NOTE 7 – STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company authorized 10,000,000 shares of par value $0.0001 preferred stock, of which 1,148 and 32 shares are issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.

On April 10, 2024, Osher elected to exchange $621,000 of Notes for an aggregate of 823.86 shares of Series B Convertible Preferred Stock. Each Series B Convertible Preferred Share converts into 125.63 shares of the Company’s common stock, subject to antidilution adjustments for any stock splits and recapitalizations, and for issuances of additional shares at an issue price of less than the conversion ratio.

On April 9, 2024, Brio elected to exchange $220,420 of Notes for an aggregate of 292.4 shares of Series B Convertible Preferred Stock. Each Series B Convertible Preferred Share converts into 125.63 shares of the Company’s common stock, subject to antidilution adjustments for any stock splits and recapitalizations, and for issuances of additional shares at an issue price of less than the conversion ratio.

During fiscal 2023, holders of 161,684 shares of common stock elected to exchange these shares for an aggregate of 32 shares of Series B Convertible Preferred Stock. Each Series B Convertible Preferred Share converts into 126.53 shares of the Company’s common stock, subject to antidilution adjustments for any stock splits and recapitalizations, and for issuances of additional shares at an issue price of less than the conversion ratio in the Warrant Exchange Agreement.

Rights and Privileges - The holders of Series B preferred stock have various rights and preferences as follows:

Rights - The holders of the Series B preferred stock have the same rights as the Common Stock, on an “as-if” converted basis, with respect to any dividends, distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily.

Voting Rights - Shares of Series B preferred stock have no voting rights except on matters adversely affecting the rights of the holders of the Preferred Stock.

Rank - With respect to payment of dividends and distribution of assets upon liquidation or dissolution or winding up of the Corporation, whether voluntary or involuntary, the Series B Preferred Stock shall rank equal to the Common Stock on an as converted basis.

Conversion Rights - The holders of the preferred stock have certain conversion rights of such preferred stock into shares of common stock of the Company. Each share of preferred stock is convertible at the option of the holder at any time into the number of shares of common stock at the quotient of the stated value divided by the conversion price, subject to customary adjustments to protect against dilution.

Redemption Rights – The Series B preferred stock is not subject to any redemption rights.

Common Stock

The Company has authorized 1,000,000,000 shares of par value $0.0001 common stock, of which 1,263,653 and 1,288,415 shares are outstanding as of June 30, 2024 and December 31, 2023, respectively.

In the six months ended June 30, 2024, the holders of $232,937 of Original Issue Discount Senior Convertible Debentures converted their debentures at a contractual exercise price of $6.00 per share in exchange for the issuance of 38,826 shares of Common Stock to the holders.

During the year ended December 31, 2023, a total of 559,839 warrants were exchanged for 279,920 shares of the Company’s common stock.

On June 2, 2023, a third-party investor elected to convert the aggregate principal amount of two Notes of $198,000, into 31,075 common shares.

Shares Cancelled

On January 9, 2024, the Company’s CTO agreed to surrender 64,100 common shares held by him and were cancelled by the Company.

Restricted Stock Units

Effective October 10, 2022, the Company’s Board of Directors appointed Ms. Richa Nand, Mr. Jim Dorst, and Mr. Chris Wetzel as non-executive members to the Company’s Board of Directors (“Director”). Effective January 1, 2023, each Director shall receive an annual grant of restricted stock units of $50,000. During the three and six months ended June 30, 2024 and 2023, respectively, the Company recorded stock-based compensation totaling $37,500 and $75,000, and $37,500 and $75,000, respectively, in the unaudited condensed consolidated statements of operations.

Reverse Stock Split

Effective January 19, 2024, Board of Directors declared a one-for-forty reverse stock split to shareholders of record on or before January 31, 2024 of the Company’s issued and outstanding shares of common stock, outstanding warrants and options, and the Series B Convertible Preferred Stock. The number of shares of common stock and convertible preferred shares obtainable upon exercise or conversion and the exercise prices and conversion rate have been equitably adjusted. As such, all share and per share amounts have been retroactively adjusted to reflect the reverse stock split.

Warrants

In accordance with ASC 718-20, Compensation – Stock Compensation, a modification of a stock award is treated as an exchange of the original award for a new award incurring additional compensation cost for any incremental value resulting from the modification. Incremental compensation cost shall be measured as the excess of the fair value of the modified award over the fair value of the original award immediately before its terms are modified and recognized over the vesting period. A short-term inducement shall be accounted for as a modification of the terms of only those that accept the inducement.

In March 2023, the Company offered a short-term inducement to the Company’s third party warrant holders in which the Company will issue one share of the Company’s common stock in exchange for each two warrants were exchanged for 279,920 shares of the Company’s common stock through December 31, 2023. The Company recognized a gain of $352,965 due to the modification of the warrants in the year ended December 31, 2023, as a result of the modification.