Principal Financing Agreements |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal Financing Agreements | Note 5 – Principal Financing Arrangements
The following table summarizes components of debt as of January 31, 2020 and April 30, 2019:
As of January 31, 2020 and April 30, 2019, the Company owed its principal lender (“Lender”) $1,000,000 under a loan and security agreement (“Loan”) dated April 28, 2011, that was amended on July 26, 2014 and again on October 31, 2017. The Lender is also the largest shareholder of the Company, owning 271,371,454 shares of common stock, or 32.7% of the 830,956,712 shares issued and outstanding, as of January 31, 2020.
The Loan was amended on October 31, 2017 to change the maturity date to October 31, 2020, reduce the interest rate from 8% to 1.25% per annum, and reduce the default interest rate from 15% to 8% per annum (the “Amendments”). In conjunction with the Amendments, the Lender also agreed to reduce the total debt and accrued interest payable by $453,031 to $1,000,000, in exchange for the Company issuing to the Lender 44,198,246 shares of its common stock. Consequently, upon issuance of the 44,198,246 shares, the Company recorded an increase of $44,198 in common stock and $408,833 in capital in excess of par value.
In connection with the financing, the Company has agreed to certain restrictive covenants, including, among others, that the Company may not convey, sell, lease, transfer or otherwise dispose of any part of its business or property, except as permitted in the agreement, dissolve, liquidate or merge with any other party unless, in the case of a merger, the Company is the surviving entity, incur any indebtedness except as defined in the agreement, create or allow a lien on any of its assets or collateral that has been pledged to the Lender, make any loans to any person, except for prepaid items or deposits incurred in the ordinary course of business, or make any material capital expenditures. To secure the payment of all obligations to the Lender, the Company granted to the Lender a continuing security interest and first lien on all of the assets of the Company.
As of January 31, 2020 and April 30, 2019, the Company’s related-party unsecured notes payable totaled $71,800 and $76,100, respectively. The Company also owes $34,324 as of January 31, 2020 and April 30, 2019 to Chase Bank. Currently, the Company pays no monthly principal payments on the outstanding balance. The Company pays a variable monthly interest expense, which is calculated at a rate of 7.0% per annum at January 31, 2020.
The debt to Chase Bank was personally guaranteed by a former Chief Executive Officer and Chairman of the Board (the “Former CEO”). The Former CEO sold shares of the Company to a third-party, and in addition to payments to the Former CEO, the contract of sale required the third-party make monthly payments to Chase Bank to pay down the money owed to Chase Bank. Total payments received from the third-party in the nine and three months ended January 31, 2019 amounted to $4,600 and $0, respectively. These payments were recorded as other income. No such payments were made in fiscal 2020.
Demand notes payable totaled $7,860 at January 31, 2020 and April 30, 2019, and do not bear interest. |
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