Note 9 – Stockholders’ Deficit

Preferred Stock

As of December 31, 2021 and March 31, 2021, there were 50,000,000 authorized shares of the Company’s preferred stock, par value $0.0001.

Series A Preferred Sock

On January 5, 2021, the Company’s Board of Directors authorized 300 shares of Series A preferred stock with a par value of $0.0001 per share. Each preferred share of Series A preferred stock will have a stated valued of $1,000 per share. From and after the second anniversary the holders of the Series A preferred stock shall be entitled to receive, quarterly cumulative dividends or distributions at the annual rate of 8% of the stated value per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A preferred stock). Such dividend shall be paid in cash or at the direction of the Company’s Board of Directors, in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof. All declared but unpaid dividends on shares of Series A preferred stock shall increase the stated value of such shares, but when such dividends are actually paid any such increase in the stated value shall be rescinded. The holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series A preferred stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the Company’s common stock or other junior securities. The Series A preferred stock has no voting rights. Each share of Series A preferred stock shall be convertible, at any time and from time to time from and after the original issue date at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such shares of Series A preferred stock by the conversion price. The conversion price for the Series A preferred stock shall equal $1.3329, subject to adjustment.

During the fiscal year ended March 31, 2021, the Company issued 251 shares of its Series A preferred stock in connection with the conversion of its convertible notes, and as of December 31, 2021, 251 shares of Series A preferred stock are outstanding.

Series B Preferred Stock

On January 22, 2021, the Company’s Board of Directors authorized 1,500 shares of Series B preferred stock with a par value of $0.0001 per share. Each preferred share of Series B preferred stock will have a stated valued of $1,000 per share. From and after the second anniversary the holders of the Series B preferred stock shall be entitled to receive, quarterly cumulative dividends or distributions at the annual rate of 8% of the stated value per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B preferred stock). Such dividend shall be paid in cash or at the direction of the Company’s Board of Directors, in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof. All declared but unpaid dividends on shares of Series B preferred stock shall increase the stated value of such shares, but when such dividends are actually paid any such increase in the stated value shall be rescinded. The holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series B preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the Company’s common stock or other junior securities. The Series B preferred stock has no voting rights. Each share of Series B preferred stock shall be convertible, at any time and from time to time from and after the original issue date at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such shares of Series B preferred stock by the conversion price. The conversion price for the Series B preferred stock shall equal $0.7149, subject to adjustment.

During the fiscal year ended March 31, 2021, the Company issued 1,443 shares of its Series B preferred stock in connection with the conversion of its convertible notes, and as of December 31, 2021, 1,443 shares of Series B preferred stock are outstanding.

Series C Preferred Stock

On February 19, 2021, the Company’s Board of Directors authorized 600,000 shares of Series C preferred stock with a par value of $0.0001 per share. Each preferred share of Series C preferred stock will have a stated valued of $1.00 per share. From and after the second anniversary the holders of the Series C preferred stock shall be entitled to receive, quarterly cumulative dividends or distributions at the annual rate of 8% of the stated value per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C preferred stock). Such dividend shall be paid in cash or at the direction of the Company’s Board of Directors, in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof. All declared but unpaid dividends on shares of Series C preferred stock shall increase the stated value of such shares, but when such dividends are actually paid any such increase in the stated value shall be rescinded. The holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series C preferred stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the Company’s common stock or other junior securities. The Series C preferred stock has no voting rights. Each share of Series C preferred stock shall be convertible, at any time and from time to time from and after the original issue date at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such shares of Series C preferred stock by the conversion price. The conversion price for the Series C preferred stock shall equal $0.893, subject to adjustment.

During the fiscal year ended March 31, 2021, the Company issued 500,756 shares of its Series C preferred stock in connection with the conversion of its convertible notes, and as of December 31, 2021, 500,756 shares of Series C preferred stock are outstanding.

Common Stock

Public Offering

On January 26, 2021, the Company entered into an underwriting agreement relating to the public offering of its common stock, par value $0.0001 per share. The Company agreed to sell 4,772,500 shares of its common stock to the underwriters, at a purchase price per share of $4.14 (the offering price to the public of $4.50 per share minus the underwriters’ discount). On January 28, 2021, the Company received net proceeds from its public offering of approximately $19.3 million, net of underwriter fees and commissions of approximately $1.7 million, and offering costs of $0.4 million.

In connection with the Company’s public offering, the Company issued a warrant to the underwriters to purchase 381,800 shares of its common stock. The warrant is exercisable beginning on the date that is 180 days after the date on which the Registration Statement becomes effective until the date that is five years after the date on which the Registration Statement becomes effective. The exercise price of the warrant is $5.625.

Financing

On September 11, 2020, the Company, entered into a securities purchase agreement with certain institutional and accredited investors to sell an aggregate of 463,333 unregistered shares of the Company’s common stock, par value $0.0001 per share and 231,667 warrants to purchase common stock in a private placement transaction, for gross proceeds of approximately $1.7 million. The shares were issued at a price of $1.25 per share. The warrants have a five-year term and an exercise price of $1.50 per share. The Company is not required to issue common stock upon exercise of any portion of a warrant if doing so results in the warrant holder beneficially owning more than 4.99% of the outstanding common stock after giving effect to such exercise. In connection with the September 11, 2020 financing, the Company paid transaction fees of approximately $139,000, and issued 36,033 common stock warrants to its placement agent. The placement agent warrants have the same terms as the warrants issued with the private placement.

Under the guidance of ASC 815, Derivatives and Hedging, the Company determined the warrants related to the financing are not indexed to the Company’s own stock and do not meet the scope exception to derivative accounting, and therefore should be accounted for as a warrant liability. The warrant liability is initially measured at fair value and subsequent changes in fair value are recorded in earnings each reporting period. As of September 11, 2020, the Company recorded an initial warrant liability of approximately $0.6 million. The change in fair value during the fiscal year ended March 31, 2021, was nominal.

Restricted Stock

During the fiscal year ended March 31, 2021, the Company issued 3 shares of common stock and 1,571,428 shares of fully vested restricted common stock to its Chief Executive Officer. The Company purchased 166,667 shares of the restricted stock, at a fair value of approximately $0.5 million, to cover the withholding taxes related to the restricted stock.

During the fiscal year ended March 31, 2021, the Company issued 800,000 shares of restricted common stock to its Chief Operating Officer and Chief Marketing Officer. (See Note 10).

Stock Issued for Services

During the nine months ended December 31, 2021, the Company issued 64,261 shares of its common stock with a fair value of approximately $0.2 million in exchange for consulting services.

During the fiscal year ended March 31, 2021, the Company issued 108,792 shares of its common stock with a fair value of approximately $0.3 million to consultants.

On April 27, 2020, the Company issued 54,149 shares of its common stock in satisfaction of accounts payable of approximately $0.1 million owed for advisory services.

Convertible Notes

During the fiscal year ended March 31, 2021, the Company issued shares of its common stock, Series A preferred stock, Series B preferred stock and Series C preferred stock with a fair value of approximately $17.1 million upon conversion of its senior secured convertible notes. The Company issued 2,830,079 shares of its common stock with a fair value of $10.6 million upon conversion. The Company issued 251 shares of its Series A preferred stock with a fair value of approximately $1.3 million, which is convertible into 188,311 shares of the Company’s common stock. The Company issued 1,443 shares of its Series B preferred stock with a fair value of approximately $9.4 million, which is convertible into 2,019,038 shares of the Company’s common stock. The Company issued 500,756 shares of its Series C preferred stock with a fair value of approximately $2.4 million, which is convertible into 560,757 shares of common stock. The Company recorded a repurchased beneficial conversion feature of approximately $6.6 million in connection with its note exchange agreements. (See Note 8).

During the fiscal year ended March 31, 2021, the Company issued 366,667 shares of its common stock with a fair value of approximately $1.1 million in connection with its convertible notes.

Warrants

On June 6, 2020, the Company issued a warrant to purchase 116,667 shares of the Company’s common stock with a fair value of approximately $0.1 million. The warrant was exercised on a cashless basis on June 30, 2020, and the Company issued 97,222 shares of its common stock.

On February 16, 2021, the Company issued 53,093 shares of its common stock in connection with the exercise of 53,093 common stock warrants for cash of approximately $0.2 million.

During the fiscal year ended March 31, 2021, the Company issued 166,106 shares of its common stock in connection with the exercise of 166,667 common stock warrants on a cashless basis.

Stock Options

During the nine months ended December 31, 2021, the Company issued 409,385 shares of its common stock in connection with the exercise of stock options and received proceeds of approximately $0.2 million.

During the fiscal year ended March 31, 2021, the Company issued 25,000 shares of its common stock in connection with the exercise of stock options, with an exercise price of $0.15 per share. During April 2021, the Company received proceeds of $3,750.