Convertible Note Payable

9 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Convertible Note Payable

8. Convertible Note Payable

On August 4, 2021, we entered into a securities purchase agreement with a lender pursuant to which we sold a convertible note payable in the principal amount of $130,000 for cash proceeds of $126,250. The convertible note is due one year from issuance, pays interest at the rate of 8% per annum, unless in default, upon which the interest rate would increase to 22% and the principal balance would increase by 150% or 200% depending upon the nature of the default. The convertible note gives us the right to prepay the note within the first 180 days from issuance at prepayment rates ranging from 110% to 125% of the then outstanding principal and interest balance. At any time during the period beginning 180 days from the origination date to the maturity date or date of default, the holder can convert all or any part of the outstanding balance into common stock at a conversion price per share equal to 65% of the lowest daily volume weighted average price of our common stock during the 10 trading days prior to the date of conversion.

We evaluated the embedded conversion feature and concluded that it was required to be bifurcated and accounted for as a derivative liability due to the lack of explicit limit on the number of shares that may be required to be issued to settle the instrument. Accordingly, the fair value of the embedded conversion feature at inception was reflected as a derivative liability in the balance sheet, with a resulting discount applied to the note payable. At inception, the fair value of the conversion feature was deemed to be $120,151 as determined using a Stock Path Monte Carlo Simulation model. The key assumptions used in this valuation included: (1) dividend yield of 0%, (2) expected volatility of 197.41%, (3) risk-free interest rate of 0.07%, (4) expected life of 1 year, and (5) the quoted market price of $1.01 for our common stock.

On November 8, 2021, we repaid the convertible note in full. Using the same valuation method, the fair value of the embedded conversion feature at repayment was $116,023, resulting in a change in fair value of the derivative liability of $(2,633) and $4,128 for the three and nine months ended December 31, 2021, respectively. We also recognized a loss on debt extinguishment of $15,076 for the three and nine months ended December 31, 2021. There was no conversion prior to November 8, 2021.