NOTE 7 – STOCKHOLDERS’ DEFICIT

On November 17, 2020, the Company effected a one-for-one thousand (1:1,000) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the unaudited condensed consolidated financial statements to reflect the Reverse Stock Split.

Preferred Stock

The total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These preferred shares have no rights to dividends, profit sharing or liquidation preferences.

Of the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”), pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on December 9, 2014. James Nathanielsz, the Company’s Chief Executive Officer and Chief Financial Officer, beneficially owns all of the outstanding shares of Series A Preferred Stock via North Horizon Pty Ltd., which entitles him, as a holder of Series A Preferred Stock, to vote on all matters submitted or required to be submitted to a vote of the Company’s stockholders, except election and removal of directors, and each share of Series A Preferred Stock entitles him to two votes per share of Series A Preferred Stock. North Horizon Pty Ltd. is a Nathanielsz Family Trust. Mr. James Nathanielsz, the Chief Executive Officer, Chief Financial Officer and a director of our Company, has voting and investment power over these shares. 500,000 shares of Series A Preferred Stock are issued and outstanding as of December 31, 2020 and June 30, 2020.

Of the total preferred shares authorized, pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on June 16, 2015, up to five shares have been designated as Series B Preferred Stock (“Series B Preferred Stock”). Each holder of outstanding shares of Series B Preferred Stock is entitled to voting power equivalent to the number of votes equal to the total number of shares of common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company. One share of Series B Preferred Stock is issued and outstanding as of December 31, 2020 and June 30, 2020. Mr. Nathanielsz directly beneficially owns such one share of Series B Preferred Stock.

No shares of Series A Preferred Stock or Series B Preferred Stock were issued during the six months ended December 31, 2020 and in the fiscal year 2020.

Common Stock:

Shares issued for conversion of convertible debt

From July 1, 2020 through December 31, 2020, the Company issued an aggregate of 1,144,654 shares of its common stock at an average contractual conversion price of $0.54, ranging from $0.15 to $2.00, as a result of the conversion of principal of $504,919, interest of $53,080 and conversion fees $8,250 underlying certain outstanding convertible notes converted during such period. The total recorded to equity was $622,404.

There were 24,427 unissued shares which were considered issuable for accounting purposes during the first quarter of fiscal 2021 related to conversion notices dated and received in September 2020. In November 2020, the Company was notified by the note holder of the cancellation of these conversion notices and as such the Company reversed the effects of these transactions thereby increasing the principal balance by $19,600, accrued interest of $416 and put premium by $11,785 and a corresponding decrease in equity of $31,801.

Converted notes totaling $75,000 contained bifurcated embedded conversion option derivatives. Accordingly, the fair market value of the shares issued was $134,155 resulting in a loss on extinguishment at the time of conversion of $56,155 and $106,140 of derivative fair value was recorded as a gain on extinguishment at the time of conversion. The Company reclassified $261,224, net of reversal of put premium upon cancellation of conversion notices by two lenders, to additional paid in capital following conversions during the six months ended December 31, 2020.

The Company has 806,249,251 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant to underlying financing agreements at December 31, 2020.

Shares issued for exercise of warrants

During the six months ended December 31, 2020, the Company received aggregate gross proceeds of $201,044 from the exercise of 10,445 prefunded warrants and 5,000 Series B Warrants. Additionally, the Company issued 52,900 shares of common stock and 147,099 common shares are considered issuable from the alternate cashless exercise of 1 Series A warrant. Accordingly, there remains 147,099 shares of common stock to be issued as of December 31, 2020.

Warrants:

The following table summarizes warrant activity for the six months ended December 31, 2020:

Exercise of Warrants

During the six months ended December 31, 2020, the Company received aggregate gross proceeds of $201,044 from the exercise of 10,445 prefunded warrants and 5,000 Series B Warrants. Additionally, the Company issued 52,900 shares of common stock and 147,099 common shares are considered issuable from the cashless exercise of 1 Series A warrant.

Options:

A summary of the Company’s option activity during the six months ended December 31, 2020 is presented below:

During the three months ended December 31, 2020 and 2019, the Company recognized stock-based compensation of $20,718 and $20,718, respectively related to vested stock options. During the six months ended December 31, 2020 and 2019, the Company recognized stock-based compensation of $41,436 and $41,437, respectively related to vested stock options. There was $113,951 of unvested stock options expense as of December 31, 2020 that will be recognized through May 2022 or 1.37 years.

No stock options were granted during the six months ended December 31, 2020.