Stockholders' Equity | NOTE 7: STOCKHOLDERS’ EQUITY The total number of shares of all classes of stock that the Company shall have the authority to issue is 1,625,000,000 shares consisting of 1,500,000,000 shares of common stock with a $0.001 par value per share; of which 1,500,000,000 are outstanding as of October 31, 2018 and 125,000,000 shares of preferred stock, par value $0.001 per share of which (A) 120,000,000 shares have been designated as Series A Convertible Preferred of which 44,570,101 are outstanding as of October 31, 2018, (B) 1,000,000 shares have been designated as Series B Convertible Preferred Stock, of which no shares are outstanding as of October 31, 2018 and (C) 1,000,000 have been designated as Series C Convertible Preferred Stock, of which 160,000 shares are outstanding as of October 31, 2018. Common Stock During the year ended October 31, 2018, the Company: ● issued 1,244,233,615 shares of its common stock valued at $801,936 as repayment for outstanding principal and interest on convertible promissory notes as requested by the note holders according to contractual terms. ● issued 44,470,101 shares of its Series A Convertible Preferred Stock and 10,559,890 shares of its common stock valued at $330,180 as a result of the Monaker litigation settlement. ● retired 4,163,315 shares of its common stock as a result of the NestBuilder spin-off transaction. ● committed to issue 152,029,899 shares of its common stock valued at $456,090 as a result of an additional settlement with Monaker. ● issued warrants to purchase 117,055,586 shares of its common stock valued at $299,635 under the provisions of the employment agreement of the Company’s Chief Executive Officer. During the year ended October 31, 2017, the Company: ● granted shares of restricted stock on January 2, 2017, to Mr. Alex Aliksanyan, Mr. Thomas Grbelja, the Company’s former chief executive officer and chief financial officer, respectively, and another employee pursuant to their separate Restricted Stock Grant Agreements, dated January 2, 2017, and the terms of their separate employment agreements. Mr. Aliksanyan, Mr. Grbelja and the third employee were granted 13,699,350, 6,309,596 and 1,973,615 shares of restricted common stock, respectively. The shares of restricted common stock issued pursuant to these grants cannot be transferred for six months. These shares were granted for services previously performed in their roles with the Company. Conversion of Convertible Notes During the year ended October 31, 2018, the holders of convertible notes with aggregate outstanding principal and accrued interest balances of an aggregate of $801,935 converted their notes into an aggregate of 1,244,233,615 shares of our common stock. Common Stock Warrants The Company estimates the fair value of each option award on the date of grant using a black-scholes option valuation model that uses the assumptions noted in the table below. Because black-scholes option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were utilized during 2018: Expected volatility 1.45% - 6.30 % Weighted-average volatility 3.52 % Expected dividends 0 % Expected term (in years) 1.0 Risk-free rate 1.09% - 2.67 % The following table sets forth common share purchase warrants outstanding as of October 31, 2018: Weighted Average Exercise Intrinsic Warrants Price Value Outstanding, October 31, 2017 17,786,467 $ 0.016 $ 0.00 Warrants granted and issued 105,975,249 $ 0.006 $ 0.00 Warrants forfeited - $ - $ - Outstanding, October 31, 2018 123,761,716 $ 0.007 $ 0.00 Common stock issuable upon exercise of warrants 123,761,716 $ 0.007 $ 0.00 Common Stock Issuable Common Stock Issuable Upon Exercise of Upon Warrants Warrants Outstanding Exercisable Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise at October 31, Contractual Exercise at October 31, Exercise Prices 2018 Life (Years) Price 2018 Price $ 0.006 120,556,716 0.98 $ 0.006 120,556,716 $ 0.006 $ 0.025 1,000,000 1.17 $ 0.025 1,000,000 $ 0.025 $ 0.050 1,000,000 0.47 $ 0.050 1,000,000 $ 0.050 $ 0.100 1,205,000 1.35 $ 0.100 1,205,000 $ 0.100 123,761,716 0.98 $ 0.007 123,761,716 $ 0.007 The following table sets forth common share purchase warrants outstanding as of October 31, 2017: Weighted Average Exercise Intrinsic Warrants Price Value Outstanding, October 31, 2016 16,055,000 $ 0.061 $ 0.00 Warrants granted and issued 16,581,467 $ 0.010 $ 0.00 Warrants forfeited (14,850,000 ) $ (0.054 ) $ 0.00 Outstanding, October 31, 2017 17,786,467 $ 0.016 $ 0.00 Common stock issuable upon exercise of warrants 17,786,467 $ 0.016 $ 0.00 Common Stock Issuable Common Stock Issuable Upon Exercise of Upon Warrants Warrants Outstanding Exercisable Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise at October 31, Contractual Exercise at October 31, Exercise Prices 2017 Life (Years) Price 2017 Price $ 0.006 14,581,467 3.87 $ 0.006 14,581,467 $ 0.006 $ 0.025 1,000,000 2.17 $ 0.025 1,000,000 $ 0.025 $ 0.050 1,000,000 1.47 $ 0.050 1,000,000 $ 0.050 $ 0.100 1,205,000 2.35 $ 0.100 1,205,000 $ 0.100 17,786,467 3.77 $ 0.016 17,786,467 $ 0.016 Series A Convertible Preferred Stock On October 14, 2014, the Company filed a certificate of amendment to its Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock with the Delaware Secretary of State pursuant to the July 31, 2014 Board of Directors approval to increase the Series A Convertible Preferred A shares from 100,000,000 shares to 120,000,000 shares. The Series A Convertible Preferred Stock was issued at $0.001 par value and bear dividends at a rate of 10% per annum payable on a quarterly basis when declared by the board of directors. Dividends accrue whether or not they have been declared by the board. At the election of the Company, Preferred Dividends may be converted into Series A Convertible Preferred Stock, with each converted share having a value equal to the market price per share, subject to adjustment for stock splits. In order to exercise such option, the Company delivers written notice to the holder. Each 20 shares of Series A Convertible Preferred Stock is convertible at the option of the holder thereof at any time into one share of Common Stock. Each holder of Series A Convertible Preferred Stock shall be entitled to one vote for each whole share of common stock that would be issuable upon conversion of such share on the record date for determining eligibility to participate in the action being taken. In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Company, (b) any acquisition of the Company by means of consolidation, stock exchange, stock sale, merger of other form of corporate reorganization of the Company with any other entity in which the Company’s stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Company, whether voluntary or involuntary (each such event in clause (a), (b) or (c) a “liquidation event”), the Board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Company (the “net assets available for distribution”). The holders of the Series A Convertible Preferred Stock then outstanding shall be entitled to be paid out of the net assets available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series A Convertible Preferred Stock or to the Common Stock, an amount for each share of Series A Convertible Preferred Stock equal to all accrued and unpaid Preferred Dividends plus the Stated Value, as adjusted (the “Series A Liquidation Amount”). On February 8, 2019, the Company filed the Second Amended and Restated Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock (the “Second Amended and Restated COD”) whereby the Company removed the anti-dilution protection for holders of Series A Convertible Preferred Stock, removed all preferred stock dividends, reduced the conversion rate of each share of Series A Convertible Preferred Stock into one share of Common Stock, and provided holders of such preferred stock with a right of participation in future financings. The Second Amended and Restated COD became effective upon filing with the Delaware Secretary of State on February 8, 2019 (See Note 16). Accrued and declared preferred stock dividends on the outstanding preferred shares as of October 31, 2018 and 2017 totaled $0 for both periods. On February 26, 2018, the Company entered into an inducement agreement (the “Inducement Agreement”) effective as of February 8, 2019, pursuant to which the Company will issue Monaker 152,029,899 shares of its common stock as an inducement to remove certain anti-dilution provisions contained in the Series A Preferred Stock Certificate of Designation in connection with the Company’s offering of a convertible promissory note in the original principal amount of $1,250,000 and a three-year warrant to purchase up to 925,925,925 shares of the Company’s common stock. At October 31, 2018, the value of the 152,029,899 shares of common stock was $456,090 and was recorded as shares to be issued within our Consolidated Statement of Changes in Stockholders’ Deficit. On January 19, 2017, we issued 100,000 shares of Series A Convertible Preferred Stock to Mr. Anshu Bhatnagar, the Company’s Chief Executive Officer, for $610. In December 2016, the Company cancelled 44,560,760 shares of Series A Convertible Preferred Stock and 10,559,892 shares of common stock which were held by Monaker in connection with an over issuance of shares of common stock relating the conversion of the Monaker dual convertible preferred shares. In December 2016, the Company converted 1,155,625 of its Series A Convertible Preferred Stock into an aggregate of 1,155,800 shares of common stock. As of October 31, 2018 and 2017, there were 44,570,101 and 100,000, shares of Series A Convertible Preferred Stock outstanding, respectively. Series B Convertible Preferred Stock On July 31, 2014, the Company’s Board of Directors approved the creation of a new Series B Convertible Preferred Stock and on October 14, 2014 the Company filed a Certificate of Designation of Series B Convertible Preferred Stock with the Delaware Secretary of State designating 1,000,000 shares, par value of $0.001 per share, as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”). The Series B Convertible Preferred Stock have a stated value of $5.00 per share. The Series B Convertible Preferred Stock accrue dividends at a rate of 10% per annum on the stated value of such shares of the Series B Convertible Preferred Stock. Dividends accrue whether or not they have been declared by the board of directors. At the election of the Company, it may satisfy its obligations to pay dividends on the Series B Convertible Preferred Stock by issuing shares of common stock to the holders of Series B Convertible Preferred Stock on a uniform and prorated basis. Each share of Series B Convertible Preferred Stock is convertible at the option of the holder thereof at any time into a number of shares of common stock determined by dividing the stated value by the conversion price then in effect. The conversion price for the Series B Convertible Preferred Stock is equal to $0.05 per share, subject to adjustment. Each holder of Series B Convertible Preferred Stock shall be entitled to the number of votes equal to 200 votes for each shares of Series B Convertible Preferred Stock held by them. Series B Convertible Preferred Stock In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Company, (b) any acquisition of the Company by means of consolidation, stock exchange, stock sale, merger of other form of corporate reorganization of the Company with any other entity in which the Company’s stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Company, whether voluntary or involuntary (each such event in clause (a), (b) or (c) a “liquidation event”), the board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Company (the “net assets available for distribution”). The holders of the Series B Convertible Preferred Stock then outstanding shall be entitled to be paid out of the net assets available for distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series B Convertible Preferred Stock or to the common stock, an amount for each share of Series B Convertible Preferred Stock equal to all accrued and unpaid preferred dividends plus the stated value, as adjusted. As of October 31, 2018 and 2017, there were no shares of Series B Convertible Preferred Stock outstanding. Series C Convertible Preferred Stock Pursuant to authority granted by our certificate of incorporation and applicable state law, our Board of Directors, without any action or approval by our stockholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate and establish the rights, preferences, and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of other classes or series of capital stock, including preferred stock that may be issued could be superior to the rights of the shares of common stock offered hereby. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to the shares of our common stock. Finally, any issuances of additional capital stock (common or preferred) will dilute the percentage of ownership interest of our stockholders and may dilute the per-share book value of the Company. For example, our Series C Convertible Preferred Stock contain voting rights which provide each share of Series C Convertible Preferred Stock with 100 votes for each shares of common stock into which the Series C Convertible Preferred Stock is convertible. Accordingly, our currently outstanding 160,000 shares of Series C Convertible Preferred Stock (which are convertible into 16,000,000 common shares) are entitled to 1,600,000,000 votes on any matter presented for a vote to our common stockholders. This has resulted in the holders of our Series C Convertible Preferred Stock having voting majority voting control of our corporation. On January 6, 2017, we issued 100,000 shares of Series C Convertible Preferred Stock to Mr. Anshu Bhatnagar, the Company’s Chief Executive Officer, for $100,000. In December 2016, one of our convertible noteholders converted $25,000 of outstanding principal into 25,000 shares of our Series C Convertible Preferred Stock, at a price of $1.00 per share. As of October 31, 2018 and 2017, there were 160,000 shares of Series C Convertible Preferred Stock outstanding, respectively. |