5. Notes Payable – Related Parties

Notes payable – related parties consisted of the following:

Subordinated Promissory Note to CEO – Our CEO made advances to the Company during 2020 under a subordinated promissory note in the amount of $524 thousand initially due September 30, 2021. This note was amended to a new maturity date of January 1, 2023. The note bore interest at 10% per annum. Accrued interest on this subordinated promissory note totaled $60 thousand at December 31, 2022. In January 2023, the amounts due under this note were restructured and rolled into a new Secured Promissory Note from our CEO (see Note 15).

Convertible Promissory Note to CEO – In 2021, our CEO made advances totaling $410 thousand to the Company under a convertible promissory note. Additional advances made in 2022 totaled $697 thousand. The convertible note initially matured on January 1, 2022 but was subsequently amended to extend the maturity date to January 1, 2023. The note bore interest at 10%. The principal and interest due on the convertible note were convertible, at the option of the holder, into restricted shares of the Company’s common stock at an initial conversion price of $0.50 per share but that was lowered in July 2022 to $0.30 per share. Accrued interest on this convertible promissory note totaled $107 thousand at December 31, 2022. In January 2023, the amounts due under this note were restructured and rolled into a new Secured Promissory Note from our CEO (see Note 15).

Secured Promissory Note and Warrants to Coventry Asset Management, LTD. – On December 30, 2020, the Company received proceeds from issuance of a secured promissory note in principal amount of $1 million to Coventry Asset Management, LTD, a Company stockholder. The promissory note is secured by the property acquired in the acquisition of certain assets of Halcyon. The unpaid balance of the secured promissory note bears interest at a rate of 14% per annum. The promissory note has been extended seven times including the issuance of 20,000 restricted common shares as extension fees each for the first five extensions and the issuance of 50,000 restricted common shares for the last two extensions. The maturity date of the promissory note is December 31, 2023, as amended. If before December 31, 2023, the Company raises new equity capital of $5 million or more, then the full amount outstanding under the promissory note is due within five days. As amended, principal payments of $250 thousand each are due June 1, 2023 and August 31, 2023. Accrued interest on this secured note totaled $200 thousand at December 31, 2022.

Subordinated Promissory Note and Warrants to Investor – On December 30, 2020, the Company issued a subordinated promissory note in principal amount of $500 thousand to an accredited investor who is also a Company stockholder. The Company previously made principal payment totaling $300 thousand. The unpaid balance of the Subordinated Note bears interest at a rate of 10% per annum. The subordinated note principal together with accrued and unpaid interest was due, as previously amended, on March 31, 2022 but was extended to June 30, 2022. On March 1, 2023, the Company paid $240 thousand in full repayment of this note and accrued interest thereon.

The holder of the subordinated note received a warrant to purchase 500 thousand shares of common stock exercisable for cash at an exercise price of $0.352 per share. As consideration for the April 2022 extension, the term of this warrant was extended by one year to December 30, 2023. The Company recognized $69 thousand of interest expense in 2022 for the modification related to this extension of the warrant term.

Promissory Note to Investment Hunter, LLC – In 2022, Investment Hunter, LLC, a Texas LLC controlled by our CEO, made advances totaling $492 thousand to the Company under a promissory note due January 1, 2023, as amended. If the Company raises new equity capital of $3 million or more, then the full amount outstanding under the note is due within five days. The note bears interest at 10% per annum. Accrued interest on this subordinated promissory note totaled $43 thousand at December 31, 2022.