NOTE 11: DEBT

Debt consists of the following as of December 31:

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The Company recorded the interest expense of $2,714,048 and $1,431,354 for the twelve months ending December 31, 2024, and December 31, 2023 respectively. The accrued interest as of December 31, 2024, and December 31, 2023 were $985,025 and $879,876 respectively.

Secured Promissory Notes 

The Company's promissory notes have original maturity dates ranging between 9 and 36 months. The notes bear interest at rates ranging between 9.25% and 24%. During the year ended December 31, 2024, $6,834,020 of principal was extinguished via debt conversion agreements (see Note 14).

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In connection with the issuance of the secured promissory notes issued in February 2022 (the “2022 Notes”), the Company issued Legacy Warrants to each lender that may be converted into shares of common stock of the Company. There were 23,332 Legacy Warrants that were issued in connection with the issuance of the February 2022 Notes that have an exercise price of $12.00 per share (see Note 12). The fair value of the Legacy Warrants was $82,861 and was recorded as a debt discount. Amortization expense related to the debt discount amounted to $27,620 and $27,620 for the years ended December 31, 2024 and 2023, respectively, and is recorded as interest expense on the accompanying consolidated statements of operations and comprehensive loss.

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For all secured promissory notes, the interest is charged at an annual simple rate. For the 2022 Notes, interest increases to 12% upon the occurrence of an event of default as defined in the secured promissory note agreements.

During the year ended December 31, 2023, the Company modified individual notes with original maturity dates prior to December 31, 2023 to extend the maturity date to the earlier of May 31, 2024 or the Closing Date.

During September 2024, the Company entered into four note conversion agreements with four of the secured promissory note holders in which the Company converted the outstanding principal and interest on the secured promissory notes, into shares of the Company’s common stock at a conversion price of $2.00 per share with a one-time share reset adjustment (see Note 14), subject to shareholder approval and a maximum aggregate ownership amount of 19.99% for each individual lender. In connection with these agreements, $6,834,020 of secured promissory notes and $1,064,080 of accounts payable and accrued expenses were extinguished in exchange for the issuance of 3,949,050 shares of the Company’s common stock (see Note 12). Two of the lenders total ownership of the Company’s common stock exceeded 5.0% as a result of the share issuances in connection with the note conversion agreements. These lenders continue to hold certain Secured Promissory Notes as of December 31, 2024 (see Note 18).

As of December 31, 2024, the Company has not made certain scheduled payments and is therefore in technical default under two of the secured promissory notes entered into in June 2024. The total outstanding principal and accrued interest under these notes was approximately $250,000 as of December 31, 2024. However, neither noteholder has issued a formal notice of default, and both have

continued to work cooperatively with the Company. Management is engaged in discussions with the noteholders regarding repayment arrangements and believes a mutually satisfactory resolution will be reached.

Small Business Administration (“SBA”) Loans

In 2020, the Company received loan proceeds of $150,000 under a SBA loan agreement that matures in June 2050. In 2021, this loan was amended to increase the total borrowing to $475,000. In 2022 the Company assumed two additional SBA loans for $150,000 each in connection with two acquisitions that mature in June 2050. Interest on all SBA loan agreements accrues on the anniversary date of the initial borrowing at 3.75% on the outstanding balance. All SBA loan agreements are collateralized by the Company’s tangible and intangible personal property.

Paycheck Protection Program Loan

On May 4, 2020, the Company received loan proceeds of $151,000 under the Paycheck Protection Program (the “PPP”). The PPP was established as part of the Coronavirus Aid, Relief, and Economic Security Act and provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the business, subject to certain limitations. The PPP loan matures in May 2025. Payments were not required under the loan for a period from six months from the date of the initial borrowing, upon which payments are required to be made monthly. Interest accrues at 1.0% annually on the outstanding balance. The PPP loan is collateralized by all tangible and intangible personal property of the Company.

Promissory Note

In October 2024, the Company entered into a promissory note to extinguish an obligation to a vendor in which the Company promised to pay the vendor a principal amount of $119,000, interest through October 15, 2024 totaling approximately $17,000, attorney’s fees of $4,000 and additional interest from October 16, 2024 through the date of repayment of 18.0% per annum. Principal payments of $20,000 are due on the 25^th of each month commencing on October 25, 2024. If five payments are made timely, the vendor agrees to waive the remaining balance due on the promissory note. The promissory note may be prepaid without penalty.

Business Loan and Security Agreements

The Company entered into three business loan and security agreements with one lender as follows:

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The Company receives a 5.0% prepayment discount on the May 2024 BLS Agreement and the July 2024 BLS Agreement. The August 2024 BLS Agreement provides the following terms for prepayments:

The Company triggers an event of default under these agreements if repayments are not made in accordance with the repayment schedule, if the Company defaults on a loan with a bank or financial institution, and other matters as defined in the agreements. In the event of a default, the lender may declare remaining outstanding amounts due and payable less a 5.0% discount on the remaining unpaid balance and  the stated interest rate is adjusted to be the lower of 18.0% per annum or the maximum rate allowed by law.

Each loan is collateralized by the assets of the subsidiary the debt was taken out for and each is guaranteed by an officer of the Company.

In May 2025, the Company amended each of the business loan and security agreements, changing the required periodic payments and extending the maturity date on the respective agreement as follows:

May 2024 BLS Agreement: The monthly payment was reduced from approximately $7,000 to a monthly payment of approximately $3,000 and the maturity date was extended from December 2025 to December 2026.

July 2024 BLS Agreement: The monthly payment was reduced from approximately $3,000 to a monthly payment of approximately $2,000 and the maturity date was extended from February 2026 to November 2026.

August 2024 BLS Agreement: The monthly payment was reduced from approximately $13,000 to a monthly payment of approximately $3,000 and the maturity date was extended from May 2025 to December 2026.

Vehicle Notes

The Company has thirteen vehicles that were acquired through the issuance of vehicle loans that were outstanding as of December 31, 2024. The maturities of these vehicle notes outstanding range from 2026 through 2029. Interest rates range from 4.99% to 17.37%. The Company defaulted on two of the vehicle notes during the year ended December 31, 2024 and the lender repossessed one of the vehicles. The Company reduced the carrying value of the note by the fair value of the vehicles of approximately $23,000 at the time of the repossession. The Company owes the lenders approximately $13,000 as of December 31, 2024. The second vehicle was repossessed during the subsequent year.

Seller Notes

The Company entered into several seller notes as part of agreements to acquire certain of its wholly owned subsidiaries as follows:

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The December 2022 Seller Note is in default and under legal proceedings (see Note 19).

During September 2024, the Company entered into a note conversion agreement with the holders of the holder of the May 2022 seller note in which the Company converted outstanding principal of $91,000, into 72,800 shares of the Company’s common stock at a

conversion price of $1.25 per share with a one-time consideration adjustment (see Notes 12 and 14), subject to shareholder approval and a maximum aggregate ownership amount of 19.99% for the holder of the seller note. This was accounted for as debt extinguishment.

Real Estate Promissory Note

On December 29, 2022, the Company entered into a Real Estate Promissory Note for land in Florida for a principal sum of $370,000, which is collateralized by real estate with a maturity date of July 29, 2023. The Real Estate Promissory Note is secured by a mortgage on the property. The carrying value of the note, including accrued interest as of the filing date, is $442,000. This note is in default and under legal proceedings (see Note 19).

Business Line of Credit

In January 2023, the Company opened a business line of credit with American Express and borrowed $74,400. The maximum amount the Company can take out on the line of credit is $74,400. The line of credit has an interest rate of 13.0%. This business line of credit matured in September of 2023 and was repaid by the Company. There was no current availability under this business line of credit as of December 31, 2024.

Sale of Future Receipts

On April 25, 2023, the Company entered into a sale of future receipts agreement (the “April 2023 SFR Agreement”) whereby the Company sold and assigned $1,597,144 of future receipts in exchange for net cash proceeds of $1,176,000, including a fee of $24,000. As a result, the Company recorded a discount of $421,144. The Company was required to remit a minimum of $30,174 of weekly sales receipts until the future receipts assigned under the April 2023 SFR Agreement were repaid in full. Accordingly, the term was determined to be approximately one year.

On November 2, 2023, the Company refinanced the April 2023 SFR Agreement to reduce the minimum weekly sales remittance to $17,700 and extend the repayment period to November 2024 (the “November 2023 SFR Refinancing Agreement”). Additionally, the Company was forgiven for $162,080 of the debt outstanding, which was recorded as a component of “loss on extinguishment of debt” in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2023, and incurred an incremental fee of $100,000. The Company applied extinguishment accounting to the November 2023 SFR Refinancing Agreement.

On August 7, 2023, the Company entered into a sale of future receipts agreement (the “August 2023 SFR Agreement”) whereby the Company sold and assigned $1,290,000 of future receipts in exchange for net proceeds of $980,000, including a fee of $20,000. As a result the Company recorded a discount of $310,000. The Company was required to remit a minimum of $25,595 of weekly sales receipts until the future receipts assigned under the August 2023 SFR Agreement were repaid in full. Accordingly, the term was determined to be approximately one year.

On November 9, 2023, the Company refinanced the August 2023 SFR Agreement to borrow an incremental $370,543 (the “Second November 2023 SFR Refinancing Agreement”). Additionally, the Company was forgiven for $130,000 of the debt outstanding, which was recorded as a component of “loss on extinguishment of debt” in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2023, and incurred an incremental fee of $221,000. The Company applied extinguishment accounting to the Second November 2023 SFR Refinancing Agreement.

As a result of the amendments entered into during 2023, the Company wrote off all remaining debt discounts totaling approximately $662,000, which is recorded within loss on extinguishment of debt on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

On January 4, 2024, the Company entered into a sale of future receipts agreement (“the January 2024 SFR Agreement”) whereby the Company sold and assigned $452,000 of future receipts in exchange for net cash proceeds of $343,000, including a fee of $7,000.  As a result, the Company recorded a discount of $101,500. The Company was required to remit a minimum of approximately $9,000 of weekly sales receipts until the future receipts assigned under the January 2024 SFR Agreement were repaid in full. Accordingly, the term was determined to be approximately one year.

On January 30, 2024, the Company entered into a second sale of future receipts agreement, amending the January 2024 SFR Agreement, (the “Amended January 2024 SFR Agreement”) whereby the Company increased the amount of future receipts sold and assigned to the lender to $2,600,000 in exchange for net cash proceeds of approximately $2,077,000, including a fee of approximately $3,000. As a result, the Company recorded a discount of approximately $523,000. The Company was required to remit a minimum of

approximately $52,000 of weekly sales receipts until the future receipts assigned under the Amended January 2024 SFR Agreement were repaid in full. Accordingly, the term was determined to be approximately one year.

In connection with the Second January 30, 2024 SFR Agreement, the Company received an additional $1,054,286 (the “Additional Advance”). Such amounts received were provided to the Company in error and are due and payable in full to the lender. During September 2024, the Company entered into a note conversion agreements with one of the sale of future receipts agreement holders in which the Company converted the outstanding principal on the Amended January 2024 SFR Agreement, including accrued and unpaid interest, and the Additional Advance into shares of the Company’s common stock at a conversion price of $2.00 per share with a two share reset adjustments and a make-whole payment (see Note 14), subject to shareholder approval and a maximum aggregate ownership amount of 19.99% for each individual lender. In connection with these agreements, $3,115,592 of secured promissory notes were extinguished in exchange for the issuance of 1,557,796 shares of the Company’s common stock (see Note 12).

On May 23, 2024, the Company entered into a sale of future receipts agreement (the “May 2024 SFR Agreement”) whereby the Company sold and assigned approximately $149,000 of future receipts in exchange for net cash proceeds of approximately $118,000, including a fee of approximately $3,000. As a result, the Company recorded a discount of approximately $31,000. The Company is required to remit a minimum of approximately $12,000 of monthly sales receipts until the future receipts assigned under the May 2024 SFR Agreement were repaid in full. Accordingly, the term of this agreement is approximately one year. In May 2025, the Company was issued a stipulation of settlement from the Supreme Court of the State of New Work, Count of Erie, under which it was required to pay $240,000 to settle the balance owed of approximately $302,000 on the May 2024 SFR Agreement. The Company is to repay the settlement balance through a conditional release of funds of approximately $17,000 held by a third party and monthly payments totaling approximately $14,000 until the settlement balance is paid in full.

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In October 2024, the Company entered into a sale of future receipts agreement (the “October 2024 SFR Agreement”) with the same lender of the May 2024 SFR Agreement whereby the Company sold and assigned approximately $310,000 of future receipts in exchange for net cash proceeds of approximately $170,000, including a fee of approximately $3,000 and repayment of approximately $78,000 outstanding under the May 2024 SFR Agreement. As a result, the Company recorded a discount of approximately $63,000. The Company is required to remit a minimum of approximately 8.0% of monthly sales receipts until the future receipts assigned under the October 2024 SFR Agreement were repaid in full. Accordingly, the term of this agreement is approximately one year. The October 2024 SFR Agreement was accounted for as an extinguishment of the May 2024 SFR Agreement and approximately $9,000 loss on extinguishment was recorded on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

On May 28, 2024, the Company entered into a second sale of future receipts agreement (the “Second May 2024 SFR Agreement”) whereby the Company sold and assigned $125,000 of future receipts in exchange for net cash proceeds of approximately $98,000, including a fee of approximately $2,000. As a result, the Company recorded a discount of approximately $27,000. The Company is required to remit a minimum of approximately $6,000 of bi-weekly sales receipts until the future receipts assigned under the Second May 2024 SFR Agreement were repaid in full. Accordingly, the term of this agreement is approximately one year. In May 2025, the Company was issued a stipulation of settlement from the Supreme Court of the State of New Work, Count of Erie, under which it was required to pay $140,000 to settle the balance owed of approximately $184,000 on the Second May 2024 SFR Agreement. The Company is to repay the settlement balance through a conditional release of funds of approximately $42,000 held by a third party and monthly payments totaling approximately $8,000 until the settlement balance is paid in full.

In November 2024, the Company entered into a sale of future receipts agreement (the “November 2024 SFR Agreement”) with the same lender of the Second May 2024 SFR Agreement whereby the Company sold and assigned approximately $201,000 of future receipts in exchange for net cash proceeds of approximately $97,000, including a repayment of $60,000 outstanding under the Second May 2024 SFR Agreement. As a result, the Company recorded a discount of approximately $41,000. The Company is required to remit a minimum of approximately $8,000 of bi-weekly sales receipts until the future receipts assigned under the November 2024 SFR Agreement were repaid in full. Accordingly, the term of this agreement is approximately one year. The November 2024 SFR Agreement was accounted for as an extinguishment of the Second May 2024 SFR Agreement and approximately $7,000 loss on extinguishment was recorded on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

On July 24, 2024, the Company entered into a sale of future receipts agreement (the “July 2024 SFR Agreement”) whereby the Company sold and assigned approximately $209,000 of future receipts in exchange for net cash proceeds of approximately $144,000, including a fee of $6,000. As a result, the Company recorded a discount of approximately $65,000. The Company is required to remit 10.0% of daily receipts until the until the future receipts assigned under the July 2024 SFR Agreement were repaid in full. The estimated term of this agreement is approximately one year, based on expected daily collections. The July 2024 SFR Agreement includes an option for early payoff with discounts on the remaining balances. In November 2024, the Company entered into a sale of future receipts agreement (the “Second November 2024 SFR Agreement”) with the same lender of the July 2024 SFR Agreement whereby the Company sold and assigned approximately $313,000 of future receipts in exchange for net cash proceeds of approximately $96,000, including a fee of approximately $9,000 and repayment of approximately $120,000 outstanding under the July 2024 SFR Agreement. As a result, the Company recorded a discount of approximately $88,000 and interest expense of approximately $9,000. The Company is required to remit a minimum of approximately $7,000 of weekly sales receipts until the future receipts assigned under the Second November 2024 SFR Agreement were repaid in full. Accordingly, the term of this agreement is approximately one year. The Second November 2024 SFR Agreement was accounted for as an extinguishment of the July 2024 SFR Agreement and approximately $34,000 loss on extinguishment was recorded on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

On September 19, 2024, the Company into a sale of future receipts agreement (the “September 2024 SFR Agreement”) whereby the Company sold and assigned approximately $107,000 of future receipts in exchange for net cash proceeds of $74,000, including a fee of $2,000. As a result, the Company recorded a discount of $33,000. The Company is required to remit 6.32% of weekly sales receipts until the until the future receipts assigned under the September 2024 SFR Agreement were repaid in full. The estimated term of this agreement is approximately one year, based on expected daily collections.

On November 8, 2024, the Company entered into a sale of future receipts agreement (the “November 2024 SFR Agreement”) whereby the Company sold and assigned approximately $112,000 of future receipts in exchange for net cash proceeds of approximately $76,000, including a fee of approximately $4,000. As a result, the Company recorded a discount of approximately $36,000. The Company is required to remit a minimum of approximately $5,000 of weekly sales receipts until the future receipts assigned under the May 2024 SFR Agreement were repaid in full. Accordingly, the term of this agreement is approximately one year.

Since the Company has significant continuing involvement in the generation of future cash flows due under these agreements among other indicators, pursuant to ASC 470-10-25-2, Debt- Sales of Future Revenues or Other Various Measures of Income, the Company has reflected any future commitments associated with these agreements as debt.

The discounts on the various sale of future receipts agreements are recorded as an adjustment to the related liability within the debt, net on the accompanying consolidated balance sheets as of December 31, 2024 and 2023. These discounts are amortized over the life of the respective loans via the effective interest method. This amortization is recorded as a component of interest expense on the accompanying consolidated statement of operations.

Future maturities for notes payable as of December 31, 2024 is as follows:

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