Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS??? DEFICIT

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STOCKHOLDERS’ DEFICIT
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
STOCKHOLDERS’ DEFICIT

NOTE 9 – STOCKHOLDERS’ DEFICIT

 

Common Stock

 

On November 20, 2020, the Board of Directors approved an increase in the Company’s authorized shares of Common Stock from 100,000,000 to 500,000,000 shares by Unanimous Written Consent. The Secretary of State of Nevada approved the share increase.

 

The Company has 500,000,000 shares of par value $0.001 common stock authorized and 191,731,218 and 46,756,970 shares were outstanding as of June 30, 2021 and December 31, 2020, respectively.

 

Common stock issued for cash

 

During the six months ended June 30, 2021, the Company issued 44,750,000 shares of common stock under a Form S-1 then in effect at a price of $0.04 per share. Also during the six months ended June 30, 2021, the Company issued 12,000,000 shares of common stock in a private placement of shares at a price of $0.015 to $0.02 per share. Total proceeds of $1,985,000 in cash was received.

 

During the six months ended June 30, 2020, the Company issued 388,889 shares of common stock in a private placement of shares at a price of $0.27 per share for total proceeds of $104,722.

 

Common stock issued for services

 

During the six months ended June 30, 2021, the Company issued 13,925,976 shares of common stock to service vendors with a fair value of $1,244,808, and 1,000,000 shares of common stock to employees and officers of the Company with a fair value of $69,950. The fair value of the shares was determined based on the closing price of the Company’s common stock on the date shares were granted, and recorded as stock compensation in selling, general and administrative expense.

 

During the six months ended June 30, 2020, the Company issued 451,198 shares of common stock to service vendors with a fair value of $52,254. The fair value of the shares was determined based on the closing price of the Company’s common stock on the date shares were granted, and recorded as stock compensation in selling, general and administrative expense.

 

During the six months ended June 30, 2020, the Company issued 1,250,117 shares of common stock to consultants and convertible note holders for services with a fair value of $186,579. The fair value of the shares was determined based on the closing price of the Company’s common stock on the date shares were granted, and recorded as stock compensation in selling, general and administrative expense.

 

During the six months ended June 30, 2020, the Company issued 705,000 shares of common stock to convertible note holders for fees with a fair value of $90,033. The fair value of the shares was determined based on the closing price of the Company’s common stock on the date shares were granted, and was recorded as debt discount to be amortized over the term of the related convertible notes payable.

 

Preferred Stock

 

On April 14, 2020, the Company issued 2,500,00 shares of newly created class of preferred stock, Series A Preferred Stock to the Company’s Chief Executive Officer in a private placement transaction. The fair value of the Series A Preferred shares was determined to be $462,500 and was recorded as a stock compensation expense in selling, general and administrative expense during the six months ended June 30, 2020. The Company determined the fair value of the Series A Preferred shares by obtaining an independent valuation of the fair value of the Company’s Series A Preferred shares.

 

Restricted common stock

 

In 2019, the Company agreed to issue 8,000,000 shares of the Company’s common stock with vesting terms to Arthur Mikaelian. 1,000,000 shares vested immediately, and the balance of 7,000,000 shares vest 625,000 shares per quarter over 2.8 years. The Company accounts for the share awards using a graded vesting attribution method over the requisite service period, as if each tranche were a separate award. During the six months ended June 30, 2021 and 2020, total share-based expense recognized related to vested restricted shares totaled $297,791 and $761,686, respectively. At June 30, 2021, there was $139,620 of unvested compensation related to these awards that will be amortized over a remaining vesting period of approximately nine months thru March 2022.

 

The following table summarizes restricted common stock activity for the six months ended June 30, 2021:

 

    Number of shares     Fair value of shares  
Non-vested shares, December 31, 2020     3,250,000       431,411  
Granted     -       -  
Vested     (1,250,000 )     (297,791 )
Forfeited     -       -  
Non-vested shares, June 30, 2021     2,000,000     $ 139,620  

 

As of June 30, 2021, no shares have been issued and 4,875,000 vested shares are included in shares to be issued on the accompanying financial statements

 

 

Common stock issued in conversion of convertible notes payable

 

During the six months ended June 30, 2021, the Company issued 73,368,272 shares of common stock to holders of convertible notes upon the conversion of convertible notes payable and accrued interest valued at $1,307,088.

 

Stock Options

 

During the six months ended June 30, 2021 and 2020, the Company recognized $126,905 and $180,916, respectively, of compensation expense relating to vested stock options.

 

During the six months ended June 30, 2021, the Company did not issue any options. In April 2020, the Company issued options exercisable into 300,000 shares of common stock which vested immediately. The options have an exercise price of $0.14 per share, and expire in 10 years. The total fair value of these options at grant date was approximately $30,000, which was determined using he Black-Scholes-Merton option pricing model with the following average assumption: stock price $0.14 per share, expected term ranging from five years, volatility 236%, dividend rate of 0% and risk-fee interest rate of 0.17%.

 

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

 

As of June 30, 2021, the amount of unvested compensation related to stock options was approximately $230,000 which will be recorded as an expense in future periods as the options vest.

 

A summary of stock option activity during the six months ended June 30, 2021:

 

    Number of options     Weighted Average
Exercise Price
    Contractual
Life in Years
 
Options Outstanding as of December 31, 2020     4,130,000       0.10       6.0  
Granted     -       -       -  
Exercised     (350,000 )     -       -  
Forfeited     (3,005,000 )     -       -  
Options Outstanding as of June 30, 2021     775,000       0.10       5.5  
Options Exercisable as of June 30, 2021     775,000     $ 0.10       5.5  

 

At June 30, 2021, the options outstanding had no intrinsic value.