NOTES PAYABLE

9 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTE 4 – NOTES PAYABLE

	December 31, 2023  (unaudited)			March 31, 2023
Note Payable Agreement 2	$	13,551,346		$	14,772,293
Note Payable Agreement 3		6,365,649			6,024,941
Note Payable Agreements 4 and 5		—			—
Total notes payable		19,916,995			20,797,234
Unamortized debt discount		(273,957	)		(767,083	)
Notes payable, net of note discounts		19,643,038			20,030,151
Current portion		(19,643,038	)		(16,942,500	)
Non-current portion	$	—		$	3,087,651

At October 5, 2023, the Company had four note payable agreements (Notes #2, #3, #4, and #5) outstanding. Effective October 5, 2023, the Company entered into standstill agreements for Notes #2 and #3, pursuant to which the investors would not seek repayment of any portion of the notes during the period from October 5, 2023 to October 31, 2023. In consideration, the Company agreed to pay a standstill fee of $1,300,000, that was added to the note principal of Notes #2 and #3.

On October 5, 2023, the Company entered into termination agreements to terminate and cancel Notes #4 and #5, which had an aggregate balance of principal and accrued interest of $7,940,657. In consideration, a principal payment of $3,000,000 was made, and $4,940,657 was added to the principal of Notes #2 and #3.

NOTE PAYABLE AGREEMENT 2

On February 8, 2021, the Company issued a note payable (“Note 2”) to a third-party investor.  The note was for $24,015,000, originally matured on February 9, 2023 (see below), and is secured by all the assets of the Company. Beginning in March 2023, the monthly principal payments are $1,000,000 per month. In addition, the Company is required to accrue a monthly PIK fee equal to 0.833% of the outstanding balance, which is in substance interest at an annual rate of approximately 10%, that is added to the note principal each month. In October 2022 Note 2 was amended to extend the maturity from February 9, 2023 to July 1, 2024. In consideration, the Company agreed to pay aggregate fees of $2,304,539 to the investor which were added to the principal balance of Note 2.

As of March 31, 2023, outstanding balance of note payable amounted to $14,772,293. On October 5, 2023, $3,143,134 was added to the principal of Note 2 related to the termination of Notes 4 and 5 and addition of the standstill fee (see above). During the nine months ended December 31, 2023, principal payments of $4,364,081 were made. As of December 31, 2023, outstanding balance of note payable amounted to $13,551,346.

NOTE PAYABLE AGREEMENT 3 

On May 20, 2022, the Company issued a note payable (“Note 3) to a third-party investor. The note was for $6,015,000, matures on May 20, 2024, and is secured by all the assets of the Company. The Company received cash proceeds of $4,700,000, resulting in a discount of $1,315,000 made up of an original issue discount (“OID”) of $1,000,000, commission of $300,000 that was paid from proceeds, and $15,000 to cover transaction expenses. In addition, the Company is required to accrue a monthly PIK fee equal to 0.833% of the outstanding balance, which is in substance interest at an annual rate of approximately 10%, that is added to the note principal each month. The debt less discount and transaction expenses will be accreted over the term of the note using the effective interest rate method. 

At March 31, 2023, the outstanding balance of Note 3 was $6,015,000. On October 5, 2023, $2,164,829 was added to the principal of Note 3 related to the termination of Notes 4 and 5 and addition of the standstill fee (see above). During the nine months ended December 31, 2023, principal payments of $1,814,180 were made. As of December 31, 2023, the outstanding balance of Note 3 was $6,365,649.

During the nine month period ended December 31, 2023, debt discount amortization of $493,125 was recorded. At December 31, 2023, the unamortized debt discount was $273,958.

NOTE PAYABLE AGREEMENTS 4 and 5

In August 2023, the Company issued two notes payable to two third party investors (“Notes 4 and 5”) , with a face value of $7,810,000 in exchange for cash of $6,500,000 or an original issue discount of $1,310,000. The notes were secured by all tangible and intangible assets of the Company and will mature in 24 months or in August 2025. The notes did not bear any interest; however, the implied annual interest rate is 9.5% based upon the OID rate of 19% and annual monitoring fee of 9.9%. As a result, the Company recorded a debt discount of $1,310,000 to account the note's original issue discount, commission and direct costs computed which is being amortized over interest expense over the term of the note payable.

On October 2023, the Company and the noteholders amended the two notes payable. As part of the amendment, the Company paid the noteholder $3 million in principal and the remaining balance of $4,810,000 and accrued interest of $130,657, was transferred and added to the outstanding principal balance of Note 2 for $2,775,828 and Note 3 for $2,164,829, issued in May 2022 and October 2022, respectively. In addition, the Company also incurred additional fees of $367,306 as part of the amendment of notes payable 4 and 5, which was added to Note 2. In addition, the Company also expensed the entire debt discount of $1,310,000. As of result of these amendments, notes payable 4 and 5 were extinguished and cancelled by the noteholder.

LINE OF CREDIT

In November 2023, the Company executed a line of credit (LOC) with a third party financing company, Streeterville Capital LLC. Pursuant to the LOC agreement, the Company can loan up to $10 million at a rate of 10% per annum and a 20% original issue discount for a period of one year. The LOC is secured by all tangible and intangible assets of the Company. The Company has not yet made advances or drawdowns against the LOC.