Debt

3 Months Ended

Jul. 31, 2022

Debt Disclosure [Abstract]

Debt

Note 4. Debt

Debt consists of the following:

	July 31,			April 30,
	2022			2022
$130K Unsecured drawdown convertible promissory note	$	130,000		$	130,000
$1.5M Secured convertible promissory notes		—			1,500,000
$1M Notes		1,000,000			1,000,000
Bridge convertible notes, net of discounts and deferred financing costs		—			3,441,807
		1,130,000			6,071,807
Less: current maturities		(130,000	)		(1,630,000	)
Notes payable, long-term	$	1,000,000		$	4,441,807

$130K Unsecured Drawdown Convertible Promissory Note

On August 12, 2019, the Company entered into an unsecured drawdown convertible promissory note with Front Range Ventures, LLC (“FRV”) for an aggregate amount not to exceed $130,000 (“$130K Note”). FRV is a shareholder of the Company and the Company entered into an agreement with FRV where FRV is entitled to appoint a member of the Board of Directors and a board observer so long as it holds at least 71,000 shares of Series C convertible preferred stock.

The $130K Note may be repaid at any time upon 20 days’ notice to the holder. The $130K Note is convertible into Series C convertible preferred stock at any time, upon written notice by either the holder or the Company or at maturity, at the lowest price paid for the Series C convertible preferred C stock prior to conversion, which is currently $25.00 per share. The $130K Note matures 20 days following FDA clearance of the Company’s MyoVista medical device. Under the terms of the agreement, the note is non-interest bearing.

The $130K Note does not contain any covenants that restrict the Company's ability to conduct business and does not contain specific events of defaults. Any breach of its terms by the Company would entitle FRV to all available rights and remedies, at law or in equity, available.

$1M Notes and Loan and Security Agreement

In April 2020, the Company entered into a loan and security agreement (the "$1M Loan and Security Agreement") with FRV and John Q. Adams who are both shareholders of the Company. John Q. Adams was also a Director of the Company at the time of entering into the $1M Loan and Security Agreement. Each party committed to lend a principal amount of $500,000, totaling $1,000,000 and the loan was drawn in three installments of $300,000 upon execution of the loan agreement, $350,000 on or about July 2, 2020 and $350,000 on or about September 4, 2020. The loan had an original maturity date of September 30, 2021 which was amended on September 30, 2021 making the note repayable on demand.

The $1M Loan and Security Agreement was amended again on November 3, 2021, extending the maturity to September 30, 2022. The loan was further amended on May 24, 2022, extending maturity to September 30, 2023. In connection with the amendment in May 2022, the Company agreed to pay Mr. Adams all accrued but unpaid interest on his note prior to September 30, 2022. In June 2022, the Company paid approximately $126,000 in accrued interest to Mr. Adams.

The $1M Loan and Security Agreement accrues interest at a rate of 12% per annum, compounded annually, which is payable at maturity. The Company is also required to pay default interest at a rate of 18% per annum, compounded annually, on any unpaid amounts due at maturity until the loan amounts are fully re-paid. The loan is collateralized by substantially all of the Company’s assets and intellectual property, except for the secured interest on the covered technology as discussed in Note 8.

As of July 31, 2022 and April 30, 2022, accrued interest was approximately $138,000 and $229,000, respectively, and is included in accrued expenses in the accompanying condensed balance sheets.

$1.5M Secured Convertible Promissory Notes

In December 2020, the Board of Directors approved the offering of a series of secured convertible promissory notes in the amount of $1,500,000 (“$1.5M Notes”). The $1.5M Notes were sold as a series to a number of different investors with $1,490,000 of the notes being sold to shareholders of the Company of which members of the Board of Directors of the Company subscribed for $30,000. The notes had an original maturity of July 31, 2022 and were subsequently amended on November 2, 2021, extending maturity to October 31, 2022. The entire amount of the $1.5M Notes converted upon the IPO into 909,071 shares of common stock at a conversion price of $1.65 (Note 5). In accordance with their terms no interest was payable as they converted prior to maturity.

2021 Bridge Securities

In December 2021 the Board approved the sale of Senior Subordinated Convertible Loan Notes (the "Bridge Notes”) and associated warrants (the “Bridge Warrants”), together the “2021 Bridge Securities”. The Company sold $4,695,555 principal value of the Bridge Notes which were issued with a 10% original issue discount (OID), and accrued interest at 8% per annum and had a maturity date of December 22, 2024. In accordance with their terms, the entire amount of the Bridge Notes, including $165,516 of accrued interest, converted upon the IPO into 1,606,027 shares of common stock at a conversion price of $2.89 and Pre-Funded Warrants to acquire 77,443 shares of common stock at an exercise price of $0.0001 per share (Note 5). The Bridge Warrants have a 5-year term from their date of issuance and, in accordance with their terms following the IPO, had the right to purchase 1,365,960 shares of common stock at an exercise price of $5.16 per share. The exercise price of the Bridge Warrants is subject to full ratchet downward adjustment for 18-months following the IPO in the event of an issuance of common stock (or issuance of convertible securities or options at a lower price conversion/exercise price) than the then exercise price. Upon a lowering of the exercise price the holder will be entitled to exercise the Bridge Warrants so the new exercise price multiplied by the number of shares of common stock purchased is 150% of the principal amount of the 2021 Bridge Notes purchased.

Subsequent to the IPO, pursuant to provisions in the Bridge Notes limiting the number of shares of common stock into which the Bridge Notes were convertible, 61,913 shares of common stock into which the Bridge Notes converted were issued and were cancelled and deemed null and void, ab initio, from the time of the conversion and issuance and a Pre-Funded Warrant to purchase an additional 61,913 shares of common stock was issued. The Pre-Funded Warrants have substantially the same terms as the Bridge Warrants except that the exercise price is $0.0001 per share. On September 8, 2022, the Company entered into a written amendment to the Bridge Warrants, referred to as the Bridge Warrant Amendment, with the lead investor in the private placement of the 2021 Bridge Securities. The Bridge Warrant Amendment amended the terms of the Bridge Warrants to make them more consistent with the terms of the IPO Warrants (Note 5).

Paycheck Protection Program Loans

On January 25, 2021, the Company received loan proceeds in the amount of $250,200 under the Paycheck Protection Program (“PPP”) which was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provided for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. Following the PPP guidelines, the Company filed for loan forgiveness in May 2021 and in June 2021, the Small Business Administration approved

the filing and forgave the loan. The forgiveness of the PPP loan is recorded in gain on extinguishment of debt in the statement of operations as of the quarter ended July 31, 2021.