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Item 8. Financial Statements and Supplementary Data

2023-03-30 compared with 2022-03-29 · 418 added, 553 removed, 611 unchanged (61% of the section changed)

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TO FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm (Marcum LLP, PCAOB ID No.

Report of Independent Registered Public Accounting Firm (Marcum LLP, PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2022 and 2021

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Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Changes In Stockholders’ Deficiency for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Changes In Stockholders’ Deficit for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

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as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’

deficiency and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred

deficit and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material

In our opinion, the financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows

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accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise

fully described in Note 2, the Company has a significant working capital deficit, has incurred significant losses and needs to raise

additional funds to meet its obligations and sustain its operations.

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financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audit s .

Our responsibility is to express an opinion on the Company’s financial statements based on our audit s .

We are a public accounting firm registered with the Public Company Accounting

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conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit s to

obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose

of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express

no such opinion.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

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Total Current Assets

Equipment and furnishings, less accumulated depreciation of $ 91,178

and $ 78,313 ,

Equipment and furnishings, less accumulated depreciation of $ 102,073 and $ 91,178 , respectively

Operating lease right-of-use asset

Liabilities and Stockholders’ Deficiency

Liabilities and Stockholders’ Deficit

Current Liabilities:

Accounts payable

Deposit for purchase

of Series D-1 Preferred Stock

Deposit for Series D-1 Preferred Stock

Unearned grant revenue

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Convertible notes payable - related parties

Operating lease liability

Operating lease liability, current portion

Total Current Liabilities

Note payable, non-current portion

Operating lease liability, non-current portion

Total Liabilities

Commitments, contingencies and litigation (Note 15)

Stockholders’ Deficiency:

Commitments, contingencies, and litigations (Note 16)

Stockholders’ Deficit:

Preferred stock;

par value $ 0.001

25,000,000 shares

Series B Convertible Preferred Stock;

shares designated;

shares issued and outstanding at December 31, 2021 and 2020, respectively;

aggregate liquidation preference of $ 0

at December 31, 2021 and 2020, respectively

D Convertible Preferred Stock;

par value $ 0.001 per share;

25,000,000 shares authorized;

Series D Convertible Preferred Stock;

12,374,000 shares designated;

12,373,247 shares issued and outstanding at December 31,

31, 2021 and 2020, respectively;

aggregate liquidation preference of $ 14,164,889

at December 31, 2021 and 2020, respectively;

Stockholders’ Deficiency – Liquidation Preference )

D-1 Convertible Preferred Stock;

2022 and December 31, 2021;

aggregate liquidation preference of $ 14,164,889 at December 31, 2022 and December 31, 2021

Series D-1 Convertible Preferred Stock;

11,241,000 shares designated;

shares issued and outstanding at December

31, 2021 and 2020, respectively;

aggregate liquidation preference of $ 105,532,804

at December 31, 2021 and 2020, respectively;

Stockholders’ Deficiency – Liquidation Preference )

9,746,626 and 9,218,449 shares issued and outstanding at

December 31, 2022 and December 31, 2021, respectively;

aggregate liquidation preference of $ 111,578,880 and $ 105,532,804 at December

31, 2022 and December 31, 2021, respectively

Preferred stock value

Common stock;

par value $ 0.001

1,000,000,000

par value $ 0.001 per share;

1,000,000,000 shares authorized;

419,497,119 and 419,447,119 shares issued and

outstanding at December 31, 2021 and 2020, respectively

outstanding at December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

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( 246,033,958 )

Total Stockholders’ Deficiency

Total Stockholders’ Deficit

( 6,228,510 )

( 4,187,280 )

Total Liabilities and Stockholders’ Deficiency

Total Liabilities and Stockholders’ Deficit

accompanying notes to consolidated financial statements.

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For the Years Ended

Grant Revenue

Operating Expenses:

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Research and development tax credit

Investment and interest income

Gain from forgiveness of PPP loan and interest

Interest expense

( 1,748,120 )

Interest expense, net

Total Other Expense, Net

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$ ( 5,539,543 )

$ ( 6,677,587 )

Basic and Diluted Loss Per Common Share

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BIOPHARMACEUTICALS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

THE YEARS ENDED DECEMBER 31, 2022 AND 2021

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$ ( 30,206,357 )

Common stock issued upon exercise

Stock-based compensation:

Conversion of Series B Preferred

Stock to Common Stock

Conversion of Series B Preferred

Stock to Common Stock ,shares

Conversion of PRH Notes to

Series D Preferred Stock

Conversion of PRH Notes to

Series D Preferred Stock, shares

Conversion of PRH Notes to

Series D-1 Preferred Stock

Conversion of PRH Notes to

Series D-1 Preferred Stock, shares

Conversion of PRH Notes to

Series D-1 Preferred Stock , shares

Conversion of Note to Series

D-1 Preferred Stock

Conversion of Note to Series

D-1 Preferred Stock

Conversion of Series D-1 Preferred

Stock to Common Stock

Conversion of Series D-1 Preferred

Stock to Common Stock , shares

Comprehensive loss:

stock issued upon exercise of warrants

compensation:

of Series B Preferred Stock to Common Stock

of PRH Notes to Series D Preferred Stock

of PRH Notes to Series D1 Preferred Stock

of Series D-1 Preferred Stock to Common stock

Comprehensive

( 5,539,543 )

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$ ( 4,187,280 )

Common stock issued upon exercise

Stock-based compensation:

Conversion of Series B Preferred

Stock to Common Stock

Conversion of PRH Notes to

Series D Preferred Stock

Conversion of PRH Notes to

Series D-1 Preferred Stock

Conversion of Series D-1 Preferred

Stock to Common Stock

Comprehensive loss:

D-1 Preferred Stock issued for cash

compensation:

of 2021 Notes to Series D-1 Preferred Stock

Comprehensive

( 3,554,683 )

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$ 242,954,193

$ ( 249,588,641 )

$ ( 6,228,510 )

accompanying notes to consolidated financial statements.

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Non-cash lease expense

Amortization of patents

Gain on forgiveness of PPP Loan and interest

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Short term receivables

Prepaid expenses

Prepaid expenses and other current assets

Accounts payable

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Operating lease liability

Accrued interest expense

Accrued interest

Net Cash Used In Operating Activities

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Repayment of short-term note payable

Proceeds from note payable

Deposit for purchase of Series D-1 Preferred Stock

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Net Cash Provided By Financing Activities

Effect of exchange rates on cash, cash equivalents,

and restricted cash

Net Increase (Decrease) In Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash, Beginning

Cash, Cash Equivalents, and Restricted Cash, End of Period

Effect of exchange rates on cash, cash equivalents, and restricted cash

Net (Decrease) Increase In Cash, Cash Equivalents, and Restricted Cash

( 1,675,235 )

Cash, Cash Equivalents, and Restricted Cash, Beginning of Year

Cash, Cash Equivalents, and Restricted Cash, End of Year

Cash, cash equivalents and restricted cash consisted of the following:

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Restricted cash

and cash Equivalents, restricted cash

Cash, Cash Equivalents,

and Restricted Cash, End of Year

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:

Cash paid during the year for:

Non-cash investing and financing activities:

Purchase of insurance policies financed by short-term

Conversion of non-amended 2017 Notes to Series D Preferred

Conversion of amended 2017 Notes and 2020 Notes to Series

D-1 Preferred Stock

Purchase of insurance policies financed by short-term note payable

$ ( 203,175 )

$ ( 273,347 )

Deposit applied to equity issuances

$ ( 150,000 )

Conversion of non-amended 2017 Notes to Series D Preferred Stock

Conversion of amended 2017 Notes and 2020 Notes to Series D-1 Preferred Stock

Conversion of Series D-1 Preferred Stock to Common stock

Conversion of 2021 Notes to Series D-1 Preferred Stock

Right-of-use asset for lease liability

$ ( 130,443 )

accompanying notes to consolidated financial statements.

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Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or “the Company”),

is a clinical-stage biotechnology company developing immunotherapy medicines for different diseases, with the aim of maximizing the curative

impact of these medicines and achieving immunity from treated disease.

These investigational drugs are based on a wholly owned class

of small molecules called halogenated xanthenes (“HXs”).

Our lead HX molecule is named rose bengal sodium (“RBS”).

PV-10 ® , an investigational cancer immunotherapy administered by intralesional (“IL”) injection and

an injectable formulation of cGMP (“current Good Manufacturing Practice”) RBS, is undergoing clinical study for adult

solid tumor cancers, such as melanoma and gastrointestinal (“GI”) tumors (including hepatocellular carcinoma (“HCC”),

colorectal cancer metastatic to the liver (“mCRC”), neuroendocrine tumors (“NET”) metastatic to the liver

(“mNET”), and uveal melanoma metastatic to the liver (“mUM”), among others).

Orphan drug designation (“ODD”)

status was granted to PV-10 by the FDA for metastatic melanoma in 2006, HCC

in 2011, and ocular melanoma (including uveal melanoma) in 2019.

formulations of cGMP RBS are also undergoing preclinical study as prophylactic and therapeutic treatments for high-risk and refractory

adult solid tumor cancers, such as head and neck, breast, colorectal, and testicular cancers.

In vivo data of a colorectal

tumor murine model that continuously promotes abnormal cell proliferation and transformation into cancer indicate increased survival

in both prophylactic and therapeutic settings.

IL PV-10 is also undergoing preclinical study for pediatric solid tumor cancers (including neuroblastoma, Ewing sarcoma,

rhabdomyosarcoma, and osteosarcoma).

ODD status was granted to PV-10 by the FDA for neuroblastoma in 2018.

Oral formulations of cGMP RBS are undergoing preclinical study for refractory and relapsed pediatric blood cancers (including

In vivo data of an acute lymphoblastic leukemia murine model indicated increased survival.

Systemically administered formulations of cGMP RBS are undergoing preclinical study for the novel strain of coronavirus (“CoV”):

severe acute respiratory syndrome (“SARS”) CoV 2 (“SARS-CoV-2”).

In silico data indicate docking-based

binding affinity to SARS-CoV-2’s main protease, spike protein, and different variants of the spike protein.

data indicate activity against SARS-CoV-2 in African green monkey kidney cell (Vero) and human lung epithelial cell (Calu-3) models,

and synergistic activity with remdesivir in a Vero cell model.

Microbiology:

Different formulations of cGMP RBS are undergoing preclinical study as potential treatments for multi-drug resistant (“MDR”)

bacteria, such as gram-positive and gram-negative.

Ophthalmology:

Topical formulations of cGMP RBS are undergoing preclinical study as potential treatments for diseases of the eye, such as infectious

PH-10 ® , an investigational immuno-dermatology agent administered as a topical gel and formulation of cGMP RBS,

is undergoing monotherapy clinical study and preclinical study of combination therapy with approved drugs for inflammatory dermatoses

(including psoriasis and atopic dermatitis).

Different formulations of cGMP RBS are undergoing development as potential treatments for animal cancers and dermatological

is a clinical-stage biotechnology company developing immunotherapy medicines for different diseases that are based on a class of synthetic

small molecule immuno-modulators called halogenated xanthenes (“HXs”).

Our lead molecule is named rose bengal sodium (“RBS”).

Company’s proprietary, patented, pharmaceutical-grade RBS is the active pharmaceutical ingredient in the drug product candidates

of our current clinical development programs and the preclinical formulations of our current drug discovery programs.

Importantly, our

pharmaceutical-grade RBS displays different therapeutic effects at different concentrations and can be formulated for delivery by different

routes of administration.

Company believes that RBS targets disease in a bifunctional manner.

First, direct contact may lead to cell death or repair depending

on the disease being treated and the concentration of the RBS utilized in the treatment.

Secondly, multivariate immune signaling, activation,

and response may follow that may manifest as stimulatory, inhibitory, or both.

Company believes that it is the first entity to advance an RBS formulation into clinical trials for the treatment of a disease, such

as those trials reported on the clinical trials registry ClinicalTrials.gov.

Company believes that it is the first and only entity to date to successfully, reproducibly, and consistently make pharmaceutical-grade

RBS at a purity of nearly 100%.

Company’s small molecule HX medical science platform comprises a number of different drug product candidates and preclinical pharmaceutical-grade

RBS formulations using different concentrations and delivered by different routes of administration specific to each disease area and/or

The Company’s HX medical science platform includes clinical development programs in oncology, dermatology, and ophthalmology;

proof-of-concept in vivo drug discovery programs in oncology, hematology, wound healing, and animal health;

and preclinical in

vitro drug discovery programs in infectious diseases and tissue regeneration and repair.

Risks and Uncertainties

The Company’s activities are subject to significant

risks and uncertainties, including failing to successfully develop and license or commercialize the Company’s prescription drug

Severe acute respiratory syndrome (“SARS”)

coronavirus (“CoV”) 2 (“SARS-CoV-2”) was first identified in late-2019 and subsequently declared a global pandemic

by the World Health Organization on March 11, 2020.

As a result of the SARS-CoV-2 pandemic, many companies have experienced disruptions

of their operations and the markets they serve.

The Company has taken several temporary precautionary measures intended to help ensure

the well-being of its employees and contractors and to minimize business disruption.

The Company considered the impact of SARS-CoV-2 pandemic

on its business and operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s

results of operations and financial position at December 31, 2022.

The full extent of the SARS-CoV-2 pandemic impacts

on the Company’s operations and financial condition is uncertain.

The Company has experienced slower than normal enrollment and

treatment of patients, and a prolonged SARS-CoV-2 pandemic could have a material adverse impact on the Company’s business and financial

results, including the timing and ability of the Company to raise capital, initiate and/or complete current and/or future preclinical

studies and/or clinical trials, disrupt the Company’s regulatory activities, and/or have other adverse effects on the Company’s

clinical development.

date, the Company has not generated any revenues or profits from planned principal operations.

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drug candidates.

was reportedly first identified in late-2019 and subsequently declared a global pandemic by the World Health Organization on March 11,

As a result of the SARS-CoV-2 pandemic, many companies have experienced disruptions of their operations and the markets they serve.

The Company has taken several temporary precautionary measures intended to help ensure the well-being of its employees and contractors

and to minimize business disruption.

The Company considered the impact of SARS-CoV-2 pandemic on its business and operational assumptions

and estimates, and determined there were no material adverse impacts on the Company’s results of operations and financial position

at December 31, 2021.

full extent of the SARS-CoV-2 pandemic impacts on the Company’s operations and financial condition is still uncertain.

Company has experienced slower than normal enrollment and treatment of patients, and a prolonged SARS-CoV-2 pandemic could have a material

adverse impact on the Company’s business and financial results, including the timing and ability of the Company to raise capital,

initiate and/or complete current and/or future preclinical studies and/or clinical trials;

disrupt the Company’s regulatory activities;

and/or have other adverse effects on the Company’s clinical development.

Liquidity and Going Concern

Company’s cash, cash equivalents, and restricted cash were $ 3,106,942

at December 31, 2021 which includes the $ 2,423,958

of restricted cash resulting from a grant

received from the State of Tennessee.

The Company’s working capital deficiency was $ 4,258,679

and $ 30,288,035

as of December 31, 2021 and 2020, respectively.

The improvement in working capital is primarily driven by the conversion of the 2017 and 2020 Notes into Series D and D-1 Preferred Stock.

Company’s cash and restricted cash were $ 1,431,707 at December 31, 2022 which includes $ 1,410,102 of restricted cash resulting

from a grant received from the State of Tennessee.

The Company’s working capital deficiency was $ 6,293,198 and $ 4,258,679 as of

December 31, 2022 and 2021, respectively.

The decline in working capital is primarily driven by lower cash on hand and higher accounts

The Company continues to incur significant operating losses.

Management expects that significant on-going operating expenditures will

be necessary to successfully implement the Company’s business plan and develop and market its products.

These circumstances raise

substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated

Management expects that significant on-going operating expenditures

will be necessary to successfully implement the Company’s business plan and develop and market its products.

These circumstances

raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated

financial statements are issued.

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the reporting period.

The Company’s significant estimates and assumptions include the recoverability

and useful lives of long-lived assets, stock-based compensation, accrued liabilities and the valuation allowance related to the Company’s

deferred tax assets.

The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived

assets, stock-based compensation, accrued liabilities and the valuation allowance related to the Company’s deferred tax assets.

and Cash Equivalents

Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

December 31, 2021 and 2020, the Company’s cash equivalents consist of Treasury bills.

cash consists of a grant award of $ 2,500,000

received in cash from the State of Tennessee less payments

to vendors for expenses and deposits in the amount of $ 76,042 .

December 31, 2022 and 2021, the Company’s cash equivalents consisted of Treasury bills of $ 0 and $ 42,594 , respectively.

cash consists of a grant award of $ 2,500,000 received in cash from the State of Tennessee less payments to vendors for expenses and deposits

in the amount of $ 1,089,898 .

See Note 14, Grants.

Concentrations

cash equivalents, and restricted cash are

maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000, although the Company seeks

to minimize this through treasury management.

The Company has never experienced any losses related to these balances although no assurance

can be provided that it will not experience any losses in the future.

As of December 31, 2021 and 2020, the Company had cash,

cash equivalent, and restricted cash balances in excess of FDIC insurance limits of $ 2,856,942

cash equivalents, and restricted cash are maintained at financial institutions and, at times, balances may exceed federally insured limits

of $ 250,000 , although the Company seeks to minimize this through treasury management.

The Company has never experienced any losses related

to these balances although no assurance can be provided that it will not experience any losses in the future.

As of December 31, 2022

and 2021, the Company had cash, cash equivalent, and restricted cash balances in excess of FDIC insurance limits of $ 1,181,707 and $ 2,856,942 ,

respectively.

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31, 2022 and 2021.

patent costs are expensed in the period incurred.

Patents purchased are capitalized and amortized over the remaining estimated useful

life of the patent.

patents are fully amortized as of December 31, 2021 and 2020.

Patent amortization was $ 0 and $ 228,107

during the years ended December 31, 2021 and

2020, respectively.

Party Receivables

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See Note 8, Short-term Receivables.

income is recognized when qualifying costs are incurred and there is reasonable assurance that conditions of the grant have been met.

Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as other income

revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the grant have been met.

Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as grant revenue

when qualifying costs are incurred.

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lab supplies and pharmaceutical preparations, insurance, rent and utilities, and depreciation and amortization.

February 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard related to leases to increase transparency

and comparability among organizations by requiring the recognition of operating lease right-of-use (“ROU”) assets and lease

liabilities on the balance sheet (“ASC 842”) with amendments issued in 2018.

Most prominent among the changes in the standard

is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

Under the standard,

disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty

of cash flows arising from leases.

The Company is also required to recognize and measure new leases at the adoption date and recognize

a cumulative-effect adjustment in the period of adoption using a modified retrospective approach, with certain practical expedients available.

Company adopted ASC 842 effective January 1, 2019 and elected to apply the available practical expedients.

The standard had an impact

on the Company’s consolidated balance sheets but did not have a material impact on the Company’s consolidated statements

of operations or cash flows upon adoption.

The most significant impact was the recognition of ROU assets and lease liabilities for operating

The Company expenses all costs as incurred in connection

with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications)

and such costs are included in general and administrative expenses in the accompanying statements of operations and comprehensive loss.

The Company adopted ASC 842 effective January 1, 2019

and applied the available practical expedients to the existing lease which expired on June 30, 2022.

The Company applied the standard

to the current lease agreement in the same manner.

The most significant impact upon adoption was the recognition of ROU assets and lease

liabilities for operating leases.

Company accounts for income taxes under the liability method in accordance with Accounting Standards Codification (“ASC”)

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are classified as temporary equity.

At all other times, preferred shares are classified as stockholders’ deficiency.

At all other times, preferred shares are classified as stockholders’ deficit.

and Diluted Loss Per Common Share

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Convertible preferred stock

2021 unsecured convertible notes

2022 unsecured convertible notes

Total potentially dilutive shares

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equivalents, restricted cash, receivables, other current assets, accounts payable, unearned grant income, and accrued expenses approximate

fair values due to the short-term nature of these instruments.

fair value due to the short-term nature of these instruments.

carrying amounts of our credit obligations approximate fair value because the effective yields on these obligations, which include contractual

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Company’s reporting currency is the United States Dollar.

The functional currencies of the Company’s operating subsidiaries

are their local currencies (United States Dollar and Australian Dollar).

Australian Dollar denominated assets and liabilities are translated

into the United States Dollar at the balance sheet date ($ 22,053

and $ 407,851

at December 31, 2021 and $ 10,552

and $ 332,446

at December 31, 2020, respectively), and expense

and other income accounts are translated at a weighted average exchange rate for the years then ended ($ 85,052

for the years ended December 31, 2021 and 2020,

respectively).

Equity is translated at historical rates and the resulting foreign currency translation adjustments are included as a

component of accumulated other comprehensive loss (“AOCL”), which is a separate component of stockholders’ deficiency.

The functional currencies of the Company’s operating

subsidiaries are their local currencies (United States Dollar and Australian Dollar).

Australian Dollar denominated assets and

liabilities of $ 17,373 and $ 383,447 at December 31, 2022 and $ 22,053 and $ 407,851 at December 31, 2021, respectively) are translated

into the United States Dollar at the balance sheet date, and net expense accounts of $ 4,503 and $ 85,052 for the years ended December

31, 2022 and 2021, respectively) are translated at a weighted average exchange rate for the years then ended.

Equity is translated

at historical rates and the resulting foreign currency translation adjustments are included as a component of accumulated other

comprehensive loss (“AOCL”), which is a separate component of stockholders’ deficit.

Therefore, the U.S.

dollar value of the non-equity translated items in the Company’s consolidated financial statements will

fluctuate from period to period, depending on the changing value of the U.S.

value of the non-equity translated items in the Company’s consolidated financial statements will fluctuate from period to

period, depending on the changing value of the U.S.

dollar versus these currencies.

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historical public market closing prices.

Issued Accounting Pronouncements

Issued Accounting Standards

August 2020, FASB issued Accounting Standards Update (“ASU”) No.

2020-06, “Debt—Debt with Conversion

and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).

Under ASU 2020-06,

the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features

that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for

as paid-in capital.

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized

cost, as long as no other features require bifurcation and recognition as derivatives.

The new guidance also requires the if-converted

method to be applied for all convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including

interim periods within those fiscal years, with early adoption permitted.

2020-06, “Debt—Debt with Conversion and Other

Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for

Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).

Under ASU 2020-06, the

embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that

are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long

as no other features require bifurcation and recognition as derivatives.

The new guidance also requires the if-converted method to be

applied for all convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim

periods within those fiscal years, with early adoption permitted.

Adoption of the standard requires using either a modified retrospective

or a full retrospective approach.

The Company is currently evaluating the effect of the adoption of ASU 2020-06 will have on its consolidated

financial statements and related disclosures.

The Company plans to adopt ASU 2020-06 on January 1, 2023 and does not believe the adoption will have

a material impact on the Company’s consolidated financial statements or disclosures.

Adopted Accounting Pronouncements

October 2020, the FASB issued ASU 2020-10 “Codification Improvements” , which improves consistency by amending the

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adopted this standard on January 1, 2022 and it did not have a material effect on its consolidated financial statements.

May 3, 2021, the FASB issued ASU

2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock

Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

This new standard provides

clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified

written call options (such as warrants) that remain equity classified after modification or exchange.

This standard is effective for

fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Issuers should apply the new standard

prospectively to modifications or exchanges occurring after the effective date of the new standard.

Early adoption is permitted, including

adoption in an interim period.

If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied

as of the beginning of the fiscal year that includes that interim period.

The Company adopted this standard on January 1, 2022 and

it did not have a material effect on its consolidated financial statements.

Adopted Accounting Pronouncements

December 2019, the FASB issued ASU 2019-12,

Simplifying the Accounting for Income Taxes.

The amendments in ASU 2019-12 simplify the accounting for income taxes by removing

certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740, Income Taxes .

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing

The Company adopted ASU 2019-12 on January 1, 2021 and there was no material impact on the Company’s consolidated

financial statements or disclosures.

January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures

(Topic 323), and Derivatives and Hedging (Topic 815).” ASU 2020-01 states any equity security transitioning from the alternative

method of accounting under Topic 321 to the equity method, or vice versa, due to an observable transaction will be remeasured immediately

before the transition.

In addition, the ASU clarifies the accounting for certain non-derivative forward contracts or purchased call options

to acquire equity securities stating such instruments will be measured using the fair value principles of Topic 321 before settlement

20 The Company adopted ASU 2020-01 on a prospective basis on January 1, 2021 and there was no material impact on the Company’s

consolidated financial statements or disclosures.

March 2020, the FASB issued ASU No.

2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”).

There are seven issues

addressed in this update.

Issues 1 – 5 were clarifications and codifications of previous updates.

Issue 3 relates only to depository

and lending institutions and therefore would not be applicable to the Company.

Issue 6 was a clarification on determining the contractual

term of a net investment in a lease for purposes of measuring expected credit losses, an issue not applicable to the Company.

relates to the regaining control of financial assets sold and the recordation of an allowance for credit losses.

The amendment related

to issues 1, 2, 4 and 5 became effective immediately upon adoption of the update.

Issue 3 becomes effective for fiscal years beginning

after December 15, 2019.

Issues 6 and 7 become effective on varying dates that relate to the dates of adoption of other updates.

Company adopted the applicable provisions within ASU 2020-03 which became effective during fiscal 2020 and 2021 and this adoption did

not have a material impact on the Company’s consolidated financial statements and financial statement disclosures.

May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),

Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding

equity-classified written call options (such as warrants) that remain equity classified after modification or exchange.

This standard

is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Issuers should

apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard.

Early adoption

is permitted, including adoption in an interim period.

If an issuer elects to adopt the new standard early in an interim period, the

guidance should be applied as of the beginning of the fiscal year that includes that interim period.

The Company adopted this standard

on January 1, 2022 and it did not have a material effect on its consolidated financial statements.

November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which increases the transparency of government

assistance including the disclosure of (1) the type of assistance, (2) an entity’s accounting for the assistance, and (3) the effect

of the assistance on an entity’s financial statements.

The amendments in this update are effective for the Company in the financial

statements issued for annual periods beginning after December 15, 2021.

The Company adopted this standard on January 1, 2022 and it did

not have a material effect on its consolidated financial statements.

Other Accrued Expenses

following table summarizes the other accrued expenses at December 31, 2022 and 2021:

of Other Accrued Expenses

Schedule of Other Accrued Expenses

For the Years Ended

2 unchanged sentences

Accrued directors’ fees

Accrued PPP interest

Accrued other expenses

3 unchanged sentences

of Convertible Notes Payable

Amended 2017 Notes

Balance at January 1, 2021

Balance at December 31, 2020

( 2,712,000 )

1 unchanged sentence

( 5,025,000 )

( 25,092,000 )

Balance at December 31, 2021

( 1,260,000 )

Balance at December 31, 2022

August 13, 2021, the Board approved a Financing Term Sheet (the “2021 Term Sheet”), which set forth the terms under which

8 unchanged sentences

the following provisions:

2021 Notes will bear interest at the rate of eight percent ( 8 %) per annum on the outstanding principal amount of the loan that has been

2021 Notes bear interest at the rate of eight percent ( 8 % ) per annum on the outstanding principal amount of the loan that has been

funded to the Company;

2 unchanged sentences

outstanding principal amount and interest payment under the 2021 Notes may be paid back at maturity at the investors’ option;

outstanding principal amount and interest payable under the 2021 Notes may be convertible at the investors’ option into shares

outstanding principal amount and interest payable under the 2021 Notes are convertible at the investors’ option into shares

of Series D-1 Preferred Stock at a price per share equal to $ 2.862 .

6 unchanged sentences

do not represent a beneficial conversion feature because the effective conversion price is not at a discount to the commitment date market

of December 31, 2021, the Company had received 2021 Notes (defined above) proceeds of $ 1,460,000 , of which $ 200,000

is from a related party investor (an officer

of the Company).

On December 31, 2019, the Board approved a Definitive

Financing Term Sheet (the “2020 Term Sheet”), which sets forth the terms of a financing in the form of secured convertible

loans from investors that were evidenced by convertible promissory notes (the “2020 Notes”), which bear interest at the rate

of eight percent ( 8 %) per annum.

outstanding principal amount and interest payable under the 2020 was convertible into shares of a new series of preferred stock

at a price per share equal to $ 2.8620 ,

either (a) at any time after the new series of preferred stock is designated, at the sole discretion of the investors;

or (b) automatically

on June 20, 2021, subject to certain exceptions.

See 2021 Conversions of Notes into Preferred Stock below.

time, the Company received 2020 Notes proceeds of $ 5,025,000 , of which $ 100,000 is from a related party investor, an officer of the Company.

March 23, 2017, the Company entered into an exclusive Definitive Financing Commitment Term Sheet with a group of the Company’s

stockholders (the “PRH Group”), which was amended and restated effective as of March 19, 2017 (the “2017 Term Sheet”)

that set forth the terms of a financing in the form of secured convertible loans from the PRH Group or other investors that were evidenced

by convertible promissory notes (the “2017 Notes”), which bore interest at the rate of eight percent ( 8 %)

outstanding principal amount and interest payable under the 2017 Notes were convertible into shares of a new series of preferred

stock at a price per share equal to $ 0.2862 ,

either (a) at any time after the new series of preferred stock is designated, at the sole discretion of the investors;

or (b) automatically

at the eighteen-month anniversary of the funding of the final tranche of 2017 Notes, subject to certain exceptions.

See 2021 Conversions

of Notes into Preferred Stock below.

time, the Company received 2017 Notes proceeds of $ 20,067,000 , of which $ 6,670,000 is from related party investors.

Officers of the Company

invested $ 3,050,000 and Board of Director members invested $ 3,620,000 .

the Company had not designated the new series of preferred stock into which the 2017 Notes and the 2020 Notes (collectively the “Notes”)

were convertible into.

As a result, the Company did not analyze the Notes for a potential beneficial conversion feature, as the definition

of a firm commitment had not been met since the Notes were not yet convertible.

On June 17, 2021, the required Certificates of Designation

were filed with the Delaware Secretary of State.

Accordingly, a firm commitment was achieved.

The Company analyzed the Notes for a beneficial

conversion feature and determined that there was none because the Notes have an effective conversion price of $ 0.2862 per share of underlying

common stock, which exceeds the $ 0.07 per share commitment date closing market price of the common stock.

Conversions of Notes into Preferred Stock

September 20, 2022, the Board approved the closure of the 2021 Financing.

As of December 31, 2022, the Company had received 2021 Notes

(defined above) aggregate proceeds of $ 2,335,000 , of which $ 525,000 is from related party investors (an officer and director of the Company).

September 20, 2022, the Board approved a Financing Term Sheet (the “2022 Term Sheet”), which set forth the terms under which

the Company will use its best efforts to arrange for financing of a maximum of $ 5,000,000 (the “2022 Financing”), which amounts

will be obtained in several tranches.

As of December 31, 2022, the Company had received proceeds of $ 752,500 from 2022 Notes, (defined

below), of which $ 677,500 was from a related party investor (a Company director) in connection with the 2022 Financing.

to the 2022 Term Sheet, the 2022 Notes (defined below) will convert into shares of the Company’s Series D-1 Preferred Stock twelve

months after the issue date of a 2022 Note, subject to certain exceptions.

2022 Financing will be in the form of an unsecured convertible loans from the investors (the “2022 Note Investors”) and evidenced

by convertible promissory notes (individually, a “2022 Note” and collectively, the “2022 Notes”).

to customary provisions, the 2022 Notes will contain the following provisions:

2022 Notes will bear interest at the rate of eight percent ( 8 %) per annum on the outstanding principal amount of the Loan that has

been funded to the Company;

the event there is a change of control of the Board, the term of the 2022 Notes will be accelerated and all amounts due under the

2022 Notes may be immediately due and payable at the 2022 Note Investors’ option;

outstanding principal amount and interest payable under the 2022 Notes may be convertible at the 2022 Note Investors’ option

into shares of Series D-1 Preferred Stock at a price per share equal to $ 2.862 .

The Series D-1 Preferred Stock is convertible into

ten ( 10 ) shares of common stock;

outstanding principal amount and interest payable under the 2022 Notes will be automatically convertible into shares of the Company’s

Series D-1 Preferred Stock twelve (12) months after the issue date of a 2022 Note.

embedded conversion options associated with the 2022 Notes do not require bifurcation and treatment as a derivative liability and they

do not represent a beneficial conversion feature because the effective conversion price is not at a discount to the commitment date market

Conversions of 2017 and 2020 Notes into Preferred Stock

following summarizes the conversion activity during the year ended December 31, 2021:

of Conversion of Notes into Preferred Stock

2021 Conversions Into Preferred

2021 Conversions Into Preferred Stock

Amended 2017 Notes

Principal converted

5 unchanged sentences

(the “Original Conversion Price”).

order to ensure that the Company had sufficient authorized shares of preferred stock into which the 2017 Notes would convert, yet keep

the economic terms of the 2017 Notes substantially equivalent, on February 26, 2019, the Company entered into amendments (the

“Amendments”) to the 2017 Notes (as amended, the “Amended 2017 Notes”) with a large majority of the holders of

2017 Notes to increase the conversion price by 10 times from $ 0.2862

(the “New Conversion Price”) and

to change the conversion ratio by providing that one share of Preferred Stock would be convertible into 10 shares of common stock (the

“New Conversion Ratio”).

The impact of the Amendments was to reduce by 10 times the number of shares of preferred stock into

which the 2017 Notes would convert, while keeping the economic terms the same.

The 2020 Notes had substantially similar terms to the

Amended 2017 Notes, including being convertible into preferred stock at the New Conversion Price, with the Preferred Stock being convertible

into Common Stock at the New Conversion Ratio.

In order to ensure that the Company had sufficient authorized shares of preferred stock

into which the 2017 Notes would convert, yet keep the economic terms of the 2017 Notes substantially equivalent, on February 26, 2019,

the Company entered into amendments (the “Amendments”) to the 2017 Notes (as amended, the “Amended 2017 Notes”)

with a large majority of the holders of 2017 Notes to increase the conversion price by 10 times from $ 0.2862 to $ 2.862 (the “New

Conversion Price”) and to change the conversion ratio by providing that one share of Preferred Stock would be convertible into

10 shares of common stock (the “New Conversion Ratio”).

The impact of the Amendments was to reduce by 10 times the number

of shares of preferred stock into which the 2017 Notes would convert, while keeping the economic terms the same.

2020 Notes had substantially similar terms to the Amended 2017 Notes, including being convertible into preferred stock at the New Conversion

Price, with the Preferred Stock being convertible into Common Stock at the New Conversion Ratio.

order to (i) address the fact that a small minority of the holders of 2017 Notes did not execute the Amendments and (ii) ensure economic

fairness for all of the holders of the 2017 Notes and 2020 Notes, on June 17, 2021, the Company designated two separate series

of preferred stock into which the 2017 Notes and 2020 Notes would convert:

(i) the Company’s Series D Convertible Preferred Stock,

par value $ 0.001

per share was designated for the holders of 2017

Notes who did not execute the Amendments and (ii) the Company’s Series D-1 Convertible Preferred Stock, par value $ 0.001

per share was designated for the holders of Amended

2017 Notes and the holders of the 2020 Notes.

June 20, 2021, principal and interest in the aggregate amount of $ 3,541,222 ,

representing all of the outstanding non-amended 2017 Notes, was converted into 12,373,247

shares of Series D Convertible Preferred Stock

at the Original Conversion Price of $ 0.2862 .

Further on June 20, 2021, principal and interest in the aggregate amount of $ 27,031,858 ,

representing all of the outstanding Amended 2017 Notes and outstanding 2020 Notes was converted into 9,440,594

shares of Series D-1 Convertible Preferred Stock

at the New Conversion Price of $ 2.862 .

Any fractional shares issuable pursuant to the formula were rounded up to the next whole share of Series D and Series D-1 Preferred

Stockholders’ Deficiency for additional information on the Series D and Series D-1 Convertible Preferred

fairness for all of the holders of the 2017 Notes and 2020 Notes, on June 17, 2021, the Company designated two separate series of preferred

stock into which the 2017 Notes and 2020 Notes would convert:

(i) the Company’s Series D Convertible Preferred Stock, par value

$ 0.001 per share was designated for the holders of 2017 Notes who did not execute the Amendments and (ii) the Company’s Series

D-1 Preferred Stock, par value $ 0.001 per share was designated for issuance upon the conversion of Amended 2017 Notes, 2020 Notes, 2021

Notes, and 2022 Notes.

June 20, 2021, principal and interest in the aggregate amount of $ 3,541,222 , representing all of the outstanding non-amended 2017 Notes,

was converted into 12,373,247 shares of Series D Convertible Preferred Stock at the Original Conversion Price of $ 0.2862 .

June 20, 2021, principal and interest in the aggregate amount of $ 27,031,858 , representing all of the outstanding Amended 2017 Notes

and outstanding 2020 Notes was converted into 9,440,594 shares of Series D-1 Convertible Preferred Stock at the New Conversion Price

Any fractional shares issuable pursuant to the formula were rounded up to the next whole share of Series D and Series D-1

Preferred Shares.

See Note 9, Stockholders’ Deficit for additional information on the Series D and Series D-1 Preferred Stock.

a result of the conversion of the 2017 Notes and 2020 Notes into convertible preferred stock, all the security interests of these Notes

in the Company’s intellectual property were released.

Conversions of 2021 Notes into Preferred Stock

following summarizes the conversion activity during the year ended December 31, 2022:

Principal converted

Accrued interest converted

Total converted

Conversion price

the year ended December 31, 2022, principal and interest in the aggregate amount of $ 1,361,640 , representing two 2021 Notes were converted

into 475,766 shares of Series D-1 Preferred Stock at the Conversion Price of $ 2.862 .

Any fractional shares issuable pursuant to the formula

were rounded up to the next whole share of Series D-1 Preferred Shares.

See Note 9, Stockholders’ Deficit for additional information

on the Series D-1 Preferred Stock.

Notes Payable

On April 20, 2020, the

Company received a $ 62,500

loan under the CARES Act PPP (the “PPP Loan”).

PPP provides for loans to qualifying businesses for amounts of up to 2.5 times certain of the borrower’s average monthly payroll

On May 20, 2021, the Company applied for forgiveness of the PPP Loan.

On June 2, 2021, the Company was awarded full

forgiveness of the PPP Loan and accrued interest.

During the year ended December 31, 2021, the Company recognized a gain on forgiveness

of the PPP loan of $ 62,500

April 20, 2020, the Company received a $ 62,500 loan under the CARES Act PPP (the “PPP Loan”).

The PPP provides for loans

to qualifying businesses for amounts of up to 2.5 times certain of the borrower’s average monthly payroll expenses.

2021, the Company applied for forgiveness of the PPP Loan.

On June 2, 2021, the Company was awarded full forgiveness of the PPP Loan

and accrued interest.

During the year ended December 31, 2021, the Company recognized a gain on forgiveness of the PPP loan of $ 62,500

and interest of $ 594 .

4 unchanged sentences

the years ended December 31, 2022 and 2021, the Company paid Mr.

Bruce Horowitz (Capital Strategists) consulting fees of $ 169,600

and $ 254,400 ,

Bruce Horowitz (Capital Strategists) consulting fees of $ 169,600 and

$ 169,600 , respectively, for services rendered.

1 unchanged sentence

Horowitz for the year ending December 31, 2022 and 2021 were $ 75,000

and $ 75,000 ,

respectively.

and $ 75,000 , respectively.

Accrued director fees for Mr.

Horowitz as of December 31, 2021 and 2020 were $ 281,250

and $ 206,250 ,

respectively.

Total amount owed to Capital Strategist as of December 31, 2021 and 2020 were $ 127,200

and $ 42,400 ,

respectively.

Horowitz serves as both COO and

Horowitz as of December 31, 2022 and 2021 were $ 356,250 and $ 281,250 , respectively.

Total amount owed to Capital Strategists as of December 31, 2022 and 2021 were $ 212,000 and $ 127,200 , respectively.

Horowitz serves

as both COO and a Director.

Note 5 and Note 8 for details of other related party transactions.

3 unchanged sentences

Short-term Receivables

at December 31, 2021 and 2020, include the Australian VAT tax credit and approximately $ 2,100,000

is owed from Peter Culpepper.

The Company has established a reserve of approximately $ 2,100,000

as of December 31, 2021 and 2020,

which represents the amount Culpepper owes to the Company under the Derivative Lawsuit Settlement (excluding the amount of attorneys’

fees incurred in enforcing the terms of the Derivative Lawsuit Settlement).

Stockholders’ Deficiency

at December 31, 2022 and 2021, include the Australian VAT tax credit and approximately $ 2,100,000 that is owed from Peter Culpepper,

the former Interim Chief Executive Officer of the Company.

The Company has established a reserve of approximately $ 2,100,000 as of December

31, 2022 and 2021, which represents the amount Culpepper owes to the Company under the Derivative Lawsuit Settlement (excluding the amount

of attorneys’ fees incurred in enforcing the terms of the Derivative Lawsuit Settlement).

Stockholders’ Deficit

of December 31, 2022, the Company was authorized to issue 1,000,000,000 shares of common stock, $ 0.001 par value, and 25,000,000 shares

3 unchanged sentences

stock is designated as follows:

240,000 shares to Series B Convertible Preferred Stock (the “Series B Preferred Stock”),

12,374,000 shares to Series D Convertible Preferred Stock (the “Series D Preferred Stock”), and 9,441,000 shares of Series

D-1 Convertible Preferred Stock (the “Series D-1 Preferred Stock”) and 2,945,000 shares undesignated.

12,374,000 shares to Series D Convertible Preferred Stock (the “Series D Preferred Stock”),

and 11,241,000 shares of Series D-1 Convertible Preferred Stock (the “Series D-1 Preferred Stock”) and 1,385,000 shares undesignated.

B Preferred Stock

1 unchanged sentence

The Series B Certificate

of Designation provides for the issuance of the Series B Preferred Stock with a par value $ 0.001 per share and a stated value of $ 25.00

of Designation provides for the issuance of the Series B Preferred Stock with a par value of $ 0.001 per share and a stated value of $ 25.00

The Series B Preferred Stock has no voting rights.

3 unchanged sentences

of $ 0.0533 .

the year ended December 31, 2021, 100

shares of outstanding Series B Preferred Stock

automatically converted, at the fifth-year anniversary of their issuance, into 65,666

shares of common stock, which represents $ 3,500

of stated value plus $ 1,000

of cumulative dividends) divided by the adjusted

conversion price.

the year ended December 31, 2021, 100 shares of outstanding Series B Preferred Stock automatically converted, at the fifth-year anniversary

of their issuance, into 65,666 shares of common stock, which represents $ 3,500 ($ 2,500 of stated value plus $ 1,000 of cumulative dividends)

divided by the adjusted conversion price.

On March 30, 2022, the Company filed a Certificate of Elimination with the State of Delaware

eliminating the Series B Preferred Stock.

D and Series D-1 Preferred Stock

1 unchanged sentence

Preferred Stock”) are set forth in their respective Certificates of Designation.

The Board of Directors of the Company approved

each of the Certificates of Designation on June 14, 2021, and each Certificate of Designation was filed with the Delaware Secretary

of State on June 17, 2021.

The Board of Directors of the Company

approved each of the Certificates of Designation on June 14, 2021, and each Certificate of Designation was filed with the Delaware

Secretary of State on June 17, 2021.

The Series D Certificate of Designation established and designated 12,374,000

shares of Series D Preferred Stock.

D-1 Certificate of Designation established and designated 9,441,000

The Series D-1 Certificate of Designation was established and initially designated 9,441,000

shares of Series D-1 Preferred Stock.

June 20, 2021, the Company issued 12,373,247

shares of Series D Preferred Stock upon the conversion

of all of the outstanding 2017 Notes at the Original Conversion Price of $ 0.2862

issued 9,440,594

shares of Series D-1 Preferred Stock upon the

conversion of all outstanding Amended 2017 Notes and 2020 Notes at the New Conversion Price of $ 2.862 .

Convertible Notes Payable for additional information on the conversion.

the year ended December 31, 2021, the Company received consideration of $ 150,000

from an investor in exchange for an aggregate

shares of restricted Series D-1 Preferred Stock

that have not yet been issued.

June 20, 2021, the Company issued 12,373,247 shares of Series D Preferred Stock upon the conversion of all of the outstanding 2017 Notes

at the Original Conversion Price of $ 0.2862 and issued 9,440,594 shares of Series D-1 Preferred Stock upon the conversion of all outstanding

Amended 2017 Notes and 2020 Notes at the New Conversion Price of $ 2.862 .

See Note 5, Convertible Notes Payable for additional information

on the conversion.

the year ended December 31, 2021, a holder of 222,145 shares of Series D-1 Preferred Stock voluntarily converted the Preferred Stock

into 2,221,450 shares of common stock.

March 30, 2022, the Company amended the Certificate of Designation filed with the Delaware Secretary of State to increase the authorized

shares of Series D-1 Preferred Stock to 11,241,000 shares.

the year ended December 31, 2021, the Company received consideration of $ 150,000 from an investor in exchange for an aggregate of 52,411

shares of restricted Series D-1 Preferred Stock that were issued during the first quarter of 2022.

the fourth quarter of 2022, the Company issued 475,766 shares of Series D-1 Preferred Stock upon the automatic conversion of $ 1,260,000

of principal and $ 101,640 accrued interest outstanding on the 2021 Notes.

Series D Preferred Stock and the Series D-1 Preferred Stock rank pari passu with each other.

11 unchanged sentences

If a Company Event occurs within two years of June 20, 2021 (the “Date of Issuance”), the holders

of D-Series D Preferred Stock will receive, for each share of D-Series Preferred Stock, an amount in cash equal to the Original Issue

of D-Series Preferred Stock will receive, for each share of D-Series Preferred Stock, an amount in cash equal to the Original Issue

Price (as defined in the respective Certificates of Designation) multiplied by four.

21 unchanged sentences

Stock Issuances

the year ended December 31, 2020, the Company issued 1,062,500

shares of immediately vested restricted common

stock with an aggregate issuance date value of $ 69,088 ,

which was recognized immediately as stock compensation within general and administrative expenses on the accompanying consolidated statements

of operations.

following summarizes the Common Stock Issuances activity during the year ended December 31, 2020:

of Common Stock Issuance Activity

Stock Issuance

Grant Date Value

Advisory Board Member

Board of Director

Board of Director/Officer

the year ended December 31, 2021, the Company issued an aggregate of 300,000

shares of immediately vested restricted common

stock with a grant date fair value of $ 23,199

for services.

the year ended December 31, 2021, the Company issued 2,221,450 shares of common stock upon the voluntary conversion of Series D-1 Convertible

Preferred Stock.

the year ended December 31, 2021, the Company issued an aggregate of 300,000 shares of immediately vested restricted common stock with

a grant date fair value of $ 23,199 for services.

the year ended December 31, 2021, the Company issued 2,221,450 shares of common stock upon the voluntary conversion of Series D-1 Preferred

the year ended December 31, 2021, the Company issued 65,666 shares of common stock upon automatic conversion of Series B Preferred Stock.

the year ended December 31, 2022, the Company issued an aggregate of 50,000 shares of immediately vested restricted common stock with

a grant date fair value of $ 3,025 for services.

Stock Incentive Plan and Warrants

6 unchanged sentences

The stock options are

exercisable over a period determined by the Board of Directors (through its Compensation Committee), but generally no longer than 10

exercised over a period determined by the Board of Directors (through its Compensation Committee), but generally no longer than 10

years after the date they are granted.

1 unchanged sentence

Compensation Plan.

were no stock options granted during the year ended December 31, 2021.

the year ended December 31, 2020, the Company issued 2,425,000

immediately vested stock options to an officer/director to purchase an aggregate of 2,425,000

shares of common stock with an exercise price

The stock options had an aggregate

grant date fair value of $ 62,880 ,

which was recognized immediately as stock compensation within general and administrative expenses on the accompanying consolidated

statements of operations.

the year ended December 31, 2020, the Company issued 100,000

immediately vested stock options to a director to purchase an aggregate of 100,000

shares of common stock with an exercise price

The stock options had an aggregate

grant date fair value of $ 1,414 ,

which was recognized immediately as stock compensation within general and administrative expenses on the accompanying consolidated

statements of operations.

options granted during the year ended December 31, 2020 were valued using the Black Scholes Model, with the following assumptions used:

Schedule of Stock Options Granted Valued Using Black Scholes Model

Expected terms (years)

Expected volatility

Risk-free interest rate

Expected dividend

were no stock options granted during the years ended December 31, 2022 and 2021.

following table summarizes option activity during the year ended December 31, 2022 and 2021:

Summary of Option Activity

Weighted Average

of Option Activity

Exercise Price

Outstanding and exercisable at January 1, 2021

Outstanding and exercisable at December 31, 2020

( 1,175,000 )

Outstanding and exercisable at December 31, 2021

Outstanding and exercisable at December 31, 2022

of December 31, 2022, the intrinsic value of outstanding and exercisable options was $ 0 .

following table summarizes information about stock options outstanding at December 31, 2022:

Summary of Stock Options Outstanding

of Stock Options Outstanding

Options Outstanding

Options Exercisable

Weighted Average

Remaining Life

Exercise Price

Outstanding Number of Options

Weighted Average Remaining Life In Years

Exercisable Number of Options

the year ended December 31, 2020, holders of warrants exercised warrants to purchase 7,855,062 shares of common stock at a price of $ 0.053

In connection with the exercises, the Company received cash proceeds of $ 418,677 and issued 7,855,062 shares of common stock.

the year ended December 31, 2022, the Company did not issue any warrants.

On August 30, 2021, a total of 68,723,698 of August 2016 warrants

the year ended December 31, 2021, holders of warrants exercised warrants to purchase 18,052,966 shares of common stock at a price of

1 unchanged sentence

In connection with the exercises, the Company received cash proceeds of $ 962,223 and issued 18,052,966 shares of common

On August 30, 2021, a total of 68,723,698 of August 2016 warrants expired.

the year ended December 31, 2020, the Company issued 62,500

three-year immediately vested warrants to board

members to purchase an aggregate of 62,500

shares of common stock with an exercise price

The warrants had an aggregate grant

date fair value of $ 1,372 ,

which was recognized immediately as stock compensation within general and administrative expenses on the accompanying consolidated

statements of operations.

the year ended December 31, 2021, the Company issued 25,000

three-year immediately vested warrants to an

advisory board member to purchase an aggregate of 25,000

shares of common stock with exercise price of

The warrants had an aggregate

grant date fair value of $ 488 ,

which was recognized immediately within stock compensation in general and administrative expenses.

the year ended December 31, 2021, the Company issued 25,000 three-year immediately vested warrants to an advisory board member to purchase

an aggregate of 25,000 shares of common stock with exercise price of $ 0.28620 per share.

The warrants had an aggregate grant date fair

value of $ 488 , which was recognized immediately within stock compensation in general and administrative expenses.

applying the Black-Scholes option pricing model to warrants granted, the Company used the following assumptions:

Schedule of Assumptions of Warrants

of Assumption of Warrants

For the Years Ended

2 unchanged sentences

Risk-free interest rate

.011 %- 0.18 %

Expected dividend

following table summarizes warrant activity during the year ended December 31, 2022 and 2021:

Summary of Warrant Activity

of Warrant Activity

Weighted Average

4 unchanged sentences

Outstanding and exercisable at December 31, 2021

( 18,052,966 )

( 68,723,698 )

Outstanding and exercisable at December 31, 2022

As of December 31, 2021, the intrinsic value of

outstanding and exercisable warrants was $ 0 .

of December 31, 2022, the intrinsic value of outstanding and exercisable warrants was $ 0 .

following table summarizes information about warrants outstanding at December 31, 2022:

Summary of Warrants Outstanding

of Warrants Outstanding

Warrants Outstanding

Warrants Exercisable

Weighted Average

Remaining Life

Exercise Price

Outstanding Number of Warrant

Weighted Average Remaining Life In Years

Exercisable Number of Warrants

of the outstanding warrants are not entitled to vote and the exercise prices of such warrants are subject to customary anti-dilution

domestic and foreign components of loss before income taxes from operations for the years ended December 31, 2022 and 2021 are as follows:

Schedule of Domestic and Foreign Loss Before Income Taxes

of Domestic and Foreign Loss Before Income Taxes

Years ended December 31

5 unchanged sentences

income tax provision (benefit) consists of the following:

Summary of Income Tax Provision (Benefit)

of Income Tax Provision (Benefit)

Years ended December 31

State and local:

Change in valuation allowance

1 unchanged sentence

reconciliations between the statutory federal income tax rate and the Company’s effective tax rate are as follows:

Schedule of Statutory Federal Income Tax Rate and Effective Tax Rate

of Statutory Federal Income Tax Rate and Effective Tax Rate

Years Ended December 31

4 unchanged sentences

Prior year true-up

Expiration of state net operating loss carryforwards

Expiration of federal and state net operating loss carryforwards

Expiration of warrants and options

3 unchanged sentences

components of the Company’s deferred income taxes are summarized below:

Schedule of Components of Deferred Income Taxes

of Components of Deferred Income Taxes

Deferred Tax Assets:

Net operating loss carryforwards

Research and development credit carryovers

Stock-based compensation

Intangible assets

Research and development credit carryovers

Capitalized R&D expenditures

Contribution carryovers

2 unchanged sentences

Deferred Tax Liabilities:

Intangible assets

Prepaid expenses

11 unchanged sentences

the net deferred tax asset.

inception of the Company on January 17, 2002, the Company has generated federal, state, and Australian tax net operating losses

of approximately $ 170

million, $ 150

million, and $ 139

respectively.

Under the Tax Cuts and Jobs Act, federal net operating losses incurred after December 31, 2017 may be carried forward

indefinitely.

The tax loss carryforwards of the Company may be subject to limitation by Section 382 of the Internal Revenue Code

with respect to the amount utilizable each year.

This limitation could reduce the Company’s ability to utilize net operating loss

carryforwards.

Federal net operating losses (“NOLS”) totaling $ 151.4

million expire in various amounts between 2022

Federal NOLS totaling $ 18.6 million

do not expire.

Schedule of Net Operating Loss

inception of the Company on January 17, 2002, the Company has generated federal, state, and Australian tax net operating losses of approximately

$ 165 million, $ 141 million, and $ 143 thousand, respectively.

Under the Tax Cuts and Jobs Act, federal net operating losses incurred after

December 31, 2017 may be carried forward indefinitely.

The tax loss carryforwards of the Company may be subject to limitation by Section

382 of the Internal Revenue Code with respect to the amount utilizable each year.

This limitation could reduce the Company’s ability

to utilize net operating loss carryforwards.

Federal net operating losses (“NOLs”) totaling $ 145.6 million expire in various

amounts between 2023 and 2037.

Federal NOLS totaling $ 19.9 million do not expire.

of Net Operating Loss

$ 165,489,113

1 unchanged sentence

$ 140,747,682

NOLS totaling $ 138,540

do not expire.

NOLS totaling $ 143,370 do not expire.

Year Generated

1 unchanged sentence

Company has determined that there are no uncertain tax positions as of December 31, 2022 or 2021.

Company files income tax returns in the U.S.

federal jurisdiction and the state of Tennessee.

The Company intends to permanently reinvest

earnings in its foreign subsidiary.

file income tax returns in the U.S., Tennessee, and Australia.

As of December 31, 2022, the U.S.

federal and Tennessee tax years open

to examination are 2019 through 2022.

The Australia income tax return remains open to examination for 2020 through 2022.

date, the Company’s operations conducted by its Australian subsidiary consist primarily of research and development activities.

1 unchanged sentence

At current tax rates,

no additional Federal income taxes (net of available tax credits) would be payable if such earnings were to be repatriated.

Company currently leases 4,500

square feet of corporate office space in Knoxville,

Tennessee through an operating lease agreement for a term of five

years ending on June

Payments are approximately $ 6,100

August 13, 2021, the Company negotiated a reduced rent from July 1, 2021 through December 31, 2021 in the amount of $ 6,100 per month.

expense for operating leases for the year ended December 31, 2021 was $ 86,545 ,

of which, $ 57,697

was included within research and development

was included within general and administrative

expenses on the consolidated statements of operations.

Total expense for operating leases for the year ended December 31, 2020

was $ 90,821 ,

of which, $ 60,547

was included within research and development

was included within general and administrative

expenses on the consolidated statements of operations.

no additional federal income taxes (net of available tax attributes) would be payable if such earnings were to be repatriated.

Company leased 4,500 square feet of corporate office space in Knoxville, Tennessee through an operating lease agreement for a term of

five years ending on June 30, 2022.

Payments were approximately $ 6,100 per month due to the Company negotiating a continued reduced rent

from January 1, 2022 through June 30, 2022.

June 30, 2022, the lease expired and was not renewed.

On June 18, 2022, the Company moved into 2,700 square feet of leased corporate

office space in Knoxville, Tennessee through an operating lease agreement for a term of three years ending June 30, 2025.

base rent ranges from $ 4,053 to $ 4,278 over the term on the lease.

expense for operating leases for the year ended December 31, 2022 was $ 63,066 , of which, $ 42,044 was included within research and development

and $ 21,022 was included within general and administrative expenses on the consolidated statements of operations.

Total expense for operating

leases for the year ended December 31, 2021 was $ 86,545 , of which, $ 57,697 was included within research and development and $ 28,848 was

included within general and administrative expenses on the consolidated statements of operations.

of December 31, 2022, the Company had no leases that were classified as a financing lease.

2 unchanged sentences

summary of the Company’s right-of-use assets and liabilities is as follows:

Schedule of Right-of-use Assets and Liabilities

of Right-of-use Assets and Liabilities

For The Years Ended

7 unchanged sentences

Operating leases

minimum payments under non-cancellable lease as of December 31, 2021 were as follows:

Schedule of Future Minimum Payments Under Non-cancellable Lease

5.0 % - 8.0 %

minimum payments under the non-cancellable lease as of December 31, 2022 were as follows:

of Future Minimum Payments Under Non-cancellable Lease

Total future minimum lease payments

6 unchanged sentences

in 2022 or 2021.

October 25, 2021, the Company received a grant award of $ 2,500,000

from the State of Tennessee for the study of

animal cancers and dermatological disorders for the period October 15, 2021 to June 30, 2022.

As of December 31, 2021, the grant award is recorded as unearned grant revenue liability on the accompanying consolidated balance sheets.

October 25, 2021, the Company received a grant award of $ 2,500,000 from the State of Tennessee for the study of animal cancers and dermatological

disorders for the period October 15, 2021 to June 30, 2022 (the “Tennessee Grant” or “Grant”).

The Tennessee

Grant was pre-funded;

therefore, the funds do not need to be used in full by June 30, 2022.

The Tennessee Grant was provided as reimbursement

of research and development expenses related to the development of animal health drug products.

The Company has elected gross presentation

of the Tennessee Grant income earned and the related research and development expenses with Grant income presented as Grant revenue in

the period in which it is earned, and qualifying costs presented as research and development expenses included in the Company’s

statement of operations, in the period that such costs are incurred.

As of December 31, 2022, $ 1,510,958 has been recorded as unearned

Grant revenue liability on the accompanying audited consolidated balance sheets.

The Company recorded $ 989,042 and $ 0 of Grant revenue

during the years ended December 31, 2022 and 2021, respectively.

License Transactions

the third quarter of 2019, the Company entered into a dialog with Bascom Palmer Eye Institute (“BPEI”) regarding collaboration

on BPEI’s ophthalmic photodynamic antimicrobial therapy (“PDAT”) using the Company’s pharmaceutical-grade RBS.

On February 16, 2022, and later amended on May 11, 2022, the Company entered into an option agreement with the University of Miami (“UM”)

for an exclusive worldwide license of intellectual property (“IP”) developed by the Ophthalmic Biophysics Center (“OBC”)

of BPEI that included the use of OBC’s PDAT medical device in combination with formulations of the Company’s pharmaceutical-grade

RBS for the treatment of bacterial, fungal, and viral infections of the eye.

The Company completed the arrangements of this collaboration

during the third quarter of 2022, whereby the Company paid $5,000 for the option that expires on May 31, 2023;

agreed to pay up to $10,000

of new UM patent expenses for this IP during the period of the option and up to $25,000 of past UM patent expenses for this IP;

into a sponsored research agreement with UM on September 16, 2022 to study the combination of OBC’s PDAT and TOP PV-305, a formulation

of the Company’s pharmaceutical-grade RBS, for the treatment of infectious keratitis.

Commitments, Contingencies and Litigation

4 unchanged sentences

Subsequent Events

Company has evaluated events that have occurred after the balance sheet date and through the date the financial statements were

Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required

adjustment or disclosure in the financial statements, except as disclosed below.

On February 23,

2022, the Company negotiated a continued reduced rent from January 1, 2022 through June 30, 2022 in the amount of $ 6,100 per month.

Company has evaluated events that have occurred after the balance sheet date and through the date the financial statements were issued.

Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment

or disclosure in the financial statements, except as disclosed below.

Notes Payable

to December 31, 2022, the Company entered into a 2022 Note with a related party investor (a Company Director) in the aggregate principal

amount of $ 600,000 .

Preferred Stock

Subsequent to December 31, 2022, the Company issued

an aggregate of 18,872 shares of Series D-1 Convertible Preferred Stock upon automatic conversion of a 2021 Note.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data