XML 27 R16.htm IDEA: XBRL DOCUMENT v3.23.3
Subsequent Events
3 Months Ended
Jun. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events

NOTE 10. Subsequent Events

 

We evaluated all events or transactions that occurred after the balance sheet date through the date when we issued these financial statements and, other than the matters discussed below, we did not have any other material recognizable subsequent events during this period.

 

Issuance of Series B-1 and B-2 Preferred Stock

 

In July and August 2023, we sold 500,000 shares of our Series B-1 Preferred Stock and 400,000 shares of our Series B-2 Preferred Stock to three private investors for a cash purchase price of $0.25 per share.

 

The Series B-1 Preferred Stock has a 100% liquidation preference over the common stock and any other future series of preferred stock, payable in the event of a liquidation or merger of us. The Series B-1 Preferred Stock is convertible at the option of the stockholder into shares of common stock at a conversion price of $0.25 per share, subject to adjustment for certain stock splits, recapitalizations and other similar events. The Series B-2 Preferred Stock has a 200% liquidation preference over the common stock and any other future series of preferred stock, payable in the event of a liquidation or merger of us. The Series B-2 Preferred Stock is convertible at the option of the stockholder into shares of common stock at a conversion price of $0.25 per share, subject to adjustment for certain stock splits, recapitalizations and other similar events.

 

As a condition to the sale of the Series B-1 and B-2 preferred shares, we agreed to use the net proceeds from the sale of the securities for working capital purposes and not to use such proceeds: (a) for the satisfaction of any portion of our debt (other than payment of trade payables in the ordinary course of our business and prior practices), (b) for the redemption of any common stock or other securities, (c) for the settlement of any outstanding litigation or (d) in violation of the Foreign Corrupt Practices Act of 1977, as amended or any regulations of the Office of Foreign Assets Control of the U.S. Treasury Department. The form of Subscription Agreement for the Series B-1 and B-2 preferred shares and the Certificates of Designation for the Series B-1 and B-2 preferred shares are filed as Exhibits 10.1, 3.1, and 3.2, respectively, to this Current Report on Form 8-K. The foregoing summaries of the terms of these documents are subject to, and qualified in their entirety by, such documents, which are incorporated herein by reference.

 

The representations, warranties and covenants contained in the Subscription Agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Subscription Agreements. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Subscription Agreements, and this subsequent information may or may not be fully reflected in the Company’s public disclosures.

 

The shares of Series B-1 and B-2 Preferred Stock and the shares of common stock to be issued upon conversion of the Series B-1 and B-2 preferred shares sold in the private placement and to be issued have not been registered under the Securities Act or any state or other applicable jurisdiction’s securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdiction’s securities laws.

 

Issuances of Convertible Note

 

In September 2023, we agreed to issue a $35,000 principal amount convertible note to a vendor in exchange for services. While the terms of the note have not yet been determined, we expect that the note will mature on September 14, 2025, bear interest at 6% per annum and be convertible into shares of our common stock at a conversion price of $0.10 per share.

 

Our chief executive officer, Peter Jensen, and our chief financial officer, Bennett Yankowitz, agreed to accept convertible notes in lieu of salary for a portion of the fiscal quarter ended June 30, 2023. See Note 7. For the period July 1 through August 31, 2023, they deferred additional salary totaling $41,667, which will be converted to convertible notes.

 

In December 2022, Messers Jensen and Yankowitz had agreed to accept restricted shares of our common stock in lieu of salary and accrued bonuses for the fiscal quarter ended December 31, 2022. The amount owed Mr. Jensen was $55,000 and the amount owed Mr. Yankowitz was $21,250. The shares were to be issued at the closing market price on December 5, 2022 of $0.11 per share. The shares were issued by our transfer agent on July 11, 2023; Mr. Jensen received 500,000 shares and Mr. Yankowitz received 193,182 shares.

 

Issuance of Common Stock, Warrants and Options

 

On August 15, 2023 we sold 484,262 shares of our common stock to a private investor at a price of $0.2065 per share. The investor also received warrants to purchase 245,700 shares of our common stock at $0.2065 per share. The warrants expire on August 15, 2028. The investor was also invited to join our advisory board and received 100,000 stock options as compensation therefor. The options have a term of 10 years, an exercise price of $0.2065 per share and were fully vested on the date of grant.

 

Our chief executive officer, Peter Jensen, and our chief financial officer, Bennett Yankowitz ,agreed to accept convertible notes in lieu of salary for a portion of the fiscal quarter ended June 30, 2023. See Note 7. For the period July 1 through August 31, 2023, they deferred additional salary totaling $41,667, which will be converted to convertible notes.