Annual report pursuant to Section 13 and 15(d)

Stockholders' Deficit

v3.19.2
Stockholders' Deficit
12 Months Ended
Dec. 31, 2018
Stockholders Deficit  
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 December 31, 2018 and December 31, 2017. As of December 31, 2018, and 2017, 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, 2018 and 2017. As of December 31, 2018, and 2017, the Company had 2,561,238,082 and 2,103,464,006, respectively, 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 $614,346 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, 2018, the Company issued an aggregate of 31,000,794 shares of its common stock for services rendered with an estimated fair value of $718,099.

 

During the year ended December 31, 2018, the Company sold an aggregate of 18,693,636 shares of its common stock for net proceeds of $152,000.

 

During the year ended December 31, 2018, the Company issued an aggregate of 80,428,246 shares of its common stock in settlement of $804,279 related party notes payable and accrued interest.

 

During the year ended December 31, 2018, the Company issued 147,927,794 shares of its common stock in part settlement of $5,466,333 convertible notes payable, accrued interest and penalties.

 

During the year ended December 31, 2018, the Company issued 57,676,810 shares of its common stock in settlement of a legal case at a cost of $1,701,466.

 

During the year ended December 31, 2018, the company issued 122,046,796 shares of its common stock in exchange for exercise of warrants on a cashless basis.

 

During the year ended December 31, 2018, the company received proceeds from common stock subscriptions for $90,000.

 

Options

 

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Binomial Option Pricing 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, 2018 and 2017:

 

    Shares    

Weighted-Average

Exercise Price

   

Weighted Average

Remaining

Contractual Term

   

Aggregate

Intrinsic Value

Outstanding at January 1, 2017     1,000,000,000     $ 0.005       8.76   $ 15,400,000
Granted     -                      
Forfeitures or expirations     -                      
Outstanding at December 31, 2017     1,000,000,000     $ 0.005       7.76   $   15,400,000
Granted     -                        
Forfeitures or expirations     -                        
Outstanding at December 31, 2018     1,000,000,000     $ 0.005       6.76       15,400,000
Exercisable at December 31, 2018     1,000,000,000     $ 0.005       6.76     $ 15,400,000

   

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 $0.0203 as of December 31, 2018, 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, 2018(1):

 

Options Outstanding     Options Exercisable  

      Exercise

     Price

   

Number of

Options

   

Weighted Average

Remaining Life

In Years

   

Exercisable

Number of

Options

 
$ 0.0005       1,000,000,000     6.76       1,000,000,000  
                           

 

The stock-based compensation expense related to option grants was $450,000 and $600,000 during the year ended December 31, 2018 and 2017, respectively.

 

(1) On February 27, 2019 Charles Larsen and Donald Steinberg cancelled an aggregate of 1,000,000,000 options (See Subsequent Events, Note 15).

 

Warrants

 

The following table summarizes the stock warrant activity for the two years ended December 31, 2018:

 

    Shares    

Weighted-Average

Exercise Price

   

Weighted Average

Remaining

Contractual Term

   

Aggregate

Intrinsic Value

 
Outstanding at January 1, 2017     -     $ -           $ -  
Granted     109,653,846       0.039       5.00     -  
Forfeitures or expirations     (10,000,000 )                      
Outstanding at December 31, 2017     -                          
Granted     50,846,817       0.037       4.67       52,000  
Exercised     (39,633,846 )     0.040       4.26          
Forfeitures or expirations     -       -                  
Outstanding at December 31, 2018     110,846,817     $ 0.039       4.18     $ 52,000  
Exercisable at December 31, 2018     110,846,817     $ 0.039       4.18     $ 52,000  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price of $0.0203 as of December 31, 2018, which would have been received by the warrant holders had those option holders exercised their warrants as of that date.

 

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

 

Warrants Outstanding     Warrants Exercisable  

      Exercise

     Price

   

Number of

Warrants

   

Weighted Average

Remaining Life

In Years

   

Exercisable

Number of

Warrants

 
$ 0.04       99,653,846     4.18       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)