Debt | NOTE 8: DEBT Convertible Notes Payable The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the FASB ASC. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt. On January 2, 2020, the Company entered into Amendment #1 to the convertible note dated July 1, 2019 in the principal amount of $605,000 (including a $90,000 original issuance discount), amending the conversion price. As a result of this amendment, the outstanding balance was determined extinguished and a loss on convertible note payable extinguishment of $355,317 was recognized, and a new liability was established. On various dates through January 31, 2020, the outstanding principal and accrued interest was converted into an aggregate of 81,623,171 shares of the Company’s common stock at an average conversion price of $0.009527, resulting in the recognition of a loss on convertible note payable settlement of $368,456. On January 9, 2020, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible note in the principal amount of $605,000 (including a $90,000 original issuance discount). The note matures on January 9, 2021, bears interest at a rate of 4% per annum (increasing to 24% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price of $0.015 per share, subject to adjustment. The note may be prepaid by the Company at any time prior to the 180 th On February 10, 2020, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $420,000 (including a $70,000 original issuance discount). The note matures on November 10, 2020, bears interest at a rate of 4% per annum, and is convertible into shares of the Company’s common stock at a conversion price of $0.0125 per share, subject to adjustment. The note may be prepaid by the Company at any time prior to the 180 th On April 8, 2020, the Company entered into Amendment #1 to the convertible notes dated September 13, 2019 in the aggregate principal amount of $660,000 (including an aggregate of $110,000 in original issuance discounts), amending the conversion price. As a result of this amendment, an aggregate beneficial conversion feature of $598,888 was recognized based upon the intrinsic value of the conversion option as a discount of the convertible notes, which will be amortized to interest expense through the maturity dates. On various dates through April 30, 2020, an aggregate of $138,000 of the outstanding principal and $674 of accrued interest was converted into an aggregate of 25,029,712 shares of the Company’s common stock. On April 21, 2020, the Company entered into Amendment #1 to the convertible note dated October 2, 2019 in the principal amount of $345,000 (including a $45,000 original issuance discount), amending the conversion price. As a result of this amendment, a beneficial conversion feature of $231,274 was recognized based upon the intrinsic value of the conversion option as a discount of the convertible note, which will be amortized to interest expense through the maturity date. On April 21, 2020, $50,000 of the outstanding principal and $1,660 of accrued interest was converted into 6,833,369 shares of the Company’s common stock. On April 29, 2020, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $165,000 (including a $15,000 original issuance discount). The note matures on April 29, 2021, bears interest at a rate of 8% per annum, (increasing to 18% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price of $0.02 per share, subject to adjustment. The note may be prepaid by the Company at any time prior to the maturity date of the Note with certain prepayment penalties as defined in the note. At April 30, 2020 and October 31, 2019, there was $1,092,524 and $1,378,855 of convertible notes payable outstanding, net of discounts and beneficial conversion features of $916,475 and $231,146, respectively. During the six months ended April 30, 2020 and 2019, amortization of debt discount, issuance costs, and beneficial conversion features amounted to $398,969 and $702,376, respectively. During the six months ended April 30, 2020, an aggregate of $809,276 of convertible notes, including accrued interest, were converted into shares of the Company’s common stock and there were no payments toward the outstanding balances of convertible notes. During the six months ended April 30, 2019, an aggregate of $1,485,633 of convertible notes, including accrued interest, were converted into shares of the Company’s common stock and there were payments of an aggregate of $1,118,049 toward the outstanding balances of convertible notes. Notes Payable On January 26, 2019, the Company entered into Amendment No. 1 to the promissory note (the “Monaco Note”) issued in favor of the Donald P. Monaco Insurance Trust on January 26, 2018 in the principal amount of $530,000, with an annual interest rate of 12%, whereby (i) the maturity date of the Monaco Note was extended to January 26, 2020 and (ii) the Company agreed to use its best efforts to prepay the unpaid principal amount of the Monaco Note together with all accrued but unpaid interest thereon on or prior to March 31, 2019. Subsequently, the Company entered into Amendment No. 2 dated February 8, 2019 to the Monaco Note whereby the maturity date of the Monaco Note was extended to November 8, 2019. Upon maturity on November 8, 2019, the Company was not able to pay the balance due and the interest rate immediately increased to 18% per annum. The note holder agreed to only impose the default interest rate and not proceed with any other default remedies currently available. At April 30, 2020, the Company expects to repay the Monaco Note in full as quickly as possible based upon its available capital. On March 31, 2020, the Company issued and sold a promissory note to an accredited investor in the principal amount of $312,500 (including a $62,500 original issuance discount). The note matures on July 1, 2020, bears interest at a rate of 4% per annum, (increasing to 18% per annum upon the occurrence of an Event of Default (as defined in the note)) and provides a security interest in all of the Company’s equity ownership interest in its wholly owned subsidiary, Big League Foods, Inc. The note may be prepaid by the Company at any time prior to the maturity date with no prepayment penalties. On April 23, 2020, the Company entered into a promissory note with an approved lender in the principal amount of $104,479. The note was approved under the provisions of the Coronavirus, Aid, Relief and Economic Security Act (the “CARES Act”) and the terms of the Paycheck Protection Program of the U.S. Small Business Administration’s 7(a) Loan Program. The note accrues interest for the first six months following the issuance date at a rate of 1% per annum, (increasing to 6% per annum upon the occurrence of an Event of Default (as defined in the note)), and beginning November 23, 2020, requires 18 monthly payments of $5,880 each, consisting of principal and interest until paid in full on April 23, 2022. The note may be prepaid by the Company at any time prior to the maturity date with no prepayment penalties. Additionally, any portion of the note up to the entire principal and accrued interest balance may be forgiven in the event the Company satisfies certain requirements as determined by the CARES Act. The Company expects to satisfy the requirements for forgiveness of the entire principal and accrued interest balance and will apply for such forgiveness by the deadline. Revolving Credit Agreement On July 31, 2019, the Company entered into a secured, $500,000 revolving credit agreement (“Credit Facility”). Borrowings under the Credit Facility may be used to fund working capital needs and bear interest at a one-month LIBOR-based rate plus 300 basis-points (3.30% at April 30, 2020). The Company’s performance and payment obligations under the Credit Facility are guaranteed by substantially all of its assets. The structure of this Credit Facility is a note payable with a revolving credit line feature with a mutual termination provision instead of a stated maturity date. The outstanding balance under the Credit Facility may be prepaid at any time without premium or penalty. Additionally, the Credit Facility contains customary events of default and remedies upon an event of default, including the acceleration of repayment of outstanding amounts under the Credit Facility. At April 30, 2020, $500,000 was outstanding under the Credit Facility. The Credit Facility contains customary affirmative and negative covenants, including a borrowing base requirement upon each request for an advance from the Credit Facility. The Company was in compliance with all covenants at April 30, 2020. |