payable to a non-related entity with principal balances totaling $9,183 as of September 30, 2024, and December 31, 2023.  The notes bear interest at 12% and are convertible into shares of the Company’s common stock at $3,551.90 per share. The notes were due in 2013 and are currently in default.

Non-Convertible Notes Payable

The Company has two non-convertible notes payable to non-related parties with principal balances totaling $17,500 as of September 30, 2024, and December 31, 2023. These notes carry interest rates ranging from 9% - 10% and have due dates ranging from December 2013 to November 2015. The notes are currently in default. 

Premium Financing Notes Payable

On June 15, 2023, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from May 2023 through May 2024 totaling $367,352. The financing agreement required an initial down payment of $73,470 with the remaining amount of $293,882 financed for an eight-month period at an annual interest rate of 8.49% with monthly payments of $37,914 beginning in June 2023.

On July 1, 2024, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from July 2024 through June 2025 totaling $330,083. The financing agreement required an initial down payment of $66,017 with the remaining amount of $264,066 financed for an eight-month period at an annual interest rate of 9.14% with monthly payments of $34,150 beginning in July 2024.