Shareholders' Equity

12 Months Ended

Dec. 31, 2020

Stockholders' Equity Note [Abstract]

Shareholders' Equity

Note 11. Shareholders’ Equity

Common Stock

The Company had 306,185,206 and 225,540,501 common shares outstanding at December 31, 2020 and December 31, 2019, respectively.

In December 2018, the Company issued 20,000,000 shares of common stock to Robert M. Carmichael as an incentive bonus with a fair value of $200,000. As the shares are subject to continued employment by Mr. Carmichael through January 2, 2020, the Company has treated the shares as issued but not as yet outstanding. Expense for the issuance is being recognized over the full vesting period, and accordingly, the Company recognized stock compensation expense of $1,280 and $188,144 for the years ended December 31, 2020 and 2019 respectively.

In January 2019, the Company entered into an investment banking and corporate advisory agreement. The term of the agreement was for one year and provided for compensation of 2,700,000 common shares with a fair value of $29,700 plus related expenses. The shares were issued in February, 2019 and March 2019. For the year ended December 31, 2019 the Company recorded $29,700 in stock based compensation expense.

In January 2019, the Company issued 1,000,000 common shares with a fair value of $12,500 to a consultant for general administrative advisory services for the period from December 1, 2018 through April 30, 2019, of which $10,000 was expensed during year ended December 31, 2019.

In March 2019 the Company issued Mr. Hyatt a unit of the securities of the Company, with the unit consisting of 50,000,000 shares of common stock and 50,000,000 18 month common stock purchase warrants exercisable at $0.01 per share in consideration of $500,000. The Company did not pay any fees or commissions in connection with the sale of the unit.

During the year ended December 31, 2019, the Company issued 1,332,885 shares of common stock valued at $19,391 an average of ($0.0145) per share for services to an employee related to an employment agreement that provided $10 per hour to be paid in common stock.

In May 2019, the Company engaged a consultant to provide certain specified services under the terms of a letter agreement. As compensation, the Company issued 1,000,000 common shares with a fair value of $16,000 to a consultant which was expensed during the year ended December 31, 2019.

On July 17, 2019 the Company sold 2,500,000 shares of common stock for proceeds of $25,000 ($0.01 per share).

In August 2019, the Company issued 318,747 common shares with a fair value of $5,000 to a consultant for general administrative advisory services, which was expensed during the year ended December 31, 2019.

In September 2019 the Company issued 1,250,000 shares of common stock valued at $20,375 ($0.016 per share) fair market value, pursuant to an investor relations agreement.

In October 2019, the Company issued 191,087 shares of common stock valued at $4,395, an average of $.023 per share for consulting services for BLU3 operating manual.

Under the STS Agreement, the Company paid an initial license fee in April 2018 through the issuance of 759,422 shares of common stock with a fair value of $30,000 which is being amortized on a straight-line basis over its five year term. The Company issued 828,221 shares of common stock with a fair value of $18,635 in satisfaction of $13,500 for the first commercial sale in October, 2019.

In January 2020 the Company issued 2,647,065 shares of common stock in exchange for $45,000 to an accredited investor and daughter of Mr. Charles F. Hyatt, a member of our Board of Directors.

In February 2020 the Company issued 12,500,000 shares of common stock related to the exercise of common stock purchase warrants at an exercise price of $.01, for a total conversion price of $125,000. The shares were issued to Mr. Hyatt, a member of the Board of Directors.

On June 9, 2020 the Company issued an aggregate of 330,636 shares of common stock to an employee for services performed in December 2019 and the first five months of 2020. The fair value of these shares was $9,520.

On April 2, 2020 the Company issued 10,000,000 shares of common stock related to the exercise of common stock purchase warrant at an exercise price of $.01 per share. The Company received proceeds of $100,000 upon such exercise from Mr. Hyatt, a member of our Board of Directors.

On April 10, 2020 the Company sold an aggregate of 20,000,000 shares of its common stock at a purchase price $0.025 per share to two accredited investors, including Mr. Hyatt, in a private transaction, resulting in proceeds to the Company of $500,000.

On April 9, 2020, the Company issued to an investor relations consultant, 3,000,000 shares of common stock, with a fair market value of $133,500.

On April 9, 2020, the Company issued, to a corporate communications consultant 2,000,000 shares of its common stock with a fair market value of $89,000.

On April 28, 2020, the Company issued 1,333,333 shares of its common stock as incentives to two employees. The fair value of the stock was $64,000.

On May 21, 2020, the Company issued 3,658,633 shares of common stock with a fair market value of $160,980 to six individuals for compensation related to the BLU3-VENT project. Of the shares issued, Mr. Carmichael received a total 725,087 shares with a fair value of $31,904 and Blake Carmichael, CEO of BLU3, Inc. who is also Mr. Carmichael’s adult son, received a total of 849,305 shares with a fair value of $37,369. The balance of the shares were received by employees of the Company and independent contractors.

In the third quarter of 2020 the Company issued 280,038 shares of its common stock to an employee for services performed from June 2020 to August 2020. The fair value of these shares was $5,890.

In the third and fourth quarters of 2020 the Company issued 2,795,000 shares of its common stock to Christopher Constable under the consulting agreement with Brandywine, LLC. The aggregate fair value of these shares was $45,659.

On December 15, 2020, the Company issued 2,100,000 shares of its common stock with a fair value of $40,320 related to an agreement with Newbridge Securities to provide investment banking and business advisory services.

Preferred Stock

During the second quarter of 2010, the holder of the majority of the Company’s outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation authorizing the issuance of 10,000,000 shares of blank check preferred stock. The blank check preferred stock as authorized has such voting powers, designations, preferences, limitations, restrictions and relative rights as may be determined by our Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business Corporation Act. In April 2011 the Board of Directors designated 425,000 shares of the blank check preferred stock as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible into a share of the Company’s common stock at any time at the option of the holder at a conversion price of $18.23 per share. Holders of shares of Series A Convertible Preferred Stock are entitled to 250 votes for each share held. The Company’s common stock and Series A Convertible Preferred Stock vote together as on any matters submitted to our shareholders for a vote. As and December 31, 2020 and 2019, the 425,000 shares of Series A Convertible Preferred Stock are owned by Robert M. Carmichael.

Options

Effective July 29, 2019 the Company issued options to purchase up to an aggregate of 12,457,142 shares of common stock to Mr. Pitzner. The options were issued pursuant to a stock option grant agreements and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $52,280 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%. In August 2019 8,304,761 options belonging to Mr. Pitzner were cancelled. Stock option expense recognized during for the year ended December 31, 2019 was $17,429.

Effective July 29, 2019 the Company issued options to purchase up to an aggregate of 10,380,952 shares of common stock to Blake Carmichael. The options were issued pursuant to a stock option grant agreements and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $43,582 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%. Stock option expense recognized during for the years ended December 31, 2020 and 2019 was $5,362 and $38,212, respectively.

Effective July 29, 2019 the Company issued Robert M. Carmichael options to purchase up to 20,761,904 shares of common stock. The options were issued pursuant to a Grant Agreement and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $87,147 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.01%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%. Stock option expense recognized for the years ended December 31, 2020 and 2019 was $10,724 and $76,423, respectively.

Effective January 6, 2020 the Company issued options to purchase up to 2,000,000 shares of common stock to Mr. Jeffrey Guzy. The options were issued pursuant to a stock option grant agreement and is exercisable at $0.0229 per share for a period of three years from the date of issuance. The options were immediately vested. The fair value of the options on the date of the grant was $40,107 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 1.55%, ii) expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of 250%. Stock option expense recognized during the year ended December 31, 2020 for this option was $40,107.

Effective January 11, 2020 the Company issued options to purchase up to 2,000,000 shares of common stock to BizLaunch Advisors, LLC. The options were issued pursuant to a professional services agreement and are exercisable at $0.0229 per share for a period of three years from the date of issuance. The options were immediately vested. The fair value of the options on the date of the grant was $40,097 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 1.54%, ii) expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of 250%. Stock option expense recognized during the year ended December 31, 2020 for this option was $40,097.

On April 14, 2020 the Company entered into a Non-Qualified Stock Option Agreement with Mr. Carmichael (the “Carmichael Option Agreement”). Under the terms of the Carmichael Option Agreement, as additional compensation the Company granted Mr. Carmichael an option (the “Carmichael Option”) to purchase up to an aggregate of 125,000,000 shares of the Company’s common stock at an exercise price of $.045 per share, of which the right to purchase 75,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 50,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

● the right to purchase 25,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any subsequent acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively, “Net Revenues”), in excess of $3,500,000 in the aggregate over four consecutive fiscal quarters commencing May 1, 2020 and ending on April 30, 2023 (the “Net Revenue Period”);

● the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $7,000,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period; and

● the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $10,500,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

The Carmichael Option Agreement provides that the Carmichael Option is exercisable by Mr. Carmichael on a cashless basis. The Carmichael Option is not transferrable by Mr. Carmichael, and he must remain an employee of the Company as an additional term of vesting. Once a portion of the Carmichael Option vests, it is exercisable by Mr. Carmichael for 90 days. Any portion of the Carmichael Option which does not vest during the Net Revenue Period lapses and Mr. Carmichael has no further rights thereto.

The fair value of the Carmichael Option on the date of the grate was $4,370,109 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .26%, ii) expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of 320%. The Company analyzed the likelihood that the vesting qualifications would be met, and as of September 30, 2020 deemed that there was a 10% chance that the options would vest. Therefore, stock option expense recognized during the year ended December 31, 2020 for this option was $655,515.

On November 5, 2020 the company entered into a Non-Qualified Stock Option agreement with Christopher Constable the “Constable Option Agreement” as part of his employment agreement. Under the terms of the option agreement, the Company granted Mr. Constable a 5 year option to purchase 5,434,783 shares of the Company’s common stock at an exercise price of $.0184, the “Compensation Options”. The Compensation Options were immediately vested. The fair value of the options on the date of the grant was $106,199 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .16%, ii) expected life of 2.5 years, iii) dividend yield of 0%, iv) expected volatility of 341%. Stock option expense recognized during the year ended December 31, 2020 for this option was $106,890.

As part of the Constable Option Agreement the company also granted Mr. Constable an option (the “Bonus Option”) to purchase up to an aggregate of 30,000,000 shares of the Company’s common stock at an exercise price of $.0184 per share, of which the right to purchase 10,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 20,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

● the right to purchase 2,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any subsequent acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively, “Net Revenues”), in excess of $5,000,000 in the aggregate over four consecutive fiscal quarters commencing January 1, 2021 and ending on April 30, 2023 (the “Net Revenue Period”);

● the right to purchase an additional 3,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $7,500,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period; and

● the right to purchase an additional 5,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $10,000,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

The Constable Option Agreement provides that the Compensation Options and Bonus Options are exercisable by Mr. Constable on a cashless basis. The Carmichael Option is not transferrable by Mr. Carmichael, and he must remain an employee of the Company as an additional term of vesting. Once a portion of the Carmichael Option vests, it is exercisable by Mr. Constable 4 years.

The fair value of the Bonus Options on the date of the grant was $578,082 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .14%, ii) expected life of 2.0 years, iii) dividend yield of 0%, iv) expected volatility of 312.2%. The Company analyzed the likelihood that the vesting qualifications would be met, and as of December 31, 2020 deemed that there was a 0% chance that the options would vest, as the measurement period does not begin until January 1, 2021. Therefore, stock option expense recognized during the year ended December 31, 2020 for this option was $0.

A summary of the Company’s stock option as of December 31, 2020 and 2019, and changes during the years ended December 31, 2020 and 2019 is presented below:

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Options			Exercise Price		Life in Years		Value
Outstanding at December 31, 2018		-		$	-
Granted		43,599,998			0.018
Forfeited		-			-
Exercised		-			-
Cancelled		(8,304,761	)		0.018
Outstanding – December 31, 2019		35,295,237		$	0.018		4.58
Exercisable – December 31, 2019		24,914,285		$	0.018		4.58	$	112,114

					Weighted
					Average
			Weighted		Remaining		Aggregate
	Number of		Average		Contractual		Intrinsic
	Options		Exercise Price		Life in Years		Value
Outstanding at December 31, 2019		35,295,237	$	0.018		4.58
Granted		164,434,783		0.0354
Forfeited		-		-
Exercised		-		-
Cancelled		-		-
Outstanding – December 31, 2020		199,730,020	$	0.0323		2.84
Exercisable – December 31, 2020		44,730,020	$	0.0185		3.59	$	168,892

Warrants

A summary of the Company’s warrants as of December 31, 2020 and 2019, and changes during the years ended December 31, 2020 and 2019 is presented below:

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Warrants			Exercise Price		Life in Years		Value
Outstanding at December 31, 2018		6,783,551		$	0.0115
Granted		50,000,000			0.01
Forfeited		-			-
Exercised		-			-
Cancelled		(4,174,826	)		0.0115
Outstanding – December 31, 2019		52,608,725		$	0.01		0.66
Exercisable – December 31, 2019		52,608,725		$	0.01		0.66	$	610,000

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Warrants			Exercise Price		Life in Years		Value
Outstanding at December 31, 2019		52,608,725		$	0.01		4.58
Granted		-			-
Forfeited		-			-
Exercised		(22,500,000	)		0.01
Cancelled		(30,108,725	)		0.0115
Outstanding – December 31, 2020		-		$	-		-
Exercisable – December 31, 2020		-		$	-		-	$	-

On February 25, 2020, Mr. Hyatt, a member of the Company’s Board of Directors, partially exercised a warrant for the acquisition of 12,500,000 shares at $.01 per share for proceeds to the Company of $125,000.

On April 2, 2020 Mr. Hyatt purchased 10,000,000 shares related to the exercise of an outstanding common stock purchase warrant at an exercise price of $.01 per share. The Company received proceeds of $100,000 upon such exercise. On September 7, 2020 the balance of 27,500,000 in common stock purchase warrant owned by Mr. Hyatt, expired.

In the first quarter of 2020 warrants to purchase 2,608,725 shares of common stock held by two investors expired.