Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Deficit

v3.7.0.1
Shareholders' Deficit
6 Months Ended
Jun. 30, 2017
Equity [Abstract]  
Shareholders' Deficit

Note 4 - Shareholders’ Deficit

 

Increase in Authorized Shares

 

On January 17, 2017, an increase in authorized capital stock from 250,000,000 shares to 500,000,000 shares became effective.

 

Series B Convertible Preferred Stock

 

At June 30, 2017, there are 50,000 shares of Series B Convertible Preferred Stock (“Series B”) which are authorized and convertible into a like amount of common shares. None of the Series B have been issued or are outstanding at June 30, 2017.

 

Common Stock

 

The Company has entered into consulting agreements with various consultants for service to be provided to the Company. The agreements stipulate a monthly fee and a certain number of shares that the consultant vests in over the term of the contract. The consultant is issued a prorated number of shares of common stock at the beginning of the contract, which the consultant earns over a three-month period. At the anniversary of each quarter, the consultant is issued a new allotment of common stock during the first 3 years of engagement. In accordance with ASC 505-50 – Equity-Based Payment to Non-Employees, the common stock shares issued to the consultant are valued upon their vesting, with interim estimates of value as appropriate during the vesting period. During the six months ended June 30, 2017, the Company issued 3,022,336 shares of common stock with a value of $183,835 related to these consulting agreements.

 

During the six months ended June 30, 2017, the Company issued pursuant to a private placement offering 19,544,908 shares of common stock and the same number of warrants for cash of $472,749 and conversion of notes and accrued interest in the amount of $66,367. The Company also issued 83,085,396 shares of common stock for the conversion of notes and accrued interest of $761,810 which resulted in a loss on debt extinguishment of $322,997 during the six months ended June 30, 2017.

 

 

Also, during the six months ended June 30, 2017, the Company issued 114,118 shares of common stock valued at $7,144 related to the extension of outstanding notes and lock-up agreements, 2,500,000 shares of common stock valued at $98,950 for partial repayment of a $175,000 accrued liability in connection with a variable note settlement agreement entered into in December 2016, and 1,565,816 shares of common stock valued at $86,995 for settlement of the principal and interest outstanding on two notes payable.

 

Series AA Preferred Shares

 

On February 22, 2013, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000) shares of a new series of preferred stock, par value $0.0001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.

 

Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. As of June 30, 2017, there were 1,000 shares of Series AA Preferred stock outstanding.

 

Warrants

 

During the six months ended June 30, 2017, in conjunction with the sale of common stock and issuance of notes, the Company issued five-year common stock purchase warrants to acquire up to 19,544,909 shares of common stock. These warrants have exercise prices ranging from $0.0165 to $0.1275 per share. In addition, during the six months ended June 30, 2017, the Company issued five-year common stock purchase warrants to acquire up to 1,100,678 shares of common stock valued at $71,113 related to consulting services received by the Company. These warrants have exercise prices ranging from $0.0961 to $0.2669 per share. The balance of all warrants outstanding as of June 30, 2017 is as follows:

 

    Outstanding Warrants  
          Weighted Average  
          Exercise Price  
    Shares     Per Share  
Outstanding at January 1, 2017     9,494,940     $ 0.33  
Granted     20,645,587     $ 0.06  
Cancelled     -     $ -  
Exercised     -     $ -  
Outstanding at June 30, 2017     30,140,527     $ 0.14  
                 
Exercisable at June 30, 2017     30,140,527     $ 0.14  

 

Stock Options

 

During the six months ended June 30, 2017, the Company granted stock options to independent contractors exercisable into up to 19,250,000 shares of common stock. These options have an exercise price of $0.054 per share, a ten-year life, cashless exercise rights and were valued at $1,000,090 using the Black Scholes option pricing model. The stock options vested immediately and were expensed in full during the six months ended June 30, 2017. The balance of all stock options outstanding as of June 30, 2017 is as follows:

 

          Weighted Average     Weighted Average
Remaining
    Aggregate  
          Exercise Price     Contractual     Intrinsic  
    Options     Per Share     Term (years)     Value (1)  
Outstanding at January 1, 2017     -     $ -       -          
Granted     19,250,000     $ 0.054       9.94          
Cancelled     -     $ -       -          
Exercised     -     $ -       -          
Outstanding at June 30, 2017     19,250,000     $ 0.054       9.94     $ -  
                                 
Exercisable at June 30, 2017     19,250,000     $ 0.054       9.94     $ -  
                                 
Weighted average fair value of options granted during the period     19,250,000     $ 0.052                  

 

 

The following assumptions were used at June 30, 2017 to value the stock options using the Black Scholes option pricing model.

 

    Six months ended  
    June 30, 2017  
       
Expected term     5 years  
Exercise price   $ 0.05  
Expected volatility     184 %
Expected dividends     None  
Risk-free interest rate     1.79 %
Forfeitures     None