v3.26.1
DEBT
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
DEBT

5. DEBT

 

Subordinated Debentures Payable. On December 31, 2024, we issued a $750,000 unsecured debenture that is subordinated to the Company’s existing secured indebtedness, which is collateralized by a lien on substantially all of the Company’s assets. The debenture bears 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. 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.

 

On March 1, 2025, we issued a $75,000 unsecured debenture that is subordinated to the Company’s existing secured indebtedness, which is collateralized by a lien on substantially all of the Company’s assets. The debenture bears interest only at 8.25% payable quarterly in 2025. A balloon payment of $45,707 is due in full on December 31, 2030. In consideration of the lender providing this financing, the Company issued warrants which entitle the holder to purchase 6,250 shares of our common stock at $4.50 per share. If the debenture is paid in full on or before December 31, 2029, the warrants will have a remaining life of 58 months from March 1, 2025.

 

The factors used to calculate the estimated value of these 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%

  

 

        
     Expiration of Warrants if Debenture is Paid on December 31, 2030  Expiration of Warrants if Debenture is Paid on December 31, 2029
 Warrants issued December 31, 2024   December 31, 2030  December 31, 2029
 Warrants issued March 1, 2025   December 31, 2030  December 31, 2029

 

Our minimum future principal payments on all of the above subordinated debentures are as follows:

    
June 30, 2027  $57,754 
June 30, 2028   62,704 
June 30, 2029   68,077 
June 30, 2030   73,910 
December 31, 2030   535,410 
Total   797,855 
Less debt issuance cost   (99,257)
Net subordinated debenture payable   698,598 
Less current portion   (35,697)
Long term portion  $662,901 

  

Term Loans Payable. The term loan payable to UMB (formerly Citywide Banks) is secured by a first mortgage on our building and is payable in 119 equal monthly installments of $7,453 commencing October 30 2021, 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:

    
June 30, 2027  $57,846 
June 30, 2028   59,576 
June 30, 2029   61,357 
June 30, 2030   63,192 
June 30, 2031   65,081 
September 30, 2031   790,299 
Total   1,097,351 
Less debt issuance cost   (11,291)
Net term loan payable   1,086,060 
Less current portion   (55,696)
Long term portion  $1,030,364 

 

The term loan payable to Vern D. Kornelsen, our Chairman and CFO, which was entered into on May 1, 2026, is secured by substantially all assets of the Company, including its building, which is subordinate to the prior perfected security interest held by UMB (formerly Citywide Banks), and is payable in 8   equal monthly installments of interest only of $4,375 through December 31, 2026, and in 60 monthly installments of $10,747 commencing January 31, 2027, including principal and interest at 10.5% based on a 360 day year, with interest to increase if the prime rate increases. Our minimum future principal payments on this term loan, by year, are as follows:

Schedule of term loan payable    
June 30, 2027  $39,078 
June 30, 2028   84,559 
June 30, 2029   93,878 
June 30, 2030   104,224 
June 30, 2031   115,709 
December 31, 2031   62,552 
Total term loan payable   500,000 
Less current portion   (39,078)
Long term portion  $460,922