Convertible Promissory Notes

12 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Convertible Promissory Notes

NOTE 8 – CONVERTIBLE PROMISSORY NOTES

On January 15, 2020, the Company consummated the initial closing of a private placement offering whereby pursuant to the Subscription Agreements entered into by the Company with five (5) accredited investors, the Company issued certain Convertible Promissory Notes for an aggregate purchase price of $1,650,000 and five (5) year warrants to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”).

On January 30, 2020, the Company consummated the final closing of a private placement whereby pursuant to the Subscription Agreements entered into by the Company with five (5) accredited investors, the Company issued certain Convertible Promissory Notes for an aggregate purchase price of $850,000 and five (5) year warrants to purchase shares of the Company’s common stock, par value $0.001 per share.

The Notes accrue interest at a rate of 8% per annum and mature on October 15, 2020 and October 30, 2020. Additionally, the Notes contain a mandatory conversion mechanism whereby any principal and accrued interest on the Notes, upon the closing of a Qualified Financing (as defined in the Notes), converts into shares of the Company’s Common Stock at a conversion price of 66.7% of the per share purchase price of shares or other units in the Qualified Financing. If a Qualified Financing has not occurred on or before the Maturity Date, the Notes shall become convertible into shares of the Company’s Common Stock at a conversion price that is equal to 50.0% of the arithmetic mean of the Volume Weighted Average Price (“VWAP”) in the ten consecutive Trading Days immediately preceding the Maturity Date. The Notes contain customary events of default. If an Event of Default occurs, interest under the Notes will accrue at a rate of fifteen percent (15%) per annum and the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Notes will become, at the Note holder’s election, immediately due and payable in cash.

The Company analyzed embedded conversion options of the convertible notes at issuance to determine whether the embedded conversion options should be bifurcated and accounted for as derivative liabilities or if the embedded conversion options contain a beneficial conversion feature. This determination must be performed at each balance sheet date and makes it possible for certain instruments to be reclassified between debt and equity at different points in their life. The Company determined that it will defer recognition of its accounting until such notes become convertible. Additionally, the Company determined that the embedded conversion options do not require bifurcation and treatment as derivative liabilities, but they included contingent beneficial conversion features that are indeterminable on the commitment date. The Company notes the embedded conversion options will be accounted for and recognized, if necessary, when the contingencies are resolved (the date of a Qualified Financing or during the 10 days prior to the Maturity Date). Through the maturity date, a Qualified Financing had not occurred and the Note was not yet convertible under the Voluntary Conversion Option.

Pursuant to the Subscription Agreements, each Investor will receive the number of Warrants to purchase shares of Common Stock equal to the quotient obtained by dividing 50% of the principal amount of the Note by the Conversion Price of the Note. The Warrants are exercisable at the per share purchase price of shares or other units in the Qualified Financing. If a Qualified Financing has not occurred on or before the Maturity Date, the warrants shall become exercisable at a price per share that is equal to the closing ten-day VWAP in the ten trading days immediately preceding the Maturity Date (the “Exercise Price”). The Warrants contain an anti-dilution protection feature, to adjust the Exercise Price if shares are sold or issued for a consideration per share less than the exercise price then in effect.

Joseph Gunnar & Co., LLC acted as placement agent for the Offering. The Placement Agent received cash compensation of $200,000 and is scheduled to be issued five (5) year warrants to purchase such number of shares of Common Stock equal to five percent (5%) of the shares underlying the Notes and the Warrants, at an exercise price equal to 125% of the Conversion Price of the Notes, which price shall not be known until the earlier of the Maturity Date or the closing of the Qualified Financing.

From October 8, 2020 to October 26, 2020, the Company received notices for voluntary conversion for the total outstanding principal ($2,500,000) and interest ($146,104) of the Convertible Promissory Notes and issued 2,157,358 shares of our Common Stock as a result of the conversion. The principal and interest related to the Initial Closing and Final Closing were converted at a conversion prices of $1.21 and $1.26, respectively. Additionally, the Company issued a total of 1,019,121 warrants to purchase shares of our Common Stock at exercise prices ranging from $2.19 to $2.67. The Company recognized $1,198,983 in interest expense as a result of the issuance of warrants. Subsequent to the issuance of the warrants, the exercise prices of the warrants were adjusted to $2.00. As a result, the Company recognized $116,511 in interest expense for the change in the valuation of the warrants.

Additionally, pursuant to the Subscription Agreements, the Company issued 152,868 warrants to purchase shares of our Common Stock to Joseph Gunnar & Co. LLC with exercise prices ranging from $1.51 to $1.58. The Company has no further obligation with respect to the Convertible Promissory Notes.

On November 5, 2020 to November 25, 2020, the Company entered into Convertible Promissory Notes with four (4) accredited investors (the “Investors”), for an aggregate purchase price of $1,959,000 (each a “8% Note,” collectively, the “8% Notes”). The 8% Notes accrue interest at a rate of 8% per annum and mature from November 5, 2022 to November 25, 2022. Additionally, the 8% Notes contain a voluntary conversion mechanism whereby any principal and accrued interest on the 8% Notes, may be converted in holder’s discretion into shares of the Company’s Common Stock at a conversion price of $2.00 per share (“Conversion Price”). If not previously paid in full or converted, on the 180^th day following the Maturity Date, the principal and interest due under the 8% Notes shall automatically be converted to common stock shares at the Conversion Price The 8% Notes contain customary events of default (each an “Event of Default”). If an Event of Default occurs, the outstanding principal amount of the 8% Notes, plus accrued but unpaid interest, and other amounts owing with respect to the 8% Notes will become, at the 8% Note holder’s election, due and payable in cash. The Company performed analysis at the 8% Notes respective commitment dates and determined the 8% Notes contained beneficial conversion features. The Company recorded the $208,855 beneficial conversion feature as a note issuance cost. The Company recognized $17,000 in interest expense related to the convertible promissory notes in the current period.

On December 5, 2020, $1,020,000 of the 8% Notes were converted into 510,000 shares of common stock. There were $939,000 in 8% Notes remaining as of December 31, 2020. The Company recognized $73,313 in interest expense for the unamortized issuance costs upon conversion.

On February 2, 2021, the remaining $939,000 in principal balance and $17,247 in accrued interest were converted into 478,123 shares of common stock at a conversion price of $2.00 per share. The Company recognized $115,811 in interest expense for the unamortized issuance costs upon conversion.