XML 25 R15.htm IDEA: XBRL DOCUMENT v3.25.2
NOTES PAYABLE AND DERIVATIVE LIABILITIES
 3 Months Ended
Jun. 30, 2025
Debt Disclosure [Abstract]  
NOTES PAYABLE AND DERIVATIVE LIABILITIES

NOTE 9 – NOTES PAYABLE AND DERIVATIVE LIABILITIES

 

On June 26, 2024, certain investors (the “Financing Investors”) and Phytanix Bio entered into certain Securities Purchase Agreements pursuant to which, among other things, the Financing Investors agreed to purchase (i) certain promissory notes of the Company in the original principal amount of $4,413,650, which only $3,193,650 was raised, (ii) certain warrants to acquire the Company’s common shares (Common Warrants”), and (iii) warrants to acquire the Company’s Series A and B Preferred Shares.

 

In 2024, the Company closed the Securities Purchase Agreements, pursuant to which the Company issued and sold to the Financing Investors (i) promissory notes in the principal amount of $3,193,650, (ii) three-year warrants to purchase up to 675,613 shares of the Company’s common stock at an initial exercise price of $11.00 per share, subject to adjustment; (iii) 1,127 Series A Preferred Warrants; and (iv) 2,436 Series B Preferred Warrants. The notes are non-interest bearing and have a maturity date of June 29, 2025. The Common and Preferred Series A and B Warrants were valued at $993,151, or $1.47 per common warrant, and $159.86 for the Series A preferred warrants and $61.91 for the Series B preferred warrants. As a result of this transaction, the Company recognized $798,412 in original issue discounts that are being amortized over the one-year life of the notes. As of June 30, 2025, all of the original issue discount has been amortized including $199,603. All notes payable are reflected in current liabilities.

 

The convertible notes payable include variable conversion prices. The Company evaluated these terms and determined that the warrants issued with the notes payable contained characteristics that required the Company to classify them as derivative liabilities. The Derivative Instruments have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Instruments. The estimated fair value of the Derivative Instruments has been calculated based on an independent valuation received that valued these warrants.

 

Upon completion of the Merger with Protagenic Therapeutics, Inc. Phytanix Bio recognized additional debt in the amount of $1,117,778 which was part of the note payable agreements regarding the Company being a public company. This amount is reflected this amount in transaction costs in the consolidated statement of operations for the three months ended June 30, 2025. There was also $18,260 in transaction costs recognized by Protagenic during this period.

 

Phytanix Bio recognized a derivative liability of $1,324,126 in the year ended March 31, 2025 related to the value of the warrants which have been bifurcated from the notes. Upon the completion of the Merger, and additional derivative liability of $343,399 was recorded to account for the valuation of the conversion option on the notes, which is recognized as derivative expense in the Consolidated Statement of Operations and Comprehensive Loss for the three months ended June 30, 2025.

 

Phytanix Bio recognized a change in the fair value of the derivative liabilities related to the conversion option and warrants of $2,133,599 for the three months ended June 30, 2025.

 

 

Phytanix Bio also in June 2024 issued 39,880 Common Stock Warrants as commissions valued at $58,624 which are also considered derivative liabilities.

 

The fair value of the warrants were based on an independent valuation of the warrants on the measurement date.

 

On April 17, 2025, the Company entered into a note with an individual for $168,750, which included a one-time original issue discount of $43,750 with cash proceeds to the Company of $125,000, due upon the consummation of financing that Phytanix Bio is conducting in accordance with the merger with Protagenic.

 

The accounting treatment of derivative financial instruments requires that the Company treat the instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.

 

The Company determined the derivative liabilities to be a Level 3 fair value measurement.

 

Activity related to the derivative liabilities for the period ended June 30, 2025 is as follows:

 

 SCHEDULE OF DERIVATIVE LIABILITIES

      
Beginning balance as of March 31, 2025  $1,382,750 
Recognition of conversion option on the notes payable   343,399 
Change in fair value of derivative liabilities   2,133,599 
Ending balance as of June 30, 2025  $3,859,748