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Convertible Debentures
 6 Months Ended
Sep. 30, 2025
Convertible Debentures  
Convertible Debentures

Convertible Debentures

On August 13, 2025, the Company entered into a Securities Purchase Agreement with SJC Lending, LLC (SJC), in which the Company agreed to sell SJC convertible promissory notes in three separate closings of 8% convertible notes in various principal amounts up to $2,750,000 in the aggregate. The closing on the initial tranche, which occurred on August 13, 2025, consisted of the issuance of a convertible note to SJC in the principal amount of $1,100,000, for a purchase price of $1,000,000. An additional convertible note to SJC representing the planned second and third tranches was closed on September 25, 2025, in the principal amount of $1,650,000, for a purchase price of $1,500,000. The Company paid $20,000 out of the proceeds of the notes for legal fees and expenses related to the Agreement. The notes mature in one year on August 13, 2026, and September 25, 2026, respectively, if not previously converted, and are convertible into shares of common stock at a discounted price amounting to 80% of the lowest volume weighted average price occurring in the ten-business day period prior to the conversion date. SJC may convert any or all of the unpaid principal amount prior to the maturity date, however $500,000 of the unpaid principal must be converted to common stock on the date of maturity. The notes bear interest from the date of issuance at 8% of the face amount of the notes. In addition, straight-line amortization amounting to $15,479 of the original issue discount of $250,000, has been recorded as interest expense at September 30, 2025.

Under the provisions of ASC 815-40-15, “Derivatives and Hedging Contracts in Entity’s Own Equity – Scope and Scope Exceptions,” our outstanding convertible notes are indexed to our stock. The application of ASC 815-40-15 resulted in our accounting for these notes as derivative instruments, and they are recognized as liabilities in our condensed consolidated balance sheets.

The notes payable are accounted for as derivative liabilities at September 30, 2025, and are recorded net of the fair value of the derivative component on the date of issuance with changes in fair value recognized as a gain or loss for each reporting period thereafter. The notes were recorded at fair value on the date of issuance, using the Binomial valuation model, and accordingly, an original derivative liability of $309,000 and $458,000 was recorded on August 13, 2025, and September 25, 2025, respectively. The fair value of this liability is determined each reporting period and gains and losses are recognized in the statement of operations under “Other Income (Expense)”. The fair value of the derivative liability of the notes payable is $814,000 at September 30, 2025. Other expense of $47,000 was recorded during the accounting period ended September 30, 2025, reflecting an increase in the fair value of the derivative component of the liability for the period from the original issuance of the notes payable to September 30, 2025.