NOTE 7: NOTES PAYABLE

The following is a summary of the Company’s notes payable from continuing operations as of June 30, 2026 and December 31, 2025. Notes payable related to the discontinued operations of Ranco LLC ($4,044,083 at June 30, 2026 and December 31, 2025) are presented within current liabilities of discontinued operations on the consolidated balance sheet. See Note 12 – Discontinued Operations.

On September 10, 2019, the Company entered into a promissory note payable whereby the Company borrowed $500,000 bearing interest at 8% per annum. Interest on the note is payable quarterly. In 2022, the maturity date was extended to 2024. In April 2025, the Company and the holder reached an agreement to extend the maturity date to December 31, 2027. In connection with the extension, the Company issued 60,000 shares of its common stock to the noteholder in consideration of the extension and in lieu of $60,000 of interest accrued on the note through March 31, 2025. The issuance of shares was recorded as a loss on conversion of accrued interest of $60,000 in the consolidated statement of operations during the year ended December 31, 2025. The outstanding balance of the note was $500,000 at both June 30, 2026 and December 31, 2025.

On October 28, 2019, the Company’s subsidiary CNP Operating entered into a promissory note payable with Complete Business Solutions Group, Inc. (“CBSG”) whereby the Company borrowed $3,050,000. The outstanding balance of the note was $2,218,000 at December 31, 2022. At December 31, 2022, the Company reversed $1,312,080 previously recorded to additional paid-in capital in 2022 to reflect the outstanding principal of $2,218,000. The note is currently in default and personally guaranteed by Anthony Zingarelli.

On September 30, 2019, the Company’s subsidiary CNP Operating entered into a promissory note payable with Eagle Six Consultants, Inc. (“Eagle”) whereby the Company borrowed $550,000 bearing interest at 16% per annum. The outstanding balance of the note was $302,489 at June 30, 2026. The note is currently in default.

On May 12, 2021, the Company’s subsidiary CNP Operating restructured the CBSG note payable of $2,957,000, the Eagle #1 note payable of $550,000 and the Eagle #2 note payable of $300,000 by entering into a payment and indemnification agreement with the receivers/trustee of CBSG and Eagle. The receiver has agreed that the balance of the outstanding amounts will be paid over the course of 24 months in equal payments of $158,625. Further, the Company shall pay $20,000 per month toward the balance and Anthony Zingarelli (“Zingarelli”) and Colorado Sky Industrial Supply LLC (“CSIS”), agree to personally pay the sum of $138,625 per month. Zingarelli is the only member of CNP Operating that signed a personal guarantee on the loans and Zingarelli is the sole member of CSIS. Zingarelli and CSIS have agreed to indemnify and hold the Company harmless from any and all losses, liabilities and claims. If a loss is incurred by the Company with respect to any claims, Zingarelli shall reimburse the Company for the amount of any such loss. The Company has recorded the Zingarelli payments during the period as contributions to additional paid-in capital through December 31, 2021. This note is currently in default.

On June 24, 2020, the Company entered into a Loan Authorization and Agreement with the U.S. Small Business Administration (“SBA”) under which the Company borrowed $150,000 and issued to the SBA a note and security agreement for the amount borrowed. Outstanding borrowings accrue interest at a rate of 3.75% per annum, and instalment payments, including principal and interest, of $731 are due monthly and begin 12 months from the date of the loan agreement. The balance of any remaining principal and interest is due 30 years from the date of the loan agreement. As collateral for the borrowing, the Company granted the SBA a security interest in substantially all assets of the Company. The outstanding balance of the note was $115,285 at June 30, 2026 (of which $8,772 was classified as current and $106,513 as long-term) and $119,671 at December 31, 2025.

On October 19, 2021, the Company borrowed $250,000 from a lender and issued a promissory note for the repayment of the amount borrowed. The promissory note is unsecured, has a maturity date of December 31, 2024 and all principal is due upon maturity. The amount borrowed accrues interest at 12% per annum and accrued interest is payable monthly commencing on December 1, 2021. The promissory note contains customary events of default permitting acceleration of repayment for nonpayment of amounts due, a bankruptcy related proceeding, breach of representations or covenants, sale of substantially all assets, and change of control. The note is currently in default. The outstanding balance of the note was $250,000 at June 30, 2026.

On November 19, 2020, the Company’s subsidiary CNP Operating purchased equipment for $58,095 which was financed at zero interest rate. The monthly payments of $968 will be made for the next 60 months and matured on November 19, 2025. Imputed interest was not material. In 2022, CNP purchased additional equipment for $55,016 which was financed at zero interest rate with the same lender with similar terms. The outstanding balance of the note was $48,513 at June 30, 2026.

In November 2020 and 2022, the Company’s subsidiary CNP Operating, LLC purchased equipment totaling $113,111 which was financed at zero interest rate with monthly payments of $968 for 60 months. Imputed interest was not material.

2026 Promissory Notes

On May 5, 2026, the Company issued a 12% promissory note to a third party (the “May 5 Lender”) in the principal amount of $30,000. The note matures on April 30, 2028 and bears interest at 12% per annum, payable quarterly in arrears, commencing June 1, 2026. At the option of the May 5 Lender, interest may be paid in cash or in shares of the Company’s common stock, with the number of shares determined based on the closing price of the Company’s common stock on the last trading day before the respective interest payment date. The Company may prepay all or any portion of the principal and accrued interest at any time without penalty. In connection with the issuance of the note, the Company issued the May 5 Lender a five-year common stock purchase warrant to purchase up to 30,000 shares of common stock at an exercise price of $0.50 per share.

On May 20, 2026, the Company issued a 12% convertible promissory note to a third party in the principal amount of $50,000. Interest accrues at 12% per annum and is payable quarterly on each of June 1, September 1, December 1 and March 1, commencing June 1, 2026, at the holder's option in cash or in shares of common stock. The note matures on May 20, 2028, may be prepaid at any time without penalty, and the outstanding principal is convertible at the holder's option into shares of common stock at a conversion price of $0.50 per share. In connection therewith, the Company issued the lender a five-year common stock purchase warrant to purchase up to 50,000 shares of common stock at an exercise price of $0.50 per share.

The relative fair value of the warrants issued with the 2026 promissory notes of $28,132 was recorded as a debt discount and additional paid-in capital and is being amortized to interest expense over the term of the related notes. Amortization of debt discount was $1,969 for the three and six months ended June 30, 2026. The Company also received $26,000 during the six months ended June 30, 2026 under a short-term loan, which is presented separately as a loan payable within current liabilities.

Ranco Notes (Discontinued Operations)

On May 8, 2023, the Company entered into a promissory note with two lenders for aggregate proceeds of $1,150,000.  The notes are unsecured and have a maturity date 15 months following their issuance.  Beginning on the fourth month after issuance, the Company will make monthly repayments totaling $143,750, including principal and interest.  Total principal and interest to be repaid is $1,725,000, and any remaining outstanding balance is due at maturity. As of June 30, 2026, note payable, net of unamortized discount of $0, was $643,250 for these two notes.

On July 1, 2023, the Company entered into a promissory note with two lenders for aggregate proceeds of $3,850,000.  The notes are unsecured and have a maturity date 15 months following their issuance. As of June 30, 2026, note payable, net of unamortized discount of $0, was $3,400,833 for these two notes.

On July 1, 2023, the May and July notes were rolled over to Ranco, LLC for an aggregate of $5,000,000 (the “Ranco Notes”). The Company has since repaid a portion of the principal, and the outstanding balance of the Ranco Notes was $4,044,083 at both June 30, 2026 and December 31, 2025.  The Ranco Notes have a 15 month term and are subject to mandatory equal repayments commencing on the fourth month following issuance. The Ranco Notes are secured by the assets of Ranco and guaranteed by the Company.

Future Maturities

Future scheduled maturities of long-term debt from continuing operations are as follows:

Obligations Under Preferred Stock

On June 20, 2019, existing debtholders were issued an aggregate of 500 shares of Series A Preferred Stock, each with a stated value per share of $1,000, as conversion of $500,000 worth of outstanding promissory notes. The Series A Preferred Stock bears interest at 12% per annum, and is convertible into the Company’s common stock at the election of the holder at a conversion price per share to be mutually agreed between the Company and the holder in the future, and is redeemable at the Company’s option following the third year after issuance, without voting rights or a liquidation preference.

On June 20, 2019, the Company issued 3,000 shares of Series B Preferred Stock, each with a stated value of $1,000 per share, to Emerging Growth, LLC as part of the purchase of the CFN Business. The aggregate fair value of $687,000 was recorded as part of the acquisition price of the net assets acquired from Emerging Growth, LLC. The Series B Preferred Stock originally bore interest at 6% per annum and is convertible into the Company’s common stock at the election of Emerging Growth, LLC at a conversion price per share to be mutually agreed between the Company and Emerging Growth, LLC in the future, without voting rights or a liquidation preference, except with respect to accrued penalty interest. On August 14, 2025, following negotiation with Emerging Growth, LLC, the Company filed a Certificate of Amendment to its Certificate of Designation of Series B Preferred Stock to increase the dividend rate from 6% per annum to 12% per annum, effective August 1, 2025.