NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

Series B Preferred Stock

In August 2018, the Company filed a Certificate of Designation designating the rights and restrictions of its Series B Preferred Stock. Of the 1,000,000 preferred shares authorized at a par value of $0.001, 1,000 were designated as Series B Preferred Stock. The Series B Preferred Stock is convertible at the option of the holder into 1,000 common shares per one share of Series B Preferred Stock. The Series B Preferred Stock provides for liquidation and dividend rights on an as-if-converted basis into equivalent common shares. The Series B Preferred Stockholders have voting rights with the common shareholders on an as-if-converted basis. The holders of Series B Preferred Stock have the right, voting as a separate class, following a “Change of Control” (as defined), to elect a majority of the members of the Company’s Board of Directors and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors.

In September 2018, the Company issued 666.66 units of Series B Preferred Stock and warrants for $600 per unit, for total cash proceeds of $400,000 to a related party. Each unit consisted of one share of Series B Preferred Stock that is convertible into 1,000 shares of the Company’s common stock, and a three-year warrant to purchase 500 shares of the Company’s common stock at an exercise price of $.70 per share. A total of 666.66 shares of Series B Preferred Stock convertible into 666,666 shares of common stock and warrants exercisable into 333,330 shares of common stock were issued. The warrants have a term of three years and vested immediately. The aggregate value of the warrants issued was $92,000 and were valued using the Black-Scholes-Merton option valuation model with the following assumptions: risk-free interest rate of 2.83%; dividend yield of 0%; and volatility of 100. The Company also determined that the Series B Preferred Stock contained a beneficial conversion feature of $92,000 which was recorded as a deemed dividend.

A portion of the proceeds from the sale of the Series B Preferred Stock was allocated to the warrants based on their relative fair value, which amounted to $92,000, using the Black Scholes option pricing model. The assumptions used in the Black Scholes model were as follows: risk-free interest rate of 2.83%; dividend yield of 0%; and volatility rate of 100%. The $92,000 has been recorded as a deemed dividend to the preferred shareholders and as a charge to additional paid-in capital (as there is a deficit in the Company’s retained earnings).

Issuance of Common Stock

During the three and six months ended September 30, 2019 and 2018, there were no shares of common stock issued.

Options

Omnibus Incentive Plan

In December 2013, the Company’s board of directors approved the 2013 Omnibus Incentive Plan (the “Plan”), which is administered by the Company’s board of directors or a committee thereof (the “Administrator”) as set forth in the Plan. The Plan provides for the granting of stock options, stock appreciation rights, restricted share awards, and restricted stock units to employees, directors (including non-employee directors), advisors and consultants. Grants under the Plan vest and expire based on periods determined by the Administrator, but in no event can the expiration date be later than ten years from the date of grant (five years after the date of grant if the grant is an incentive stock option to an employee who owns more than 10% of the total combined voting power of all classes of the Company’s capital stock (a “10% owner”)). Grants of stock options may be either incentive stock options or nonqualified stock options. The per share exercise price on an option, other than with respect to substitute awards, shall not be less than 100% of the fair market value of the Company’s Common Stock on the date the option is granted (110% of the fair market value if the grant is to a 10% owner). A total of 14,153 shares of common stock have been authorized for issuance and reserved under the Plan. The Plan was approved by the Company’s stockholders on December 11, 2013.

The Company utilizes the Black-Scholes option valuation model to estimate the fair value of stock options granted. The Company’s assessment of the estimated fair value of stock options is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables and the related tax impact.

Stock option activity is set forth below:

The aggregate intrinsic value shown in the table above represents the difference between the fair market value of the Company’s Common Stock per share on September 30, 2019 and the exercise price of each option.

During the six-months ended September 30, 2019 and 2018, the Company recorded no stock-based compensation expense related to stock options.

Warrants

Warrant activity is set forth below:

In January 2018, warrants exercisable into 1,333,333 shares of common stock were issued by the Company in conjunction with the issuance of 1,333,333 shares of common stock. The warrants have a term of two years and an exercise price of $0.60 per share. In September 2018, warrants exercisable into 333,330 shares of common stock were issued by the Company in conjunction with the issuance of Series B Preferred Stock. The warrants have a term of three years and an exercise price of $.70 per share. The intrinsic value of the Company’s warrants was nil at September 30, 2019, March 31, 2019, and March 31, 2018.