Annual report pursuant to Section 13 and 15(d)

CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE (Tables)

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CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE (Tables)
12 Months Ended
Dec. 31, 2022
Convertible Notes Payable And Notes Payable  
SCHEDULE OF NOTES PAYABLE RELATED PARTIES

The Company has the following outstanding notes payable as of December 31, 2022 and 2021:

 

Note  

Issuance

Date

 

Maturity

Date

 

Interest

Rate

    Original
Borrowing
    Balance at
December 31,
2022
    Balance at
December 31,
2021
 
Related party convertible note payable (A)   December 1, 2015   April 1, 2023     12.0 %   $ 1,249     $ 725     $ 725  
Related party convertible note payable (B)   April 4, 2016   June 4, 2021     12.0 %     343       40       40  
Note payable (C)   May 15, 2020   May 15, 2050     3.75 %   $ 150       150       150  
Convertible Notes Due 2023 (D)   January 12, 2022   January 12, 2023     6.0 %     6,300       1,350       -  
Promissory note payable (E)   November 7, 2022   May 7, 2024     9.0 %     5,470       5,470       -  
Debt discount                             (408 )     -  
Debt issuance costs                             (309 )     -  
Total notes payable                             7,018       915  
Non-current                             (1,215 )     (875 )
Current                           $ 5,803     $ 40  

 

 

  (A) On December 1, 2015, the Company issued a convertible note payable to Mr. Cutaia, the Company’s Chief Executive Officer and a director, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. On May 19, 2021, the Company amended the note to allow for conversion of the note at any time at the discretion of the holder at a fixed conversion price of $1.03, which was the closing price of the common stock on the amendment date. On May 12, 2022, the maturity date of the note was extended to April 1, 2023. As of December 31, 2022, and 2021, the outstanding balance under the note was $811 and $725, respectively.
     
  (B) On April 4, 2016, the Company issued a convertible note payable to Mr. Cutaia, in the amount of $343, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. On May 19, 2021, the Company amended the note to allow for conversion of the note at any time at the discretion of the holder at a fixed conversion price of $1.03, which was the closing price of the common stock on the amendment date. As of December 31, 2022 and 2021, the outstanding balance under the note was $45 and $40, respectively.
     
  (C) On May 15, 2020, the Company executed an unsecured loan with the SBA under the Economic Injury Disaster Loan program in the amount of $150. Installment payments, including principal and interest, began on October 26, 2022. In September 2022, the SBA approved an additional loan of $350. As of April 17, 2023, the Company has not received these funds. As of December 31, 2022, and 2021, the outstanding balance under the note was $150.
     
  (D)

On January 12, 2022, the Company entered into a securities purchase agreement (the “January Note Purchase Agreement”) with three institutional investors (collectively, the “January Note Holders”) providing for the sale and issuance of an aggregate original principal amount of $6,300 in convertible notes due January 2023 (each, a “Note,” and, collectively, the “Notes,” and such financing, the “January Note Offering”). The Company and the January Note Holders also entered into a security agreement, dated January 12, 2022, in connection with the January Note Offering, pursuant to which the Company granted a security interest to the January Note Holders in substantially all of its assets. The January Note Purchase Agreement prohibits the Company from entering into an agreement to effect any issuance of common stock involving a Variable Rate Transaction (as defined therein) during the term of the agreement, subject to certain exceptions set forth therein. The January Note Purchase Agreement also gives the January Note Holders the right to require the Company to use up to 15% of the gross proceeds raised from future debt or equity financings to redeem the Notes, which redemptions have been elected by the January Note Holders. There are no financial covenants related to these notes payable.

 

The Company received $6,000 in gross proceeds from the sale of the Notes. The Notes bear interest of 6.0% per annum, have an original issue discount of 5.0%, mature 12 months from the closing date, and have an initial conversion price of $3.00, subject to adjustment in certain circumstances as set forth in the Notes.

 

In connection with the January Note Offering, the Company paid $461 of debt issuance costs. The debt issuance costs and the debt discount of $300 are being amortized over the term of the Notes using the effective interest rate method. During the year ended December 31, 2022, the Company amortized $294 of debt discount and $451 of debt issuance costs. As of December 31, 2022, the amount of unamortized debt discount and debt issuance costs was $6 and $10, respectively.

 

As of December 31, 2022 and 2021, the outstanding balance of the Notes amounted to $1,350 and $0, respectively. During the year ended December 31, 2022, the Company repaid $4,950 in principal payments and $357 of accrued interest to January Note Holders pursuant to the terms of the Notes.

 

On January 26, 2023, the Company repaid in full all outstanding obligations under the January Note Offering dated January 12, 2022. See Note 17 - Subsequent Events.

 

 

  (E)

On November 7, 2022, the Company entered into a note purchase agreement (the “November Note Purchase Agreement”) and promissory note with an institutional investor (the “November Note Holder”) providing for the sale and issuance of an unsecured, non-convertible promissory note in the original principal amount of $5,470, which has an original issue discount of $470, resulting in gross proceeds to the Company of approximately $5,000 (the “November Note,” and such financing, the “November Note Offering”). The November Note matures eighteen months following the date of issuance. Commencing six months from the date of issuance, the Company is required to make monthly cash redemption payments in an amount not to exceed $600. The November Note may be repaid in whole or in part prior to the maturity date for a 10% premium. The November Note requires the Company to use up to 20% of the gross proceeds raised from future equity or debt financings, or the sale of any subsidiary or material asset, to prepay the November Note, subject to a $2,000 cap on the aggregate prepayment amount. Until all obligations under the November Note have been paid in full, the Company is not permitted to grant a security interest in any of its assets, or to issue securities convertible into shares of common stock, subject in each case to certain exceptions. verbMarketplace, LLC entered into a guaranty, dated November 7, 2022, in connection with the November Note Offering, pursuant to which it guaranteed the obligations of the Company under the November Note in exchange for receiving a portion of the loan proceeds.

 

In connection with the November Note Offering, the Company incurred $335 of debt issuance costs. The debt issuance costs and the debt discount of $450 are being amortized over the term of the November Notes using the effective interest rate method. As of December 31, 2022, the amount of unamortized debt discount and debt issuance costs was $402 and $299, respectively.

 

As of December 31, 2022, the outstanding balance of the November Notes amounted to $5,470. See Note 17, Subsequent Events.

SCHEDULE OF INTEREST EXPENSE

The following table provides a breakdown of interest expense for the periods presented:

 

    2022     2021  
    Years Ended December 31,  
    2022     2021  
             
Interest expense – amortization of debt discount   $ 1,799     $ 2,461  
Interest expense – amortization of debt issuance costs     566       -  
Interest expense – other     582       114  
                 
Total interest expense   $ 2,947     $ 2,575