Annual report pursuant to Section 13 and 15(d)

Note 8 - Convertible Notes Payable, Series 1 and 2

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Note 8 - Convertible Notes Payable, Series 1 and 2
 12 Months Ended
Sep. 30, 2023
Series 1 & 2 Convertible Notes [Member]  
Notes to Financial Statements  
Debt Disclosure [Text Block]

8.

CONVERTIBLE NOTES PAYABLE, SERIES 1 AND 2

 

   

2023

    

2022

  

Series 1 Convertible Notes (converted in July 2023)

   $ -     $ 550,000  

Series 2 Convertible Notes (converted in November 2023)

     450,000       450,000  

Total

     450,000       1,000,000  

Current Balance

     (450,000 )     (550,000 )

Non-Current Balance

   $ -     $ 450,000  

 

 

Series 1 Convertible Notes

 

On June 4, 2020, the Company issued unsecured 10% Series 1 Convertible Notes in the aggregate principal amount of $550,000. The maturity dates of the Series 1 Notes was June 30, 2023, and all were converted in July 2023.

 

 

The Series 1 Convertible Notes provide, among other things:

 

 

(i)

interest at a rate of 10% per annum;
 

(ii)

term of approximately three years;
 

(iii)

allow for the Company’s ability to prepay the Series Convertible Notes, in whole or in part, at any time;
 

(iv)

allow the automatic conversion of the Series 1 Convertible Notes upon a change of control into shares of the Company’s common stock, at a conversion price of $54.00 per share;
 

(v)

allow the holders to convert the principal of the Series 1 Convertible Notes, along with accrued interest, in whole or in part, into shares of common stock at the conversion price of $54.00 per share;
 

(vi)

allow for the Company’s ability to convert all note obligations outstanding upon a qualified equity financing into shares of common stock at the corresponding price per share of the qualified equity financing;
 

(vii)

the Company’s ability to convert the principal of the Series 1 Convertible Notes, along with accrued interest, in whole or in part, into shares of Common Stock at the respective Conversion Price in the event the volume weighted average price (“VWAP”) of the Common Stock equals or exceeds $64.00 per share for at least fifteen consecutive Trading Days;
 

(viii)

the Company’s ability to convert all outstanding Note Obligations into shares of Common Stock at the respective Conversion Price (an “In Kind Note Repayment”) in lieu of repaying the Note Obligations outstanding on the Maturity Date, subject to a conversion multiplier of 4.5, as amended.

 

As of September 30, 2022, outstanding balance of the Series 1 Convertible Notes amounted to $550,000.

 

During the year ended September 30, 2023, pursuant to the terms of the convertible notes agreement, the Company issued 59,912 shares of common stock to convert the outstanding notes payable of $550,000 and accrued interest of $168,918 for a total of $718,918. There are no Series 1 convertible notes payable outstanding as of September 30, 2023.

 

Series 2 Convertible Notes

 

On November 6, 2020, the Company issued its unsecured Series 2 10% Convertible Notes Payable in exchange for cash proceeds of $1,050,000. The Series 2 Convertible Notes have similar terms and provisions with the Series 1 Convertible Notes (see above), except the maturity dates of the Series 2 Notes was November 30, 2023, and the notes were all converted in November 2023.

 

As of September 30, 2021, outstanding balance of the Series 2 Convertible Notes amounted to $1,050,000. During the year ended September 30, 2022, as a part of a separate 2022 Convertible Note Offering (see Note 6), certain holders of the Series 2 Notes agreed to exchange their Series 2 Notes with an aggregate principal amount of $600,000 and accrued interest of approximately $100,000 for promissory notes of the Company on substantially similar terms to those of the 2022 Notes (the “Exchange Notes”, see Note 7).

 

As of September 30, 2023 and 2022, outstanding balance of the Series 2 Convertible Notes amounted to $450,000 and $1,000,000, respectively.