Note 8. Factoring liability

The Company is party to a purchase and sale agreement with an unrelated lender (the “Factor”) whereby the Factor will purchase certain accounts receivable for a purchase price of up to 90% of the face amount, which is paid to the Company in the form of a cash advance. The Company has a revolving line-of-credit for $2 million with a loan interest rate of 15.2% annum on outstanding balances. Additionally, in the event of default the Lender at its option can increase the loan interest rate by 5% per annum for each month or partial month default on outstanding balances. Under the factoring arrangement, the Company must buy back any invoices that the Factor is unable to collect payment on. Accordingly, pursuant to ASC 860-20-55-24, the Company recognizes a factoring liability to the lender until the accounts receivables are collected. As of December 31, 2022, the factoring liability was $502,349. For the year ended December 31, 2022, the costs and interest incurred by the Company in connection with factoring activities were $14,293.