| STOCKHOLDERS EQUITY (DEFICIT) | 11.
STOCKHOLDERS EQUITY (DEFICIT) Overview The
Companys authorized capital stock consists of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock,
par value $0.001 per share. As of December 31, 2016, there were 32,318,471 shares of common stock issued and outstanding and 1,000,000
shares of preferred stock issued and outstanding. Description
of Common Stock The
Companys common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including
the election of directors. Except as otherwise required by law or provided in any resolution adopted by the Companys board
of directors with respect to any series of preferred stock, the holders of common stock will possess all voting power. Generally,
all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality)
of the votes entitled to be cast by all shares of common stock that are present in person or represented by proxy, subject to
any voting rights granted to holders of any preferred stock. Holders of the Companys common stock representing fifty percent
(50%) of the Companys capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary
to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of the Companys outstanding
shares is required to effectuate certain fundamental corporate changes such as a liquidation, merger or an amendment to the Companys
articles of incorporation. Subject
to any preferential rights of any outstanding series of preferred stock created by the Companys board of directors from
time to time, the holders of shares of common stock will be entitled to such cash dividends as may be declared from time to time
by the Companys board of directors from funds available therefor. Subject
to any preferential rights of any outstanding series of preferred stock created from time to time by the Companys board
of directors, upon liquidation, dissolution or winding up, the holders of shares of common stock will be entitled to receive pro
rata all assets available for distribution to such holders. In
the event of any merger or consolidation of the Company with or into another company in connection with which shares of the Companys
common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders
of the Companys common stock will be entitled to receive the same kind and amount of shares of stock and other securities
and property (including cash). Holders of the Companys common stock have no pre-emptive rights, no conversion rights and
there are no redemption provisions applicable to the Companys common stock. Description
of Preferred Stock The
Companys board of directors is authorized to divide the authorized shares of the Companys preferred stock into one
or more series, each of which must be so designated as to distinguish the shares of each series of preferred stock from the shares
of all other series and classes. The Companys board of directors is authorized, within any limitations prescribed by law
and the Companys articles of incorporation, to fix and determine the designations, rights, qualifications, preferences,
limitations and terms of the shares of any series of preferred stock, including, but not limited to, the following:
the rate of dividend,
the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends accrue;
whether shares may
be redeemed, and, if so, the redemption price and the terms and conditions of redemption;
the amount payable
upon shares in the event of voluntary or involuntary liquidation;
sinking fund or
other provisions, if any, for the redemption or purchase of shares;
the terms and conditions
on which shares may be converted, if the shares of any series are issued with the privilege of conversion;
voting powers, if
any, provided that if any of the preferred stock or series thereof have voting rights, such preferred stock or series shall
vote only on a share for share basis with the common stock on any matter, including, but not limited to, the election of directors,
for which such preferred stock or series has such rights; and,
subject to the foregoing,
such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and preferences,
if any, of shares or such series as the board of directors may, at the time so acting, lawfully fix and determine under the
laws of the State of Nevada. On
April 15, 2015, the Company filed a Certificate of Amendment to the Companys Articles of Incorporation (the Certificate
of Amendment) with the Nevada Secretary of State. The Certificate of Amendment authorized ten million (10,000,000) shares
of preferred stock. The Companys Board of Directors and a majority of its shareholders approved the Certificate of Amendment. On
April 15, 2015, pursuant to Article IV of our Articles of Incorporation, the Companys Board of Directors voted to designate
a class of preferred stock entitled Series A Preferred Stock, consisting of up to one million (1,000,000) shares, par value $0.001.
Under the Certificate of Designation, holders of Series A Preferred Stock will be entitled to quarterly dividends on 2% of our
earnings before interest, taxes and amortization. The dividends are payable in cash or common stock. The holders will also have
a liquidation preference on the state value of $0.02 per share plus any accumulated but unpaid dividends. The holders are further
entitled to have the Company redeem their Series A Preferred Stock for three shares of common stock in the event of a change of
control and they are entitled to vote together with the holders of the Companys common stock on all matters submitted to
shareholders at a rate of forty-five (45) votes for each share held. Common
Stock issuances During
the period commencing October 1, 2016 through December 31, 2016, the Company received $68,000 from 4 investors pursuant to private
placement agreements with the investors to purchase 85,000 shares of the Companys $0.001 par value common stock at a purchase
price equal to $0.80 for each share of Common stock. In
November of 2016, the Company issued 2,932,704 shares of common stock to two officers for the cashless exercise of 3,000,000 options. In
December of 2016, the Company issued 1,466,352 shares of common stock to a director for the cashless exercise of 1,500,000 options. |
