Note 8 – Debt Obligations

In connection with the acquisition of Teal by the Company, Decathlon Capital agreed to restructure the terms of an existing loan agreement with Teal. Effective August 31, 2021, the principal amount outstanding of $1,670,294 bears interest at 10% annually and is repayable in monthly payments of $49,275 through its December 31, 2024 maturity date. The balance outstanding at October 31, 2021 totaled $1,591,988.

In May 2021, Teal entered into a convertible note agreement totaling $350,000 with one of its equity investors. The note bears interest at the applicable Federal Rate which was approximately 0.13% on the date of issuance. The Company has assumed this obligation which is payable upon demand.

In May 2020, Teal entered into a settlement agreement with a vendor that had been providing contract manufacturing services. At August 31, 2021, the Company assumed the outstanding balance of $387,500 which is payable in monthly installments of $37,500 with a final payment of $12,500 due in July 2022. The balance outstanding at October 31, 2021 totaled $350,000.

On February 2, 2021, Teal received a second Small Business Administration Paycheck Protection Program (“SBA PPP”) loan in the amount of $300,910. The loan is unsecured, non-recourse, and accrues interest at one percent annually. All or a portion of the loan is forgivable if used to fund qualifying payroll, rent and utilities. If not forgiven, the loan is payable over five years. Teal used the proceeds for the purposes required and the Company is currently working with the SBA regarding the loan forgiveness process.

Shopify Capital is an affiliate of Shopify, Inc. which provides sales software and services to the Company.  The Company processes customer transactions ordered on the e-commerce site for Rotor Riot through Shopify.  Shopify Capital has entered into multiple agreements with the Company in which it has "purchased receivables" at a discount.  Shopify retains a portion of the Company's daily receipts until the purchased receivables have been paid.  The Company recognizes the discount as a transaction fee, in full, in the month in which the agreement is executed.  The Company assumed an existing agreement when it acquired Rotor Riot in January 2020.  This agreement was repaid in May 2020.  Since then, the Company has entered into the following agreements with Shopify:

In October 2021, Teal entered into an agreement with Corporate Equity to fund $60,000 of leasehold improvements. The loan bears interest at 8.25% annually and is repayable in monthly payments of $2,005 through its July 2024 maturity date. The balance outstanding at October 31, 2021 totaled $48,671.

In April 2021, Teal entered into an agreement under which it sold future customer payments, at a discount to Forward Financing. At August 31, 2021, the Company assumed the outstanding balance of $38,758. The balance outstanding totaled $25,210 at October 31, 2021. Weekly payments of $2,280 are being remitted to Forward Financing and the Company expects that the remaining balance will be repaid in January 2022.

In September 2021, Teal entered into a financing agreement with Ascentium Capital to fund the purchase of a fixed asset totaling $24,383. Monthly payments of $656 are being remitted to Ascentium Capital and the Company expects that the remaining balance will be repaid in September 2024. The balance outstanding at October 31, 2021 totaled $15,379.

PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. The Company processes certain customer payments ordered on its e-commerce site through PayPal. The Company has entered into multiple agreements under which PayPal provides an advance on customer payments, and then retains a portion of customer payments until the advance is repaid.  PayPal charges a fee which the Company recognizes in full upon entering an agreement.  A November 2019 agreement under which PayPal advanced $100,000 and charged a transaction fee of $6,900 was completed in January 2021.  A January 2021 agreement under which PayPal advanced $75,444 and charged a transaction fee of $2,444 was completed in August 2021.

Short and long term debt obligations totaled $1,338,030 and $1,431,739 at October 31, 2021, respectively. Outstanding principal payments are due as follows: