7. Stockholders' Equity

3 Months Ended

Mar. 31, 2017

Notes

7. Stockholders' Equity

7.   STOCKHOLDERS’ EQUITY

Private Placement Offerings - Unit Private Placements

Series F Convertible Preferred Stock:

On December 30, 2016, February 7, 2017, March 1, 2017 and March 31, 2017, the Company completed an offer and sale of 153 shares of Series F Preferred stock, resulting in net proceeds of $50,000 in 2016 and $103,000 to the Company in the three months ended March 31, 2017. These shares were issued from the designated 10,000,000 share of Preferred Stock, par value as the Board may determine.

In connection with the issuance of the Series F Preferred Stock, the Company issued a total of 5,100,000, five-year Class S warrants to purchase shares of the Company’s common stock. The Class S warrants have an exercise price of $0.03 per share of the Company’s common stock and had a relative fair value of $24,138 at December 31, 2016 and $54,138 in the three months ended March 31, 2017, as determined using a Black Scholes model and allocation between the preferred shares and the warrants.

Additionally, a beneficial conversion feature of $78,762 was determined to exist, which represented a deemed dividend to the holders of the preferred shares recognizable immediately upon issue due to the ability to convert the shares concurrent with issuance of the preferred shares. The fair value of the warrants and the beneficial conversion feature, which together consumed the value of the net proceeds, were charged to additional paid in capital at the date of issuance, resulting in no credit to Convertible preferred stock series F on the Company’s balance sheet.

The Company has 153 shares of Series F Convertible Preferred Stock outstanding at March 31, 2017. These shares were issued from the designated 300 shares of Series F Preferred Stock, no par value. Conversion of outstanding shares of Series F Preferred stock would result in dilution of 5,100,000 and nil common shares for the three-month periods ended March 31, 2017 and 2016, respectively.

The fair value of the warrants of Series D, E and F, were estimated on the issue dates using the following weighted average assumptions:

Preferred Series	F	F	F
Issue Date	February 7, 2017	March 1, 2017	March 31, 2017
Risk-free interest rate	1.85%	1.99%	1.93%
Expected dividend yield	0	0	0
Expected term (in years)	5	5	5
Expected volatility	153.3%	155.4%	157.4%