Quarterly report pursuant to Section 13 or 15(d)

NOTE 12: STOCKHOLDERS' DEFICIT

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NOTE 12: STOCKHOLDERS' DEFICIT
6 Months Ended
Jun. 30, 2018
Notes  
NOTE 12: STOCKHOLDERS' DEFICIT

NOTE 12: STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company has authorized 5,000,000 shares of preferred stock, with a par value of $0.0001 per share. Of the 5,000,000 authorized preferred shares, 4,000,000 are undesignated "blank check" preferred stock. The Company may issue such preferred shares and designate the rights, privileges and preferences of such shares at the time of designation and issuance. As of June 30, 2018 and December 31, 2017 there are -0- and -0- shares of undesignated preferred shares issued and outstanding, respectively.

 

Series A Convertible Preferred Stock

 

The Company also has authorized 1,000,000 shares of Series A Convertible Preferred Stock, which had been previously issued to Sanammad Foundation and subsequently assigned and transferred by Sanammad to Treo Holdings, LLC ("Treo"). On June 28, 2016 the Company, Sanammad and Treo agreed that the issuance of the Series A Convertible Preferred be rescinded and that such share issuance be cancelled. The Company accounted this cancelation of preferred stock as equity transaction and accordingly the par value of preferred stock adjusted against additional paid in capital account.

 

Each share of the Series A Convertible Preferred Stock is convertible into five (5) shares of the Company's common stock at any time at the discretion of the holder. The Series A Convertible Preferred Stock provides for a liquidation preference as follows; In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (a "Liquidation"), the assets of the Company available for distribution to its stockholders shall be distributed as follows. The holders of the Series A Convertible Preferred Stock shall be entitled to receive, prior to the holders of the other series of preferred stock, if any, and prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of any other shares of stock of the Company by reason of their ownership of such stock: (i) all shares of common stock of any subsidiary of the Company which are held by the Company: and (ii) an amount equal to $1.00 per share with respect to each share of Series A Convertible Preferred stock, plus all declared but unpaid dividends with respect to such share. The Series A Convertible Preferred Stock also contains super-majority voting rights and a number of protective covenants. As of June 30, 2018 and December 31, 2017 there are -0- and -0- Series A Convertible Preferred shares issued and outstanding; respectively.

 

On August 15, 2016 the Company issued 1,000,000 shares of its Series A Convertible Preferred Stock in exchange for 1,000,000 shares of its Undesignated Preferred Stock (see Footnote 10 - "Preferred Stock" for a discussion of the Company's preferred stock). The Undesignated Preferred Stock was held by Sanammad Foundation and MJNA Investment Holdings, LLC (500,000 shares each), which parties together own a majority of the common stock of the Company. Under the terms of the exchange, the 1,000,000 shares of Series A Convertible Preferred received in the exchange were immediately converted into 5,000,0000 restricted shares of the Company's common stock (2,500,000 shares for each of Sanammad Foundation and MJNA Investment Holdings, LLC). As a result, the Series A Convertible Preferred Stock is retired and no longer available for future issuance. The three members of the Sanammad Foundation also serve as the current three directors of the Company and Sanammad, along with MJNA Investment Holdings, LLC, hold a majority of the outstanding stock of the Company. During the three months ended June 30, 2018, the Company recorded preferred dividend of $ -0-.

 

Series B Convertible Preferred Stock

 

On August 17, 2016 the Company designated up to 500,000 shares of a new Series B Convertible Preferred Stock (Series B Preferred Stock). The holders of the Series B Preferred are entitled to elect three members to the Company's board of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of Series B Convertible Preferred is convertible into one share of the Company's common stock. The Series B Convertible Preferred designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without the prior approval of the holders of the Series B Preferred or the unanimous vote of all three Series B Directors.

 

On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series B Preferred Stock to Sanammad Foundation in exchange for cash of $50,000. As the holders of the Series B Preferred Stock, Sanammad has designated the current directors, Dr. George E. Anastassov, Dr. Phillip A. Van Damme and Mr. Lekhram Changoer as their three Series B Directors.

 

Series C Convertible Preferred Stock

 

On August 17, 2016 the Company designated up to 500,000 shares of a new Series C Convertible Preferred Stock (Series C Preferred Stock). The holders of the Series C Preferred are entitled to elect four members to the Company's board of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of Series C Convertible Preferred is convertible into one share of the Company's common stock. The Series C Convertible Preferred designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without the prior approval of the holders of the Series C Preferred or the unanimous vote of all four Series C Directors. If at any time there are four Series C Directors, one such director must be independent as that term is defined in the Series C designation. Any challenge to the independence of a Series C Director is a right conferred only upon the holders of the Series B Convertible Preferred Stock and may only be made by the holders of the Series B Convertible Preferred Stock.

 

On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series C Preferred Stock to MJNA Investment Holdings, LLC in exchange for cash of $65,000. As the holders of the Series C Preferred Stock, MJNA Investment Holdings, LLC has designated Dr. Timothy R. Scott, John W. Huemoeller II, Robert Cunningham and Blake Schroeder as their four Series C Directors.

 

Amended and Restated Bylaws

 

On August 17, 2016 the Company amended its Bylaws to achieve the following: (i) to fix the number of authorized directors at seven (7), comprised of three (3) seats authorized for Series B Directors and four (4) seats authorized for Series C Directors, (ii) ) to set forth that upon there being four Series C Directors, one such director shall be independent as such term is defined in the certificate of designation for the Series C Convertible Preferred Stock and to set forth that the term, conditions and procedures for electing, determining and challenging such director independence are governed by the certificate of designation for the Series C Convertible Preferred Stock, (iii) to set forth that the holders of the Series B Convertible Preferred Stock and the holders of the Series C Convertible Preferred Stock have the right at any time without a meeting and without prior notice to elect their respective Series B and Series C Directors, (iv) that the holders of two-thirds (2/3) of the Series B or Series C Convertible Preferred Stock have the right at any time without a meeting and without prior notice to remove their respective Series B and Series C Directors, (v) to reduce the number of directors needed to constitute a quorum to a majority of the directors then in office, (vi) to subject the right of the board of directors to form a committee to the rights of the holders of the Series B and Series C Convertible Preferred Stock (and to eliminate any committee related provision that might conflict with the rights of the Series B and Series C holders), and (vii) to clarify and set forth that neither the stockholders (other than the holders of the Series B and Series C Convertible Preferred Stock) nor the board of directors has the right to repeal, amend or adopt bylaws without the prior consent of the holders of both the Series B Convertible Preferred Stock and the holders of the Series C Convertible Preferred Stock.

 

Common Stock

 

The Company has authorized 300,000,000 shares of common stock, with a par value of $0.0001 per share. As of June 30, 2018, and December 31, 2017, the Company had 57,541,228 and 54,564,441 shares of common stock issued and outstanding, respectively.

 

On March 8, 2018, the Company issued 956,030 restricted shares of its common stock in exchange for the conversion of $210,422 of a convertible note payable, which included $10,422 in interest.

 

On March 12, 2018, the Company issued 169,800 restricted shares of its common stock in exchange for the conversion of $16,980 of a convertible note payable, which included $380 in interest.

 

On March 13, 2018, the Company issued 800,000 restricted shares of its common stock in exchange for the conversion of $176,080 of a convertible note payable, which included $10,558 in interest.

 

On March 20, 2018 the Company has issued 2,179 shares of common stock valued at $15,000 which were shown as stock to be issued for consultancy service.

 

On March 20, 2018, the Company issued 174,000 shares of common stock for certain services and recorded consulting expenses of $817,800. Closing price of the shares on March 20, 2018 was $4.7 as quoted on Yahoo.com/finance.

 

On May 2, 2018 the Company has issued 70,000 shares of common stock valued at $271,320 pursuant to the Company’s Registration Statement on Form S-3. We received $52,570 in cash and $218,750 was authorized as payment of redemption notice issued by Atlas LLC ($175,000 redemption notice x 125% = $218,750).

 

On May 15, 2018, the Company issued 204,778 restricted shares of its common stock to Kettner Investment LLC valued at $600,000 pursuant to the stock purchase agreement. $218,750 was authorized as payment of redemption notice issued by Atlas LLC($175,000 redemption notice x 125% = $218,750), $250,000 paid to Cross and Co who paid the redemption notice issued by Atlas LLC. The balance of $131,250 was paid directly to the company.

 

On May 16, 2018 the Company has issued 75,000 shares of common stock valued at $226,756 pursuant to the Company’s Registration Statement on Form S-3. The Company received this amount in cash.

 

On May 24, 2018 the Company has issued 100,000 shares of common stock valued at $262,950 pursuant to the Company’s Registration Statement on Form S-3. The Company received this amount in cash.

 

On June 4, 2018 the Company has issued 125,000 shares of common stock valued at $335,755 pursuant to the Company’s Registration Statement on Form S-3. The Company received $117,005 in cash and $218,750 was authorized as payment of redemption notice issued by Atlas LLC ($175,000 redemption notice x 125% = $218,750).

 

On June 15, 2018 the Company has issued 150,000 shares of common stock valued at $413,400 pursuant to the Company’s Registration Statement on Form S-3. The Company received this amount in cash.

 

On June 29, 2018 The Company issued 150,000 S-3 shares to Cross & Company for $2.476 per share, which represented a discount of 12.5% from the Stock’s closing price and True-Up adjustment of $97,050 on that date for a total purchase price of $274,350. The Company received $281,850 in cash and recorded $7,500 liability due to shareholder.