Common Stock [Text Block] | 13. Common Stock The Company was authorized to issue a total of 510,000,000 shares of stock, of which 500,000,000 shares were designated Common Stock, par value of $0.0001 per share with one vote in respect of each share held and no cumulative voting rights (“Common Stock”), and 10,000,000 are designated preferred stock, par value of $0.0001 per share with one vote in respect of each share held (“Preferred Stock”). There were no shares of Preferred Stock issued or outstanding as of December 31, 2016 and no such shares were issued during the three months ended March 31, 2017. In January 2017, the Board of Directors agreed to increase the Company’s authorized shares of common stock to 750,000,000. The Company filed the Restated Charter with the Secretary of State of the State of Delaware on April 25, 2017 to increase the Company’s authorized shares to 760,000,000, of which 750,000,000 shares were designated common stock, par value of $0.0001 per share and 10,000,000 designated preferred stock, par value of $0.0001 per share. Proxy On January 31, 2017, at a special meeting of the Board of Directors, our Board of Directors approved by unanimous vote to seek shareholder approval of certain proposals by written consent that, to adopt and effectuate, will require the majority consent of our stockholders. These proposals were submitted to our stockholders pursuant to our definitive proxy statement on Schedule 14A, filed on March 2, 2017 with the Securities and Exchange Commission (“SEC”). On April 24, 2017, the Company received the written consent of more than a majority of the voting power of its common stock outstanding as of the record date in favor of the proposals. Under the proposals we were soliciting our stockholders’ written consent to approve the filing of an amended and restated certificate of incorporation in Delaware (“Restated Charter”), to increase the number of authorizes shares of our Common Stock, $0.0001 par value per share (“Common Stock”) from 500,000,000 shares of Common Stock to 750,000,000 shares of Common Stock (the “Authorized Common Stock Increase”), and with such Authorized Common Stock Increase to be effective at such time and date within one year after the date such action is approved by the Majority Stockholders, if at all, as determined by the Board of Directors in its sole discretion (the “Authorized Common Stock Increase Proposal”). Included within our definitive proxy statement on Schedule 14A, filed as of March 2, 2017 with the SEC, we submitted a proposal to our stockholders seeking written consent to approve the filing of an amended and restated certificate of incorporation in Delaware (the “Restated Charter”), or in a subsequent amendment to the Restated Charter, provisions to effect a reverse split of our issued and outstanding Common Stock, within a range of not less than one-for-fifteen (1:15) and not more than one-for-fifty (1:50), with such ratio to be determined by the Board of Directors, in its sole discretion (the “Reverse Split”), and with such Reverse Split to be effective at such time and date within one year after the date such action is approved by the stockholders, if at all, as determined by the Board of Directors in its sole discretion (the “Reverse Split Proposal”). We obtained stockholder consent to the Reverse Split Proposal, but have yet to effectuate the Reverse Split. Any decision to effectuate the Reverse Split will be determined by our Board of Directors based on the requirements to list our Common Stock on the Nasdaq Capital Market and shall become effective only (a) upon the approved filing of the Restated Charter to consummate the Reverse Split with the Secretary of State of the State of Delaware, including the final reduced number of shares of Common Stock into which our currently outstanding shares will be converted; and (b) upon announcement of the Reverse Split by FINRA. If implemented, the Reverse Stock Split will only effect our outstanding Common Stock and shares of Common Stock issuable upon conversion of convertible securities and exercise of warrants and options. It will not effect the number of shares of Common Stock we are authorized to issue under our Restated Charter. The purpose of the Reverse Split is to enable us to qualify our Common Stock for listing on a national stock exchange such as The Nasdaq Capital Market or the NYSE AMEX. Our Common Stock is currently traded on the OTC Markets OTCQB marketplace. Such trading market is considered to be less efficient than that provided by a stock exchange such as The Nasdaq Stock Market or NYSE AMEX. In order for us to list our Common Stock on The Nasdaq Stock Market or NYSE MKT, we must fulfill certain listing requirements, including minimum bid price requirements for our Common Stock. Conversion of Obligations to Stockholder During the six months ended June 30, 2017, certain related parties agreed to convert $2,320,400 of such Stockholder advances received on or before December 31, 2016 and $326,319 of such Stockholder advanced received in 2017 along with accrued interest of $92,319 into units of our securities consisting of (a) 36,520,494 shares of our Common Stock (at a conversion price of $0.075 per share) plus (b) an eighteen-month warrant to purchase an additional 36,520,494 share of Common Stock at an exercise price of $0.09 per share and (c) a five-year warrant to purchase an additional 36,520,494 shares of Common Stock at an exercise price of $0.1125 per share containing identical terms to the units of equity securities which we sold in our private placement to unaffiliated accredited investors between November 2016 and March 31, 2017. In May 2017, the related parties agreed to exchange one Class A warrant and one Class B warrants for 1.5 shares of Common Stock. Upon exchange, the holders will receive 54,680,744 shares of Common Stock. Sale of Common Stock In January through March 2017 (the “Closing”), the Company received an aggregate of $688,000 in gross cash proceeds from 21 accredited investors (the “Purchasers”) in connection with the sale of approximately 68.80 units of securities (each a “Unit” and collectively, the “Units”) pursuant to the terms and conditions of Subscription Agreements (the “Subscription Agreements”) by and among the Company and each of the Purchasers. Pursuant to its private placement memorandum, dated as of October 31, 2016 (the “Memorandum”), the Company is offering, through a placement agent, a maximum of 500 Units of securities at a purchase price of $10,000 per Unit for up to $5,000,000 in gross proceeds (the “Offering”). Each Unit consists of up to (a) 133,333.33 shares of Common Stock, par value $0.0001 (the “Common Stock”), (b) 18 month warrants to purchase 133,333.33 shares of Common Stock at an exercise price of $0.09 per share (the “Class A Warrants”), and (c) five year warrants to purchase 133,333.33 shares of Common Stock at an exercise price of $0.1125 per share (the “Class B Warrants” and together with the Class A Warrants, the “Investor Warrants”). If all 500 Units are sold, the Company will issue an aggregate of 66,666,667 shares of its Common Stock and Investor Warrants to purchase up to 133,333,334 shares of Common Stock. The Offering terminated on March 31, 2017. In connection with the Closing, the Company issued an aggregate of 9,173,331 shares of Common Stock at $0.075, Class A Warrants to purchase 9,173,331 shares of Common Stock at an exercise price of $0.09 per share and Class B Warrants to purchase 9,173,331 shares of Common Stock at an exercise price of $0.1125 per share. See Note 15 Warrants for additional information. In connection with the Closing, the Company paid to the placement agent an aggregate of $88,040 in cash compensation, representing fees and an expense allowance. In addition, the Company agreed to issue a warrant to the placement agent to purchase an aggregate of 2,222,000 shares of Common Stock, with an exercise price of $0.075 per share and term of three years. The Company also issued one Unit to the placement agent’s legal counsel for services rendered in connection with the Closing. In connection with the Closing, the Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with each of the Purchasers, which requires the Company to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) registering for resale (i) all Common Stock issued to the Purchasers as part of the Units, (ii) all shares of Common Stock issuable upon exercise of the Investor Warrants and the warrants issued to the placement agent, and (iii) all shares of Common Stock issued to legal counsel for services rendered in connection with the Closing. If the Registration Statement is not declared effective by the SEC within the specified deadlines set forth in the Registration Rights Agreement, the Company will be required to pay to each Purchaser an amount in cash, as partial liquidated damages, equal to 1.0% of the aggregate purchase price paid by such Purchaser per 30-day period that such failure continues, up to the maximum of 6% of the aggregate Purchase Price. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum. As of the date of this filing, the Company is in negotiations with the placement agent to amend the Registration Rights Agreement and with filing the Registration Statement. Exchange Agreements In addition, the anti-dilution provisions contained in many of our outstanding securities between 2013 and 2017 has created significant derivative liabilities for our Company. As of December 31, 2016, such derivative liability has been calculated to be in excess of $3,100,000 and increases as we sell additional warrants. Such derivative liability directly impacts and reduces our stockholders equity which could materially and adversely affect our ability in the future to qualify to list our common stock for trading on the Nasdaq Capital Market or other comparable national securities exchange. In order to cure our defaults in payment of our debt securities and to reduce, if not eliminate, the derivative liability, we: Offered to the holder(s) of all $2,270,688 of 20% original issue discount debentures issued in 2016, an opportunity under Section 3(a)(9) of the Securities Act of 1933, as amended, to exchange their debentures for a new 20% original issued discount convertible debenture due September 30, 2017, plus one share of our Common Stock for each $1.00 outstanding principal amount of the new 20% OID convertible debenture issued to them. As proposed, the contemplated restated 20% OID convertible debenture would be in face amount equal to 100% of the outstanding principal of and accrued interest on the earlier convertible debentures and, upon consummation of any subsequent public offering of our common stock that is registered under the Securities Act prior to the new maturity date, would be subject to mandatory conversion at a 20% discount to the initial public offering price of our Common Stock (the “OID Convertible Debenture Exchange Offer”). As of the date of this report, an aggregate of $1,680,719 of the 2016 20% OID Debentures were exchanged for $1,764,755 of new 20% OID Debentures due September 30, 2017, and the parties to the exchange offer received an additional 1,856,196 shares of our common stock. Offered to the 156 holders of our common stock and warrants issued in the 2013 offering, an opportunity under Section 3(a)(9) of the Securities Act, to (a) waive for all purposes the “make whole” provisions in their subscription agreement in exchange for one-quarter of a warrant exercisable at $0.09 per share for each of the 103,497,609 shares of Common Stock issued and issuable to them in the 2013 Offering (approximately 25,874,399 additional warrants) which would contain no weighted average or full ratchet anti-dilution provisions, plus (b) exchange all of the outstanding 2013 B Warrants issued in the 2013 offering (approximately 7,762,321 warrants) for one additional share of our common stock (the “2013 Exchange Offer”). As of the date of this report, 116 of the purchasers of our securities in the 2013 offering accepted the exchange offer resulting in 6,162,570 shares of common stock and warrants to purchase 20,541,895 shares of common stock being issued. Offered to the 72 holders of our common stock and warrants issued in the 2016-17 offering, an opportunity under Section 3(a)(9) of the Securities Act of 1933, as amended, to exchange all of their 2016-17 Class A Warrants and 2016-17 Class B Warrants for 1.5 shares of Common Stock for each 2016-17 Class A Warrant and 2016-17 Class B Warrant (the “2016-17 Exchange Offer”). Accordingly, each $10,000 Unit that represented 13,333.33 shares of common stock, plus 13,333.33 of 2016-17 Class A Warrants and 13,333.33 of 2016-17 Class B Warrants would be exchanged for 70,180,982 shares of Common Stock, representing (a) 28,072,393 shares of Common Stock, plus (ii) 42,108,589 additional shares of common stock issued in lieu of the 2016-17 Class A Warrants and 2016-17 Class B Warrants. As of the date of this report, 69 of the purchasers of our securities in the 2016-17 offering accepted the exchange offer resulting in 38,608,616 additional shares of common stock being issued. Consultant Agreements On January 31, 2017, the Board of Directors approved payment of $50,000 to a certain Consultant for Consulting Services of which is to be paid as units of our securities consisting of (a) 666,667 shares of our Common Stock (a conversion price of $0.075 per share) plus (b) an eighteen-month warrant to purchase an additional 666,667 share of Common Stock at an exercise price of $0.09 per share and (c) a five-year warrant to purchase an additional 666,667 shares of Common Stock at an exercise price of $0.1125 per share containing identical terms to the units of equity securities which we sold in our private placement to unaffiliated accredited investors between November 2016 and March 31, 2017. In June 2017, the consultant was offered an opportunity to exchange every two warrants for 1.5 shares of common stock. As of the date of this report the consultant was issued an additional 1,000,000 shares of common stock pursuant to this exchange. On January 31, 2017, the Board of Directors approved payment of 2,000,000 shares of Common Stock to one Consultants for Consulting Services. In February 2017, the Company has issued an aggregate of 750,000 in Common Stock for consulting services. The consulting agreement required 500,000 shares of Common Stock to be issued upon execution of the Consulting Agreement. The aggregate of 250,000 shares of Commons Stock were issued as upon execution of the Consulting Agreement, in 2016, leaving an aggregate of 250,000 shares of Common Stock to be issued for execution of the agreement. In addition to the 500,000 shares of Common Stock to be issued upon execution of the Consulting Agreement, and for each quarter thereafter for the remainder of the Consulting Period, Common Stock and warrants to purchase Common Stock will be issued 250,000 shares of Common Stock and a warrant to purchase 250,000 shares of Common Stock to the Consultant on the first day of each quarter. The issuance of 750,000 comprised of 250,000 shares of Common Stock due upon execution of the Consulting Agreement, 250,000 shares of Common Stock for the first quarter in 2017 and 250,000 shares of Common Stock for the second quarter of 2017. On January 31, 2017, the Board of Directors approved the request to accelerate the issuance of 250,000 shares of Common Stock for the second quarter of 2017. On February 28, 2017, the Company entered into a consulting agreement for business advisory services and has term period from February 28, 2017 through January 31, 2018. The Company will compensate the Consultant by issuing 100,000 shares of Common Stock. On March 8, 2017, the Company entered into a consulting agreement with a firm for professional financial advisory and introductory services for a period is from March 8, 2017 through December 31, 2017. Besides a one-time $10,000 retainer payment the consulting agreement requires payment of 1,200,000 shares of the Company’s Common Stock which were issued in May 2017. On April 25, 2017, the Company entered into one (1) consulting agreement. This agreement was entered into for business advisory services and has a term period from April 25, 2017 through December 31, 2017. The Company will compensate the Consultant by issuing 250,000 shares of Common Stock no later than 30 days from the effective date. These shares were issued in May 2017. On June 30, 2017, the Company issued 250,000 shares of Common Stock to a certain consultant as part of his consulting agreement dated December 2016. The agreement states the Company is to pay 250,000 shares of Common Stock upon completion of the 2016-17 Unit Offering which was completed on March 31, 2017. Conversion of Accounts Payable In December 2016, the Company’s Board of Directors authorized the conversion of an aggregate of $50,000 of accounts payable to a vendor into 666,667 shares of Common Stock at the rate of $0.075 per share. The vendor was also issued an A Warrant and B Warrant with the same terms and agreement as the 2016-17 offering. In June 2017, the vendor was offered an opportunity to exchange one (1) Class A warrant and one (1) Class B warrant for 1.5 shares of common stock. In June 2017, the vendor was issued an additional 1,000,000 shares of common stock pursuant to this exchange. Anti-Dilution Triggering Event The sale of Common Stock in the 2016/17 Offering was completed at a unit price of $0.075 per share, which triggered the anti-dilution provisions contained in certain outstanding financial instruments. As a result, to satisfy the Company’s obligations under such provisions, the Company expects to issue 1,567,653 shares of Common Stock and has already issued 72,448,325 shares of Common Stock, issue 25,244,336 Warrants to purchase shares of Common Stock, reduce the conversion rate for the Exchange Notes to $0.075 per share and has reduced the exercise price of 49,459,532 warrants. Common Stock issued and outstanding is as follows: Shares Price issued and per Gross Par Additional outstanding share proceeds value paid-in capital Balance as of December 31, 2016 162,471,373 Various $ 59,801,216 $ 16,247 $ 62,440,674 Issuance (a) 9,173,330 $ 0.075 688,000 917 687,083 Issuance (b) 103,508,126 $ 0.075 10,351 7,752,758 Issuance (c) 5,416,667 $ various 542 355,808 Issuance (d) 5,000,000 $ 0.075 500 374,500 Issuance (e) 36,520,495 $ 0.075 3,652 2,735,385 Issuance (f) 72,448,325 $ 0.075 7,245 Balance as of June 30, 2017 394,538,316 (g) $ 60,489,216 $ 39,454 $ 74,346,208 (a) Shares issued in conjunction with the 2016/17 Offering and contains no anti-dilution provisions (b) Shares issued in conjunction with exchange offers (c) Shares issued in conjunction with certain Consultant Agreements (d) Shares issued in conjunction with short-term convertible note (e) Shares issued for conversion of debt and interests. Shares do not contain anti-dilution provisions (f) Shares issued in conjunction with trigger of anti-dilution provision, previously recognized in 2016 (g) Includes 8,889,503 shares that contain an anti-dilution provision |