| Debt |
Note 4 – Debt
Long-Term Debt – SBA Loans
In May 2020, the Company borrowed $143,100
from the Small Business Administration (the “SBA”) as an Economic Injury Disaster Loan (“EIDL”) to help fund
its operations during the COVID-19 pandemic. The loan bears interest at the rate of 3.75%
per annum and is payable in monthly installments of $698
for a 30-year
period.
In June 2020, the Company borrowed
$106,200 from the SBA through a second EIDL loan to help fund its operations during the COVID-19 pandemic. The
loan bears interest at the rate of 3.75% per annum and is payable in monthly installments of $518 for a 30-year period.
These loans are recorded as long-term debt in
the consolidated balance sheet as follows:
| Schedule of EIDL loans | |
| | |
| |
| | |
May 31, | |
| | |
2025 | | |
2024 | |
| SBA (EIDL) current portion | |
$ | 14,592 | | |
$ | 7,054 | |
| SBA (EIDL) noncurrent portion | |
| 249,500 | | |
| 249,361 | |
| Accrued interest | |
| 22,095 | | |
| – | |
| Total EIDL loans | |
$ | 286,187 | | |
$ | 256,415 | |
The accrued interest shown in the above table
is presented as accrued interest in the consolidated balance sheets.
Short-Term Debt
Non-Convertible Loans and Financing Agreements
The Company has entered into loans under which
it borrowed money and financing agreements under which it sold receivables to third parties. In accordance with ASC 470, the financing
agreements are treated as loans encumbering the receivables of the Company in the event of default and are accounted for as indebtedness,
such that payments are allocated to principal and interest expense as they are made. These transactions are as follows:
| · | In May 2022, the Company entered into a financing agreement with an unrelated party for a loan of
$50,000,
bearing interest at the rate of 20.9%
per annum, to be repaid at the rate of $1,218 per week for one year. At May 31, 2025, the outstanding balance, including
interest, was $55,422. This loan is in default. |
| · | In January 2023, the Company
entered into a financing agreement with an unrelated party for a loan of $20,000, bearing interest at the rate of 33.5% per annum, to
be repaid at the rate of $1,874 per month. The outstanding balance at May 31, 2025, was $2,921. Payments under this agreement are in
arrears and the Company is negotiating with the unrelated party to reschedule them. |
| · | In April 2023, the Company
entered into a financing agreement with an unrelated party for a loan of $37,475, bearing interest at the rate of 19% per annum, to be
repaid at the rate of $1,718 per month. The outstanding balance at May 31, 2025, was $35,508. Payments under this agreement are in arrears
and the Company is negotiating with the unrelated party to reschedule them. |
| · | On August 8,
2022, the Company entered into a financing agreement with an unrelated party for a loan of $45,000,
bearing interest at the rate of 26.4%
per annum, to be repaid at the rate of $6,114 per week for 20 weeks. As refinanced, the loan was increased to $76,000 at
the same rate of interest and was to be repaid at the rate of $6,114 per week for 17 weeks. On May 13, 2024, the Company
agreed to settle the $38,638
owing under this agreement in consideration of a payment of $15,000,
which the Company made on June 12, 2024. Under ASC 470-50-40, the fair value of extinguished debt, less the fair value of the
payment, is treated as gain. Accordingly, $23,638
is recorded in the Company’s consolidated statement of operations as Other income (Expense) – Forgiveness of debt. |
| · | On October 8, 2019, the Company borrowed $12,500 from
an unrelated party bearing interest at the rate of 14%
per annum (the “Headway Loan”). This loan is payable at the weekly rate of $589 for 24 weeks. On
October 13, 2022, an additional loan of $6,304 was
obtained with a weekly payment of $297 for 24 weeks. The loan was guaranteed by a related party. At May 31, 2025, the
outstanding balance of this loan, including interest, was $16,871. This loan is in default. |
Convertible Notes
The Company has borrowed money under promissory
notes that have convertibility features as follows:
| |
· |
On March 14, 2024, the Company made a promissory
note in the principal amount of $66,000
in favor of an unrelated party. The note was subject to an original issuance discount of $11,000
and to an initial interest charge of 13% of its principal amount, or $8,580.
The net proceeds received by the Company after the original issuance discount, the initial interest charge and payment of legal and due
diligence fees of $5,000,
were $50,000.
The note required repayment in five installments, as follows: a payment of $37,290 on September 15, 2024, and payments of $9,322.50 on
October 15, 2024, November 15, 2024, December 15, 2024, and January 15, 2025. Each of these payments included accrued interest. The note
was repaid on January 12, 2025, at which time, it was not in default. The note provided that upon an event of default, the holder could
convert the amount then unpaid into Common Stock at a conversion price of 65% of the lowest trading price therefor during the 10 trading
days prior to the date of conversion.
|
| |
· |
On November 7, 2024, the Company made a
promissory note in the principal amount of $67,200
in favor of an unrelated party (the “Diagonal Note”). The note is subject to an original issuance discount of $11,200.
The net proceeds received by the Company after payment of legal and due diligence fees of $6,000,
were $56,000.
The note requires repayment in five installments, as follows: a payment
of $37,968 on May 15, 2025, and payments of $9,492 on June 15, 2025, July 15, 2025, August 15, 2025, and September 15, 2025. Each of these
payments includes accrued interest. The note provides that upon an event of default, the holder may convert the amount then unpaid into
Common Stock at a conversion price of 65% of the lowest trading price therefor during the 10 trading days prior to the date of conversion. At May 31, 2025, the unpaid amount of the
note was $32,228. |
The Company determined that the above convertible
notes contained an embedded derivative instrument, inasmuch as the conversion price was based on a variable that was not an input to the
fair value of a “fixed-for-fixed” option, as defined under FASB ASC Topic No. 815–40. The Company determined the fair
values of the embedded convertible note derivatives contained in the convertible notes using the Black Scholes option pricing model.The
conversion features of these notes have been accounted for as a derivative liability in the Consolidated Statements of Operations –
Change in fair value of derivative liabilities.
Related Party Debt
For information about related party debt, see Note 11 – Related
Party Transactions – Loans and Advances.
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