Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
STOCKHOLDERS' EQUITY
10. 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 2,000,000,000 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 September 7, 2013.

 

On January 9, 2018, the Company’s Board of Directors voted to approve an increase in authorized common stock shares outstanding from 200 million shares to 2 billion shares of the Company’s common stock. This increase was approved by the shareholders in the first quarter of 2018.

 

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 December 31, 2018, and 2017, the Company has 82,500 and 55,000 shares of Series A Preferred Stock outstanding, respectively.

 

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 year ended December 31, 2017. The Company valued the warrants using the Binomial Lattice pricing model as described in Note 6.

 

On October 24, 2017, the Company entered into Securities Purchase Agreements with an accredited investor. In connection with the agreement, the Company issued 10,000 shares of Series A Preferred Stock and warrants to acquire 2,000,000 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 1,000,000 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 $93,312 as a charge against additional paid in capital. The Company valued the warrants using the Binomial Lattice pricing model as described in Note 6.

 

On February 2, 2018, the Company entered into Securities Purchase Agreements with four accredited investors. In connection with these agreements, the Company issued 27,500 shares of Series A Preferred Stock and warrants to acquire 5,500,000 shares of common stock in consideration of $275,000. The shares of Series A Preferred Stock are convertible, at any time at the option of the holder, into an aggregate of 2,750,000 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 $226,833 as a charge against additional paid in capital. The Company valued the warrants using the Binomial Lattice pricing model as described in Note 6

 

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. 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.

 

On October 4, 2017, the Company issued 500,000 shares of its common stock with a fair value of $27,400 to a vendor in exchange for consulting services.

 

On October 6, 2017 the Company issued a total of 10,000,000 shares of its common stock in conjunction with the conversion of $500,000 of its Related Party Convertible Notes Payable.

 

On October 16, 2017 the Company issued a total of 4,000,000 shares of its common stock in conjunction with the conversion of $200,000 of its Related Party Convertible Notes Payable plus accrued interest. Of the total amount of shares issued, 1,000,000 were for the conversion of the Notes Payable for $50,000 and 3,000,000 shares were issued for the conversion of accrued interest of $150,000.

 

On February 16, 2018, the Company’s Board of Directors approved the issuance of 3,666,666 shares of the Company’s common stock to two consultants for services rendered amounting to $330,000.

 

During 2018, 29 investors converted their Convertible Debenture totaling $1,225,000 plus accrued interest of $52,066, into 17,027,544 shares of the Company’s common stock.

 

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 December 31, 2018, the Company had 38,999,990 warrants outstanding which are all classified as equity instruments and are fully exercisable.

 

The following table summarizes the Company’s common stock warrants activity for the years ended December 31, 2018 and 2017:

 

      Warrants     Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
 
Outstanding as of December 31, 2016       28,424,669     $ 0.29     $  
Granted       13,250,000       0.14          
Exercised                      
Forfeited/Canceled       (645,000 )     1.00          
Outstanding as of December 31, 2017       41,029,669       0.23     $  
Granted       5,875,000       0.15          
Exercised                      
Forfeited/Canceled       (7,904,679 )     0.43          
Outstanding as of December 31, 2018       38,999,990     $ 0.17     $  

 

The aggregate intrinsic value represents the pretax intrinsic value, based on the warrants with an exercise price less than the Company’s stock price of $0.03 at December 31, 2018, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.