v3.26.1
Note 2 - Convertible Notes Payable
 12 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 2– Convertible Notes Payable

 

On September 9, 2023, the Company's Board authorized an offering up to $2.0 million in unsecured, non-interest bearing convertible promissory notes (the “Notes”) and accompanying warrants (the “Bridge Financing Warrants”) (collectively, the “Bridge Offering”) which were to mature on December 31, 2025. The Notes provided that, on the closing date of the IPO, the outstanding principal would be automatically converted into common stock at the conversion price of $40.00. Each dollar in principal amount of Notes purchased were accompanied by a five-year Bridge Financing Warrant to purchase 0.0125 shares of Common stock with an exercise price of $20.00 per share. The Company records the Bridge Financing Warrants as a discount to the Notes.

 

The Bridge Financing Warrants can be exercised from the date of Notes issuance through the five-year anniversary of the issuance of the Notes. The Note holders were not permitted to convert their Notes when the holders or any of their affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion.

 

The Company received proceeds of $2.0 million of Notes from the Bridge Offering. The Company’s effective interest rate for the Notes was 15.3% due to the amortization of the discount stemming from the issuance of the Bridge Financing Warrants. On January 26, 2024, the Company consummated its initial public offering (“IPO”). In connection with the closing of the IPO, a portion of the Notes were converted into 16,750 shares of common stock. Upon the closing of the IPO, certain Notes that were to be automatically converted according to their terms into common stock were not converted due to restrictions on the holders of the Notes or any of their affiliates beneficially owning in excess of 4.99% of the Company's common stock after such conversion. The remaining portion of the Notes were converted into 33,250 shares of common stock in March 2025.

 

Warrants - Convertible Promissory Notes

 

From  September to December 2023, the Company issued the Notes with the detachable Bridge Financing Warrants. The Company utilized a Monte Carlo simulation model to determine the fair value of each Bridge Financing Warrant. The key inputs to the Monte Carlo simulation used to determine the fair value of each Bridge Financing Warrant include, the Company’s stock price fair value, which was determined through a back solve calculation such that the stock price results in the average total value of the Notes and the Bridge Financing Warrants being equal to the cash proceeds received, volatility based on a selection of publicly held peer companies of 101.88%, expected term of 5 years, risk free rate of 4.40%, discount rate of 20.00% and a discount for lack of marketability of 15.77%.

 

During the year ended March 31, 2026 and 2025, the Company recorded $0 and less than $0.2 million, respectively, in interest expense related to the amortization of the debt discount.

 

The following table presents a summary of activity for the Bridge Financing Warrants issued in connection with the Company’s Notes:

 

  

Warrants

  

Weighted-Average Exercise Price Per Share

  

Remaining Life (In Years)

  

Aggregate Intrinsic Value*

 
                 

Outstanding and exercisable, March 31, 2024

  25,003  $20.00   4.48  $1,010,000 
                 

Outstanding and exercisable, March 31, 2025

  25,003  $20.00   3.48  $— 
                 

Outstanding and exercisable, March 31, 2026

  25,003  $20.00   2.48  $— 

 

*Aggregate Intrinsic Value = Excess of market value over the exercise price of all in-the-money warrants.