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STOCKHOLDERS DEFICIT
3 Months Ended
Sep. 30, 2022
STOCKHOLDERS DEFICIT  
Stockholders' Deficit

NOTE 7: STOCKHOLDERS’ DEFICIT

 

Common Stock

 

At September 30, 2022, the Company had 1,000,000,000 authorized common shares.

 

The Company effected a reverse split of our Common stock by a ratio of one thousand three hundred fifty for one (1,350:1). The board of directors was authorized to implement the reverse stock split effective September 22, 2022. The reverse stock split adjusted the then outstanding Common shares of the company from 3,916,144,800 Common Shares to a total of 2,896,396 Common Shares. This action also reduced the number of Authorized common shares of the Company from 10,000,000,000 to 1,000,000,000.

 

Issuances of Common Stock During the Three Months Ended September 30, 2022

 

Stock Based Compensation

 During the three months ended September 30, 2022 the Company issued 3,705 shares of its $0.0001 par value common stock as compensation to its directors and officers. The shares were valued at $27,210, or $7.34 per share, based on the quoted share price at the time of the transactions.

 

During the three months ended September 30, 2022 1,482 shares of its $0.0001 par value common stock vested to a consultant, as compensation under a consulting agreement. The shares were valued at $15,772, or $10.67 per share based on the quoted share price at the time of the transactions.

Preferred Stock

 

Series A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $0.001. All classes rank(ed) prior to any class or series of the Company’s common stock as to the distribution of assets upon liquidation, dissolution or winding up of the Company or as to the payment of dividends. All preferred stock shall have no voting rights except if the subject of such vote would reduce the amount payable to the holders of preferred stock upon liquidation or dissolution of the company and cancel and modify the conversion rights of the holders of preferred stock as defined in the certificate of designations of the respective series of preferred stock.

 

Series A Convertible Preferred Stock

 

The Series A Preferred Stock has a stated value of $750.00 per share. Each one share of Series A Preferred Stock is convertible into one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the Conversion shall be set at $0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements.

 

Series B Convertible Preferred Stock

 

Thirty million (30,000,000) shares of preferred stock were designated as a new Series B Preferred stock in April 2016. This new Series B Preferred Stock has a $0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock, with a stated value of $375 per share.

 

Series AA Convertible Preferred Stock

 

In March 2018, the Company authorized and issued one share of Series AA convertible preferred stock which provides for the holder to vote on all matters as a class with the holders of Common Stock and each share of Series AA Convertible Preferred Stock shall be entitled to 51% of the common votes on any matters requiring a shareholder vote of the Company. Each one share of Series AA Convertible Preferred Stock is convertible into one (1) share of Common Stock. Mark Lucky, our CEO, is the holder of the one share of Series AA Convertible Preferred Stock.

 

Common Stock Warrants

 

In January and February 2022, we issued 2,268 warrants with a two year life, and fixed exercise prices ranging from $7.425 to $27.00 per share.

 

In July and October 2021 we issued 2,781 warrants with a three year life, and fixed exercise prices of $10.3957, $12,285, and $20.385.

 

In September 2022 we issued 138,667 warrants with a five year life, and a fixed exercise price of $1.35 per share, as part of a modification to three outstanding convertible notes payable.. The Company evaluated these amendments under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the issuance of these warrants in exchange for deferring the interim interest payments that were due resulted in significant and consequential changes to the economic substance of the debt and thus resulted in accounting for these modifications as an extinguishment of the debt.  The Company recorded a loss of extinguishment of debt of $504,925. The Company used a binomial option pricing model to estimate the fair value of the warrants issued, using the following assumptions on the date that the warrants were issued:

 

Expected volatility

 

 

285.9%

Expected term

 

1,825 Days

 

Risk-free interest rate

 

 

3.54%

Forfeiture Rate

 

 

0%

Expected dividend yield

 

 

0%

 

A summary of the status of the Company’s outstanding common stock warrants as of September 30, 2022 and changes during the fiscal year ending on that date is as follows:

 

 

 

Number of

 

 

Weighted Average

 

 

 

Warrants

 

 

Exercise Price

 

Common Stock Warrants

 

 

 

 

 

 

Balance at beginning of year

 

 

5,049

 

 

$14.85

 

Granted

 

 

138,667

 

 

$1.35

 

Exercised

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

Balance at end of period

 

 

143,716

 

 

$1.84

 

 

 

 

 

 

 

 

 

 

Warrants exercisable at end of period

 

 

143,716

 

 

$1.84

 

The following table summarizes information about common stock warrants outstanding at September 30, 2022:

 

 

 

 

Warrants Outstanding

 

 

Warrants Exercisable

 

Range of Exercise Price

 

 

Number

Outstanding at

September 30,

2022

 

 

Weighted

Average

Remaining

Contractual Life

 

 

Weighted

Average

Exercise

Price

 

 

Number

Exercisable at

September 30,

2022

 

 

Weighted

Average

Exercise

Price

 

$

1.35

 

 

 

138,667

 

 

4.92 Years

 

 

$1.35

 

 

 

138,667

 

 

$1.35

 

 

7.425

 

 

 

1,212

 

 

0.28 Years

 

 

 

7.425

 

 

 

1,212

 

 

 

7.425

 

 

10.395

 

 

 

631

 

 

0.78 Years

 

 

 

10.395

 

 

 

631

 

 

 

10.395

 

 

12.285

 

 

 

1,339

 

 

2.01 Years

 

 

 

12.285

 

 

 

1,339

 

 

 

12.285

 

 

20.385

 

 

 

811

 

 

2.01 Years

 

 

 

20.385

 

 

 

811

 

 

 

20.385

 

 

27.00

 

 

 

1,056

 

 

 

0.36

 

 

 

27.00

 

 

 

1,056

 

 

 

27.00

 

 

 

 

 

 

143,716

 

 

4.79 Years

 

 

$1.83

 

 

 

143,716

 

 

$1.83