v3.25.1
DEBT
 3 Months Ended
Mar. 31, 2025
Debt Disclosure [Abstract]  
DEBT

5. DEBT

 

Debentures. On December 31, 2024 we issued a $750,000 debenture subordinated to obligations to the Company’s general and secured creditors that calls for interest only at 8.25% payable quarterly in 2025, with monthly payments of $9,199 including principal and interest at 8.25% commencing on January 31, 2026 based on a ten year amortization schedule. A balloon payment of $451,012 is due in full on December 31, 2030.

 

In consideration of the lender providing the financing, the Company issued warrants which entitle the holder to purchase 62,500 shares of our common stock at $4.50 per share. The warrants have a life of 72 months. If the debenture is paid in full on or before December 31, 2029, the warrants will have a life of 60 months.

 

The factors used to calculate the estimated value of the warrants and the resulting fair value, were as follows.

    
Stock price  $3.45 
Exercise price per share  $4.50 
Original term (months)   72 
Volatility   116.58%
Annual rate of quarterly dividends   None 
Risk free interest rate   4.38%
Fair value of warrants  $120,000 

 

On March 1, 2025 we issued a $75,000 debenture subordinated to obligations to the Company’s general and secured creditors that calls for interest only at 8.25% payable quarterly in 2025, with monthly payments of $920 including principal and interest at 8.25% commencing on January 31, 2026 based on a ten year amortization schedule. A balloon payment of $45,707 is due in full on December 31, 2030.

 

In consideration of the lender providing the financing, the Company issued warrants which entitle the holder to purchase 6,250 shares of our common stock at $4.50 per share. The warrants have a life of 70 months. If the debenture is paid in full on or before December 31, 2029, the warrants will have a life of 60 months.

 

The factors used to calculate the estimated value of the warrants and the resulting fair value, were as follows.

    
Stock price  $2.75 
Exercise price per share  $4.50 
Original term (months)   70 
Volatility   116.58%
Annual rate of quarterly dividends   None 
Risk free interest rate   4.38%
Fair value of warrants  $12,000 

 

Applying these assumptions resulted in a relative fair value of $132,000, all of which was recorded as debt discount with a corresponding credit to common stock. The debt discount will be amortized as interest expense of $22,000 annually over the respective terms of the debt.

 

Our minimum future principal payments on these subordinated debentures, by year, are as follows:

    
March 31, 2026  $13,433 
March 31, 2027   56,579 
March 31, 2028   61,428 
March 31, 2029   66,692 
March 31, 2030   72,407 
December 31, 2030   554,461 
Total   825,000 
Less debt issuance cost   (126,829)
Net subordinated debenture payable   698,171 
Less current portion   (7,933)
Long term portion  $690,238 

  

Term Loan Payable. The term loan is secured by a first mortgage on our building, and is payable in 119 equal monthly installments of $7,453, including principal and interest at 2.95% based on a 360 day year, plus a final payment of $773,727 (excluding interest) on September 30, 2031.  Our minimum future principal payments on this term loan, by year, are as follows:

    
2025  $41,661 
2026   57,000 
2027   58,704 
2028   60,460 
2029   62,268 
2030 – 2031   887,210 
Total   1,167,303 
Less debt issuance cost   (13,977)
Net term loan payable   1,153,326 
Less current portion   (53,604)
Long term portion  $1,099,722