9. STOCKHOLDERS EQUITY

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

STOCKHOLDERS EQUITY

PREFERRED STOCK

There are currently 5,000,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock issued or outstanding as of December 31, 2018 and 2017.

Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 7,500 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution. Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate. There were no Series B Shares issued or outstanding as of December 31, 2018 and 2017.

On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00. The Series C Preferred Stock is entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018.

The Series C Preferred Stock is senior to the Company’s common stock and any other currently issued series of the Company’s preferred stock upon liquidation and is entitled to a liquidation preference per share equal to the original issuance price of such shares of Series C Preferred Stock together with the amount of all accrued but unpaid dividends thereon. Each of the Series C Shares is convertible at the option of the holder into 1,000 shares of common stock as provided in the Certificate. Additionally, each holder of Series C Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s Series C shares could then be converted. As of December 31, 2018, and December 31, 2017, there were 0 and 85,561 shares of Series C Preferred Stock issued and outstanding, respectively.

On March 10, 2017, the Company issued 715 shares of Series C preferred stock in exchange for cash in the amount of $50,050.

During 2017, one shareholder converted 800 shares of Series C preferred stock and dividend of $9,692 to common stock of 937,556 shares.

During February and March 2018, the Company issued 100,567,691 shares of Common Stock for the conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends. Dividends were converted at $0.07 per share. As of December 31, 2018, there were no shares of Series C Preferred Stock outstanding and all accrued dividends were converted to Common Stock.

The Series C preferred stock earned dividends of $28,061 and $139,006 for the years ended December 31, 2018 and December 31, 2017, respectively. As an inducement to encourage the Series C Preferred Stock shareholders to convert their Series C Preferred Stock to Common Stock prior to October 10, 2018, the Company offered to apply the full dividend, (accelerated to October 10, 2018) upon the shareholders exercise of their conversion. The fair value of the extra shares of Common Stock issued to Series C Stock shareholders was $103,197 for dividends that would have accrued from the date of their conversion through October 10, 2018.

On November 13, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series D Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 25,000 shares of Series D Preferred Stock. Shares of Series D Preferred Stock are not entitled to any preference with respect to dividend or upon liquidation and will automatically convert (at a ratio of 1,000-to-1) into shares of the Company’s common stock, par value $0.001 upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. On September 3, 2014, the Company increased its authorized common stock to 250,000,000 shares. As a result, all outstanding Series D preferred shares were converted to common stock. As of December 31, 2018, and December 31, 2017 there were no shares of Series D Preferred Stock issued and outstanding.

On May 30, 2014, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series E Convertible Preferred Stock (The “Certificate of Designations”), under which it designated 5,000 shares of Series E Preferred Stock. Shares of Series E Preferred Stock are not entitled to any preference with respect to dividends or upon liquidation, and will automatically convert (at a ratio of 1,000 shares of Common Stock for every one share of Series E Preferred Stock) into shares of the Company’s common stock, $0.001 par value upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of December 31, 2018, there were no shares of Series E Preferred Stock issued and outstanding.

The Company evaluated the Series C preferred stock under FASB ASC 815 and determined that they do not qualify as derivative liabilities. The Company then evaluated the Series C preferred stock for beneficial conversion features under FASB ASC 470-30 and determined that none existed.

COMMON STOCK

On September 3, 2014, the Company held a stockholders meeting. The stockholders approved an amendment to the Company’s Articles of Incorporation to increase the authorized shares of common stock of the Company from 100,000,000 to 250,000,000.

On March 9, 2017, the Company issued 150,000 shares of common stock to each of the Company’s then four Board Directors, (a total of 600,000 shares valued at $42,000).

On March 10, 2017, the Company issued 250,000 shares of common stock valued at $18,250 to a contract consultant upon achievement of specified revenue targets which occurred January 31, 2017.

On July 31, 2017, the Company issued 937,556 shares of common stock for the conversion of 800 shares of Series C Convertible Preferred Stock and $9,629 of related Series C dividends

On November 22, 2017, the Company issued 1,200,000 shares of common stock valued at $84,000 for settlement of debt (see NOTE 11 below for a discussion of the settlement).

On November 22, 2017, the Company issued 750,000 shares of common stock valued at $0 to a contract consultant upon termination of contract (see NOTE 3 above for a discussion of the termination).

 On March 6, 2018, the Company issued 22,651,356 shares of Common Stock for the conversion of $1,200,000 in Related Party convertible debt and $385,594 in accrued interest.

In February and March 2018, the Company issued 100,567,691 shares of Common Stock for the conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends.

WARRANTS

At December 31, 2018, there were 0 warrants outstanding. At December 31, 2017, there were 5,100,000 warrants outstanding with a weighted average exercise price of $0.06.

A summary of the status of the warrants granted at December 31, 2018 and 2017, and changes during the years then ended is presented below:

	For the Year Ended December 31, 2018
		Shares			Weighted Average Exercise Price
Outstanding at beginning of period			5,100,000		$	0.06
Granted			-			-
Exercised			-			-
Forfeited			-			-
Expired			(5,100,000	)		0.06
Outstanding at end of period			-		$	-

	For the Year Ended December 31, 2017
		Shares			Weighted Average Exercise Price
Outstanding at beginning of period			67,246,300		$	0.12
Granted			-			-
Exercised			-			-
Forfeited			(60,051,300	)		0.12
Expired			(2,095,000	)		0.13
Outstanding at end of period			5,100,000		$	0.06

The following table summarizes the outstanding warrants as of December 31, 2017:

Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.06		4,500,000		1	$	0.06		4,500,000	$	0.06
	0.08		200,000		1		0.08		200,000		0.08
	0.09		400,000		1		0.09		400,000		0.09
$	0.06 - 0.09		5,100,000		1	$	0.06		5,100,000	$	0.06

 STOCK OPTIONS

A summary of the status of the stock options granted for the years ended December 31, 2018 and 2017, and changes during the period then ended is presented below:

	For the Year Ended December 31, 2018
		Options		Weighted Average Exercise Price
Outstanding at beginning of period			1,150,000	$	0.06
Granted			400,000		0.06
Exercised			-		-
Forfeited			-		-
Expired			-		-
Outstanding at end of period			1,550,000	$	0.06

	For the Year Ended December 31, 2017
		Options			Weighted Average Exercise Price
Outstanding at beginning of period			1,093,500				$	0.15
Granted			1,150,000			0.06
Exercised			-					-
Forfeited			(150,000	)			(a)
Expired			(943,500	)				0.15
Outstanding at end of period			1,150,000				$	0.06

(a) On January 1, 2015, the Company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result, the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life. As of December 31, 2017, the options were forfeited.

On December 31, 2017, the Company granted a total of 1,150,000 options to five employees. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $61,322 and no expense was recognized.

On April 13, 2018, the Company granted a total of 200,000 options to one employee and one contractor. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $8,943 which will be expensed over the three-year vesting period.

On August 31, 2018 the Company granted a total of 200,000 options to one employee. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $16,405 which will be expensed over the three-year vesting period.

During the twelve-month period ending December 31, 2018 an option expense of $24,500 was recognized.

The following table summarizes the outstanding options as of December 31, 2018:

		As of December 31, 2018					As of December 31, 2018
		Stock Options Outstanding				Stock Options Exercisable
Exercise Price		Number Outstanding		Weighted-Average Remaining Contract Life			Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.06		1,550,000		4.39		$	0.06		383,333	$	0.06

The following table summarizes the outstanding options as of December 31, 2017:

		As of December 31, 2017						As of December 31, 2017
		Stock Options Outstanding						Stock Options Exercisable
Exercise Price		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.06		1,150,000		5	$	0.06		-	$	-