NOTE 7: STOCKHOLDERS' DEFICIT

6 Months Ended

Jun. 30, 2021

Notes

NOTE 7: STOCKHOLDERS' DEFICIT

NOTE 7: STOCKHOLDERS’ DEFICIT

Common Stock

Effective April 3, 2020, the Company granted 500,000 of restricted shares of its common stock to a consultant for services as an advisory board member, with 250,000 shares vesting immediately and the remainder vesting in four equal quarterly installments commencing on July 1, 2020. During 2020, the Company recorded $10,768 of share-based compensation expense. The arrangement was terminated on July 17, 2020, and the unvested portion of the restricted stock grant of 187,500 shares were forfeited.

Effective August 6, 2020, the Company and Emerging Growth reached an agreement whereby the Company issued 4.8 million shares of its common stock with a value of $240,000 to Emerging Growth as payment for outstanding liabilities due to Emerging Growth totaling $209,931.  The outstanding liabilities due to Emerging Growth included $104,931 in outstanding accrued interest on the Series B Preferred Stock through August 31, 2020, as well as $105,000 of outstanding payables.  The additional $30,069 was recorded as loss on extinguishment of debt during 2020.

Effective October 13, 2020, the Company and the holder of its $500,000 promissory note payable issued on September 10, 2019 (see Note 5) reached an agreement whereby the Company agreed to issue 1,650,000 shares of its common stock with a value of $82,500 to the noteholder as payment of $41,192 of accrued interest on the promissory note.  This resulted in a loss on extinguishment of debt of $41,308 in 2020.  The common shares were issued on January 2, 2021 and are reflected as common shares issuable as of December 31, 2020.

In December 2020, the Company received $410,000 in cash in respect of a sale of an aggregate total of 10,250,000 shares of its common stock for proceeds of $420,000.  The Company received the remaining $10,000 for the sale in January 2021 and the common shares were issued in January 2021.  The Company has reflected the $410,000 received in common shares issuable in the statement of shareholders equity.

In January 2021, the Company issued 12,150,000 shares of common stock, of which 11,900,000 were issuable on December 31, 2020 and 250,000 were sold in 2021 for $10,000.

In March 2021, the Company issued 1,750,000 shares of common stock in exchange for $105,000 of interest accrued to Emerging Growth as a result of holding the Series B Preferred stock. The fair value of the shares was $157,500 and the Company recognized a loss on extinguishment of debt in the amount of $52,500.

In May 2021, in connection with the maturity extension of the $500,000 promissory note (Note 4), the Company issued 2,000,000 shares of its common stock to the noteholder in lieu of $40,000 of interest accrued and accruing on the promissory note through December 31, 2021. The fair value of the shares was $160,000 and the Company recognized a loss on extinguishment of debt in the amount of $120,000.

In June 2021, the Company received $50,000 in cash in respect to an exercise of warrants by a Note holder. The Company has reflected the $50,000 received in common shares issuable in the statement of stockholder’s equity as the Company issued 500,000 shares of common stock on July 7, 2021.  

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock with a par value of $0.001 per share, of which 500 have been authorized as Series A Preferred Stock and 3,000 have been authorized as Series B Preferred Stock.

On June 20, 2019, the Company issued to certain of its promissory noteholders an aggregate of 500 shares of Series A Preferred Stock, each with a stated value per share of $1,000, as conversion of $500,000 worth of outstanding promissory notes. The Series A Preferred Stock bears interest at 12% per annum, and is convertible into the Company’s common stock at the election of the holder at a conversion price per share to be mutually agreed between the Company and the holder in the future, and be redeemable at the Company’s option following the third year after issuance, without voting rights or a liquidation preference.

On June 20, 2019, the Company issued 3,000 shares of Series B Preferred Stock to Emerging Growth each with a stated value of $1,000 per share, as part of the Emerging Growth Agreement. The aggregate fair value of $687,000 was recorded as part of the acquisition price of the net assets acquired from Emerging Growth (see Note 4). The Series B Preferred Stock bears interest at 6% per annum and is convertible into the Company’s common stock at the election of Emerging Growth at a conversion price per share to be mutually agreed between the Company and Emerging Growth in the future, without voting rights or a liquidation preference, except with respect to accrued penalty interest.

For the six months ended June 30, 2021 and 2020, the Company incurred $120,000 and $120,000, respectively, of interest from the outstanding preferred stock.

Warrants

The following summarizes the Company’s warrant activity for the six months ended June 30, 2021.

	Warrants	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life (Years)
Outstanding at December 31, 2020	5,256,944	$ 0.33	3.56
Forfeited	(69,444)	0.45
Exercised	(500,000)	0.10
Outstanding at June 30, 2021	4,687,500	$ 0.33	3.36
Vested and expected to vest
at June 30, 2021	4,687,500	$ 0.33	3.36
Exercisable at June 30, 2020	4,687,500	$ 0.33	3.36

As of June 30, 2021, all outstanding warrants were fully vested and there was no remaining unrecorded compensation expense.

Options

The Company had a Stock Option Plan, or the Plan, under which the total number of shares of capital stock of the Company that may be subject to options under the Plan was 22,500,000 shares of Common Stock from either authorized but unissued shares or treasury shares.  The Plan expired on December 14, 2016.

The following summarizes the Company’s stock option activity for the six months ended June 30, 2021.

	Options	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life Years)
Outstanding at December 31, 2020	3,160,000	$ 0.33	1.44
Granted/forfeited/cancelled	-
Outstanding at June 30, 2021	3,160,000	$ 0.33	.94
Vested and expected to vest
at June 30, 2021	3,160,000	$ 0.33	.94
Exercisable at June 30, 2021	3,160,000	$ 0.33	.94

As of June 30, 2021, all outstanding options were fully vested and there is no remaining unrecorded compensation expense.