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Stockholders' Deficit

12 Months Ended

Dec. 31, 2019

Note 9 – Stockholders' Deficit

Shares Authorized

The Company is authorized to issue up to thirty-five million (35,000,000) shares of capital stock, of which fifteen million (15,000,000) shares are designated as common stock, par value $0.001 per share, and twenty million (20,000,000) are designated as "blank check" preferred stock, par value $0.001 per share. The designations, rights, and preferences of such preferred stock are to be determined by the Company's board of directors.

Reverse Stock Split

On July 25, 2019, following board of directors approval, the Company filed a Certificate of Change to its Articles of Incorporation (the "Amendment"), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:20) reverse stock split (the "Reverse Stock Split") of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on July 30, 2019. The number of common stock authorized was proportionately reduced pursuant to Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were "rounded up" to the next whole share.

All share and per share amounts for the common stock have been retroactively restated to give effect to the reverse splits.

Preferred Stock

As of December 31, 2019, and 2018 there were no preferred stock issued or outstanding.

Series A Cumulative Convertible Preferred Stock

On February 13, 2015, 100,000 shares of preferred stock were designated as Series A Cumulative Convertible Preferred Stock ("Series A"). Each share of Series A shall have a stated value equal to $100 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the "Series A Stated Value").

The holders of the Series A shall be entitled to receive preferential dividends at the rate of 6% per share per annum on the Series A Stated Value, but before any dividend or other distribution will be paid or declared and set apart for payment on any shares of any Junior Stock, as defined. Such dividends shall compound annually and be fully cumulative, and shall accumulate from the date of original issuance of the Series A and shall be payable quarterly, in arrears, commencing on the first day of the calendar quarter following the date on which the Series A is issued. Upon the occurrence of an Event of Default (as defined below) and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series A Stated Value. At the Company's option, such dividend payments may be made in (i) cash (ii) additional shares of Series A valued at the Series A Stated Value thereof, in an amount equal to 150% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series A, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series A Preferred.

The dividends on the Series A shall be cumulative whether or not declared so that, if at any time full cumulative dividends at the rate aforesaid on all shares of the Series A then outstanding from the date from and after which dividends thereon are cumulative to the end of the annual dividend period next preceding such time shall not have been paid or declared and set apart for payment, or if the full dividend on all such outstanding Series A for the then current dividend period shall not have been paid or declared and set apart for payment, the amount of the deficiency shall be paid or declared and set apart for payment before any sum shall be set apart for or applied by the Corporation or a subsidiary of the Corporation to the purchase, redemption or other acquisition of the Series A or any shares of any other class of stock ranking on a parity with the Series A and before any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Stock and before any sum shall be set aside for or applied to the purchase, redemption or other acquisition of any Junior Stock.

Holder of Series A shall have the right at any time after the issuance, to convert such shares, accrued but unpaid declared dividends on the Series A and any other sum owed by the Corporation arising from the Series A into fully paid and non-assessable shares of Common Stock (the "Conversion Shares") of the Corporation determined in accordance with the applicable conversion price (the "Conversion Price").

The number of Conversion Shares issuable upon conversion shall equal (i) the sum of (A) the Series A Stated Value being converted and/or (B) at the Holder's election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series A shall be $5.00, subject to adjustment.

During the year ended December 31, 2016 the conversion price was adjusted to $3.28

The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this provision is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty-one (61) days' prior written notice to the Corporation.

The holders of our Series A do vote together with the holders of our Common Stock on an as converted basis on each matter submitted to a vote of holders of Common Stock. The number of votes that may be cast by a holder of Series A shall be equal to the number of shares of Common Stock issuable upon conversion of such Holder's Series A on the record date for determining those stockholders entitled to vote on the matter. In addition, the affirmative vote of the holders of a majority of our outstanding Series A is required to for the following actions:

(a) amending the Corporation's articles of incorporation or by-laws if such amendment would adversely affect the Series A

(b) purchasing any of the Corporation's securities other than required redemptions of Series A and repurchase under restricted stock and option agreements authorizing the Corporation's employees;

(d) declaring or paying any dividends other than in respect of the Series A; and

(e) issuing any additional securities having rights senior to or on parity with the Series A.

During the years ended December 31, 2018, the Company accrued $0 for liquidating damages on the Series A and $0 on the warrants associated with the Series A.

During the year ended December 31, 2018 the Company converted the remaining Series A into the August 2018 Equity Raise. See below.

Series B Cumulative Convertible Preferred Stock

On December 21, 2015, 20,000 shares of preferred stock were designated as Series B Cumulative Convertible Preferred Stock ("Series B"). Each share of Series B shall have a stated value equal to $100.00 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the "Series B Stated Value").

The holders of outstanding shares of Series B shall be entitled to receive preferential dividends at the rate of 6% per share per annum on the Series B Stated Value, but before any dividend or other distribution will be paid or declared and set apart for payment on any shares of any Junior Stock as defined. Such dividends shall compound annually and be fully cumulative and shall accumulate from the date of original issuance of the Series B, and shall be payable quarterly, in arrears, commencing on the first day of the calendar quarter following the date on which the Series B is issued. Upon the occurrence of an Event of Default as defined below and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series B Stated Value. At the Corporation's option, such dividend payments may be made in (i) cash (ii) additional shares of Series B valued at the Series B Stated Value thereof, in an amount equal to 100% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series B, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series B Preferred.

The dividends on the Series B shall be cumulative whether or not declared so that, if at any time full cumulative dividends at the rate aforesaid on all shares of the Series B then outstanding from the date from and after which dividends thereon are cumulative to the end of the annual dividend period next preceding such time shall not have been paid or declared and set apart for payment, or if the full dividend on all such outstanding Series B for the then current dividend period shall not have been paid or declared and set apart for payment, the amount of the deficiency shall be paid or declared and set apart for payment before any sum shall be set apart for or applied by the Corporation or a subsidiary of the Corporation to the purchase, redemption or other acquisition of the Series B or any shares of any other class of stock ranking on a parity with the Series B and before any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Stock and before any sum shall be set aside for or applied to the purchase, redemption or other acquisition of any Junior Stock.

Holders of shares of Series B shall have the right at any time commencing after the issuance to convert such shares, accrued but unpaid declared dividends on the Series B into fully paid and non-assessable shares of Common Stock (the "Conversion Shares") of the Corporation determined in accordance with the applicable conversion price (the "Conversion Price"). All declared or accrued but unpaid dividends may be converted at the election of the Holder together with or independent of the conversion of the Series B Stated Value of the Series B.

The number of Conversion Shares issuable upon conversion of the Conversion Amount shall equal (i) the sum of (A) the Series B Stated Value being converted and/or (B) at the Holder's election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series B shall be $6.00, subject to adjustment.

During the year ended December 31, 2016 the conversion price was adjusted to $3.94.

The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this proviso is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty-one (61) days' prior written notice to the Corporation.

The holders of our Series B do vote together with the holders of our Common Stock on an as converted basis on each matter submitted to a vote of holders of Common Stock. The number of votes that may be cast by a holder of Series B shall be equal to the number of shares of Common Stock issuable upon conversion of such Holder's Series B on the record date for determining those stockholders entitled to vote on the matter. In addition, the affirmative vote of the holders of a majority of our outstanding Series B is required to for the following actions:

(a) amending the Corporation's articles of incorporation or by-laws if such amendment would adversely affect the Series B

(b) purchasing any of the Corporation's securities other than required redemptions of Series B and repurchase under restricted stock and option agreements authorizing the Corporation's employees;

(d) declaring or paying any dividends other than in respect of the Company's Series A or Series B; and

(e) issuing any additional securities having rights senior to the Series B.

During the years ended December 31, 2018, the Company accrued $0 for liquidating damages on the Series B and $0 on the warrants associated with the Series B.

During the year ended December 31, 2018 the Company converted the remaining Series B into the August 2018 Equity Raise. See below.

Common Stock

On January 31, 2018, the Company issued 18,750 shares of its restricted common stock to settle outstanding vendor liabilities of $3,750. In connection with this transaction the Company also recorded a gain on settlement of vendor liabilities of $375.

During the year ended December 31, 2018, the Company issued 610,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $116,300. These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the year ended December 31, 2018 the Company recorded $72,835 to share based payments.

On January 4, 2019, the Company issued 100,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $240,000.

On January 3, 2019, the Company issued 25,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $70,050.

August 2018 Equity Raise

Effective August 31, 2018 (the "Effective Date"), the Company consummated the initial closing (the "Initial Closing") of a private placement offering of its securities of up to $5,000,000 (the "August 2018 Equity Raise"). In connection with the August 2018 Equity Raise, the Company entered into definitive securities purchase agreements (the "Purchase Agreements") for aggregate gross proceeds of $649,829 and $2,787,462 during the years ended December 31, 2019 and 2018 respectively. Pursuant to the Purchase Agreement, the Purchasers purchased an aggregate of 129,966 and 557,492 shares of common stock at $5.00 per share and received warrants to purchase 129,966 and 557,492 shares of common stock at an exercise price of $6.00 per share (the "Purchaser Warrants", collectively, the "Securities").

The Purchaser Warrants are exercisable for a term of five years from the Initial Exercise Date (as defined in the Purchaser Warrants).

In connection with the August 2018 Equity Raise, the Company will issue 110,000 shares of Common Stock, will pay fees of $161,406 and will grant warrants to purchase 6,999 shares of common stock at an exercise price of $6.00 per share for services rendered as the Company's placement agent in the Private Offering. The Company has recorded $334,985 to stock issuance costs, which are part of Additional Paid-in Capital.

Letter Agreements for the Conversion of Debt and Preferred Stock

In connection with the August 2018 Equity Raise, the Company entered into those certain letter agreements (the "Debt Conversion Agreements") with certain holders of its debt securities (the "Debt Holders"), for the conversion of an aggregate amount of $7,997,939 of principal and $1,028,890 of accrued but unpaid interest of the Company's debt obligations into 2,256,448 shares of Common Stock at a conversion price equal to $4.00 per share. Additionally, as inducement to enter into the Debt Conversion Agreement, the Debt Holders were issued warrants to purchase 1,128,225 shares of Common Stock at an exercise price equal to $6.00 per share, expiring five years from the date of issuance (the "Incentive Debt Warrants"). The Company recorded a Loss on extinguishment of debt of $2,913,934 in connection with of the debt conversions. See Notes 7, 8 and 9.

Concurrently with its entrance in the Debt Conversion Agreements, the Company entered into those letter agreements (the "Preferred Stock Conversion Agreements") with certain holders (the "Preferred Holders") of its Series A Cumulative Convertible Preferred Stock and Series B Cumulative Convertible Preferred Stock (the "collectively, the Preferred Stock") whereby the Preferred Holders converted 38,512 shares of the Preferred Stock into an aggregate of 1,343,329 shares of Common Stock at conversion prices equal to $3.94 per share for Series A and $3.28 per share for Series B. As in an inducement to enter into the Preferred Stock Conversion Agreements, the Preferred Holders were issued warrants to purchase 671,665 shares of Common Stock at an exercise price equal to $6.00 per share, expiring five years from the date of issuance (the "Incentive Preferred Warrants", and together with the Incentive Debt Warrants, the "Incentive Warrants"). The Company recorded an inducement of $2,016,634 in connection with of the Preferred conversions and is recorded as an adjustment to net loss attributable to common shareholders, on the statements of operations.

Tender offers

	Warrants subject to tender		Common shares issuable		Warrants tendered		Shares issued
Tender offer 1		3,091,648		1,030,539		2,546,581		848,854
Tender offer 2		2,687,742		1,336,371		2,502,607		1,251,319
Total		5,779,390		2,366,910		5,049,188		2,100,173

Tender 1

In February 2019 the Company offered to its holders of certain outstanding warrants (the "Tender 1 Warrants"), each with an exercise price of $4.00, by agreeing to receive thirty-three thousand three hundred and thirty three (1,667) Shares in exchange for every one-hundred thousand (5,000) Warrants tendered by the holders of Warrants (the "Exchange Ratio"). The Exchange Ratio was selected by the Company in order to provide the holders of the Warrants with an incentive to exchange the Warrants. The Tender closed on April 15, 2019. The Company considered the fair value accounting for all share-based payments awards. The fair value of each warrant tendered is estimated on the tender date using the Black-Scholes option-pricing model. Since the fair of the warrants were in excess of the fair value of common stock the company did not record an inducement expense.

Tender 2

In April 2019 the Company offered to its holders of certain outstanding warrants (the "Tender 2 Warrants"), each with an exercise price of $6.00, by agreeing to receive fifty thousand (2,500) Shares in exchange for every one-hundred thousand (5,000) Warrants tendered by the holders of Warrants (the "Exchange Ratio"). The Exchange Ratio was selected by the Company in order to provide the holders of the Warrants with an incentive to exchange the Warrants. The Tender closed on May 17, 2019. The Company considered the fair value accounting for all share-based payments awards. The fair value of each warrant tendered is estimated on the tender date using the Black-Scholes option-pricing model. Since the fair of the warrants were in excess of the fair value of common stock the company did not record an inducement expense.

Stock Options

The Company applied fair value accounting for all share-based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

The assumptions used for options granted during the year ended December 31, 2019 and 2018 are as follows:

	December 31, 2019			December 31, 2018
Exercise price		$4.40-2.20			6.00-15
Expected dividends		0	%		0	%
Expected volatility		102.76	%		93.64%-116.27%
Risk free interest rate		1.61	%		2.2%-2.56
Expected life of option		10 years			3.6 - 4.3 years

The following is a summary of the Company's stock option activity:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balance – December 31, 2017 – outstanding		882,500	$	8.40		3.27
Granted		-		-		-
Exercised		-		-		-
Cancelled/Modified		-		-		-
Balance – December 31, 2018 – outstanding		882,500		8.40		3.27
Balance – December 31, 2018 – exercisable		765,833		7.20		3.25

Balance – December 31, 2018 – outstanding		882,500		8.40		3.27
Granted		29,000		3.22		10.01
Exercised		-		-		-
Cancelled/Modified		-		-		-
Balance – December 31, 2019 – outstanding		911,500		8.16		2.51
Balance – December 31, 2019 – exercisable		911,500	$	8.16		2.51

During the year ended December 31, 2019 the Company granted options of 29,000 to consultants. As of the date of this filing the company has not issued these options.

At December 31, 2019, the aggregate intrinsic value of options outstanding and exercisable was $0 and $0, respectively.

Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $14,336 and $446,123, for the year ended December 31, 2018 and 2019, respectively.

The following is a summary of the Company's stock options granted during the year ended December 31, 2019:

Options				Value				Purpose for Grant
	29,000			$	3,021			Service Rendered

The following is a summary of the Company's stock options granted during the year ended December 31, 2018:

Options				Value				Purpose for Grant
	35,000			$	56,495			Service Rendered

Warrants

The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.

The assumptions used for warrants granted during the year ended December 31, 2019 are as follows:

	December 31, 2019			December 31, 2018
Exercise price	$	6.00			$ 4.00-$6.00
Expected dividends		0	%		0	%
Expected volatility		78.50% - 116.92	%		92.14% - 109.54	%
Risk free interest rate		1.32% - 2.75	%		1.64% - 3.09	%
Expected life of warrant		4 – 5 years			4 – 5 years

Warrant Activities

The following is a summary of the Company's warrant activity:

	Warrants			Weighted Average Exercise Price

Outstanding – December 31, 2017		2,312,000		$	5.00
Granted		3,236,141			5.40
Exercised		-			-
Forfeited/Cancelled		-			-
Outstanding – December 31, 2018		5,548,141			5.40
Granted		463,832			5.89
Exercised		-			-
Forfeited/Cancelled		(5,269,753	)		5.32
Outstanding and Exercisable – December 31, 2019		742,221		$	5.25

Warrants Outstanding					Warrants Exercisable
	Exercise price	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	5.25	742,221	2.71	5.25		742,221	2.71

During the year ended December 31, 2019, a total of 133,190 warrants were issued with convertible notes (See Note 6 above). The warrants have a grant date fair value of $252,533 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2019, a total of 128,905 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $205,509 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2019, a total of 1,320 warrants were issued with convertible notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $2,465 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2019, a total of 129,966 warrants were issued with the August 2018 Equity Raise (See above). The warrants have a grant date fair value of $334,985 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2019, a total of 42,443 warrants were issued in exchange for services. The warrants have a grant date fair value of $122,777 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2018, a total of 2,962,884 warrants were issued with promissory notes (See Note 6 above). The warrants have a grant date fair value of $501,268 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2018, a total of 10,481,016 warrants were issued with convertible notes (See Note 7 above). The warrants have a grant date fair value of $1,284,683 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2018, a total of 2,530,242 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $429,340 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2018, a total of 1,403,500 warrants were issued with convertible notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $162,834 using a Black-Scholes option-pricing model and the above assumptions.

During the year ended December 31, 2018, a total of 47,287,641 warrants were issued with the August 2018 Equity Raise (See above). The warrants have a grant date fair value of $6,418,381 using a Black-Scholes option-pricing model and the above assumptions.