Note 6 - Stockholders' Deficit | NOTE 6 – STOCKHOLDERS’ DEFICIT Warrant Activity Common Stock Warrants On July 7, 2020, our Board of Directors appointed Michael Kaplan to the Board of Directors. In connection with the agreement one million (1,000,000) warrants were issued. The warrants are valued at $177,200 based on the Black Scholes Model. For the six months ended June 30, 2022 and 2021, the Company recorded $0 and $87,872 as compensation expense related to the warrants, respectively. For the three months ended June 30, 2022 and 2021, the Company recorded $0 and $44,179 as compensation expense related to the warrants, respectively. Prior to Mr. Kaplan’s appointment to the Board of Directors, on July 7, 2020 the Company entered into a Consulting Agreement with Mr. Kaplan to award him, as full compensation for two (2) years of service, warrants to purchase two million (2,000,000) shares of common stock, if certain milestones are reached, at an exercise price of $0.18 per share, which was the closing price of our common stock on such date. The warrants are valued at $354,400 based on the Black Scholes Model. When the warrants were issued management had assessed the probability of certain milestones being met as probable and therefore the warrants were being straight-lined over the term of services and accelerated whenever a milestone is met. During the quarter ending June 30, 2022, management, upon further review, has determined that these milestones will probably not be met and has recorded an accumulative catch up adjustment of $291,482. For the six months ended June 30, 2022 and 2021, the Company recorded $41,508 and $83,478 as compensation expense related to the warrants, respectively. For the three months ended June 30, 2022 and 2021, the Company recorded $0 and $41,970 as compensation expense related to the warrants, respectively. The warrants shall vest upon the occurrence to the Company of the following milestone events through the efforts of the consultant. In July 2022, the term of the consulting agreement ended with no further milestones being completed. No further compensation will be recorded in association to these warrants: No. of Warrants Milestone 100,000 Acceptance by the Company of a full go-to market strategy for the Company’s products. This milestone has been achieved. 100,000 Acceptance by the Company of a social marketing platform and PR strategy and onboarding of such. 300,000/500,000 300,000 for each multi outlet (“MULO”) retailer that is onboarded – regardless of store count carrying the product; and 500,000, if the onboarded MULO is a national chain. 300,000 Deliverance of full due diligence package for each potential acquisition for which the Company requests the consultant perform due diligence 500,000 Upon the closing of any acquisition which the consultant brought to the Company and provided due diligence. 500,000 Additional compensation in board seat agreement. On August 4, 2020, the Company signed an Employment Agreement for a term of three years with an annual base salary of eighty-four thousand dollars ($84,000). As part of the agreement the Company will issue a warrant to the employee to purchase 300,000 shares a year, for a total of 900,000 shares of the Company’s common stock. The warrants have a term of three (3) years from date of issue and an exercise price equal to the closing market price of the Company’s common stock on August 4, of the corresponding year. The warrants issued on August 4, 2020, 2021 and 2022, are valued at $97,470, $46,050 and $22,740, respectively, based on the Black Scholes Model. The warrants will be subject to a 12-month period whereby the warrants will vest in equal monthly increments for each year of the employment period. Once per quarter, the employee may waive the right to receive 25,000 warrants and receive in exchange for $5,000 worth of shares of the Company’s common stock. In the event the employee’s employment is terminated by the Company without cause, the employee shall be entitled to receive severance in an amount equal to the lesser of three month’s salary or the amount of salary otherwise payable until the termination date. The employee additionally shall be entitled to retain all warrants scheduled to vest within the following six months. For the six months ended June 30, 2022 and 2021, the Company recorded $41,634 and $48,334 as compensation expense related to the warrants, respectively. For the three months ended June 30, 2022 and 2021, the Company recorded $11,480 and $24,301 as compensation expense related to the warrants, respectively. On March 21, 2022, the Company extended the maturity date on one of its promissory notes (see Note 5). In association with this extension the company granted warrants for the right to purchase 125,000 shares of common stock at an exercise price of $0.24 a share. The warrants are valued at $28,088 based on the Black Scholes Model, are fully vested as of the issue date and have an exercise term of three (3) years. The Company recorded a debt discount and will amortize it over the life of the loan. The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective period: 2022 2021 Risk-free interest rate 0.22 % 0.03-0.08 % Expected term of options, in years 3 3 Expected annual volatility 214.0 % 228.0-247.7 % Expected dividend yield - % - % Determined grant date fair value per option $ 0.15 – 0.22 $ 0.14 – 0.22 A summary of the Company’s warrants to purchase common stock activity is as follows: Number of Warrants (in common shares) Weighted Average Exercise Price Outstanding, December 31, 2020 4,899,750 $ 0.21 Granted 1,148,775 0.19 Exercised - - Forfeited or cancelled (343,750 ) 0.08 Outstanding, December 31, 2021 5,704,775 $ 0.22 Granted 425,000 0.18 Exercised - - Forfeited or cancelled (60,000 ) 0.30 Outstanding, June 30, 2022 6,069,775 $ 0.21 As of June 30, 2022, 4,144,775 warrants for common stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 1.67 years and the remaining expense is $4,416 over the remaining amortization period which is three months. As of June 30, 2021, 3,468,391 warrants for common stock were exercisable and the intrinsic value of these warrants was $76,742, the weighted average remaining contractual life for warrants outstanding was 2.01 years and the remaining expense is $184,313 over the remaining amortization period which is 1.25 years. Preferred Stock Warrants A summary of the Company’s warrants to purchase Series B Preferred Stock activity is as follows: Number of Warrants (in Series B Preferred Stock) Weighted Average Exercise Price Outstanding, December 31, 2020 4,470,000 $ 0.68 Granted - - Exercised - - Forfeited or cancelled - - Outstanding, December 31, 2021 4,470,000 $ 0.68 Granted - - Exercised - - Forfeited or cancelled - - Outstanding, June 30, 2022 4,470,000 $ 0.68 As of June 30, 2022, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $0, the weighted average remaining contractual life for warrants outstanding was 5.87 years. As of June 30, 2021, 4,470,000 warrants for Series B preferred stock were exercisable and the intrinsic value of these warrants was $1,739,250, the weighted average remaining contractual life for warrants outstanding was 6.87 years. |