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Loans Payable

3 Months Ended

Oct. 31, 2021

5. Loans Payable

The Company has the following notes payable outstanding as of October 31, 2021, and July 31, 2021:

	October 31, 2021		July 31, 2021
Secured Promissory Note payable, interest at 15%, matures August 15, 2024	$	1,760,000	$	1,760,000
Secured Promissory Note payable, interest at 6%, matures August 23, 2024		2,750,000		2,750,000
Promissory Note, interest at 5.66%, matures October 1, 2023		96,116		112,012
Paycheck Protection Program loan		444,850		444,850
Secured Promissory Note Payable, Interest at 15%, matures June 15, 2022, net of discount $4,119		2,664,629		2,660,186
Promissory Note, interest at 4.75%, matures March 2, 2022		406,137		406,137
Sub- total notes payable		8,121,732		8,133,185
Less long-term portion		4,559,694		7,235,776
Current portion of notes payable	$	3,562,038	$	897,409

On August 15, 2019, the Company entered into a Secured Promissory Note with a face value of $1,760,000, with a non-related party. The note requires monthly payments of interest only at the rate of 15% per annum. The note is secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024.

On August 23, 2019, the Company entered into a Secured Promissory Note with a face value of $2,750,000, with a non-related party. The note requires monthly payments of interest only at the rate of 6% per annum. The note is secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024.

On September 12, 2019, the Company entered into a Promissory Note with a face value of $183,031 with a non-related party for the purchase of equipment. The note requires monthly payments of $4,290 including interest at the rate of 5.66% per annum for a period of 48 months commencing November 1, 2019. The loan is secured by a collateral charge on production equipment. Of the amount owed, $46,422 is included in current liabilities and $65,591 is included in long-term liabilities on the consolidated balance sheet presented herein.

On April 30, 2020 the Company received loan proceeds in the amount of $444,850 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company believes it has used the proceeds for purposes consistent with the PPP, however, we cannot assure you that the Company will be eligible for forgiveness of the loan, in whole or in part.

On December 15, 2020, the Company entered into a Secured Promissory Note with a face value of $2,668,748, with the same lender of the August 23, 2019, Secured Promissory Note. The principal balance of the note included an initial debt discount of $25,688, that will be amortized to interest expense over the term of the note. For the three months ended October 31, 2021, the Company recorded $100,078 of interest expense. As of October 31, 2021, there remains $4,119 of unamortized debt discount. The note requires monthly payments of interest only at the rate of 15% per annum. The note is secured by a third Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is June 15, 2022. A portion of the face value of this note was used to repay $1,140,000 of related party amounts due (see Note 7).

On March 2, 2021, the Company entered into a Promissory Note with a face value of $406,137 related to the Asset Purchase Agreement with Primordia. The note carries an interest rate of 4.75% per annum and matures with a balloon a payment of principal and all accrued and unpaid interest on March 2, 2022. As of October 31, 2021, interest expense was $4,863.