| SHAREHOLDERS’ (DEFICIT) | NOTE
8: SHAREHOLDERS’ (DEFICIT) Our
authorized capital stock consists of 200,000,000 shares of common stock, $0.001 par value per share and 5,000,000 shares of preferred
stock, par value $0.001 per share, of which 4,000,000 shares of preferred stock have been designated as Series A Convertible Preferred
Stock and 1,000,000 shares of preferred stock have been designated as Series B Convertible Preferred Stock. As
of June 30, 2022 we had the following issued and outstanding securities:
● 41,625,331 shares
of common stock;
● 4,000,000
shares of Series A Convertible Preferred Stock;
● 1,000,000
shares of Series B Convertible Preferred Stock;
● 2,595,270
warrants to purchase shares of our common stock;
● 6,722,500
options to purchase shares of our common stock; and ● $2,950,000 principal amount of convertible promissory notes convertible into 55,500,000 shares of common stock. Common
Stock In
September 2020, the Company commenced a $4.0 million private offering of up to 8,000,000 Units (“Units”) at a price of $0.50
per Unit, which private offering ended April 30, 2021. Each Unit consists of (a) two shares of common stock; and (b) one warrant, entitling
the holder to purchase one share of our common stock at an exercise price of $0.50 at any time through August 31, 2025. As of December
31, 2020, the Company sold 2,080,000 Units in the private offering for gross proceeds of $1,040,000 with offering costs of $154,965 resulting
in net proceeds of $885,035. From January 1, 2021 through April 30, 2021, the Company sold an additional 200,000 Units for gross proceeds
of $100,000 with offering costs of $13,105 resulting in net proceeds of $86,895. The terms of this offering provided that, if during
the one-year period from the final closing of the offering, the Company undertakes a subsequent private offering of its equity, equity
equivalent or debt securities (“Subsequent Offering”), the investor will be entitled to exchange their Units purchased in
the offering for an equivalent dollar amount of securities sold in the Subsequent Offering (based on the respective offering prices).
The Company also entered into a registration rights agreement with the investors which states, among other things, that the Company shall
use commercially reasonable efforts to prepare and file with the SEC a registration statement covering, among other things, the resale
of all or such portion of the registrable securities that are not then registered on an effective registration statement. As of September
30, 2021, all Unit holders converted their Units into Series A Preferred Shares. Preferred
Stock On
October 13, 2017, the Company filed Amended and Restated Articles of Incorporation of the Company which authorized preferred stock consisting
of 5,000,000 shares, par value $0.001 per share, issuable from time to time in one or more series. On May 10, 2021, the Company filed
a Certificate of Amendment to the Articles of Incorporation designating 4,000,000 shares of preferred stock as Series A Convertible Preferred
Stock and 1,000,000 shares of preferred stock as Series B Convertible Preferred Stock. On
May 11, 2021, the Company entered into a Securities Purchase Agreement with the Wit Trust, pursuant to which the Company contemporaneously
sold to the Wit Trust an aggregate of (a) 2,000,000 Series A Preferred Shares; and (b) 1,000,000 shares of its Series B Convertible Preferred
Stock (“Series B Preferred Shares”) in exchange for (i) the payment of $2,000,000 (including $302,500 principal plus accrued
but unpaid interest in bridge financing provided by the Wit Trust to the Company during April 2021); and (ii) the surrender by the Wit
Trust to the Company of 2,000,000 Units, in accordance with the terms of the subscription agreements for the purchase of the Units entered
into by the Wit Trust and the Company in September and October 2020. As a result of the transaction and the voting rights accorded the
Series A Preferred Shares and Series B Preferred Shares as set forth below, the Wit Trust then held approximately eighty eight percent
(88%) of the voting power of the Company and accordingly, a “Change in Control” occurred. On
September 30, 2021, the Company completed a private offering which commenced on August 5, 2021 of Series A Preferred Shares to certain
investors, pursuant to which the Company sold an aggregate of 2,000,000 Series A Preferred Shares at a purchase price of $1.00 per share
(“2021 Private Placement”) in exchange for (i) the payment of $1,860,000 (including $1,644,068.49 principal plus accrued
but unpaid interest in bridge financing provided by certain investors during April, July and August 2021 upon the conversion of the investors’
secured convertible promissory notes, and conversion of an account payable); and (ii) the surrender of 280,000 Units, in accordance with
the terms of the subscription agreements for the purchase of the Units entered into by certain investors and the Company in February
through April 2021. The investors in the 2021 Private Placement included: Mr. Johnson upon the conversion of $50,000 promissory note;
Mr. Pino upon the conversion of $25,000 promissory note; Mr. Vickers upon conversion of $50,000 promissory note and accounts payable;
Kuno van der Post, a member of the Board of Directors of the Company (“Dr. van der Post”), in the amount of $50,000, and;
the Wit Trust, in the amount of $65,931.51 and upon conversion of $1,500,000 secured convertible promissory notes and $19,068.49 in accrued
and unpaid interest. Series
A Convertible Preferred Stock The
Series A Preferred Shares have a stated value of $1.00 per share. Each Series A Preferred Share is convertible into the Company’s
common stock at the option of the holder thereof at a conversion rate of $0.05 per share of common stock. The conversion rate is subject
to adjustment in the event of stock splits, stock dividends, other recapitalizations and similar events, as well as in the event of issuance
by the Company of shares of common stock or securities exercisable for, convertible into or exchangeable for common stock at an effective
price per share less than the conversion rate then in effect (other than certain customary exceptions). In respect of rights to the payment
of dividends and the distribution of assets in the event of any liquidation, dissolution or winding-up of the Company, the Series A Preferred
Shares rank (a) junior to the Company’s Series B Preferred Shares; and (b) senior to (i) the Company’s common stock and any
other class or series of stock (including other series of Preferred Stock) of the Company (collectively, “Junior Stock”).
From and after the date of the issuance of Series A Preferred Shares, dividends at the rate per annum of eight percent (8%), compounded
annually, accrue daily on the stated value (“Series A Accruing Dividends”). Series A Accruing Dividends shall accrue from
day to day, whether or not declared, and shall be cumulative; provided, however, such Series A Accruing Dividends shall be
payable only when, as, and if declared by the Board of Directors and the Company shall be under no obligation to pay such Series A Accruing
Dividends except as set forth herein. The Company shall not declare, pay or set aside any dividends on shares of any other class or series
of capital stock of the Company (other than dividends on (a) shares of Series B Preferred Shares; and (b) common stock payable in shares
of common stock) unless (in addition to the obtaining of any consents required elsewhere in the Articles of Incorporation) the holders
of the Series A Preferred Shares then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share
of Series A Preferred Share in an amount at least equal to the sum of (a) the amount of the aggregate Series A Accruing Dividends then
accrued on such Series A Preferred Shares and not previously paid; and (b) (i) in the case of a dividend on common stock or any class
or series that is convertible into common stock, that dividend per Series A Preferred Share as would equal the product of (A) the dividend
payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted
into common stock; and (B) the number of shares of common stock issuable upon conversion of a Series A Preferred Share, in each case
calculated on the record date for determination of holders entitled to receive such dividend; or (ii) in the case of a dividend on any
class or series that is not convertible into common stock, at a rate per Series A Preferred Share determined by (A) dividing the amount
of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series
of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization
with respect to such class or series); and (B) multiplying such fraction by an amount equal to the stated value of the Series A Preferred
Shares; provided, that if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class
or series of capital stock of the Company, the dividend payable to the holders of Series A Preferred Shares shall be calculated based
upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Share dividend. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or any deemed liquidation event, (collectively,
a “Liquidation Event”), the holders of Series A Preferred Shares shall be entitled to receive, after payment to all holders
of Series B Preferred Shares of a liquidation preference equal to the aggregate amount of one hundred fifty percent (150%) of the stated
value of the Series B Preferred Shares and the amount of the accrued but unpaid dividends on the Series B Preferred Shares, but prior
and in preference to any distribution of any of the assets of the Company to the holders of Junior Stock by reason of their ownership
thereof, an aggregate amount per share equal to the stated value of the Series A Preferred Shares and the accrued but unpaid dividends
thereon. After the payment to all holders of Series B Preferred Shares of a liquidation preference equal to the aggregate amount of one
hundred fifty percent (150%) of the stated value of the Series B Preferred Shares and the amount of the accrued but unpaid dividends
on the Series B Preferred Shares and to all holders of the Series A Preferred Shares the full liquidation preference hereunder, the remaining
assets of the Company available for distribution to its shareholders shall be distributed among the holders of the shares of Series B
Preferred Shares and Junior Stock, pro rata, on an “as converted basis,” determined immediately prior to such Liquidation
Event, and the Series A Preferred Shares shall not be entitled to participate in such distribution of the remaining assets of the Company. The
Series A Preferred Shares shall vote together with holders of Series B Preferred Shares and holders of common stock as a single class
on all matters brought to a vote of shareholders. Each Series A Preferred Share shall entitle the holder thereof to such number of votes
as equal the number of shares of common stock then issuable upon conversion of the Series A Preferred Share. The Series A Preferred Shares
also contain protective provisions which provide that the Company shall not undertake certain transactions without the prior approval
of the holder(s) of a majority of the Series A Preferred Shares. Series
B Convertible Preferred Stock The
Series B Preferred Shares have a stated value of $1.00 per share. Each Series B Preferred Share is convertible into common stock at the
option of the holder thereof at a conversion rate of $0.20 per share of common stock. The conversion rate is subject to adjustment in
the event of stock splits, stock dividends, other recapitalizations and similar events, as well as in the event of issuance by the Company
of shares of common stock or securities exercisable for, convertible into or exchangeable for common stock at an effective price per
share less than the conversion rate then in effect (other than certain customary exceptions). In respect of rights to the payment of
dividends and the distribution of assets in the event of any liquidation, dissolution or winding-up of the Company, the Series B Preferred
Shares rank senior to the (a) Series A Preferred Shares; (b) the Company’s common stock and any other class or series of Junior
Stock. From and after the date of the issuance of Series B Preferred Shares, dividends at the rate per annum of eight percent (8%), compounded
annually, accrue daily on the stated value (“Series B Accruing Dividends”). Series B Accruing Dividends shall accrue from
day to day, whether or not declared, and shall be cumulative; provided, however, such Series B Accruing Dividends shall be
payable only when, as, and if declared by the Board of Directors and the Company shall be under no obligation to pay such Series B Accruing
Dividends except as set forth herein. The Company shall not declare, pay or set aside any dividends on shares of any other class or series
of capital stock of the Company (other than dividends on (a) shares of Series B Preferred Shares; and (b) common stock payable in shares
of common stock) unless (in addition to the obtaining of any consents required elsewhere in the Articles of Incorporation) the holders
of the Series B Preferred Shares then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share
of Series B Preferred Share in an amount at least equal to the sum of (a) the amount of the aggregate Series B Accruing Dividends then
accrued on such Series B Preferred Shares and not previously paid; and (b) (i) in the case of a dividend on common stock or any class
or series that is convertible into common stock, that dividend per Series B Preferred Share as would equal the product of (A) the dividend
payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted
into common stock; and (B) the number of shares of common stock issuable upon conversion of a Series B Preferred Share, in each case
calculated on the record date for determination of holders entitled to receive such dividend; or (ii) in the case of a dividend on any
class or series that is not convertible into common stock, at a rate per Series B Preferred Share determined by (A) dividing the amount
of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series
of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization
with respect to such class or series); and (B) multiplying such fraction by an amount equal to the stated value of the Series B Preferred
Shares; provided, that if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class
or series of capital stock of the Company, the dividend payable to the holders of Series B Preferred Shares shall be calculated based
upon the dividend on the class or series of capital stock that would result in the highest Series B Preferred Share dividend. In the
event of a Liquidation Event, the holders of Series B Preferred Shares shall be entitled to receive, prior and in preference to any distribution
of any of the assets of the Company to the holders of Junior Stock (including Series A Preferred Shares), a liquidation preference equal
to the aggregate amount of one hundred fifty percent (150%) of the stated value of the Series B Preferred Shares and the amount of the
accrued but unpaid dividends on the Series B Preferred Shares. After the payment to all holders of Series B Preferred Shares of such
liquidation preference and to all holders of the Series A Preferred Shares their full liquidation preference, the remaining assets of
the Company available for distribution to its shareholders shall be distributed among the holders of the shares of Series B Preferred
Shares and Junior Stock other than Series A Preferred Shares, pro rata, on an “as converted basis,” as applicable. The Series
B Preferred Shares shall vote together with holders of Series A Preferred Shares and holders of common stock as a single class on all
matters brought to a vote of shareholders. Each Series B Preferred Share shall entitle the holder thereof to such number of votes as
equal the number of shares of common stock then issuable upon conversion of the Series B Preferred Share multiplied by 50. The Series
B Preferred Shares also contain protective provisions which provide that the Company shall not undertake certain transactions without
the prior approval of the holder of the Series B Preferred Shares. Preferred
Stock Dividends The
following table presents undeclared preferred stock dividends for the six month and three month periods ended June 30, 2022 and June
30, 2021, respectively.
Undeclared dividends Undeclared dividends
For the six months ended For the three months ended
June 30, June 30,
Series of preferred stock 2022 2021 2022 2021
Series A preferred stock dividends $ 158,685 $ 21,479 $ 79,781 $ 21,479
Series B preferred stock dividends 39,671 10,740 19,945 10,740
Total undeclared preferred stock dividends $ 198,356 $ 32,219 $ 99,726 $ 32,219 The
following table presents the cumulative undeclared dividends by class of preferred stock as of June 30, 2022 and June 30, 2021, respectively.
These cumulative undeclared dividends are recorded in Dividends payable on our balance sheet as of June 30, 2022 and June 30, 2021.
Cumulative undeclared dividends
June 30,
Series of preferred stock 2022 2021
Series A preferred stock $ 303,446 $ 21,479
Series B preferred stock 90,740 10,740
Cumulative undeclared preferred stock dividends $ 394,186 $ 32,219 |
