Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
9 Months Ended
Sep. 30, 2017
Equity [Abstract]  
STOCKHOLDERS' EQUITY

6.           STOCKHOLDERS’ EQUITY

 

The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 200,000,000 shares of its $0.001 par value common stock. During the year ended December 31, 2013, the Company amended its certificate of incorporation to increase the number of common shares from 100,000,000 to 200,000,000. The amendment went into effect on September 7, 2013. On August 3, 2017, the Company’s Board of Directors voted to approve an increase in authorized common stock shares outstanding from 200,000,000 shares to 750,000,000 shares of the Company’s common stock. This increase is subject to shareholder approval.

 

Series A Preferred Stock

 

The Company has designated 150,000 shares of its preferred stock as Series A Preferred Stock. Each share of Series A Preferred Stock has a stated value of $10. The Series A Preferred Stock is convertible into shares of the Company’s common stock by dividing the stated value by a conversion price of $0.10 per share. The Series A Preferred Stock shall have voting rights on an as converted basis (subject to limitations) and liquidation preference for each share of Series A Preferred Stock at an amount equal to the stated value per share. As of September 30, 2017, the Company has 45,000 shares of Series A Preferred Stock outstanding.

 

On August 14, 2017, the Company entered into Securities Purchase Agreements with two accredited investors. In connection with these agreements, the Company issued 45,000 shares of Series A Preferred Stock and warrants to acquire 9,000,000 shares of common stock. The shares of Series A Preferred Stock are convertible, at any time at the option of the holder, into an aggregate of 4,500,000 shares of the Company’s common stock. The Warrants shall be exercisable for a period of five years at an exercise price of $0.15 per share.

 

The Company recognized the value attributable to the conversion feature of the issued warrants of $650,421 as a charge against additional paid in capital up to $450,000 with the excess of $200,421 charged to change in fair value of warrant liability during the nine months ended September 30, 2017. The Company valued the warrants using the Binomial Lattice pricing model as described in Note 4.

  

 Common Stock

 

On April 11, 2017, the Company issued a total of 1,038,301 shares of its common stock in conjunction with the conversion of one of the 6% Convertible Debentures plus accrued interest (See Note 5). Of the total amount of shares issued, 1,000,000 were for the conversion of a Note for $75,000 and 38,301 shares were issued for the conversion of accrued interest of $2,873.

 

On July 14, 2017, in accordance with the terms of a Securities Purchase Agreement, the Company issued 666,667 shares to an investor upon conversion of a note payable held by the investor for $50,000. The cost basis for the shares issued was $0.075.

 

On July 31, 2017, in accordance with the terms of a Securities Purchase Agreement, the Company issued 21,370 shares to a related party in lieu of cash for payment of accrued interest of $2,130. The cost basis for the shares issued was $0.10.

 

On September 29, 2017, in accordance with the terms of a Securities Purchase Agreement, the Company issued 1,507,989 shares to investors in lieu of cash for payment of accrued interest of $79,169. The cost basis for the shares issued was $0.0525.

 

Common Stock Warrants

 

The Company accounts for warrants as either equity instruments or liabilities depending on the specific terms of the warrant agreement. As of September 30, 2017, the Company had 39,404,669 warrants outstanding which are all classified as equity instruments and are fully exercisable as of September 30, 2017.

 

The following table summarizes the Company’s common stock warrant activity during the nine months ended September 30, 2017:

 

      Warrants    

Weighted Average 

Exercise Price 

 
Outstanding as of December 31, 2016       28,424,669     $ 0.29  
   Granted       11,000,000       0.14  
   Exercised              
   Forfeited/cancelled       (20,000 )     1.15  
Outstanding as of September 30, 2017       39,404,669     $ 0.25