NOTE 6 – DEBENTURES, CONVERTIBLE BRIDGE NOTES, AND NOTES PAYABLE

Debentures

The Company has Original Issue Discount Senior Secured Convertible Debentures (the “Debentures”) in the aggregate amount of $0 and $35,000 outstanding as of March 31, 2022 and 2021, respectively. All assets of the Company were previously secured under the Debentures. There is no interest on these notes. In the first quarter of 2021, the two institutional holders of the debentures converted an aggregate of $102,500 into 12,927 shares of common stock, and the Company recognized a loss on the two debenture conversions of $356,454. In the first quarter of 2022, the remaining institutional holder converted an aggregate of $35,000 into 5,469 shares of common stock, and the Debentures were retired in full. The fair value of the shares issued upon conversion was estimated to be approximately $35,000 based on the market price on the date of conversion. Therefore, no gain or loss was recorded on conversion.

Convertible Bridge Notes

In 2017, 2018 and 2019, the Company issued a total of $2,801,908 in a convertible promissory note (the “Bridge Notes”) offering, which included three of the Company’s directors converting $156,368 and one shareholder converting $11,784 of prior notes and cash advances, including interest thereon, into the offering. In 2020, $2.9 million of the Bridge Notes, inclusive of principal and accrued and capitalized interest, was converted into 332,804 shares of common stock at $8.80 per share. The Company recorded a loss on extinguishment of these Bridge Notes of $495,320, which is included in the loss on conversion of bridge notes and accrued interest. As of March 31, 2021, all remaining Bridge Notes inclusive of principal and accrued and capitalized interest, were settled with the holders of these notes converting their debt into a total of 165,692 shares of common stock of the Company with a fair value of $4,378,488 based on the stock price of the Company on the date of conversion. The Company recorded a loss on extinguishment of these Bridge Notes of $744,205 for the three months ended March 31, 2021, which is included in loss on conversion of bridge notes and accrued interest, as other income expenses in the statements of operations.

Convertible Promissory Notes

In the fourth quarter of 2021, the Company issued a total of $605,000 in convertible notes payable. The convertible notes mature on December 31, 2023, and include a 6% simple interest rate per annum payable upon maturity. The notes are convertible into common stock, at the option of the holder, any time prior to maturity at a conversion price of $8.00 per share. Each of the convertible notes have an automatic conversion feature in the event that the Company completes an equity offering resulting in gross proceeds to the Company of at least $5,000,000 or lists its equity securities on NASDAQ or NYSE. The conversion of notes will be at $8.00 per share and adjusted for stock splits, stock dividends or other recapitalizations. In addition to the notes payable, each holder received a warrant for the purchase of shares of common stock with a purchase price of $24.00 per share. The exercise period for the warrant holder expires on October 31, 2022. In accordance with accounting standards, the warrants were valued using a Black Scholes Model and the relative fair value of the warrants was applied against the convertible notes for a debt discount of $72,600 for a net convertible note liability on the balance sheet of $532,400. The amortization expense for the three months ended March 31, 2022 is $9,075. The remaining unamortized discount as of March 31, 2022 is $63,525.