Annual report pursuant to Section 13 and 15(d)

Debt

v3.24.1.1.u2
Debt
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Debt

(9) Debt

 

Convertible Debt

 

On various dates during the year ended December 31, 2023, the Company issued convertible notes for net proceeds of approximately $5.5 million which contained varied terms and conditions as follows: a) 1-12 month maturity date; b) interest rates of 0 -18% per annum c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon the Company’s up-listing to NASDAQ or NYSE or an event of default. These notes were issued with shares of common stock or preferred stock that were fairly valued at issuance dates. The aggregate relative fair value of the shares of common stock issued with the notes of $790,975 was recorded as a debt discount to be amortized over the term of the notes. The aggregate relative fair value of the preferred stock issued with the notes of $563,441 was also recorded as a debt discount to be amortized over the term of the notes. Deferred financing costs and OID issued with the debt are $1,051,000 and the Company repaid $2,742,409 for the year ended December 31, 2023. Finally, we evaluated our convertible notes for derivative liability treatment on an on-going basis and have determined that all our notes did not qualify for derivative accounting treatment at December 31, 2023. In the year ended December 31, 2023 the amortization of debt discount on convertible notes was $2,507,055.

 

On various dates during the year ended December 31, 2022, the Company issued convertible notes for net proceeds of approximately $4.9 million which contained varied terms and conditions as follows: a) 1-12 month maturity date; b) interest rates of 0 -18% per annum c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon the Company’s up-listing to NASDAQ or NYSE or an event of default. These notes were issued with shares of common stock or warrants to purchase common stock that were fairly valued at issuance dates. The aggregate relative fair value of the shares of common stock issued with the notes of $873,854 was recorded as a debt discount to be amortized over the term of the notes. The aggregate relative fair value of the warrants issued with the notes of $93,576 was also recorded as a debt discount to be amortized over the term of the notes. Deferred financing costs and OID issued with the debt are $541,313 and the Company repaid $1,522,494 for the year ended December 31, 2022. We evaluated our convertible notes for derivative liability treatment on an on-going basis and have determined that all our notes did not qualify for derivative accounting treatment at December 31, 2022. In the year ended December 31, 2022 the amortization of debt discount on convertible notes was $1,694,028.

 

 

The summary of specific terms of the convertible notes and outstanding balances as of December 31, 2023 and December 31, 2022 are listed in the tables below. The convertible notes are from numerous parties and with original issue dates from June, 2019 to December, 2023, and maturity dates from March, 2020 to December, 2024. There are approximately $13 million of notes that are past due as of December 31, 2023.

 

    December 31, 2023     December 31, 2022  
Holders   Interest Rate     Conversion Price     Principal     Interest Rate     Conversion Price     Principal  
Main Investor     10 %   $ 2.50 (1)   $ 8,920,250       10 %   $ 2.50 (1)   $ 9,393,150  
Others     0 to 24 %   $ 2.50 (2) or $7.50       12,409,062       0 to 24 %   $ 7.50 (2)     8,886,036  
Totals                     21,329,312                       18,279,186  
Discount                     645,471                       455,517  
Net                   $ 20,683,841                     $ 17,823,669  

 

Notes:

 

  (1) Conversion price of these note is $2.50 except for a note for $189,750, which will be adjusted to, upon an Event of Default, the lower of (i) the conversion price or (ii) a 25% discount to the 5-day average VWAP of the stock prior to default, and $1,062,600 lower of (i) $2.50 or (ii) the conversion price of the Series AA Preferred Stock as adjusted. These notes are secured by all assets of the Company.
     
  (2) Conversion price of these notes is $2.50 but also varies with one or more of these notes having the following conversion adjustment:

 

  a. Notes are convertible before maturity at $2.50 per share or mandatorily convertible when the Company up-lists to the NASDAQ at the lower of $2.50 or the up-list price.
  b. Notes are convertible upon an Event of Default at 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
  c. Notes are convertible at $2.50 per share except that following an Event of Default the conversion price will be adjusted to 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
  d. Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. In the event of default, these notes can be converted at lower of 1) $2.50/share; 2) 30% discount to 5-day VWAP prior to date of default.
  e. Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. In the event of default, these notes can be converted at lower of 1) $2.50/share; 2) 25% discount to 5-day VWAP prior to date of default.
  f. Conversion price is lower of (i) $2.50 or (ii) the price per share that the Company last sold Common Stock after the execution of an anti-dilution protection agreement.
  g. Note can be converted at a Voluntary Conversion Price which is the lower of 1) $2.50/share; or 2) purchase price of stock sold by the Company at a price lower than $2.50 except that following an Event of Default, the Holder shall have the right, with no further consent from the Borrower, to convert notes which can be the lower of 1) the Voluntary Conversion Price, or 2) 70% of the 5-day VWAP prior to conversion.
  h. Conversion price is $2.50. If note is in default, it is $1.
  i. Notes can be voluntarily converted before maturity at $2.50 per share. Lender retains the option upon an Up-list to convert at the lower of $2.50 or the 10% off Up-list price.
  j. Notes can be converted at the lesser of $2.5 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of (i) original conversion price or (ii) a 35% discount to the VWAP prior to each conversion date.
  k. Some notes are not convertible until 180 days from the date of issuance of the Note and following an Event of Default will be convertible at the lowest trading price of the 20 days prior to conversion. The loan with a principal balance of $950,000 as of December 31, 2023 is guaranteed by the Company’s Chief Executive Officer, but the lender may only enforce this guarantee after certain conditions have been met, specifically after (i) the occurrence of an Event of Default (as defined in the Note), (ii) the failure of the Company to cure the Default in 10 business days, and (iii) a failure by the Company to issue, or cause to be issued, shares of its common stock upon submission by the lender of a notice of conversion.
  l. Some notes can be converted at the lesser of $2.50 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of original conversion price or the product of the VWAP of the common stock for the 5 trading dates immediately prior to the maturity date multiplied by 0.75.
  m. Some notes can be converted at $2.50 through fixed rate expiration dates, thereafter 60% of the lowest trading price for the last 20 days before conversion.
  n. Some notes can be converted at $2.50 through fixed rate expiration dates; thereafter lesser of (1) lowest trading price during the prior 25 days of the note or 65% of the lowest price during the 25 days prior to the conversion. Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. Notes can be voluntary converted at lower of lower of (i) $2.5/share and (ii) purchase Price of stock sold by PBIO at a price lower than $2.50/share that is not an Excluded Event in the Series AA Deal Documents. Notes can be converted at lower of lower of (i) $2.50 or (ii) the conversion price of the Series AA Preferred Stock as adjusted. Notes can be converted at lower of (i) $2.50 or (ii) the purchase price of stock by Series AA Holders. Notes can be voluntary converted at offering price of Common Stock at the close of the day prior to the Conversion Date

 

 

As of December 31, 2023, the approximate principal balance that are secured by the assets of the Company’s subsidiary, PBI Agrochem, Inc. is $352,188.

 

During the year ended December 31, 2023, the Company extended 23 loans totaling $5,625,648 and increased the principal to $6,325,263. The Company issued 2,552,300 shares of common stock and 802 shares of preferred stock for these extensions and added principal.

 

Standstill and Forbearance Agreements

 

The Company has entered into Standstill and Forbearance Agreements with lenders who hold variable-rate convertible notes with a total principal as of December 31, 2023 of $272,500. Pursuant to the Standstill and Forbearance Agreements, the lenders agreed to not convert any portion of their notes into shares of common stock at a variable rate until April 16, 2021. During the year ended December 31, 2023, the Company settled one note with total principal of $302,484, leaving one final lender (three notes) with total principal of $272,500 outstanding and incurred interest, penalties and fees of approximately $253,425 in connection with the Standstill and Forbearance Agreement. During the year ended December 31, 2022 the Company settled one note with a total principal of $166,703 and incurred interest, penalties, and fees of approximately $0.8 million in connection with the Standstill and Forbearance agreements.

 

Convertible Loan Modifications and Extinguishments

 

We refinanced certain convertible loans during the years ended December 31, 2023 and 2022 at substantially the same terms for extensions ranging over a period of three to twelve (12) months. We amortized any remaining unamortized debt discount as of the modification date over the remaining, extended term of the new loans. We applied ASC 470 of modification accounting to the debt instruments which were modified during the period or those settled with new notes issued concurrently for the same amounts but different maturity dates. The terms such as the interest rate, prepayment penalties, and default rates will be the same over the new extensions. According to ASC 470, an exchange of debt instruments between or a modification of a debt instrument by a debtor and a creditor in a nontroubled debt situation is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different and will be accounted for as modifications.

 

The cash flows of new debt exceeded 10% of the remaining cash flows of the original debt on several loans in 2023 and 2022. We recorded losses on extinguishment of liabilities of $751,335 in 2022 and $3,970,983 in 2023. Our gains and losses were measured by calculating the difference of the fair value of the new debt and the carrying value of the old debt.

 

 

Other Debt

 

Twelve notes in Other Debt are past due as of December 31, 2023.

 

    December 31, 2023     December 31, 2022  
Holders   Interest Rate     Principal     Interest Rate     Principal  
Non-Convertible     -(4 )   $ 170,000       -(1 )   $ 878,809  
Merchant debt (3)             1,094,162               760,160  
SBA (2)     3.75 %     161,864       3.75 %     150,000  
Totals             1,426,026             $ 1,788,969  
Long Term             161,864               150,000  
Short Term           $ 1,264,162             $ 1,638,969  

 

Notes:

 

  (1) Interest varies from 1% to 10%. The maturity is between being past due and May 2, 2023.
  (2) The Company entered into a COVID-19 government loan in 2020, the Economic Injury Disaster Loan (or “EIDL”). The Company’s EIDL loan, $150,000, accrues interest at 3.75% and requires monthly payments of $731 for principal and interest beginning in December 2022. The balance of the principal will be due in 30 years. In connection with the EIDL loan the Company entered into a security agreement with the SBA, whereby the Company granted the SBA a security interest in all of the Company’s right, title and interest in all of the Company’s assets. During the year ended December 31, 2020, the Company borrowed $367,039 (two-year term and 1% interest rate per annum) under Payroll Protection program (or “2020 PPP”). During the year ended December 31, 2021, the Company borrowed $367,039 through a second Payroll Protection program (or “2021 PPP”) and extended the monthly payment date on the EIDL to December 2022. In year 2021, both 2020 PPP and 2021 PPP was forgiven by the United States and SBA.
  (3) During the years ended December 31, 2023 and 2022 we signed various Merchant Agreements which are secured by second position rights to all customer receipts until the loan has been repaid in full and subject to interest rates of 4.1% - 100.9% per month. Under the terms of these agreements, we received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the Merchant lenders at the Daily Payment Rate. We accounted for the Merchant Agreements as loans under ASC 860 because while we provided rights to current and future receipts, we still had control over the receipts. The difference between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid each day. The Company’s Chief Executive Officer guarantees the Company’s performance of all representations, warranties, and covenants made by the Company in the Agreement. For loans outstanding on December 31, 2023, the maturity dates ranged from July, 2023 to October, 2024. For loans outstanding on December 31, 2022, the maturity dates ranged from April 4, 2023 to June 6, 2023.
  (4) Interest rate of 10%. The maturity date is December 31, 2019. During the year ended December 31, 2023, the term was modified from non-convertible to convertible for two loans in the amount of $651,500. As of December 31, 2023, $170,000 of the non-convertible debt is past due.

 

 

Related Party Debt

 

    December 31, 2023     December 31, 2022
Holders   Interest Rate     Principal     Interest Rate     Principal     Security
Officers & Directors     -(1 )   $ 522,450       -(1 )   $ 521,950     Unsecured
Other Related Parties     12 %     126,050       12 %     120,850     Unsecured
Totals             648,500               642,800      
Discount             -               7,915      
Net           $ 648,500             $ 634,885      

 

Notes:

 

  (1) Interest varies from 12% to 120%.

 

During the year ended December 31, 2023, we received short-term non-convertible loans of $190,000 with $8,300 OID from related parties and repaid $168,085 of related party loans. These notes bear interest ranging from 12% to 120% interest and are due upon demand.

 

During the year ended December 31, 2022, we received short-term non-convertible loans of $958,100 with $91,750 OID from related parties and repaid $315,300 of related party loans. These notes bear interest ranging from 12% to 120% interest and are due upon demand. All related party notes are convertible at $2.50 per /share.

 

We amortized $8,300 and $83,835 of debt discounts during the years ended December 31, 2023 and 2022, respectively for all non-convertible notes. The total unamortized discount for all non-convertible notes as of December 31, 2023 and 2022 was $0 and $7,915, respectively.