STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2021

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

9 STOCKHOLDERS’ EQUITY

a. Common Stock

The Company has authorized 500,000,000 common shares with a par value of $0.0001 each. The Company has issued and outstanding 332,338,981 and 193,637,747 shares of common stock as of March 31, 2021 and December 31, 2020, respectively.

The following common shares were issued by the Company during the three months ended March 31, 2021:

● In terms of debt conversion notices received between January 5, 2021 and February 23, 2021, the Company issued an aggregate of 61,793,616 shares of common stock for the conversion of $2,259,221 of convertible debt and interest thereon, realizing a loss on conversion of $5,184,447.

● In terms of warrant exercise notices received between February 18, 2021 and March 9, 2021, the Company issued 44,074,285 shares of common stock for gross proceeds of $2,203,714.

● On March 17, 2021, the Company, entered into Securities Purchase Agreements with several institutional investors, pursuant to which the Company agreed to sell to the Investors in a private placement (i) 30,333,334 shares of its common stock (the “Shares”) and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 15,166,667 shares of its common stock for gross proceeds of approximately $4,550,000. The combined purchase price for one share of common stock and associated Warrant is $0.15.

Pursuant to an engagement letter dated as of March 6, 2021, by and between the Company and H.C. Wainwright & Co., LLC (“Wainwright”), the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection with the private placement. Pursuant to the engagement agreement, the Company agreed to pay Wainwright a cash fee of 8.0% of the gross proceeds raised by the Company in the private placement. The Company also agreed to pay Wainwright (i) a management fee equal to 1.0% of the gross proceeds raised in the private placement; (ii) $35,000 for non-accountable expenses and (iii) up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses. In addition, the Company agreed to issue to Wainwright (or its designees) placement agent warrants (the “Placement Agent Warrants”) to purchase a number of shares equal to 8.0% of the aggregate number of Shares sold under the Purchase Agreement or warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875.

b. Restricted stock awards

On December 15, 2020, in terms of an employment agreement entered into with an employee, the Company granted 2,500,000 restricted shares of which 1,000,000 vested on January 1, 2021 and the remaining 1,500,000 shares vest over a period of two years.

The restricted stock granted and exercisable at March 31, 2021 is as follows:

		Restricted Stock Granted				Restricted Stock Vested
Grant date Price		Number Granted		Weighted Average Fair Value per Share		Number Vested		Weighted Average Fair Value per Share
$	0.049		20,495,000	$	0.049		10,247,500	$	0.049
	0.05		2,500,000		0.050		1,000,000		0.050
			22,995,000	$	0.049		11,247,500		0.049

The Company has recorded an expense of $122,141 and $313,830 for the three months ended March 31, 2021 and 2020, respectively.

c. Preferred Stock

The Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued and outstanding as of March 31, 2021 and December 31, 2020.

d. Warrants

In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 7 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants.

The warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and is entitled to pro-rata distributions made by the Company in assets or securities other than common stock.

The warrants include a fundamental transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement.

On February 22, 2021, the Board of Directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24, valued at $4,327,899 and expensed as stock based compensation during the current period.

In connection with the Securities Purchase Agreements with several institutional investors, disclosed in 9(a) above, the Company sold warrants to purchase up to an aggregate of 15,166,667 shares of its common stock. The combined purchase price for one share of common stock and associated Warrant is $0.15. The warrants were valued at $2,028,509 using a Black Scholes valuation model and using the assumptions disclosed below.

The Warrants are exercisable for a period of five years from the date of issuance and have an exercise price of $0.15 per share, subject to adjustment as set forth in the Warrants for stock splits, stock dividends, recapitalizations and similar events. The Investors may exercise the Warrants on a cashless basis if after the six month anniversary of date of issuance the shares of common stock underlying the Warrants (the “Warrant Shares”) are not then registered pursuant to an effective registration statement. Each Investor has contractually agreed to restrict its ability to exercise the Warrants such that the number of shares of the Company’s common stock held by the Investor and its affiliates after such exercise does not exceed the beneficial ownership limitation set forth in the Warrants which may not exceed initially 4.99% or 9.99% of the Company’s then issued and outstanding shares of common stock.

Pursuant to an engagement letter dated as of March 6, 2021, by and between the Company and H.C. Wainwright & Co., LLC (“Wainwright”), the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection with the private placement, discussed above. The Company agreed to issue to Wainwright (or its designees) placement agent warrants (the “Placement Agent Warrants”) to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875. The warrants were valued at $323,924 using a Black Scholes valuation model and using the assumptions disclosed below.

The fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions:

	Three months ended March 31, 2021
Exercise price	$	0.05 to 0.24
Risk free interest rate		0.46% to 0.92	%
Expected life		5.0 years
Expected volatility of underlying stock		213.84 to 215.33	%
Expected dividend rate		0	%

A summary of warrant activity during the period January 1, 2020 to March 31, 2021 is as follows:

	Shares Underlying Warrants			Exercise price per share		Weighted average exercise price
Outstanding January 1, 2020		852,775		$	2.00 to 6.25	$	5.10
Granted		51,188,572			0.05		0.05
Forfeited/Cancelled		(852,775	)		2.00 to 6.25		5.10
Exercised		-			-		-
Outstanding December 31, 2020		51,188,572		$	0.05	$	0.05
Granted		66,302,515			0.05 to 0.24		0.16
Forfeited/Cancelled		-			-		-
Exercised		(44,074,285	)		0.05		0.05
Outstanding March 31, 2021		73,416,802			$ 0.05 – 0.24	$	0.15

The warrants outstanding and exercisable at March 31, 2021 are as follows:

		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		Weighted Average Remaining Contractual life in years
$	0.05		26,936,510		4.65				26,936,510				4.65
	0.15		15,166,667		4.96				15,166,667				4.96
	0.1875		2,426,667		4.96				2,426,667				4.96
	0.24		28,886,958		4.89				28,886,958				4.89
			73,416,802		4.82		0.15		73,416,802		0.15		4.82

The warrants outstanding have an intrinsic value of $1,831,683 and $0 as of March 31, 2021 and December 31, 2020, respectively.

e. Stock options

On June 18, 2018, the Company established its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of ten years in June 2028.

The Plan is administered by the Board of Directors or a Committee appointed by the Board of Directors who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.

The maximum number of securities available under the Plan is 800,000 shares of common stock. The maximum number of shares of common stock awarded to any individual during any fiscal year may not exceed 100,000 shares of common stock.

On February 22, 2021, the Board awarded each of its directors, James Fuller and Andrey Novikov, options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.

No options were granted for the year ended December 31, 2020.

A summary of option activity during the period January 1, 2020 to March 31, 2021 is as follows:

	Shares Underlying options		Exercise price per share		Weighted average exercise price
Outstanding January 1, 2020		100,000	$	0.40	$	0.40
Granted		-		-		-
Forfeited/Cancelled		-		-		-
Exercised		-		-		-
Outstanding December 31, 2020		100,000		0.40		0.40
Granted		416,666		0.24		0.24
Forfeited/Cancelled		-		-		-
Exercised		-		-		-
Outstanding March 31, 2021		516,666	$	0.24 to 0.40	$	0.27

The options outstanding and exercisable at March 31, 2021 are as follows:

		Options Outstanding						Options Exercisable
Exercise Price*		Number Outstanding		Weighted Average Remaining Contractual life in years		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual life in years
	0.24		416,666		9.90				416,666				9.90
	0.40		100,000		7.75				100,000				7.75
			516,666		9.49	$	0.27		516,666	$	0.27		9.49

The options outstanding have an intrinsic value of $0 and $0 as of March 31, 2021 and December 31, 2020, respectively.