Senior Convertible Debentures and Warrants

9 Months Ended

Sep. 30, 2023

Senior Convertible Debentures And Warrants

Senior Convertible Debentures and Warrants

NOTE 7 – Senior Convertible Debentures and Warrants

In March 2022, the Company entered into a securities purchase agreement in which the Company maximum offering amount is $5,000,000. For every $1,000 invested in the offering, the Investors will receive a Debenture with a face amount of $1,000 and Warrants to purchase 350 Common Shares at an exercise price that ranges from $0.75 to $1.50 per share expiring on April 30, 2027. Pursuant to this agreement, the Company has received proceeds from convertible debentures totaling $3,641,958. The interest rate is 8% and the maturity date is September 30, 2023. Interest is due quarterly on January 1, April 1, July 1, and October 1 of each year during which the debentures are outstanding. Interest was payable in shares of the Company’s common stock until December 1, 2022. Thereafter, the interest will be paid 50% in cash and 50% in the Company’s common stock. The outstanding debentures are convertible into shares of common stock at a price range from $1.00 to $2.00 per share. The debentures may be converted at any time after the issuance date until the debentures are paid off.

As of September 30, 2023, the Company’s common stock underlying the convertible debentures and warrants is subject to a registration rights agreement. The Company is required to use its reasonable best efforts to comply with the provisions of the registration rights agreement.

At September 30, 2023, the Company issued warrants to acquire up to an aggregate 1,274,687 shares of the Company’s common stock at an exercise price ranging from $0.75 to $1.50 per share. Each Warrant is exercisable by the Investor beginning on the effective date through the fifth-year anniversary thereof.

The fair value of each warrant issued during the nine months ended September 30, 2023 was estimated on the date of issuance using the Black-Scholes option pricing model with the following assumptions:

Stock price	$	0.11-.68
Exercise price	$	0.75
Risk-free interest rate		3.54-4.55	%
Expected dividend yield		0.00	%
Expected stock volatility		320.03-333.92	%
Expected life in years		5.00

The expected life was based on the average life of the warrants. Expected volatility is based on historical volatility of Company's common stock. The risk-free rate for periods within the contractual life of the warrants is based on the U.S. Treasury yield curve in effect at the time of issuance. The dividend yield assumption is based on the Company's expectation of dividend payments.

The relative fair value of the warrants was $123,653 and was recorded as debt discount. During the three and nine months ended September 30, 2023, the Company amortized $64,172 and $183,377, respectively, of the debt discount to interest expense.

The following summarized the senior convertible debentures during the nine-month period ended September 30, 2023:

Senior Convertible Debentures at December 31, 2022	$	2,555,793
Debentures Issued		1,032,498
Relative fair value of warrants issued as discount		(123,653	)
Accretion of warrants issued as discount		183,377
Senior Convertible Debentures at September 30, 2023	$	3,648,015