Item 8. Financial Statements and Supplementary Data
4. STOCKHOLDER’S DEFICIT
Common Stock
The Company has authorized 3,000,000,000 shares of
common stock with $0.001 par value, of which 13,138,282 were issued and outstanding as of December 31, 2020. As of December 31, 2019,
there were 3,000,000,000 authorized shares of common stock, of which 3,319,469 were issued and outstanding.
For the year ended December 31, 2020, the Company
issued 9,818,813 shares of common stock as listed below:
Conversion of debt into common shares – exchange agreements
|
|
|
7,957,013
|
|
Conversion of debt into common shares
|
|
|
175,000
|
|
Shares issued for manufacturing agreements
|
|
|
12,147
|
|
Shares issued for payment of Series D dividends
|
|
|
148,653
|
|
Investments
|
|
|
1,526,000
|
|
Issued during the year ended December 31, 2020
|
|
|
9,818,813
|
|
Summary table of common stock share transactions:
Balance at December 31, 2019
|
|
|
3,319,469
|
|
Issued in 2020
|
|
|
9,818,813
|
|
Balance at December 31, 2020
|
|
|
13,138,282
|
|
Investments
During 2020, the Company
received equity investments in the amount of $1,735,500 and incurred fees due on these investments of $96,985. These investors received
a total of 1,736 Series E Preferred Stock (if the Investor elects to convert their Series E Preferred Stock, each Series E Preferred Stock
shares converts into 4,000 shares of the Company’s common stock shares).
During January and April
2020, the Company received equity investments in the amount of $128,000. These investors received a total of 256,000 common stock shares
and 256,000 warrants issued to purchase common stock shares at a strike price of $0.25, 256,000 warrants to purchase common stock shares
at a strike price of $0.75 and 128 Series D Preferred Stock (if the Investor elects to convert their Series D Preferred Stock, each Series
D Preferred Stock shares converts into 3,000 shares of the Company’s common stock shares). Of the amount invested $38,000 was from
related parties.
During December 2019, the
Company received equity investments in the amount of $635,000. The $635,000 of investments were recorded as a subscription liability in
December 2019. The common stock shares were issued in January 2020. These investors received a total of 1,270,000 common stock shares
and 1,270,000 warrants to purchase common stock shares at a strike price of $0.25, 1,270,000 warrants issued to purchase common stock
shares at a strike price of $0.75 and 635 Series D Preferred Stock (each Series D Preferred Stock shares converts into 3,000 shares of
the Company’s common stock shares). Of the amount invested $350,000 was from related parties.
For the Series D Preferred
Stock, the Company received equity investments in the amount of $763,000 and incurred fees due on these investments of $26,000.
Debt Exchanges
On January 8,
2020, the Company exchanged $2,064,366 in debt for several equity instruments (noted below) that were determined to have a total fair
value of $2,065,548, resulting in a loss on extinguishment of debt of $1,183 which is recorded in other income (expense) on the accompanying
consolidated statements of operations. The Company also issued 6,957,013 warrants to purchase common stock shares; with exercise prices
of $0.25, $0.75 and $0.20. In addition, one of the investors forgave approximately $29,000 of debt, which was recorded as a gain for extinguishment
of debt.
On June 3, 2020, the Company
exchanged $328,422 in debt from Auctus, (summarized in footnote 10: Convertible Notes), for 500,000 common stock shares
and 700,000 warrants to purchase common stock shares. The fair value of the common stock shares was $250,000 (based on a $0.50 fair value
for the Company’s stock) and of the warrants to purchase common stock shares was $196,818 (based on a $0.281 black scholes fair
valuation). This resulted in a net loss on extinguishment of debt of $118,396 ($446,818 fair value less the $328,422 of exchanged debt).
On June 30, 2020, the Company
exchanged $125,000 in debt (during June 2020, $125,000 in payables had been converted into short-term debt) from Mr. James Clavijo, for
500,000 common stock shares and 250,000 warrants to purchase common stock shares. The fair value of the common stock shares was $250,000
(based on a $0.50 fair value for the Company’s stock) and of the warrants to purchase common stock shares was $99,963 (based on
a $0.40 black scholes fair valuation). This resulted in a net loss on extinguishment of debt of $224,963 ($349,963 fair value less the
$125,000 of exchanged debt). After the exchange transaction a balance was due to Mr. Clavijo of $10,213 which was paid.
On July 9, 2020, the Company
entered into an exchange agreement with Mr. Bill Wells (one of its former employees) for an outstanding debt to him of $220,000. In lieu
of agreeing to dismiss approximately half of what is owed by the Company, Mr. Wells will receive the following: (i) cash payments of $20,000
within 60 days of the signing of the agreement; cash payments over time in the amount of $90,000 in the form of an unsecured note with
the Company to be executed within 30 days of a new financing(s) totaling at least $3.0 million. The note shall bear interest of 6.0% and
mature over 18 months; (ii) 66,000 common share stock options that vest at a rate of 3,667 per month and have a $0.49 exercise price (if
two consecutive payments in (iii) are not made the stock options will be canceled and a cash payment will be required; and (iv) the total
amount of forgiveness by creditor of approximately $110,000 shall be prorated according to amount paid. During the year ended December
31, 2020, the Company made a payment of $20,000; this payment allowed the Company to reduce $40,000 in debt, with the corresponding $20,000
difference recorded as a gain.
The following table summarizes
the debt exchanges:
|
|
Total Debt and Accrued Interest
|
|
Total Debt
|
|
Total Accrued Interest
|
|
Common Stock Shares
|
|
Warrants (Exercise $0.25)
|
|
Warrants (Exercise $0.75)
|
|
Warrants (Exercise $0.20)
|
|
Warrants (Exercise $0.15)
|
|
Warrants (Exercise $0.50)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aquarius
|
|
$
|
145,544
|
|
|
$
|
107,500
|
|
|
$
|
38,044
|
|
|
|
291,088
|
|
|
|
145,544
|
|
|
|
145,544
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
K2 Medical (Shenghuo)3
|
|
|
803,653
|
|
|
|
771,927
|
|
|
|
31,726
|
|
|
|
1,905,270
|
|
|
|
704,334
|
|
|
|
704,334
|
|
|
|
496,602
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Blumberg
|
|
|
305,320
|
|
|
|
292,290
|
|
|
|
13,030
|
|
|
|
1,167,630
|
|
|
|
119,656
|
|
|
|
119,656
|
|
|
|
928,318
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Case
|
|
|
179,291
|
|
|
|
150,000
|
|
|
|
29,291
|
|
|
|
896,456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
896,456
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Grimm
|
|
|
51,050
|
|
|
|
50,000
|
|
|
|
1,050
|
|
|
|
255,548
|
|
|
|
-
|
|
|
|
-
|
|
|
|
255,548
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Gould
|
|
|
111,227
|
|
|
|
100,000
|
|
|
|
11,227
|
|
|
|
556,136
|
|
|
|
-
|
|
|
|
-
|
|
|
|
556,136
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Mamula
|
|
|
15,577
|
|
|
|
15,000
|
|
|
|
577
|
|
|
|
77,885
|
|
|
|
-
|
|
|
|
-
|
|
|
|
77,885
|
|
|
|
-
|
|
|
|
-
|
|
Dr. Imhoff2
|
|
|
400,417
|
|
|
|
363,480
|
|
|
|
36,937
|
|
|
|
1,699,255
|
|
|
|
100,944
|
|
|
|
100,944
|
|
|
|
1,497,367
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Rosenstock1
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. James2
|
|
|
2,286
|
|
|
|
2,000
|
|
|
|
286
|
|
|
|
7,745
|
|
|
|
1,227
|
|
|
|
1,227
|
|
|
|
5,291
|
|
|
|
-
|
|
|
|
-
|
|
Auctus
|
|
|
328,422
|
|
|
|
249,119
|
|
|
|
79,303
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
700,000
|
|
|
|
-
|
|
Mr. Clavijo
|
|
|
125,000
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
Mr. Wells4
|
|
|
220,000
|
|
|
|
220,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
2,737,787
|
|
|
$
|
2,496,316
|
|
|
$
|
241,471
|
|
|
|
7,957,013
|
|
|
|
1,121,705
|
|
|
|
1,121,705
|
|
|
|
4,713,603
|
|
|
|
700,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Ms. Rosenstock
also forgave $28,986 in debt to the Company.
2 Mr. Imhoff
and Mr. James are members of the board of directors and therefore related parties.
3 The Company’s
COO and director, Mark Faupel, is a shareholder of Shenghuo, and a former director, Richard Blumberg, is a managing member of Shenghuo.
4 Mr. Wells
will also receive 66,000 common share stock options; the details of which are explained above.
Preferred Stock
The Company has authorized 5,000,000 shares
of Preferred Stock with a $.001 par value. The board of directors has the authority to issue these shares and to set dividends, voting
and conversion rights, redemption provisions, liquidation preferences, and other rights and restrictions. The board of directors designated
525,000 shares of Preferred Stock redeemable convertible Preferred Stock, none of which remain outstanding, 33,000 shares of Preferred
Stock as Series B Preferred Stock, none of which remain outstanding, 9,000 shares of Preferred Stock as Series C Convertible Preferred
Stock, (the “Series C Preferred Stock”), of which 286 were issued and outstanding at December 31, 2020 and 2019, respectively
and 20,250 shares of Preferred Stock as Series C1 Preferred Stock, of which 1,050 shares were issued and outstanding at December 31, 2020
and 2019. In addition, some holders separately agreed to exchange each share of the Series C1 Preferred Stock held for one (1) share of
the Company’s newly created Series C2 Preferred Stock. In total, for 3,262.25 shares of Series C1 Preferred Stock to be surrendered,
the Company issued 3,262.25 shares of Series C2 Preferred Stock. At December 31, 2020, shares of Series C2 had a conversion price of $0.50
per share, such that each share of Series C Preferred Stock would convert into approximately 2,000 shares of the Company’s common
stock.
In 2019 and 2020, the board of directors designated
6,000 shares of Preferred Stock as Series D Preferred Stock, 763 of which remain outstanding, and 6,000 shares of Preferred Stock as Series
E Preferred Stock, 1,736 of which remain outstanding.
Series C Convertible Preferred Stock
Pursuant to the Series C certificate
of designations, shares of Series C Preferred Stock are convertible into common stock by their holder at any time and may be mandatorily
convertible upon the achievement of specified average trading prices for the Company’s common stock. At December 31, 2020 and 2019,
there were 286 shares outstanding with a conversion price of $0.50 per share, such that each share of Series C Preferred Stock would convert
into approximately 2,000 shares of the Company’s common stock; for a total convertible of 572,000 common stock shares, subject to
customary adjustments, including for any accrued but unpaid dividends and pursuant to certain anti-dilution provisions, as set forth in
the Series C certificate of designations. The conversion price will automatically adjust downward to 80% of the then-current market price
of the Company’s common stock 15 trading days after any reverse stock split of the Company’s common stock, and 5 trading days
after any conversions of the Company’s outstanding convertible debt.
Holders of the Series C Preferred
Stock are entitled to quarterly cumulative dividends at an annual rate of 12.0% until 42 months after the original issuance date (the
“Dividend End Date”), payable in cash or, subject to certain conditions, the Company’s common stock. In addition, upon
conversion of the Series C Preferred Stock prior to the Dividend End Date, the Company will also pay to the converting holder a “make-whole
payment” equal to the number of unpaid dividends through the Dividend End Date on the converted shares. At December 31, 2020, the
“make-whole payment” for a converted share of Series C Preferred Stock would convert to 200 shares of the Company’s
common stock. The Series C Preferred Stock generally has no voting rights except as required by Delaware law. Upon the Company’s
liquidation or sale to or merger with another corporation, each share will be entitled to a liquidation preference of $1,000, plus any
accrued but unpaid dividends. In addition, the purchasers of the Series C Preferred Stock received, on a pro rata basis, warrants exercisable
to purchase an aggregate of approximately 1 share of Company’s common stock. The warrants contain anti-dilution adjustments in the
event that the Company issues shares of common stock, or securities exercisable or convertible into shares of common stock, at prices
below the exercise price of such warrants. As a result of the anti-dilution protection, the Company is required to account for the warrants
as a liability recorded at fair value each reporting period. At December 31, 2020, the exercise price per share was $512,000.
Series C1 Convertible
Preferred Stock
Between April 27, 2016 and
May 3, 2016, the Company entered into various agreements with certain holders of Series C Preferred Stock, including directors John
Imhoff and Mark Faupel, pursuant to which those holders separately agreed to exchange each share of Series C Preferred Stock held
for 2.25 shares of the Company’s newly created Series C1 Preferred Stock and 12 (9,600 pre-split) shares of the
Company’s common stock (the “Series C Exchanges”). In connection with the Series C Exchanges, each holder also
agreed to roll over the $1,000 Stated Value (“Stated Value”) per share of the holder’s shares of Series C1
Preferred Stock into the next qualifying financing undertaken by the Company on a dollar-for-dollar basis and, except in the event
of an additional $50,000 cash investment in the Company by the holder, to execute a customary “lockup” agreement in
connection with the financing. In total, for 1,916 shares of Series C Preferred Stock surrendered, the Company issued 4,312 shares
of Series C1 Preferred Stock and 29 shares of common stock.
On August 31, 2018, 3,262.25 shares of Series
C1 Preferred Stock were surrendered, and the Company issued 3,262.25 shares of Series C2 Preferred Stock.
At December 31, 2020, there
were 1,049.25 shares outstanding with a conversion price of $0.50 per share, such that each share of Series C1 Preferred Stock would convert
into approximately 2,000 shares of the Company’s common stock; for a total convertible of 2,098,500 common stock shares.
The Series C1 Preferred Stock
has terms that are substantially the same as the Series C Preferred Stock, except that the Series C1 Preferred Stock does not pay dividends
(unless and to the extent declared on the common stock) or at-the-market “make-whole payments” and, while it has the same
anti-dilution protections afforded the Series C Preferred Stock, it does not automatically reset in connection with a reverse stock split
or conversion of our outstanding convertible debt.
Series C2 Convertible
Preferred Stock
On August 31, 2018, the Company
entered into agreements with certain holders of the Company’s Series C1 Preferred Stock, including the chairman of the Company’s
board of directors, and the Chief Operating Officer and a director of the Company pursuant to which those holders separately agreed to
exchange each share of the Series C1 Preferred Stock held for one (1) share of the Company’s newly created Series C2 Preferred Stock.
In total, for 3,262.25 shares of Series C1 Preferred Stock to be surrendered, the Company issued 3,262.25 shares of Series C2 Preferred
Stock. At December 31, 2020, shares of Series C2 had a conversion price of $0.50 per share, such that each share of Series C Preferred
Stock would convert into approximately 2,000 shares of the Company’s common stock; for a total convertible of 6,524,500 common stock
shares.
The terms of the Series C2 Preferred Stock
are substantially the same as the Series C1 Preferred Stock, except that (i) shares of Series C1 Preferred Stock may not be convertible
into the Company’s common stock by their holder for a period of 180 days following the date of the filing of the Certificate of
Designation (the “Lock-Up Period”); (ii) the Series C2 Preferred Stock has the right to vote as a single class with the Company’s
common stock on an as-converted basis, notwithstanding the Lock-Up Period; and (iii) the Series C2 Preferred Stock will automatically
convert into that number of securities sold in the next Qualified Financing (as defined in the Exchange Agreement) determined by dividing
the Stated Value ($1,000 per share) of such share of Series C2 Preferred Stock by the purchase price of the securities sold in the Qualified
Financing.
Series D Convertible Preferred
Stock
On January 8, 2020, the Company
entered into a Purchase Agreement with the Series D Investors (the “Series D Purchase Agreement”) . In total, for $763,000
the Company issued 763 shares of Series D Preferred Stock, 1,526,000 common stock shares, 1,526,000 common stock warrants, exercisable
at $0.25, and 1,526,000 common stock warrants, exercisable $0.75. Each Series D Preferred Stock is convertible into 3,000 common stock
shares. The Series D Preferred Stock will have cumulative dividends at the rate per share of 10% per annum. The Stated Value and liquidation
preference on the Series D Preferred Stock is $554.
Each share of Series D Preferred
is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing
the Stated Value by $0.25, subject to certain adjustments set forth in the Series D Certificate of Designation (the “Series D Conversion
Price”). The conversion of Series D Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99%
at the election of the holder of the Series D Preferred. If the average of the VWAPs (as defined in the Series D Certificate of Designation)
for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series D Conversion Price and the
average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement
Period (subject to adjustments), the Company may redeem the then outstanding Series D Preferred, for cash in an amount equal to aggregate
Stated Value then outstanding plus accrued but unpaid dividends.
The Series D Warrants may
be exercised cashlessly if there is no effective registration statement covering the Common Stock issuable upon exercise of the Series
D Warrants. The Series D Warrants contain a 4.99% beneficial ownership blocker which may be increased to 9.99% at the holder’s election.
On January 8, 2020, the Company
also entered into a Registration Rights Agreement (the “Series D Registration Rights Agreement “) with the Series D Investors
pursuant to which the Company agreed to file with the SEC, a registration statement on a Form S-3 (or on other appropriate form if a Form
S-3 is not available) covering the Common Stock issuable upon conversion of the Series D Warrants within 90 days of the date of the Registration
Rights Agreement and cause such registration statement to be declared effective within 120 days of the date of the Registration Rights
Agreement. All reasonable expenses related to such registration shall be borne by the Company.
During August 2020, the Company
issued 148,653 common stock shares for the payment of Series D Preferred Stock dividends accrued. As of December 31, 2020, the Company
had accrued dividends of $14,306.
Series E Convertible
Preferred Stock
During year ended December
31, 2020, the Company entered into a Purchase Agreement with the Series E Investors (the “Series E Purchase Agreement”). In
total, for $1,736,000 the Company issued 1,736 shares of Series E Preferred Stock. Each Series E Preferred Stock is convertible into 4,000
common stock shares. The Series E Preferred Stock will have cumulative dividends at the rate per share of 6% per annum. The Stated Value
and liquidation preference on the Series E Preferred Stock is $1,736. The Company incurred fees due on these investments of $91,895.
Each share of Series E Preferred
is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing
the Stated Value by $0.25, subject to certain adjustments set forth in the Series E Certificate of Designation (the “Series E Conversion
Price”). The conversion of Series E Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99%
at the election of the holder of the Series E Preferred. If the average of the VWAPs (as defined in the Series E Certificate of Designation)
for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series E Conversion Price and the
average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement
Period (subject to adjustments), the Company may redeem the then outstanding Series E Preferred, for cash in an amount equal to aggregate
Stated Value then outstanding plus accrued but unpaid dividends. As of December 31, 2020, the Company had not issued shares as payment
of Series E Preferred Stock dividends. As of December 31, 2020, the Company had accrued dividends of $67,247.
Warrants
The following table summarizes transactions involving
the Company’s outstanding warrants to purchase common stock for the year ended December 31, 2020:
|
|
Warrants
(Underlying Shares)
|
Outstanding, January 1, 2020
|
|
|
46,016,840
|
|
Issuances
|
|
|
11,270,013
|
|
Cancelled / Expired
|
|
|
(70
|
)
|
Exchanged in debt restructuring
|
|
|
(28,962,508
|
)
|
Exercised
|
|
|
—
|
|
Outstanding, December 31, 2020
|
|
|
28,324,275
|
|
The Company had the following shares reserved for the warrants as of December
31, 2020:
Warrants
(Underlying Shares)
|
|
Exercise Price
|
Expiration Date
|
4,262
|
(1)
|
$1.824 per share
|
March 19, 2021
|
7,185,000
|
(2)
|
$0.20 per share
|
February 12, 2023
|
1,725,000
|
(3)
|
$0.04 per share
|
February 21, 2021
|
325,000
|
(4)
|
$0.18 per share
|
April 4, 2022
|
215,000
|
(5)
|
$0.25 per share
|
July 1, 2022
|
100,000
|
(6)
|
$0.25 per share
|
September 1, 2022
|
7,500,000
|
(7)
|
$0.20 per share
|
December 17, 2024
|
250,000
|
(8)
|
$0.16 per share
|
March 31, 2025
|
2,597,705
|
(9)
|
$0.25 per share
|
December 30, 2022
|
2,597,705
|
(10)
|
$0.75 per share
|
December 30, 2022
|
4,713,603
|
(11)
|
$0.20 per share
|
December 30, 2022
|
60,000
|
(12)
|
$0.25 per share
|
April 23, 2023
|
50,000
|
(13)
|
$0.25 per share
|
December 30, 2022
|
50,000
|
(14)
|
$0.75 per share
|
December 30, 2022
|
700,000
|
(15)
|
$0.15 per share
|
May 21, 2023
|
250,000
|
(16)
|
$0.50 per share
|
June 23, 2023
|
1,000
|
(17)
|
$0.50 per share
|
August 10, 2022
|
28,324,275
|
|
|
|
(1)
|
Issued to investors for a loan in March 2018.
|
(2)
|
Exchanged in January 2020 from amount issued as part
of a February 2016 private placement with senior secured
debt holder
|
(3)
|
Issued to a placement agent in conjunction with a February 2016 private placement with senior secured debt holder
|
(4)
|
Issued to investors for a loan in April 2019
|
(5)
|
Issued to investors for a loan in July 2019
|
(6)
|
Issued to investors for a loan in September 2019
|
(7)
|
Issued to investors for a loan in December 2019
|
(8)
|
Issued to investors for a loan in January 2020
|
(9)
|
Issued to investors as part of Series D Preferred Stock Capital raise in December 2020
|
(10)
|
Issued to investors as part of Series D Preferred Stock Capital raise in December 2020
|
(11)
(12)
(13)
(14)
(15)
(16)
|
Issued to investors as part of Series D Preferred Stock
Capital raise in December 2020
Issued to a consultant for services in April 2020
Issued to an investor as part of Series D Preferred
Stock Capital raise in April 2020
Issued to an investor as part of Series D Preferred
Stock Capital raise in April 2020
Issued to an investor for a loan in May 2020
Issued to an investor in exchange of debt in June 2020
|
(17)
|
Issued to a consultant for services in August 2020
|
Footnote (2) - On January 16, 2020, the Company entered
into an exchange agreement with GPB. This exchange agreement canceled the existing outstanding warrants, which were subject to anti-dilution
and ratchet provisions, to purchase 35,937,500 shares of common stock at an exercise price of $0.04 per share and resulted in the issuance
of new warrants to purchase 7,185,000 share of common stock at a price of $0.20 per share. The new warrants have fixed exercise prices
of $0.20. On January 8, 2021, the Company met the requirement by making the final payment of $750,000 as required by the exchange agreement
with GPB, which canceled the previously issued warrants.
Warrants to purchase 70 shares of common stock were
not recorded as their exercise price after considering reverse stock splits, were greater than $60,000 and deemed to be immaterial for
disclosure.
On January 6, 2020, the Company
entered into a finder’s fee agreement. The finder will receive 5% cash and 5% warrants on all funds it raises including bridge loans.
The three-year common stock share warrants will have an exercise price of $0.25. During 2019 and 2020, the finder helped the Company raise
$300,000, therefore a fee of $31,650 was paid and 126,600 warrants will be issued.
On January 22, 2020, the
Company entered into a promotional agreement with a consultant. The consultant will provide the Company investor and public relations
services. As compensation for these services, the Company will issue a total of 5,000,000 common stock warrants at a $0.25 strike price
and expiring in three years, if the following conditions occur: 1,250,000 common stock warrants, 6 months after the close of the Series
D Preferred Stock units, if the minimum common stock share price is a at least $0.50 based on a 30-day VWAP, with a two year term; 1,250,000
common stock warrants, 12 months after the close of the Series D Preferred Stock units, if the minimum common stock share price is at
least $0.75 based on a 30-day VWAP, with a one and half year term; 1,250,000 common stock warrants, 18 months after the close of the Series
D Preferred Stock units, if the minimum common stock share price is a minimum of $1.00 based on a 30-day VWAP, with a one year term; and
1,250,000 common stock warrants, 24 months after the close of the Series D Preferred Stock units, if the minimum common stock share price
is a minimum of $1.25 based on a 30-day VWAP, with a one year term. The consultant agrees to a 10.0% blocker at any single point in time
it cannot own 10.0% of the total common stock shares outstanding.
14. SUBSEQUENT EVENTS
GPB
On
January 8, 2021, the Company made the final payment of $750,000 out of the total $1,500,000 as required by this exchange agreement with
GPB Debt Holdings II LLC (“GPB”). Based on this final payment, the Company agreed to issue 2,236 shares of Series F Preferred
Stock in accordance with the terms of the agreement (see footnote11: Convertible Debt).
GHS
On January 29, 2021, the Company paid GHS $40,000
per the agreement to reduce the outstanding debt.
Series F Convertible
Preferred Stock
During January and February
2021, the Company entered into a Purchase Agreement with the Series F Investors (the “Series F Purchase Agreement”). In total,
for $1,944,000 the Company agreed to issue 1,944 shares of Series F Preferred Stock. Each Series F Preferred Stock is convertible into
4,000 shares of common stock. The Series F Preferred Stock will have cumulative dividends at the rate per share of 6% per annum. The Stated
Value and liquidation preference on the Series F Preferred Stock is $1,944. The Company does not have the authorized shares of Series
F Preferred Stock necessary at this time. To increase the authorized shares of Series F Preferred Stock, the Company needs approval from
both the Company’s shareholders and Series F Preferred Stock shareholders. The Company intends to seek both.
On February 19, 2021, the
Company exchanged $100,000 and $85,000 of long-term debt for Dr. Cartwright and Dr. Faupel in exchange for 100 and 85 shares of Series
F Preferred Stock, respectively.
Each share of Series F Preferred
is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing
the Stated Value by $0.25, subject to certain adjustments set forth in the Series F Certificate of Designation (the “Series F Conversion
Price”). The conversion of Series F Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99%
at the election of the holder of the Series F Preferred. If the average of the VWAPs (as defined in the Series F Certificate of Designation)
for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series F Conversion Price and the
average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement
Period (subject to adjustments), the Company may redeem the then outstanding Series F Preferred, for cash in an amount equal to aggregate
Stated Value then outstanding plus accrued but unpaid dividends.
Powerup (Series G Callable Preferred Stock)
During January 2021, the
Company finalized an investment by Power Up Lending Group Ltd. Power Up invested $78,500, net to the Company is $75,000, for 91,000 shares
of Series G Preferred Stock with additional tranches of financing up to $925,000 in the aggregate over the terms of the Series G Preferred
Stock. Series G will be non-voting on any matters requiring shareholder vote. The Series G Preferred Stock will have cumulative dividends
at the rate per share of 8% per annum. At any time during the period indicated below, after the date of the issuance of shares of Series
G Preferred Stock, the Company will have the right, at the Company’s option, to redeem all of the shares of Series G Preferred Stock
by paying an amount equal to: (i) the number of shares of Series G Preferred Stock multiplied by then Stated Value (including accrued
dividends); (ii) multiplied by the corresponding percentage as follows: Day 1-60, 105%; Day 61-90, 110%; Day 91-120, 115%; and Day 121-180,
122%. After the expiration of the 180 days following the issuance date, except for mandatory redemption, the Company shall have no right
to redeem the Series G Preferred Stock. Mandatory redemption occurs within 24 months. In addition, if the Company does not redeem the
Series G Preferred Stock then Power Up will have the option to convert to common stock shares. The variable conversion price will be the
value equal to a discount of 19% off of the trading price; which is calculated as the average of the three lowest closing bid prices over
the last fifteen trading days. The conversion of Series G Preferred is subject to a 4.99% beneficial ownership limitation, which may be
increased to 9.99% at the election of the holder of the Series G Preferred.
During February 2021, the
Company finalized an investment by Power Up Lending Group Ltd. Power Up invested $53,500, net to the Company is $50,000, for 62,000 shares
of Series G Preferred Stock with additional tranches of financing up to $925,000 in the aggregate over the terms of the Series G Preferred
Stock. Series G will be non-voting on any matters requiring shareholder vote. The Series G Preferred Stock will have cumulative dividends
at the rate per share of 8% per annum. At any time during the period indicated below, after the date of the issuance of shares of Series
G Preferred Stock, the Company will have the right, at the Company’s option, to redeem all of the shares of Series G Preferred Stock
by paying an amount equal to: (i) the number of shares of Series G Preferred Stock multiplied by then Stated Value (including accrued
dividends); (ii) multiplied by the corresponding percentage as follows: Day 1-60, 105%; Day 61-90, 110%; Day 91-120, 115%; and Day 121-180,
122%. After the expiration of the 180 days following the issuance date, except for mandatory redemption, the Company shall have no right
to redeem the Series G Preferred Stock. Mandatory redemption occurs within 24 months. In addition, if the Company does not redeem the
Series G Preferred Stock then Power Up will have the option to convert to common stock shares. The variable conversion price will be the
value equal to a discount of 19% off of the trading price; which is calculated as the average of the three lowest closing bid prices over
the last fifteen trading days. The conversion of Series G Preferred is subject to a 4.99% beneficial ownership limitation, which may be
increased to 9.99% at the election of the holder of the Series G Preferred.
Other matters
On February 19, 2021, the Company entered into a new
promissory note replacing the original note from September 4, 2018, with Mark Faupel and Gene Cartwright. For Dr. Cartwright the principal
amount on the new note was $267,085, matures on February 18, 2023, and will accrue interest at a rate of 6%. For Dr. Faupel the principal
amount on the new note was $153,178, matures on February 18, 2023, and will accrue interest at a rate of 6%.
On February 22, 2021, the
Company based on a past agreement with Mr. Blumberg, was required to issuance 1,250,000 2-year warrants with an exercise price of $0.25,
when the 30-day vwap reached $0.50.
On March 2, 2021, the Company
agreed to pay a fee to Aspen Capital Corporation for investor relations. Aspen would receive a fee of $49,000, payable in cash of $24,500
and 98,000 common stock shares. In addition, they would receive 196,000 three year warrants to purchase common stock shares at an exercise
price of $0.25 and expiring on March 4, 2024.
On March 10, 2021, the Company
entered into a consulting agreement with Richard Blumberg. The consulting agreement requires Mr. Blumberg to provide $350,000 to the Company
and additional consulting services in exchange for the following: (1) 900,000 3-year warrants with an exercise price of $0.30 and 400,000
common stock shares; (2) 900,000 3-year warrants with an exercise price of $0.40 and 400,000 common stock shares; (3) 900,000 3-year warrants
with an exercise price of $0.50 and 400,000 common stock shares; and (4) 900,000 3-year warrants with an exercise price of $0.60 and 400,000
common stock shares. Based on this agreement the Company will record compensation expense of $3,144,400. In addition, $88,000 in accrued
consulting fees for Mr. Blumberg will be converted into 88 series F Preferred Stock shares.
On March 22, 2021, the Company
entered into an exchange agreement with Richard Fowler. As of December 31, 2020, the Company owed Mr. Fowler $546,214 ($412,624 in deferred
salary and $133,590 in accrued interest). The Company will exchange the amount owed of $546,214 for 20 Series F Preferred Shares (convertible
into 200,000 common stock shares), a $150,000 unsecured note and Mr. Fowler will remain on our health insurance plan. The unsecured note
of $150,000 will have a four year term, with monthly payments scheduled to begin on March 15, 2022, and then monthly on the 15th thereafter,
in the amount of $3,600 and accruing interest at a rate of 6%. The unsecured note will be in default on the 20th of the month. The amount
forgiven by Mr. Fowler was $346,214. In addition, the Company will reimburse Mr. Fowler for $4,325 of accrued expenses. The Company will
also begin repaying two outstanding notes totaling $45,118 in principal and interest on April 15, 2021. The notes will be combined into
one note with a payment of $3,850 per month and have an interest rate of 6%, if the notes go into default the interest will be 18%.