v3.22.2.2
Notes Payable
 6 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Notes Payable

Note 8 Notes Payable

 

The following are the various notes payable of the Company:

 

Covid-19 PPP Loan

 

During the year ended March 31, 2021, the Company entered into loans under the Paycheck Protection Program (“PPP”) sponsored by the U.S. Small Business Administration (SBA) providing for proceeds of $588,891. The PPP loans were made pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and was administered by the SBA. The interest rate on the PPP loans were 1.0%. The PPP loans were unsecured and contained customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or the Lender, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. In May 2021, $294,066 was forgiven, with another $146,200 forgiven in August 2021 and the remaining $148,625 forgiven in October 2021, resulting in a gain on forgiveness of $593,546 including interest during the year ended March 31, 2022.

 

Senior Secured Notes

 

In June 2021, the Company entered into a Senior Secured Note with Auctus Fund for $650,000, discounted $55,000, resulting in net proceeds of $595,000, with a maturity date of June 23, 2022. The note bears interest of 12% per annum with the first twelve months of interest to be due and payable on the issue date of the note. Interest of $78,000 was expensed during the year ended March 31, 2022. Any principal amount or interest on this note which is not paid when due shall bear interest at the rate of the lesser of (i) sixteen percent (16%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid.

 

On July 14, 2021, the principal amount of the note was increased by $25,000 in return for a one-time waiver by the Lender of one of the covenants under the note, bringing the balance of the note to $675,000.

 

Also pursuant to the agreement, in connection with the issuance of the note, the Company issued two common stock purchase warrants (separately, the “First Warrant” and the “Second Warrant” and together, the “Warrants”) to Auctus, each allowing Auctus to purchase an aggregate of 4,333,333 shares of the Company’s common stock. The Second Warrant is subject to cancellation pursuant to the terms of the Auctus Note and may not be exercised until the Trigger Date (as defined in the Second Warrant). The Warrants each have an exercise price of $0.15 per share, subject to customary adjustments (including anti-dilution adjustments), and may be exercised at any time until the three-year anniversary of the Warrants; provided, however, in the event the Company repays the Auctus Note in its entirety on or prior to the maturity date, the Second Warrant shall automatically expire and may only be exercised in the event it does not so automatically expire. The Warrants include a cashless exercise provision as set forth therein.

 

 

The total fair value of the warrants was estimated on the issue date at $513,827 using the following weighted average assumptions:

 

   June 24, 2022 
Market price of common stock on date of issuance  $0.30 
Risk-free interest rate   0.48%
Expected dividend yield   0 
Expected term (in years)   3 
Expected volatility   199.6%

 

On or about November 22, 2021, the Company triggered an event of default under the Auctus Note and related documents which entitled Auctus, among other things, to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Auctus Note. On February 17, 2022, Auctus and the Company executed a Waiver Letter which waived such defaults effective as of November 22, 2021.

 

The note is secured by an Affidavit of Confession of Judgment and ranks senior over all existing and future indebtedness of the Borrower.

 

Nonconvertible Notes – Related Party

 

As of September 30, 2022, the Company has issued $1,994,655 in notes payable to investors, of which $1,852,735 is due in the short term and $141,920 is due in the long term. The following table reflects the nonconvertible notes related party outstanding as of September 30, 2022.

Interest Rate   Issuance Date  Maturity 

September 30,

2022

 
            
 4.00%  12/31/2018  12/31/2023   55,250 
 4.00%  12/31/2018  12/31/2022   66,900 
 4.00%  12/31/2018  12/31/2023   74,220 
 4.00%  9/30/2019  9/29/2023   314,000 
 4.00%  9/17/2019  9/16/2023   81,500 
 4.00%  9/30/2019  9/29/2023   12,450 
 1.00%  12/31/2020  12/30/2022   254,382 
 1.00%  12/31/2020  12/30/2022   235,600 
 1.00%  12/31/2020  12/30/2022   83,785 
 4.00%  12/31/2020  12/31/2022   53,100 
 4.00%  12/31/2020  12/31/2022   13,468 
 12.00%  1/10/22  5/10/2023   750,000 
            1,994,655 

 

 

Nonconvertible Notes

 

As of September 30, 2022, the Company has issued $1,959,137 in notes payable to investors, of which $1,792,566 is due in the short term and $166,571 is due in the long term. The following table reflects the nonconvertible notes outstanding as of September 30, 2022.

Interest Rate   Default Rate   Issuance Date  Maturity 

September

30, 2022

 
 14%   N/A   8/1/18  1/31/22  $500,000 
 14.2%   25%  9/18/19  9/18/23  $23,347 
 14.2%   25%  10/9/19  10/9/23  $37,037 
 14%   Additional 2%  10/30/19  10/29/21  $229,500 
 14%   Additional 2%  12/31/19  12/31/20  $102,000 
 14%   N/A   2/5/20  2/5/21  $50,000 
 20%   Additional 2%  2/25/20  2/25/2023  $220,000 
 20%   Additional 2%  2/28/20  6/30/22  $104,000 
 14.2%   25%  3/10/20  3/10/24  $90,654 
 20%   Additional 2%  4/24/20  4/23/21  $20,000 
 30%   Additional 2%  10/29/20  2/28/21  $25,500 
 12%   Additional 2%  10/30/20  11/1/21  $25,500 
 12%   Additional 2%  10/30/20  11/1/21  $25,500 
 20%   N/A%  2/2/21  5/31/22  $45,000 
 15%   N/A%  4/1/21  3/31/24  $38,880 
 10%   N/A%  4/1/21  3/31/22  $100,000 
 N/A%    N/A%  8/11/21  12/31/21  $322,219 
                $1,959,137 

 

Convertible Notes – Related Party

 

The Company has issued $29,970 in convertible notes payable to a related party, bearing an annual interest rate of 4% and a default interest rate of an additional 2%. The note was due December 30, 2020 unless sooner paid in full or converted in accordance with the terms of Conversion, (the “Maturity Date”) provided, however, that if a Qualified IPO (as defined below) does not occur on or before the Maturity Date, the Maturity Date shall be extended automatically for an additional one-year period and, during such period, the notes will bear interest at an annual rate of eight percent (8%). At September 30, 2022 and 2021, the Company had $29,970 and $29,970, respectively, in outstanding convertible notes – related party.

 

Convertible Notes

 

As of September 30, 2022, the Company has issued $1,438,193 in convertible notes payable to investors, of which $1,368,193 is due in the short term and $70,000 is due in the long term. The following table reflects the convertible notes outstanding as of September 30, 2022.

Interest Rate   Conversion Rate  Issuance Date  Maturity   September 30,
2022		 
 12%  $1.80   5/5/19   1/26/21   $102,000 
 12%  $1.80   7/10/19   7/9/21   $153,000 
 12%  $1.80   2/12/20   2/11/21   $102,000 
 8%  $0.22   3/9/21   3/8/22   $100,000 
 2%  $0.30   6/16/21   3/31/22   $250,000 
 10%  $0.30   6/22/21   6/21/22   $50,000 
 10%  $7.50   8/30/21   8/29/22   $150,000 
 10%  $7.50   8/31/21   8/30/22   $75,000 
 10%  $*   8/31/21   8/30/22   $50,000 
 10%  $*   9/15/21   9/14/22   $20,000 
 10%  $*   9/20/21   9/19/22   $10,000 
 10%  $*   9/22/21   9/21/22   $10,000 
 10%  $*   10/13/21   10/12/22   $50,000 
 10%  $7.50   10/18/21   10/17/22   $25,000 
 10%  $7.50   10/20/21   10/19/22   $20,000 
 10%  $*   10/28/21   10/27/22   $20,000 
 10%  $*   12/27/21   12/26/22   $20,000 
 10%  $*   2/11/22   2/10/23   $10,000 
 10%  $*   2/22/22   2/21/23   $5,000 
 8%  $*   5/05/22   11/5/23   $70,000 
 8%  $*   5/17/22   5/11/23   $55,000 
 8%  $*   5/31/22   5/30/23   $33,750 
 10%  $*   8/31/22   8/30/23   $25,000 
 10%  $*   9/15/22   9/14/23   $25,000 
 adjustment                $7,443 
                  $1,438,193 

 

  * Upon commencement by the Company of a Qualified Financing, all of the outstanding principal and interest shall convert into that number of shares of New Round Stock, based upon a conversion price equal to the actual price per share of New Round Stock in the Qualified Financing. If not converted prior to the twelve-month anniversary of the issuance of the Notes, the Notes will be payable upon demand. Prepayment is not permitted prior to a payoff event.

 

The Company evaluates these notes at commencement for beneficial conversion features and derivatives. As of September 30, 2022, the Company recorded a beneficial conversion feature on the convertible notes of $1,014,478 compared to $771,576 at September 30, 2021.