Note 7 – Stockholders’ (Equity)

Common Stock

The Company has authorized 500,000,000 shares of common stock, par value $0.01; 121,452,914 and 81,268,443 shares were issued and outstanding at September 30, 2020 and December 31, 2019, respectively.

Common Stock Transactions During the Nine Months Ended September 30, 2020

On May 27, 2020, the Company issued 2,901,440 shares of common stock for the cashless exercise of warrants. These warrants were issued pursuant to a settlement agreement with a note holder regarding the effective price of warrants issued with regard to a variable conversion price feature which resulted in the issuance of 1,011,967 more shares than would have been issued prior to the settlement agreement. The Company recorded a loss in the amount of $24,894 on this transaction based upon the additional shares issued at the market price of the Company’s common stock.

The holder of the Eagle Equities Note 1 converted the following amounts of principal and accrued interest to common stock: On June 5, 2020, principal of $25,000 and accrued interest of $1,608 were converted at a price of $0.0132 per share into 2,015,783 shares of common stock; On June 17, 2020, principal of $25,000 and accrued interest of $1,708 were converted at a price of $0.0132 per share into 2,023,358 shares of common stock; On June 23, 2020, principal of $40,000 and accrued interest of $2,813 were converted at a price of $0.0132 per share into 3,243,434 shares of common stock; on June 26, 2020, principal of $26,000 and accrued interest of $1,855 were converted at a price of $0.01362 per share into 2,045,130 shares of common stock; on July 9, 2020, principal of $45,000 and accrued interest of $3,405 were converted at a price of $0.01518 per share into 3,188,735 shares of common stock; on July 17, 2020, principal of $50,000 and accrued interest of $3,917 were converted at a price of $0.01572 per share into 3,429,814 shares of common stock; and on July 30, 2020, principal of $45,000 and accrued interest of $3,720 were converted at a price of $0.021 per share into 2,320,000 shares of common stock. There were no gains or losses recorded, as these conversions were made pursuant to the terms of the agreement.

The holder of the Eagle Equities Note 2 converted the following amounts of principal and accrued interest to common stock: On August 20, 2020, principal of $56,000 and accrued interest of $4,573 were converted at a price of $0.01896 per share into 3,194,796 shares of common stock; On September 1, 2020, principal of $50,000 and accrued interest of $4,283 were converted at a price of $0.01806 per share into 3,005,721 shares of common stock; On September 9, 2020, principal of $50,000 and accrued interest of $4,417 were converted at a price of $0.0153 per share into 3,556,645 shares of common stock; and on September 25, 2020, principal of $50,000 and accrued interest of $4,683 were converted at a price of $0.0153 per share into 3,574,074 shares of common stock.

On January 2, 2020, the Company issued 200,000 restricted shares of the Company’s common stock at valued $7,680 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.

The Company charged the amount of $69,342 to operations in connection with the vesting of stock granted to its officers and board members; the Company also charged the amount of $128,714 to operations in connection with the vesting of options granted to officers, board members and employees.

On March 2, 2020, the Company entered into agreements to issue 500,000 options to each of four consultants (a total of 2,000,000 options). The options have a fair value of $20,930 per consultant (a total of $83,720). These agreements will become effective April 6, 2020, at which time the Company will begin to charge the value of these options to operations. The Company valued these options using the Black-Scholes valuation model.

The Company entered into agreements with two note holders regarding the exercise price of warrants held by the note holders. These agreements resulted in the following: (i) on January 29, 2020, the Company issued 1,000,000 shares of common stock, and the note holders agreed to cancel 2,769,482 warrants; the Company recorded a gain in the amount of $77,652 on this transaction; (ii) on February 19, 2020, the Company issued 4,098,556 shares of common stock for the exercise of 4,480,938 warrants in a cashless transaction; the Company recorded a gain in the amount of $259,947 on this transaction, which is included in gain on derivative liabilities.

On August 27, 2020, the Company issued 386,985 shares of common stock at a price of $0.034 per share to an ex-employee for accrued compensation. A gain in the amount of $6,988 was recognized on this transaction.

Common Stock Transactions During the Nine Months Ended September 30, 2019

The Company issued 200,000 restricted shares of the Company’s common stock at valued $17,480 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.

The Company issued 2,975,000 shares of common stock to employees, subject to vesting provisions, pursuant to employment agreements. The par value of these shares in the amount of $29,750 was credited to paid-in capital.

The Company charged the amount of $2,875 to additional paid-in capital in connection with the vesting of stock granted to its President.

The Company issued, in twenty-four transactions, a total of 14,394,002 shares in connection with the conversion of notes payable principal, accrued interest and fees in the aggregate amounts of $368.882, $26,330, and $1,500, respectively; a loss in the aggregate amount of $161,458 was recognized on these transactions.

The Company cancelled an aggregate 700,000 shares of common stock issued to former executive officers.

The Company issued 1,401,224 shares of common stock in connection with the settlement of a note payable in the amount of $74,104. The Company recorded a loss in the amount of $26,924 in connection with this transaction.

Preferred Stock

We are authorized to issue:

●

500,000,000 shares of Common Stock of which 121,452,914 shares are outstanding, and 9,917,879 common shares which are issuable upon exercise of warrants and options. We are also obligated to issue Common Stock upon conversion of certain promissory notes of approximately $1.3 million, or $1.5 million if held for an extended period of time. Most have a conversion feature that could allow the holder to convert to Common Stock at a 40% discount to the market price.

●

100,000,000 shares of Preferred Stock with such rights designations and preferences as determined by our board of directors. We have designated:

27,324 shares as Series X Preferred Stock, and

3,000,000 shares as Series A Preferred Stock,

Series A Preferred Stock

We issued 4,800 and 0 shares of our 12% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) as of September 30, 2020 and December 31, 2019, respectively. The Series A Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and is not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series A Preferred Stock. The Series A Preferred Stock is not redeemable prior to December 31, 2022. The Series A Preferred Stock will accrue dividends at the rate of 12% on $25.00 per share.

The designation includes, among other terms, that:

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The Series A Preferred Stock ranks junior to our Series X Preferred Stock;

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The Series A Preferred Stock has limited voting rights only on matters impacting certain of our securities that are senior to the Series A and in transactions involving mergers or similar transactions that adversely affects and deprives holders of the Series A Preferred Stock;

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The Series A Preferred Stock is on a parity with all equity securities issued by us with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up;

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The Series A Preferred Stock is junior to all equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up;

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The Series A Preferred Stock is effectively junior to all of our existing and future indebtedness;

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The Series A Preferred Stock will remain outstanding indefinitely unless we decide to redeem or otherwise repurchase it at our option;

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The Series A Preferred Stock will accrue cumulative cash dividends at the rate of 10% of the $25.00 per share liquidation preference per annum which will accrue if we do not have funds to pay the dividend;

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We have not yet generated revenues from our current business plan and we do not presently have a reserve to pay dividends that will be due in the future on the Series A Preferred Stock;

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No dividends will be paid or set apart for payment by us at any time if it would violate the terms of any agreement in which we are a party to or that we may enter into in the future;

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2,395,200 additional shares of the Series A Preferred Stock may be issued by us without the approval of shareholders;

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The Series A Preferred Stock may be redeemed by us on or after December 31, 2022, for a cash redemption price of $25.00 per share if certain requirements are met;

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The Series A Preferred Stock is not convertible into our Common Stock; and

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If we fail to pay a dividend on the Series A Preferred, holders will not receive additional interest or fees in respect to such dividend.

Series A Preferred Stock Transactions During the Nine Months Ended September 30, 2020

On March 2, 2020, the Company issued 4,800 shares of its Series A Preferred Stock to four individuals with certain skills and know-how to assist the Company in the development of its newly-formed subsidiary The Good Clinic, LLC. The Company has valued these shares at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. During the nine months ended September 30, 2020, the Company accrued dividends in the amount of $6,967 on the Series A Preferred Stock. At September 30, 2020, dividend payable on the Series A Preferred Stock was $6,967. At September 30, 2020, if management determined to pay these dividends in shares of the Company’s common stock, this would result in the issuance of 214,898 shares of common stock based upon the average price of $0.03242 per share for the five day period ended September 30, 2020.

Series X Preferred Stock

The Company has 26,227 shares of its 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”) outstanding as of September 30, 2020 and December 31, 2019. The Series X Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common and preferred stock and accrues dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Each one share of the Series X Preferred Stock is entitled to 20,000 votes on all matters submitted to a vote of our shareholders.

Series X Preferred Stock Transactions During the Nine Months Ended September 30, 2020

During the nine months ended September 30, 2020, the Company accrued dividends in the amount of $49,176 on the Series X Preferred Stock. At September 30, 2020, dividend payable on the Series X Preferred Stock was $49,176. At September 30, 2020, if management determined to pay these dividends in shares of the Company’s common stock, this would result in the issuance of 1,516,841 shares of common stock based upon the average price of $0.03242 per share for the five day period ended September 30, 2020.

Stock Options

The following table summarizes the options outstanding at September 30, 2020 and the related prices for the options to purchase shares of the Company’s common stock:

						Weighted				Weighted
				Weighted		average				average
				average		exercise				exercise
Range of		Number of		remaining		price of		Number of		price of
exercise		options		contractual		outstanding		options		exercisable
prices		outstanding		life (years)		options		exercisable		options
$	0.03		1,250,000		9.67	$	0.03		250,000	$	0.03
$	0.05		7,450,000		9.44	$	0.05		983,334	$	0.05
$	0.06		1,000,000		9.84	$	0.06		-	$	-
$	21.40		67,879		2.41	$	21.40		67,879	$	1.16
			9,767,879		9.46	$	0.20		1,301,213	$	1.16

Transactions involving stock options are summarized as follows:

	Shares			Weighted- Average Exercise Price ($)
Outstanding at December 31, 2018		67,879		$	21.40
Granted		-			-
Cancelled		-			-

Outstanding at December 31, 2019		67,879		$	21.40

Granted		11,200,000		$	0.05
Cancelled		(1,500,000	)		0.05
Outstanding at September 30, 2020		9,767,879		$	0.20

Exercisable at September 30, 2020		1,301,213		$	1.16

At September 30, 2020, the total stock-based compensation cost related to unvested awards not yet recognized was $253,582.

The Company valued warrants and stock options during the nine months ended September 30, 2020 and 2019 using the Black-Scholes valuation model utilizing the following variables:

	September 30,			September 30,
	2020			2019
Volatility		201.9% to 209.6	%		228.0% to 229.4	%
Dividends	$	-		$	-
Risk-free interest rates		0.55% to 1.30	%		1.75% to 2.53	%
Term (years)		6.0 to 10.00			5.00

Warrants

The following table summarizes the warrants outstanding at September 30, 2020 and the related prices for the warrants to purchase shares of the Company’s common stock:

	Shares			Weighted- Average Exercise Price ($)

Outstanding at December 31, 2018		1,167,653		$	2.18

Granted		400,000		$	0.00858
Additional warrants due to trigger of ratchet feature		6,659,382		$	0.00858
Exercised – cashless conversion		(3,514,900	)	$	0.00858
Forfeited		(2,769,482	)	$	0.00858
Expired		(142,653	)		17.42
Outstanding at December 31, 2019		1,800,000		$	0.00858

Granted		6,582,382		$	0.00858
Exercised		(8,382,382	)	$	0.0561
Outstanding at September 30, 2020		-		$	-