Note 10 – Stockholders’ Deficit

Preferred Stock

As of December 31, 2022 and 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stated value of such shares, but when such dividends are actually paid any such increase in the stated value shall be rescinded.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, 2022 and 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, 2022 and 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, 2022 and 2021, 500,756 shares of Series C preferred stock are outstanding.

Series D Preferred Stock

On July 8, 2022, the Company’s Board of Directors authorized 7,000 shares of Series D preferred stock with a par value of $0.0001 per share. Each preferred share of Series D preferred stock has a stated valued of $1,000 per share, is convertible into shares of the Company’s common stock at an initial conversion price of $1.30 per share, and is entitled to a dividend of 12% per annum. The cumulative dividends shall be paid in common stock based on the conversion price in effect on the applicable conversion date. All accrued but unpaid dividends on shares of Series D preferred stock shall increase the stated value of such shares. The Company may redeem all, but not less than all, of the Series D preferred stock for cash, at a price per share of Series D preferred stock equal to 125% of the stated value. The Series D preferred stock has no voting rights.

In July 2022, the Company issued 1,058 shares of Series D preferred stock for approximately $1.1 million, which was included on the consolidated balance sheet in shares liability as of June 30, 2022, as the proceeds were received by the Company in June 2022, prior to issuance of the shares. As of December 31, 2022, 1,058 shares of Series D preferred stock are issued and outstanding.

In connection with the issuance of the 1,058 shares of Series D preferred stock, the Company issued 814,102 equity-classified warrants to purchase shares of the Company’s common stock with an exercise price of $1.30 per share. The proceeds from the Series D preferred stock were allocated between the warrants and the Series D preferred stock based on their relative fair values.

The Company entered into a Registration Rights Agreement (“RRA”) with the holders of the Series D preferred stock, whereby the Company was to use its best efforts to file a registration statement registering the resale of the shares of common stock issuable upon conversion of the Series D preferred stock and upon exercise of the warrants within thirty (30) calendar days following the closing of the Series D preferred stock offering. The Company was to use its best efforts to have the registration statement declared “effective” within ninety (90) calendar days from closing, or one hundred and twenty (120) from closing in the event the registration statement is reviewed by the SEC. If the Company fails to meet these requirements, the RRA states that the Company shall pay to each holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the aggregate subscription amount paid by such holder pursuant to the purchase agreement, up to an aggregate of 10% of the aggregate subscription amount paid by such holder pursuant to the purchase agreement for all such liquidated damages.

Using the guidance provided by ASC 825-20 Financial Instruments, the Company determined that the RRA should be accounted for as a separate unit of account from the Series D preferred stock. Accordingly, under ASC 825-20, a financial instrument that is both within the scope of ASC 825-20 and subject to a registration payment arrangement shall be recognized and measured in accordance with ASC 825-20 without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement.

The RRA called for the Company to file a registration statement by August 25, 2022 and declare it effective within 90 days of July 26, 2022. The Company filed its registration statement on November 17, 2022, and the holders of the Series D preferred stock waived the related registration rights penalty of approximately $2,400.

The Series D preferred stock and warrants sold were not registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The holders of Series D preferred stock are “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act.

Common Stock

Public Offering

On July 19, 2022, the Company entered into an underwriting agreement relating to the Company’s public offering of its common stock, par value $0.0001 per share. The Company agreed to sell 1,250,000 shares of its common stock to the underwriters, at a purchase price per share of $0.744 (the offering price to the public of $0.80 per share minus the underwriters’ discount), pursuant to the Company’s registration statement on Form S-3 (File No. 333-262122), under the Securities Act of 1933, as amended. The Company has also granted to the underwriters a 30-day option to purchase up to 187,500 additional shares of common stock to cover over-allotments. On July 22, 2022, the Company received net proceeds of $855,000, net of underwriter fees and commissions of approximately $70,000, and offering costs of $75,000.

In connection with the Company’s public offering, the Company issued a warrant to the underwriters to purchase 62,500 shares of its common stock. The warrant may be exercised beginning on the date that is 180 days after July 22, 2022 until July 19, 2027. The exercise price of the warrant is $0.80 per share.

ATM Offering

As of December 31, 2022, the Company has received net proceeds on sales of 3,368,146 shares of common stock under its ATM Offering (See Note 2) of approximately $1.25 million (after deducting $0.05 million in commissions and expenses) at a weighted average price of $0.385 per share.

Stock Issued for Services

During the year 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.

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.