Note 6 - Common Stock, Preferred Stock, Warrants and Options
|12 Months Ended|
Dec. 31, 2019
|Notes to Financial Statements|
|Stockholders' Equity Note Disclosure [Text Block]||
Preferred Stock, Warrants and Options
December 27, 2019,the Company issued
123,330,807shares of Common Stock of the Company upon the conversion of debt held by certain Legacy Holders. (see Note
Series A Convertible Preferred Stock
The terms of the Series A Convertible Preferred Stock, Warrants and Options are as follows:
A total of
500,000shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) have been authorized for issuance under the Certificate of Designation of Preferences, Rights and Limitation of Series A Convertible Preferred Stock of the Company (the “Certificate of Designation”), which Certificate of Designation was filed with the Secretary of State of the State of Oklahoma on
December 11, 2013.The shares of Series A Preferred Stock have a par value of
$0.0002per share and a stated value of
$1.00per share (the “Stated Value”) and shall receive a dividend of
6%of their Stated Value per annum payable or upon conversion or redemption of Series A Preferred at the option of the Corporation. We have
notpaid any cash or stock dividends to the holders of our Series A Preferred. As of
December 31, 2019,dividends in arrears totaled approximately
$128,000.Under the Certificate of Designation, the holders of the Series A Preferred Stock have the following rights, preferences and privileges:
The Series A Preferred Stock
may,at the option of the Investor, be converted at any time after the
firstanniversary of the issuance of the Series A Preferred Stock or from time to time thereafter into
166,667post-split shares of Common Stock that such investor is entitled to in proportion to the
500,000shares of Series A Preferred so designated in the Certificate of Designation.
The Series A Preferred Stock will automatically be converted into Common Stock anytime the post-split
5-day average VWAP of the Company’s Common Stock prior to such conversion is equal to
$15.00or more. Such mandatory conversion would be converted by the same method described above for discretionary conversions.
Except as otherwise required by law, the holders of shares of Series A Preferred Stock shall
nothave voting rights or powers.
In the event of any (i) liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or ii) sale, merger, consolidation, reorganization or other transaction that results in a change of control of the Company, each holder of a share of Series A Preferred shall be entitled to receive, subject to prior preferences and other rights of any class or series of stock of the Company senior to the Series A Preferred, but prior and in preference to any distribution of any of the assets or surplus funds of the Company to holders of Common Stock, or any other class or series of stock of the Company junior to the Series A Preferred, an amount equal to the Stated Value plus accrued and unpaid dividends (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Preference Amount”). After such payment has been made to the holders of Series A Preferred of the full Preference Amount to which such holders shall be entitled, the remaining net assets of the Company available for distribution, if any, shall be distributed pro rata among the holders of Common Stock. In the event the funds or assets legally available for distribution to the holders of Series A Preferred are insufficient to pay the Preference Amount, then all funds or assets available for distribution to the holders of capital stock shall be paid to the holders of Series A Preferred pro rata based on the full Preference Amount to which they are entitled.
notdeclare, pay or set aside any dividends on shares of any class or series of capital stock of the Company (other than dividends on shares of Common Stock payable in shares of Common Stock) unless the holders of the Series A Preferred Stock shall
firstreceive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred in an amount equal to the dividend per share that such holders would have received had they converted their shares of Series A Preferred into shares of Common Stock immediately prior to the record date for the declaration of the Common Stock dividend in an amount equal to the average VWAP during the
5trading days prior to the date such dividend is due.
Series A Warrants
The Series A Warrants expired in
fouryears from date of issuance.
August 7, 2019the Company issued
5) year options to purchase common stock of the Company at an exercise price of
$0.041per share. The estimated fair value of the options was
$881,500.Michael Kraft, CEO was issued
10,000,000options, Concordia Financial Group was issued
10,000,000options, Ramez Elgammal, CTO was issued
1,000,000options and Ronald Robinson CFO was issued
500,000options. Mr. Kraft’s options were issued for
$90,869in accrued compensation due him,
$25,000under the terms of his employment agreement and
$294,132as additional compensation for his services as CEO. Concordia’s, Mr. Elgammal’s and Mr. Robinson’s options were issued for additional compensation for services during the year ended
December 31, 2019.
$881,500estimated fair value of options to purchase common stock issued in
August 2019was determined using the Black-Scholes option pricing model. The expected dividend yield of
$0is based on the average annual dividend yield at the date issued. Expected volatility of
337.19%is based on the historical volatility of the stock. The risk-free interest rate of
1.52%is based on the U.S. Treasury Constant Maturity rates as of the issue date. The expected life of the options of
fiveyears is based on historical exercise behavior and expected future experience
Under the terms of the DAF Credit Agreement, warrants to subscribe for and purchase
3,000,000shares of common stock at an exercise price of
$0.052per share were issued to DAF. The warrants will be issued in amounts of
210,000per month during the funding period. As of
December 31, 2019,
570,000warrants have been granted under the terms of the DAF Credit Agreement. The estimated value of the warrants granted monthly, with each advance, is calculated using the Black-Scholes option pricing model. The resulting estimated value of the warrant is used to proportionally allocate the fair value of the debt advance and the fair value of the warrant.
December 31, 2018,Golden State had warrants outstanding to purchase
61shares of common stock at a price of
$114,450per share which expired
December 31, 2018,subsequently extended to
September 30, 2019and cancelled in
October 2019with the retirement of the Golden State convertible debenture. Global Capital had warrants outstanding to purchase
1,000shares of common stock at a price of
$0.96per shares which expired on
March 31, 2019.
The following table summarizes the Company’s warrant activity during the year ended
December 31, 2019:
The following table summarizes the Company’s warrants as of
December 31, 2019:
Stock options for employees, directors or consultants that vest immediately, are valued at the date of award, which does
notprecede the approval date, and compensation cost is recognized in the period the options are vested. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant.
The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.
The following table summarizes the Company’s option activity during the year ended
December 31, 2019:
The following table summarizes the Company’s options as of
December 31, 2019:
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef