STOCKHOLDERS’ EQUITY

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 13. STOCKHOLDERS’ EQUITY

Series A Preferred Stock

In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock for $1.00 per share to certain investors who then became members of management and the board of directors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of Common Stock and vote on an as-converted basis. The rights and designations of these Preferred Shares include the following:

· entitles the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders:

· The holders of outstanding Series A Convertible Preferred Stock shall only be entitled to receive dividends upon declaration by the Board of Directors of a dividend payable on the Company’s Common Stock, whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock is convertible;

· Each Series A Preferred Share is convertible into 1,250 shares of Common Stock;

· not redeemable.

The beneficial conversion (“BCF”) feature attributed to the purchase of Preferred Stock was deemed to have no value on the date of purchase because there was no public trading market for the Convertible Preferred Stock, and none is expected to develop in the future. Therefore, the BCF related to the Preferred Shares was considered to have no value on the date of issuance.

The Company is authorized to issue up to 100,000 shares of Series A Preferred Stock, par value of $1.00.

There were 65,429 shares of Series A Preferred Stock issued and outstanding as of September 30, 2021 and 60,000 shares outstanding at December 31, 2020, respectively.

The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights, and any other preferences.

Series B Preferred Stock / Common Stock

In February 2019, the Company commenced an offering of up to $3 million in principal amount of Units at a price of $1.00 per Unit, each Unit consisting of one share of Series “B” Convertible Preferred Stock, each Convertible Preferred Share convertible into one share of the Company’s Common Stock at the election of the holder and one Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise price of $2.00 per share, which offering is to be offered only to “accredited investors,” as that term is defined in Rule 501 of Regulation D. This Offering was closed at the end of August 2019. As of December 31, 2020, the Company had accepted $475,000 in subscriptions in this offering.

The Company is authorized to issue 3,000,000 shares of Series B Preferred Stock, par value of $1.00.

There were 475,000 shares of Series B Convertible Preferred Stock issued and outstanding as of September 30, 2021, and December 31, 2020, respectively.

The Company is authorized to issue 300,000,000 shares of Common Stock, par value $0.0001 per share. As of September 30, 2021, and December 31, 2020, 95,348,472 and 46,986,794 shares of Common Stock were issued and outstanding, respectively.

The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights, and any other preferences.

Shares Reserved for Issuance

As of September 30, 2021, the Company had 122,616,480 Common Shares reserved for issuance. These shares are comprised of 81,786,250 Common Shares issuable upon the conversion of the Series A Preferred Stock; 475,000 Common Shares issuable upon the conversion of Series B Preferred Stock; 38,032,702 shares issuable upon a conversion of the convertible notes, and 2,322,528 Common Shares issuable upon the exercise of warrants. None of these shares were used in the calculation of earnings per share because their inclusion would be anti-dilutive since the Company is operating at a loss. There are no assurances that the conversion rights will be utilized or that the options or the warrants will be exercised.

Stock Options

During the period ended September 30, 2021 and December 31, 2020, the Company did not record any stock-based compensation expense related to stock options, as there were none outstanding.

Stock Purchase Warrants

The following table reflects all outstanding and exercisable warrants on September 30, 2021 and December 31, 2020: 

	Number of Warrants Outstanding (a)			Weighted Average Exercise Price		Average Remaining Contractual Life (Years)
Warrants outstanding, January 1, 2018		–		$	–		–
Warrants issued		350,000			0.57		1.50
Warrants exercised		–			–		–
Warrant forfeited		–			–		–
Warrants outstanding, December 31, 2018		350,000		$	0.57		.12
Warrants issued		1,519,750		$	1.01		.59
Warrants outstanding December 31, 2019		1,869,750		$	0.92		.80
Warrants exercised		(25,000	)		–		–
Warrants outstanding December 31, 2020		1,844,750		$	0.92		.50
Warrants issued (a)		477,778		$	0.30		5.00
Warrants outstanding September 30, 2021		2,322,528			–

Stock purchase warrants are exercisable for two-five years from the date of issuance.

(a) The Company issued 477,448 common share purchase warrants during the second quarter to an accredited investor as part of a convertible debenture. These warrants are exercisable at $0.30 per share and expire at the end of five years.

The value of the stock purchase warrants for the periods ended September 30, 2021, and December 31, 2020, was determined using the following Black-Scholes methodology: 

Expected dividend yield (1)	0.00%
Risk-free interest rate range (2)	0.07%
Volatility range (3)	135%
Expected life (in years)	5.00

_____________

(1)	The Company has no history or expectation of paying cash dividends on its Common Stock.
(2)	The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant.
(3)	The volatility of the Company’s Common Stock is based on trading activity for the previous three-year period ended at each stock purchase warrant contract date.

During the nine-month period ended September 30, 2021, and September 30, 2020, the Company recorded $290,099 and $617,758, respectively, in stock-based compensation.