Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Deficit

v3.8.0.1
Shareholders' Deficit
9 Months Ended
Sep. 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 September 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 September 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 and discretionary bonuses. 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 nine months ended September 30, 2017, the Company issued 3,598,996 shares of common stock with a value of $195,555 related to these consulting agreements.

 

During the nine months ended September 30, 2017, the Company issued pursuant to two private placement offerings 32,200,069 shares of common stock and the same number of warrants for cash of $727,750 and conversion of notes and accrued interest in the amount of $66,367. The Company also issued 106,110,372 shares of common stock for the conversion of notes and accrued interest of $1,108,321, which resulted in a loss on debt extinguishment of $269,255 during the nine months ended September 30, 2017.

 

Also, during the nine months ended September 30, 2017, the Company issued 126,618 shares of common stock valued at $7,530 related to the extension of outstanding notes and lock-up agreements, 6,125,000 shares of common stock valued at $202,681 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 $86,994 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. During the quarter ended September 30, 2017, the Company issued 4,000 shares of Series AA Preferred Stock to an officer and director of the Company for $4. As of September 30, 2017, there were 5,000 shares of Series AA Preferred Stock outstanding.

 

Warrants

 

During the nine months ended September 30, 2017, in conjunction with the sale of common stock and issuance of notes, the Company issued three and five-year common stock purchase warrants to acquire up to 32,200,069 shares of common stock. These warrants have exercise prices ranging from $0.0165 to $1.00 per share. In addition, during the nine months ended September 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 September 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     33,300,747     $ 0.24  
Cancelled     -     $ -  
Exercised     -     $ -  
Outstanding at September 30, 2017     42,795,687     $ 0.26  
                 
Exercisable at September 30, 2017     42,795,687     $ 0.26  

 

Stock Options

 

During the nine months ended September 30, 2017, the Company granted stock options to independent contractors exercisable into up to 25,272,305 shares of common stock with exercise prices ranging from $0.0269 to $0.054 per share, lives ranging from three to ten years, and cashless exercise rights and were valued at $1,139,403 using the Black Scholes option pricing model. The stock options vested on grant and were expensed in full during the nine months ended September 30, 2017.

 

In addition, during the nine months ended September 30, 2017, the Company issued stock options to independent contractors exercisable into up to 67,931,064 shares of common stock in exchange for the conversion of $1,467,311 of deferred compensation due to the independent contractors. These options have an exercise price of $0.0216 per share, a three-year life and cashless exercise rights. These options vested on grant. The balance of all stock options outstanding as of September 30, 2017 is as follows:

 

          Weighted Average     Weighted Average     Aggregate  
          Exercise Price     Remaining Contractual     Intrinsic  
    Options     Per Share     Term (years)     Value  
Outstanding at January 1, 2017     -     $ -                  
Granted     93,203,369     $ 0.029                  
Cancelled     -     $ -                  
Exercised     -     $ -                  
Outstanding at September 30, 2017     93,203,369     $ 0.029       4.29     $ 2,674,937  
                                 
Exercisable at September 30, 2017     93,203,369     $ 0.029       4.29     $ 2,674,937  

 

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

 

    Nine months ended
    September 30, 2017
     
Expected term   1.5 - 5 years
Exercise price   $0.0216 - $0.054
Expected volatility   184% - 190%
Expected dividends   None
Risk-free interest rate   1.23% - 1.79%
Forfeitures   None