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CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
12 Months Ended
Sep. 30, 2023
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE  
CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE

7. CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE

 

Convertible notes payable as of September 30, 2023 and 2022 consisted of the following:

 

Convertible Promissory Notes with Clayton A. Struve

 

The Company owes Clayton A. Struve, a significant stockholder, $1,301,005 under convertible promissory or OID notes. The Company recorded accrued interest of $94,062 and $86,562 as of September 30, 2023 and 2022, respectively. On December 7, 2022, the Company signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2023.  On September 15, 2023, the due dates on the notes was further extended to September 30, 2024. The Company expensed $230,005 as loss on debt extinguishment during the year ended September 30, 2023 related to the extension of the notes. The Company recorded in convertible note payable the incremental value related to the conversion feature and as such, we recorded the extension value as an expense with an offset to convertible note payable.

Convertible Redeemable Promissory Notes with J3E2A2Z

 

The Company owes Ronald P. Erickson and J3E2A2Z, an entity affiliated controlled by Ronald P. Erickson $1,460,926 under convertible promissory notes On March 16, 2018, the Company entered into a Note and Account Payable Conversion Agreement pursuant to which (a) all $664,233 currently owing under the J3E2A2Z Notes was converted to a Convertible Redeemable Promissory Note in the principal amount of $664,233, and (b) all $519,833 of the J3E2A2Z Account Payable was converted into a Convertible Redeemable Promissory Note in the principal amount of $519,833 together with a warrant to purchase up to 1,039,666 shares of common stock of our for a period of five years. The initial exercise price of the warrants described above is $0.50 per share, also subject to certain adjustments. The Company recorded accrued interest of $218,334 and $287,290 as of September 30, 2023 and 2022, respectively. On December 7, 2022, the Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to January 30, 2023. On January 25, 2023, the Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to September 30, 2023. On September 15, 2023, the due dates on the notes was further extended to September 30, 2024. The Company expensed $276,860 as loss on debt extinguishment during the year ended September 30, 2023 related to the extension of the notes. The Company recorded in convertible note payable the incremental value related to the conversion feature and as such, we recorded the extension value as an expense with an offset to convertible note payable.

 

Convertible Debt Offering

 

Beginning in 2019, the Company entered into a series of debt offerings with similar and consistent terms. The Company issued Subordinated Convertible Notes and Warrants in a private placement to accredited investors, pursuant to a series of substantially identical Securities Purchase Agreements, Common Stock Warrants, and related documents. As of September 30, 2022, all convertible notes and accrued interest had been converted to common stock. During the year ended September 30, 2022, amortization related to the debt offerings of $7,272,911 was recognized as interest expense in the consolidated statements of operations.

 

Convertible notes payable as of September 30, 2023 and 2022 are summarized below:

 

 

 

September 30,

2023

 

 

September 30,

2022

 

Convertible note- Clayton A. Struve

 

$1,301,005

 

 

$1,071,000

 

Convertible note- Ronald P. Erickson and affiliates

 

 

1,460,926

 

 

 

1,184,066

 

2021 Convertible notes

 

 

-

 

 

 

14,209,000

 

Less conversions of notes

 

 

-

 

 

 

(14,209,000)

 

 

$2,761,931

 

 

$2,255,066