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Loans Payable
 9 Months Ended
Jul. 31, 2024
Debt Disclosure [Abstract]  
Loans Payable

Note 5 – Loans Payable 

 

Insurance Loans

 

On May 10, 2024, the Company obtained two insurance loans. The first loan is a nine-month loan from First Insurance Bank to finance the annual D&O insurance, with the principal amount of $381,077 and subject to an effective interest rate of 7.45%. The second loan is a nine-month loan from First Insurance Bank to finance the annual D&O insurance, with the principal amount of $94,404 and subject to an effective interest rate of 11.15%. As of July 31, 2024, the outstanding balance of the Insurance loans amounted to $371,566. 

 

On May 20, 2023, the Company obtained a nine-month loan from Westfield Bank to finance the annual D&O insurance. The principal amount was $342,001 and subject to an effective interest rate of 7.79%. As of July 31, 2024, and October 31, 2023, the remaining balance was zero   and $152,000, respectively. 

 

Loan Agreements

 

On May 9, 2023, the Company entered into two loan agreements which are collateralized by all assets of the Company until the loans are repaid in full. As illustrated in the following table, under the terms of these agreements, the Company received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the lenders at the disclosed weekly payment rate. The Company’s former Chief Executive Officer, Eric Mosser personally guarantees the performance of these loans. These loans were fully paid on December 4, 2023, upon their maturity.

 

On November 29, 2023, the Company entered into two loan agreements which are collateralized by all assets of the Company until the loans are repaid in full. As illustrated in the following table, under the terms of these agreements, the Company received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the lenders at the disclosed weekly payment rate. The Company’s former Chief Executive Officer, Eric Mosser personally guarantees the performance of these loans. These loans were fully paid on June 13, 2024, upon their maturity.

 

The following table shows the loan agreements as of July 31, 2024:

 

                            
Inception Date  Purchase Price  Purchased Amount  Outstanding Balance  Payment frequency  Payment Rate  Deferred Finance Fees
November 29, 2023  $600,000   $864,000   $—   Weekly   30,857   $— 
November 29, 2023   600,000    864,000    —   Weekly   30,857    — 
   $1,200,000   $1,728,000   $—            

 

The following table shows the loan agreements as of October 31, 2023:

 

 

Inception Date  Purchase Price  Purchased Amount  Outstanding Balance  Payment frequency  Payment Rate  Deferred Finance Fees
May 9, 2023  $400,000   $580,000   $53,709   Weekly   20,714   $3,434 
May 9, 2023   400,000    580,000    80,467   Weekly   20,714    5,247 
   $800,000   $1,160,000   $134,176           $8,681 

 

The Company has accounted for these agreements as loans under ASC 860 because while the Company provided rights to current and future receipts, the Company 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.

 

On August 9, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) with AJB Capital Investments, LLC (“AJB”), pursuant to which the Company sold a Promissory Note in the principal amount of $650,000 (the “Note”) to AJB in a private transaction for a purchase price of $585,000 (giving effect to original issue discount of $65,000). The Note matured on February 8, 2024 (the “Maturity Date”) and bore interest at the rate of 10% per annum. Interest was payable on a monthly basis beginning on the date that was one month following the date of issuance of the Note. Provided no event of default (as defined in the Note) was in effect as of the Maturity Date, the Company may elect to extend the Maturity Date for a period of six (6) months. Pursuant to the terms of the SPA, the Company paid a commitment fee to AJB in the form of 19,048 shares of Common Stock (the “Commitment Fee Shares”) with a relative fair value of $130,478 which was recognized as discount to the note. The debt discount and issuance costs were amortized over the term of the note. Amortization expense amounted to $38,273 and zero for the nine months ended July 31, 2024, and 2023, respectively.

 

Under the SPA, the Company has the right to repurchase half of the Commitment Fee Shares if the Note is repaid in full prior to maturity. On December 1, 2023, the Company fully paid the loan balance in advance of the maturity date. In connection with the repayment of the Note, the Company agreed that AJB would be permitted to retain all of the Commitment Fee Shares. The Company recognized zero 0 and $98,432 as loss on extinguishment of debt for the three and nine months ended July 31, 2024. As of July 31, 2024, and October 31, 2023, the carrying value of the loan and unamortized debt discount and issuance costs were zero and zero and $513,295 and $136,705, respectively.