Shareholders' Equity | NOTE 7 – SHAREHOLDERS’ EQUITY Authorized shares On September 3, 2019, the Company’s Board of Directors unanimously approved the amendment of its Articles of Incorporation to increase the total authorized capital stock from 185,000,000 common shares to 200,000,000 common shares. As of September 18, 2019, holders of a majority of the outstanding shares of voting capital stock executed written stockholder consents approving this action and the Company amended its Articles of Incorporation through a filing of a Certificate of Amendment on October 11, 2019. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. As of September 30, 2020 and 2019, there were 118,252,077 and 107,497,077 shares of common stock issued and outstanding, respectively. Common Shares Issued for Cash During the year ended September 30, 2019, the Company received $10,000 from the sale of 142,857 shares of its common stock. In connection with the sale, the Company issued a warrant to the shareholder to purchase 284,714 shares of the Company’s common stock. The warrant expires five years from the date of grant and has an exercise price of $0.15 per share. Common Shares Issued for Services During the year ended September 30, 2019, the Company issued 1,277,143 shares of its common stock valued at $79,029 for services provided by WCUI consultants. The shares were valued at the trading price of the common stock at the date of issuance and were recorded as compensation expense during the year ended September 30, 2019. During the year ended September 30, 2020, the Company issued 285,000 shares of its common stock valued at $22,800 for services provided by PSI consultants. The shares were valued at the trading price of the common stock at the date of issuance and were recorded as compensation expense during the year ended September 30, 2020. Restricted Stock Grants to Officers and Directors In April 2020, the Company’s Board of Directors approved the issuance of a combined total of 20,170,000 restricted shares of the Company’s common stock to its Officers and Directors. A total of 7,120,000 shares vested in April 2020, and a total of 1,800,000 will vest monthly from April 2020 through March 2021, and a total of 11,250,000 will vest monthly from April 2020 through March 2023. Of the 13,050,000 shares that vest over time, a total of 2,775,000 shares vested during the year ended September 30, 2020. The following table summarizes restricted common stock activity: Number of Restricted Shares Fair Value Weighted Average Grant Date Fair Value Non-vested, September 30, 2019 - $ - $ - Granted 20,170,000 605,100 0.03 Vested (9,895,000 ) (296,850 ) 0.03 Forfeited - - - Non-vested, September 30, 2020 10,275,000 $ 308,250 $ 0.03 Stock Options On December 22, 2010, the Company’s Board of Directors approved the adoption of the “2010 Non-Qualified Stock Option Plan” (“2010 Option Plan”) by unanimous consent. The 2010 Option Plan was initiated to encourage and enable officers, directors, consultants, advisors and key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 7,500,000 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan. Effective January 1, 2018, the Board of Directors approved to increase the number of authorized shares of the Company’s common stock that may be subject to, or issued pursuant to, the terms of the plan from 7,500,000 to 30,000,000. The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s policy is to issue new shares of common stock to satisfy stock option exercises. The Company applied fair value accounting for all share-based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The table below summarizes the Company’s stock option activities for the years ended September 30, 2020 and 2019: Number of Option Shares Exercise Price Range Per Share Weighted Average Exercise Price Balance, September 30,2018 17,946,667 $ 0.10 - 2.00 $ 0.28 Granted 250,000 0.03 - 0.06 0.05 Cancelled (646,429 ) 0.14 - 0.19 0.17 Exercised - - - Expired (2,312,500 ) 0.13 - 0.40 0.37 Balance, September 30, 2019 15,237,738 0.03 - 2.00 0.28 Granted 5,000,000 0.04 - 0.09 0.05 Cancelled (4,910,000 ) 0.14 - 0.30 0.14 Exercised - - - Expired (1,200,000 ) 0.11 - 0.25 0.15 Balance, September 30, 2020 14,127,738 $ 0.03 – 2.00 $ 0.23 Vested and exercisable, September 30, 2020 10,702,738 $ 0.03 – 2.00 $ 0.29 Unvested, September 30, 2020 3,425,500 $ 0.04 $ 0.04 The following table summarizes information concerning outstanding and exercisable options as of September 30, 2020: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 0.03 - 0.39 12,665,238 5.54 $ 0.09 9,240,238 4.14 $ 0.11 0.40 - 0.99 62,500 1.50 0.40 62,500 1.50 0.40 1.00 - 1.99 750,000 0.25 1.00 750,000 0.25 1.00 2.00 650,000 0.25 2.00 650,000 0.25 2.00 $ 0.06 - 2.00 14,127,738 3.05 $ 0.23 10,702,738 3.61 $ 0.29 The aggregate intrinsic value for option shares outstanding at September 30, 2020 was $184,375. Stock Option Grants during Fiscal Year Ended September 30, 2019 During the year ended September 30, 2019, the Company granted options to an employee to purchase an aggregate total of 250,000 shares of its common stock with an aggregate fair value of $10,366. The options have exercise prices ranging from $0.03 to $0.06 per share and expire five years from the date of grant. The shares vested equally each quarter beginning on December 31, 2018. The Company valued the options using a Black-Scholes option pricing model. During the year ended September 30, 2019, the Company recorded $10,366 of stock compensation for the value of the options, and as of September 30, 2019, no unvested compensation remained that will be amortized over the remaining vesting period. The assumptions used for all of the options granted during the year ended September 30, 2019 are as follows: Exercise price $ 0.03 - $0.06 Expected dividends - Expected volatility 126.8% – 144.0 % Risk free interest rate 1.60 % - 2.47 % Expected life of options 2.5 Stock Option Activity during Fiscal Year Ended September 30, 2020 During the year ended September 30, 2020, the Company’s Board of Directors approved the cancellation of stock options to purchase 3,360,000 shares of the Company’s common stock with an exercise prices of $0.14 and $0.30 per share that had vested as of March 31, 2020, and 1,550,000 shares with an exercise price of $0.14 per share that were set to vest monthly from April 2020 through March 2021. All of the cancelled options were held by the Company’s Officers and Directors. The Board approved the grant of stock options to its Chief Executive Officer to purchase 4,250,000 shares with an exercise price of $0.04 per share that expire ten years from the date of grant. The fair value of the shares was determined to be $127,500 as of the date of grant based on a Black-Scholes option model. A total of 1,125,000 shares vested during the year ended September 30, 2020 and 3,125,000 shares will vest monthly over the period from October 2020 through March 2023. Subsequent to the grant of these shares, the Board approved the following modifications relating to the Chief Executive Officer’s options: a. Repricing of stock options to purchase 1,200,000 shares with an exercise price of $0.14 per share to $0.04 per share that had vested as of March 31, 2020, b. Repricing of stock options to purchase 600,000 shares with an exercise price of $0.14 per share to $0.04 per share that were set to vest monthly from April 2020 through March 2021. c. Extend the expiration of the options to ten years from the date of grant, rather than the five-year expiration the shares initially had. In accounting for the modification, the Company calculated for the fair value of the options before modification using current valuation inputs including the Company’s closing stock price of $0.03 on May 28, 2020, a volatility metric of 183%, and a risk-free interest rate of 0.34%. The Company also calculated the fair value of the options after modification using the extended term and modified exercise price. The incremental fair value of the options resulting from the modifications was $22,680 that was recognized as an expense during the year ended September 30, 2020. In addition to the options granted to the Company’s Chief Executive Officer noted above, during the year ended September 30, 2020, the Company granted options to several employee to purchase a total of 750,000 shares of its common stock with an aggregate fair value of $59,376. The options have an exercise price of $0.04 and $0.09 per share and expire five years from the date of grant. The shares vested on the date of grant. The Company valued the options using a Black-Scholes option pricing model. The assumptions used for all of the options granted during the year ended September 30, 2020 are as follows: Exercise price $ 0.04 - $0.09 Expected dividends - Expected volatility 157.6% – 197.0 % Risk free interest rate 0.17 % - 1.60 % Expected life of options 2.5 During the years ended September 30, 2020 and 2019, the Company recorded in the aggregate $263,414 and $300,925, respectively of stock compensation for options vesting during those years, and as of September 30, 2020, unvested compensation of $96,764 remained that will be amortized over the remaining vesting period. Stock Warrants The table below summarizes the Company’s warrants activities for the year ended September 30, 2020: Number of Warrant Shares Exercise Price Range Per Share Weighted Average Exercise Price Balance, September 30, 2018 67,907,728 $ 0.12 - 1.00 $ 0.17 Granted 284,714 0.15 0.15 Cancelled - - - Exercised - - - Expired (1,708,393 ) 0.30 - 0.67 0.44 Balance, September 30, 2019 66,484,049 $ 0.12 - 0.40 $ 0.17 Granted 1,150,000 0.07 0.07 Cancelled - - - Exercised - - - Expired - - - Balance, September 30, 2020 67,634,049 $ 0.07 - 0.40 $ 0.16 Vested and exercisable, September 30, 2020 67,634,049 $ 0.07 - 0.40 $ 0.16 During the year ended September 30, 2019, the Company issued a warrant to purchase 284,714 shares with an exercise price of $0.15 per share as part of the sale of equity units. The warrant expires five years from the date of grant. During the year ended September 30, 2020, in connection with the conversion of a loan payable, the Company issued a warrant to purchase 1,150,000 shares with an exercise price of $0.07 per share with a fair value of $43,815. The warrant expires five years from the date of grant. Effective January 1, 2020, the Company’s Board of Directors approved the extension of the Company’s unexpired stock warrants as of December 31, 2019, by an additional one year period. This change affected approximately 66,000,000 warrant shares including approximately 20,000,000 warrant shares that were set to expire by the year ending September 30, 2020. The 66,000,000 warrant shares had exercise prices ranging from $0.12 per share to $0.40 per share. The incremental fair value of the warrants resulting from modification was $507,265 and was recognized as an expense during the year ended September 30, 2020. There was no aggregate intrinsic value for warrant shares outstanding at September 30, 2020. The following table summarizes information concerning outstanding and exercisable warrants as of September 30, 2020: Warrants Outstanding Warrants Exercisable Range of Exercise Prices Number Outstanding Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 0.12 – 0.20 60,429,384 1.97 $ 0.15 60,429,384 1.97 $ 0.15 0.21 – 0.40 7,204,665 0.88 0.26 7,204,665 0.88 0.26 $ 0.12 – 0.40 67,634,049 1.85 $ 0.16 67,634,049 1.85 $ 0.16 |