Annual report pursuant to Section 13 and 15(d)

Stockholders' Deficit

v3.8.0.1
Stockholders' Deficit
12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
Stockholders' Deficit

NOTE 10 – STOCKHOLDERS’ DEFICIT

 

 Preferred stock

 

The Company is authorized to issue 50,000,000 shares of $0.001 par value preferred stock as of September 30, 2017 and December 31, 2016. As of December 31, 2017 and 2016, the Company has designated and issued 10,000,000 shares of Class A Preferred Stock.

 

Each share of Class A Preferred Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion, dividend or distribution upon liquidation rights.

 

Common stock

 

The Company is authorized to issue 5,000,000,000 shares of $0.001 par value common stock as of December 31, 2017 and 2016. As of December 31, 2017 and 2016, the Company had 2,103,464,006 and 1,620,996,998 common shares issued and outstanding.

 

In 2016, the Company issued an aggregate of 91,333,333 shares of its common stock for services rendered with an estimated fair value of $1,218,879.

 

In 2016, the Company issued an aggregate of 409,674,303 shares of its common stock in settlement of related party notes payable in aggregate of $450,642.

 

In 2016, the Company issued an aggregate of 4,565,860 shares of its common stock in settlement of notes payable and purchase agreements of $43,750.

 

In 2016, the Company canceled and returned to treasury an aggregate of 65,500,000 shares of previously issued common stock.

 

In 2016, the Company sold an aggregate of 69,623,874 shares of its common stock for net proceeds of $349,500.

 

In December 2016, the Company’s board of directors approved bonuses to the officers of the Company of an aggregate of 25,000,000 shares. As such, the Company recorded stock based compensation of $2,025,000 based on the fair value at the date of grant.

 

During the year ended December 31, 2017, the Company issued an aggregate of 344,033,333 shares of its common stock for services rendered with an estimated fair value of $19,068,583.

 

During the year ended December 31, 2017, the Company issued an aggregate of 29,545,455 shares of its common stock for prior year officer stock-based compensation accrual.

 

During the year ended December 31, 2017, the Company issued an aggregate of 20,000,000 shares of its common stock as replacement shares previously canceled in 2016 as part of settlement agreement.

 

During the year ended December 31, 2017, the Company sold an aggregate of 8,166,667 shares of its common stock for net proceeds of $85,000.

 

During the year ended December 31, 2017, the Company issued an aggregate of 62,721,553 shares of its common stock in settlement of $616,095 related party notes payable and accrued interest.

 

During the year ended December 31, 2017, the Company issued 3,000,000 shares of its common stock in part settlement of $140,000 convertible notes payable, accrued interest and penalties.

 

During the year ended December 31, 2017, the Company issued 15,000,000 shares of its common stock as part investment into Bougainville Ventures, Inc.

 

Options

 

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla" options, as defined in the accounting standards codification.

 

The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. 

 

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

 

The following table summarizes the stock option activity for the years ended December 31, 2017 and 2016:

 

    Shares  

Weighted-Average

Exercise Price

 

Weighted Average

Remaining

Contractual Term

 

Aggregate

Intrinsic Value

Outstanding at January 1, 2016     1,000,000,000     $ 0.005       9.77     $ 23,300,000  
Granted     —                            
Forfeitures or expirations     —                            
Outstanding at December 31, 2016     1,000,000,000     $ 0.005       8.76     $ 76,000,000  
Granted     —                            
Forfeitures or expirations     —                            
Outstanding at December 31, 2017     1,000,000,000     $ 0.005       7.76       53,800,000  
                                 
Exercisable at September 30, 2017     750,000,000     $ 0.005       7.76     $ 40,350,000  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $0.0588 as of December 31, 2017, which would have been received by the option holders had those option holders exercised their options as of that date.

  

The following table presents information related to stock options at December 31, 2017:

 

Options Outstanding   Options Exercisable

     Exercise

     Price

 

Number of

Options

 

Weighted Average

Remaining Life

In Years

 

Exercisable

Number of

Options

$ 0.005       1,000,000,000     7.76     750,000,000  
                         

 

As of December 31, 2017, stock-based compensation of $450,000 remains unamortized and is expected to be amortized over the weighted average remaining period of 0.75 years.

 

The stock-based compensation expense related to option grants was $600,000 and $600,000 during the year ended December 31, 2017 and 2016, respectively.

 

Warrants

 

The following table summarizes the stock warrant activity for the two years ended December 31, 2017:

 

    Shares  

Weighted-Average

Exercise Price

 

Weighted Average

Remaining

Contractual Term

 

Aggregate

Intrinsic Value

Outstanding at January 1, 2016     —       $ —               $ —    
Granted     —                            
Forfeitures or expirations     —                            
Outstanding at December 31, 2016     —                            
Granted     109,653,846     $ 0.039     5.00     $ 158,000  
Forfeitures or expirations     (10,000,000 )   $ 0.025                  
Outstanding at December 31, 2017     99,653,846     $ 0.04       4.81     $ 1,873,492  
                                 
Exercisable at December 31, 2017     99,653,846     $ 0.04       4.81     $ 1,873,492  

  

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $0.0588 as of December 31, 2017, which would have been received by the option holders had those option holders exercised their options as of that date.

 

The following table presents information related to warrants at December 31, 2017:

 

Warrants Outstanding   Warrants Exercisable

     Exercise

     Price

 

Number of

Options

 

Weighted Average

Remaining Life

In Years

 

Exercisable

Number of

Options

$ 0.04       99,653,846     4.81     99,953,846  
                         

 

In connection with the issuance of convertible notes payable, the Company issued an aggregate of 109,653,846 warrants to purchase the Company’s common stock from $0.025 to $0.04, vesting immediately and expiring 5 years from the date of issuance. (See Note 8)

 

Restricted Stock Units (“RSU”)

 

The following table summarizes the restricted stock activity for the nine months ended September 30, 2017:

  

  Restricted shares units issued as of January 1, 2016       —    
  Granted       10,000,000  
  Forfeited       —    
  Total Restricted Shares Issued at December 31, 2016       10,000,000  
  Granted       —    
  Forfeited       —    
  Total Restricted Shares Issued at December 31, 2017       10,000,000  
  Vested at December 31, 2017       —    
  Unvested restricted shares as of December 31, 2017       10,000,000  

 

In April 2016, the Company granted to Robert Cronin and Robert Peak an aggregate of 10,000,000 shares of restricted common stock each vesting two years from Anniversary. On November 3, 2016, Mr. Cronin and Mr. Peak each agreed to return to treasury all 20,000,000 shares to the Company, and the Company agreed to issue Mr. Cronin and Mr. Peak 2,500,000 restricted shares each. The fair value of the granted restricted stock units vested in 2017 and 2016 of $210,750 and $303,750 was recognized in operations as stock based compensation.

 

As of December 31, 2017, stock-based compensation related to restricted stock awards of $73,500 remains unamortized and is expected to be amortized over the weighted average remaining period of 0.25 years.