Item 2. Unregistered Sales of Equity Securities
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
Common Shares Issued
for Services
During the nine months
ended September 30, 2022, the Company issued a total of 408,957 shares of its common stock for services rendered and to be rendered.
These shares were valued at $340,950, the fair market values on the grant dates using the reported closing share prices on the dates of
grant, and the Company recorded stock-based compensation expense of $291,270 for the nine months ended September 30, 2022 and reduced
accrued liabilities of $30,000 and recorded prepaid expense of $19,680 as of September 30, 2022 which will be amortized over the
rest of corresponding service periods.
Common Shares Sold
for Cash
On August 5, 2022, the Company sold 448,718 shares
of common stock at a purchase price of $0.78 per share to Wenzhao Lu pursuant to a subscription agreement. The Company received proceeds
of $350,000.
On August 5, 2022, the Company sold 320,513 shares
of common stock at a purchase price of $0.78 per share to an investor pursuant to a subscription agreement. The Company received proceeds
of $250,000.
Common
Shares Issued for Debt Conversion
On July
25, 2022, the Company and 2022 Convertible Note holder entered into a Conversion Agreement pursuant to which the investor converted its
Convertible Notes in the principal amount of $3,718,943 and unpaid interest of $9,751 into 5,736,452 shares of
common stock of the Company at a per share price of $0.65. The Company recorded a conversion inducement charge of $344,264 as a result
of the Conversion Agreement, representing the value of common stock issued upon conversion in excess of the common stock issuable under
the original terms of the 2022 Convertible Note.
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Common
Shares Issued Pursuant to Related Party Debt Settlement Agreement and Release
On July
25, 2022, the Company and Mr. Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which the Company settled
$2,440,262 debt owed under the Line of Credit and unpaid interest of $448,331 by issuance of 4,443,990 shares of common
stock of the Company. The total amount of the debt
settled of $2,888,593 exceeded the fair market value of the shares issued by $888,353 which was treated as a capital transaction due to
Mr. Lu's relationship with the Company.
The offers, sales, and
issuances of the securities described above were deemed to be exempt from registration under the Securities Act of 1933 in reliance on
Section 4(a)(2) of the Securities Act of 1933 or Regulation D promulgated thereunder as transactions by an issuer not involving a public
offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions.
Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through
employment, business or other relationships, to information about us.
ITEM 3. DEFAULTS UPON
SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
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