| Equity | 8. Equity Series A Preferred
Stock – December 2020 Issuance
of Series B Preferred Stock Units – The sale of the preferred
stock units for $10,000 each resulted in aggregate gross proceeds of approximately $1.35 million, before deducting estimated offering
expenses payable by the Company. Substantially all of the proceeds raised in the offering were used to fund the acquisition of assets
of Halcyon, expenses related thereto and for general corporate purposes. Each share of Series
B Preferred Stock is initially convertible into 25,000 shares of common stock, subject to adjustment. Holders of Series B Preferred Stock
are entitled to receive dividends of 6.00% per annum based on the stated value equal to $10,000 per share. Except as otherwise required
by law, the Series B Preferred Stock does not have voting rights. However, as long as any shares of Series B Preferred Stock are outstanding,
the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred
Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock, (b) alter or amend the related
certificate of designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects
any rights of the holders of Series B Preferred Stock, (d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than
a de minimis number of shares of its common stock, (e) enter into any agreement with respect to any of the foregoing, or (f) pay cash
dividends or distributions on any equity securities of the Company other than pursuant to the terms of the outstanding Series B Preferred
Stock. The Series B Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company. Beginning the later of
June 30, 2021 or the effectiveness of any registration statement registering the underlying common shares, all or any portion of the Series
B Preferred Stock may be converted, at their holder’s option, into 25,000 shares of common stock, as adjusted for any stock dividends,
splits, combinations or similar events. At any time after the
occurrence of a “Qualifying Event,” the Company, upon 5-day written notice, shall have the right to cause each share of Series
B Preferred Stock (and all accrued in-kind dividends with respect thereto) to be converted into common stock. For purposes of this automatic
conversion of the Series B Preferred Stock, a “Qualifying Event” shall have occurred if (A) (1) the rolling five-trading day
volume-weighted average trading price of shares of the common stock exceeds $1.00, and (2) there shall be an effective registration statement
under the Securities Act of 1933, as amended covering all of the shares of common stock which would be issuable upon conversion of all
of the outstanding shares of Series B Preferred Stock or (B) the Company closes a firm commitment underwriting of the common stock on
a Form S-1 Registration Statement with aggregate gross proceeds of at least $5,000,000 at a price per share equal to or greater than $1.00.
In each instance, a conversion may not be made unless the Company has filed an amendment to its Articles of Incorporation effecting an
increase in its authorized common stock so that the Company has a sufficient number of authorized and unissued shares of common stock
so as to permit the conversion of all outstanding shares. The Series B Preferred
Stock may be redeemed by the Company for its stated value, plus accrued and unpaid dividends, at any time. On September 30, 2021 and December
31, 2021, redemption payments of 12.5% each of the total amount of Series B Preferred Stock then outstanding plus accrued dividends will
be due from the Company to each Holder of Series B Preferred Stock. The first required redemption payments were made in April 2021. In May and June of 2021, the three holders of the Company’s Series
B Preferred Stock and associated warrants (the “Series B Preferred Units”), including the Company’s chief executive
officer, entered into transactions in which they accepted the mandatory redemption payment required pursuant to the Series B Preferred
Stock certificate of designation in a number of Series B Units to effectively waive the redemption requirement. All other terms of the
Series B Units remain unchanged and the holders’ ownership interest in the Series B Preferred Units remains the same as it was before
such transactions. Common Stock –
● February 2020 Issuance of Common Stock Units – The common stock issued in the
exchange was valued using the trading price of the common stock on February 20, 2020. The warrants were valued at $45,848 using a binomial
lattice valuation model using inputs as of the exchange date. Our expected volatility assumption was based on the historical volatility
of the Company’s common stock (252%). The expected life assumption was based on the expiration date of the warrant (two years).
The risk-free interest rate for the expected term of the warrant was based on the U.S. Treasury yield curve in effect at the time of measurement
(1.39%). The warrants are classified within equity in the consolidated balance sheets. Under GAAP, the anti-dilution provisions will be
accounted for if and when these provisions are triggered.
●
Acquisition of Certain Assets of Halcyon
●
2021 First Quarter Issuances of Common Stock
Units
●
Warrant Exercises
●
Issuances for Exchange or Conversion of Debt
● Stock-based Compensation Common Stock Warrants
Outstanding –
# of Warrants Exercise Price Expiration Date Method of Exercise
Issued upon exchange of EHR Series C Preferred Stock (1) 1,065,340 $ 0.352 November 27, 2021 Cash
Issued upon exchange of EHR Series C Preferred Stock (1) 7,244,316 $ 0.352 November 27, 2021 Cashless
Issued in February 2020 with common stock units (2) 250,000 $ 0.400 March 1, 2022 Cash
Issued in December 2020 with Series B preferred units (1) 5,500,000 $ 0.352 December 30, 2022 Cash
Issued in December 2020 with subordinated note to investor (1) 500,000 $ 0.352 December 30, 2022 Cash
Issued in Q1 2021 with common stock units (1) 1,600,000 $ 0.500 Jan-Feb, 2023 Cash
Total warrants outstanding at June 30, 2021 16,159,656
(1) May
be redeemed for $0.0001 per warrant at the Company’s option with 30 days advanced notice should the weighted average market price
of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such
seven-day period of at least 25,000 shares of common stock.
(2) Contains
certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued
at prices less than the warrant exercise price. Following is a summary of outstanding stock warrants activity
for the periods presented:
Warrants as of January 1, 2020 14,488,632
Issued 250,000
Warrants as of June 30, 2020 14,738,632
Warrants as of January 1, 2021 22,988,632
Issued 1,600,000
Exercised (8,428,976 )
Warrants as of June 30, 2021 16,159,656 |
