| Shareholders' Deficit | Note 6 - Shareholders’ Deficit Preferred Stock The Company has authorized
5,000,000 shares of preferred stock which have been designated as follows:
Number of Shares Number of Shares Outstanding at Par Liquidation
Authorized March 31, 2019 Value Value
Series AA 1,000,000 25,000 $ 0.0010 $ -
Preferred Series B 50,000 600 $ 0.0001 $ 100
Preferred Series C 8,000 1,784 $ 0.0001 $ 1,000
Undesignated 3,942,000 - - - Series AA Preferred Shares On February 22, 2013, the
Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles
of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000)
shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,”
for which the board of directors established the rights, preferences and limitations thereof. Each holder of outstanding
shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series
AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting
of stockholders of the Company. The Series AA Super Voting Preferred Stock holders will receive no dividends nor any value on liquidation.
As of March 31, 2019, there were 25,000 shares of Series AA Preferred stock outstanding. Series B Convertible
Preferred Stock On February 7, 2017, the
Company filed a certificate of designation for 50,000 shares of Series B Convertible Preferred Stock designated as Series B (“Series
B”) which are authorized and convertible, at the option of the holder, commencing six months from the date of issuance into
common shares and warrants. For each share of Series B, the holder, on conversion, shall receive the stated value divided by 75%
of the market price on the date of purchase of Series B and a three-year warrant exercisable into up to a like amount of common
shares with an exercise price of 150% of the market price as defined in the Certificate of Designation. Dividends shall be paid
only if dividends on the Company’s issued and outstanding Common Stock are paid and the amount paid to the Series B holder
will be as though the conversion shares had been issued. The Series B holders have no voting rights. Upon liquidation, the holder
of Series B, shall be entitled to receive an amount equal to the stated value, $100 per share, plus any accrued and unpaid dividends
thereon before any distribution is made to Series C Secured Redeemable Preferred Stock or common stockholders. As of March 31,
2019, 600 shares of Series B and 4,805,600 warrant shares remain outstanding. Series C Secured
Redeemable Preferred Stock On December 22, 2017, the
Company filed a certificate of designation for 8,000 shares of Series C Secured Redeemable Preferred Stock (“Series C”).
Each share of the C Preferred is entitled to receive a $20.00 quarterly dividend commencing March 31, 2018 and each quarter thereafter
and is to be redeemed for the stated value, $1,000 per share, plus accrued dividends in cash (i) at the Company’s option,
commencing one year from issuance and (ii) mandatorily as of December 31, 2019. The C Preferred does not have any rights to vote
with the common stock. Upon liquidation, the holder of Series C, shall be entitled to receive an amount equal to the stated value,
$1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders but after
distributions are made to holders of Series B. Since the C Preferred is mandatorily payable, the obligation has been included in
long term liabilities on the consolidated balance sheets as of March 31, 2019 and December 31, 2018. The Company’s obligation
to redeem the C Preferred is secured by a security interest in the RGN Assets. During the three months ended March 31, 2019, the
Company issued 64 shares of C Preferred in units comprised of shares of C Preferred and common stock purchase warrants exercisable
into up to 549,966 shares of common stock for consideration of $64,000. The warrants resulted in a debt discount of $11,512 for
the three months ended March 31, 2019 and are recorded as a discount to the preferred stock liability on the consolidated balance
sheet. Common Stock On December 31, 2018, we
entered into a non-transferrable Investment Agreement whereby the investor committed to purchase up to $10,000,000 of our common
stock, over the course of 36 months. The aggregate number of shares issuable by us and purchasable by the investor under the Investment
Agreement is 81,250,000. A registration statement for the sale of our common stock related to the Investment Agreement went effective
on February 11, 2019. We may draw on the facility
from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement.
The maximum amount that we are entitled to put in any one notice is the greater of: (i) 200% of the average daily volume (U.S.
market only) of the common stock for the three (3) trading days prior to the date of delivery of the applicable put notice, multiplied
by the average of the closing prices for such trading days or (ii) $100,000. The purchase price shall be set at ninety-four percent
(94%) of the lowest daily VWAP of our common stock during the Pricing Period. However, if, on any trading day during a Pricing
Period, the daily VWAP of the common stock is lower than the floor price specified by us in the put notice, then we will withdraw
that portion of the put amount for each such trading day during the Pricing Period, with only the balance of such put amount above
the minimum acceptable price being put to the investor. There are put restrictions applied on days between the put notice date
and the closing date with respect to that particular put. During such time, we are not entitled to deliver another put notice. There are circumstances
under which we will not be entitled to put shares to the investor, including the following: ● we will not be entitled to
put shares to the investor unless there is an effective registration statement under the Securities Act to cover the resale of
the shares by the investor; ● we will not be entitled to
put shares to the investor unless our common stock continues to be quoted on the OTCQB market, or becomes listed on a national
securities exchange; ● we will not be entitled to
put shares to the investor to the extent that such shares would cause the investor’s beneficial ownership to exceed 4.99%
of our outstanding shares; and ● we will not be entitled to
put shares to the investor prior to the closing date of the preceding put. In connection with the
preparation of the Investment Agreement and the registration rights agreement, we incurred fees of $20,000. In no event will we be
obligated to register for resale more than $10,000,000 in value of shares of common stock, or 81,250,000 shares. During the three months
ended March 31, 2019, we issued 2,000,000 shares of common stock in exchange for $27,559 cash pursuant to the Investment Agreement. During the three months
ended March 31, 2019, the Company issued 78,043,649 shares of common stock for the conversion of notes and accrued interest in
the amount of $919,618. During the three months
ended March 31, 2019, the Company issued 443,262 shares of common stock valued at $8,333 related to the extension of outstanding
notes. During the nine months
ended March 31, 2019, the Company issued 4,132,251 shares of common stock with a value of $92,084, related to services. During the three months
ended March 31, 2019, the Company issued 1,091,000 shares of common stock with a value of $26,545 as additional consideration for
the issuance of two promissory notes totaling $336,000. The Variable Debentures
issued by the Company each have a provision requiring the Company to reserve a variable amount of shares of common stock for when
the holder of the Variable Debenture converts. Stock Options The balance of
all stock options outstanding as of March 31, 2019 is as follows:
Weighted Average
Weighted Average
Exercise Price Remaining Contractual
Aggregate Intrinsic
Options Per Share Term (years) Value
Outstanding at January 1, 2019 94,553,369 $ 0.029 2.94
Granted - $ -
Cancelled - $ -
Exercised - $ -
Outstanding at March 31, 2019 94,553,369 $ 0.029 2.69 $ -
Exercisable at March 31, 2019 94,136,702 $ 0.029 2.70 $ - Warrants During the three months
ended March 31, 2019, in conjunction with the conversion of fixed rate promissory notes into Preferred C Stock, the Company issued
two-year common stock purchase warrants to acquire up to 549,966 shares of common stock with exercise prices ranging from $0.0195
to $0.0279 per share. The Company measures the
fair value of warrants issued using the Black Scholes option pricing model using the following assumptions:
Three months ended March 31,
2019 2018
Expected term 2 years 2 years - 5 years
Exercise price $0.0195-$0.0279 $0.0001-$0.0516
Expected volatility 231%-242% 176%-193%
Expected dividends None None
Risk-free interest rate 2.45% to 2.60% 1.92% to 2.65%
Forfeitures None None A summary of the status
of the warrants granted under these agreements at March 31, 2019, and changes during the three months then ended is presented below:
Outstanding Warrants
Weighted Average
Exercise Price
Shares Per Share
Outstanding at January 1, 2019 77,550,880 $ 0.30
Granted 549,966 $ 0.02
Cancelled - $ -
Exercised - $ -
Outstanding at March 31, 2019 78,100,846 $ 0.30
Exercisable at March 31, 2019 78,100,846 $ 0.30 |
