Annual report pursuant to Section 13 and 15(d)

NOTE 13: STOCKHOLDERS' DEFICIT

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NOTE 13: STOCKHOLDERS' DEFICIT
12 Months Ended
Dec. 31, 2018
Notes  
NOTE 13: STOCKHOLDERS' DEFICIT

NOTE 13: 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 December 31, 2018, and 2017 there are -0- and -0- shares of Series A Preferred Stock outstanding and 500,000 and 500,000 shares of Series B Preferred Stock and 500,000 and 500,000 shares of Series C Preferred Stock 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 On June 28, 2016 the Company, Sanammad and Treo agreed that the issuance of the Series A Convertible Preferred be rescinded and that such share issuance be cancelled.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 for 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 shareholders 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 December 31, 2018, and 2017 there are -0- and -0- Series A Convertible Preferred shares issued and outstanding; respectively.

 

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 Stock 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 Stock 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 Stock 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 (The Netherlands) in exchange for cash of $50,000. As the holders of the Series B Preferred Stock, Sanammad has designated 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 Stock 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 Stock is convertible into one share of the Company’s common stock. The Series C Convertible Preferred Stock 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 Stock 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 holder of the Series C Preferred Stock, on May 18, 2017 MJNA Investment Holdings, LLC designated Dr. Timothy R. Scott, John W. Huemoeller II, Robert Cunningham and Blake Schroeder as their four Series C Directors.

 

Common Stock

 

The Company has authorized 300,000,000 shares of common stock, with a par value of $0.0001 per share. As of December 31, 2018, and 2017, the Company had 59,582,890 and 54,564,441 shares of common stock issued and outstanding, respectively.

 

On March 20, 2018 the Company issued 50,000 shares of its restricted common stock to Dr. George Anastassov. At the year ended December 31, 2018 and 2017 the Company recorded $235,000 and $-0- compensation expense, respectively, in the accompanying consolidated financial statements to account for the required issuance of the incentive shares.

 

On March 20, 2018 the Company issued 50,000 shares of its restricted common stock to Mr. Changoer and recorded $235,000 compensation expense. At the year ended December 31, 2018 and 2017 the Company recorded $235,000 and $-0- compensation expense, respectively, in the accompanying consolidated financial statements to account for the required issuance of the incentive shares.

 

2018 Issuances:

 

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 finance.yahoo.com.

 

On May 15, 2018, the Company issued 204,778 restricted shares of its common stock to third party valued at $600,000 pursuant to the stock purchase agreement.

 

On August 24, 2018 The Company issued 124,782 restricted shares of common stock to Investor as a redemption notice #13 to note payable at a conversion price of $1.40 valued at $175,000. The market value of the stock on August 23, 2018 was $2.46 as advertised on finance.yahoo.com. The Company recorded loss of $91,618 on the difference between conversion price and market value.

 

On September 11, 2018 the Company has issued 18,000 shares of common stock for $2.03 per share valued at $36,540 as consulting services.

 

On September 17, 2018 The Company issued 106,433 restricted shares of common stock to Investor as a redemption notice #14 to note payable at a conversion price of $1.41 valued at $150,000. The market value of the stock on September 17, 2018 was $1.95 as advertised on finance.yahoo.com. The Company recorded loss of $23,105 on the difference between conversion price and market value.

 

On September 25, 2018 the Company amended Independent Director Compensation agreement. Under the agreement in lieu of the share compensation due to independent directors of the Company for their annual service ending May 23, 2018, each of the independent members of the Board shall receive cash compensation of $20,000. The Company resulting gain on settlement of liabilities due the members of the board of directors of $25,000 was treated as a component of equity for the year ended December 31, 2018.

 

On October 2, 2018 the Company issued 117,447 restricted shares of common stock to Investor as a redemption notice #16 to note payable valued at $150,000. The market value of the stock on October 2, 2018 was $1.80 as quoted on finance.yahoo.com. The Company recorded loss of $24,814 on the difference between conversion price and market value.

 

On December 3, 2018 the Company issued 250,000 shares of common stock to investor upon extinguishment of the debt per agreement valued at $250,000. The market value of stock on November 30, 2018 was $1.00 as quoted on finance.yahoo.com.

 

On December 18, 2018 the Company issued 150,000 shares of common stock to investor to satisfy amended extinguishment of the debt per agreement valued at $106,500. The market value of stock on December 18, 2018 was $0.71 as quoted on finance.yahoo.com.

 

Between May 2, 2018 and December 31, 2018, the Company issued total 1,945,000 shares of common stock valued at $3,769,082 pursuant to the Company’s Registration Statement on Form S-3.

 

2017 Issuances:

 

On March 17, 2017 the Company issued 60,000 shares of common stock valued $20,064, which was earlier recorded under common stock to be issued.

 

On May 9, 2017 the Company issued 3,000 shares of common stock valued $31,800 in exchange for consulting services.

 

On August 23, 2017 the Company issued 1,995,000 shares of common stock valued $199,500 in exchange for the conversion of $199,500 of a convertible note.