NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2016
(Unaudited)
1.
ORGANIZATION
AND BASIS OF PRESENTATION
During
the periods covered by these financial statements, GTX Corp and subsidiaries (the “Company” or “GTX”)
were engaged in businesses that design, develop and sell various interrelated and complementary products and services in the Personal
Location Wearable Technology marketplace. GTX owns 100% of the issued and outstanding capital stock of Global Trek Xploration
(“GTX California”) and LOCiMOBILE, Inc. Through February 2015, GTX also owned 100% of the issued and outstanding capital
stock of Code Amber News Service, Inc. (“CANS”), which it dissolved in February 2015.
Global
Trek Xploration designs, develops, manufactures and distributes - hardware, software, connectivity services of Global Positioning
System (“GPS”) and Bluetooth Low Energy (“BLE”) monitoring and tracking solutions that provide real-time
tracking of the whereabouts of people and high valued assets. Utilizing a miniature quad band GPRS transceiver, antenna, circuitry,
battery and inductive charging pad our product(s) can be customized and integrated into numerous products and form factors whose
location and movement can be monitored in real time over the Internet through our 24x7 tracking portal or on a web enabled cellular
telephone. Our core products and services are supported by an extensive IP portfolio of patents, patents pending, registered trademarks,
copyrights, URLs and a library of software source code.
LOCiMOBILE,
Inc., has been engaged in of Smartphone application (“App”) development since 2008. With a suite of mobile applications
that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which can be tracked from handset to
handset or through our tracking portal or on any connected device with internet access. LOCiMOBILE has launched numerous Apps
across multi mobile device operating systems and continues to launch consumer and enterprise apps.
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of GTX have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange
Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. In the
opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement
of financial position and results of operations have been included. Our operating results for the three and nine months ended
September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The
accompanying unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial
statements for the year ended December 31, 2015, which are included in our Annual Report on Form 10-K.
The
accompanying consolidated financial statements reflect the accounts of GTX Corp and its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated.
Going
Concern
The
consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize
its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has
incurred net losses of $813,771 and $889,948 for the nine months ended September 30, 2016 and 2015, respectively, has incurred
losses since inception resulting in an accumulated deficit of $19,332,834 as of September 30, 2016, and has negative working
capital of $1,061,331 as of September 30, 2016. The Company anticipates further losses in the development of its business.
The
ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The obtainment
of additional financing, the successful development of the Company’s contemplated plan of operations, or its attainment
of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors
raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements
of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
2.
SIGNIFICANT
ACCOUNTING POLICIES
Use
of Estimates
The
preparation of the accompanying unaudited consolidated financial statements requires the use of estimates that affect the reported
amounts of assets, liabilities, revenues, expenses and contingencies. These estimates include, but are not limited to, estimates
related to revenue recognition, allowance for doubtful accounts, inventory valuation, tangible and intangible long-term asset
valuation, warranty and other obligations and commitments. Estimates are updated on an ongoing basis and are evaluated based on
historical experience and current circumstances. Changes in facts and circumstances in the future may give rise to changes in
these estimates which may cause actual results to differ from current estimates.
Fair
Value Estimates
Pursuant
to the Accounting Standards Codification (“ASC”) No. 820, “
Disclosures About Fair Value of Financial Instruments
”,
the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value,
clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in
the valuation methodologies in measuring fair value:
Level
1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level
2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability
through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life.
Level
3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability
at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs
to the model.
The
carrying values for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities
approximate their fair value due to their short maturities.
Equity
Securities
During the second quarter of fiscal 2016,
we received restricted equity securities, which we have classified as “available for sale” securities. Our
equity securities are marked to market on a quarterly basis, with unrealized gains and losses being excluded from earnings
and reflected as a component of other comprehensive income.
The
inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities.
Following
are the disclosures related to our financial assets pursuant to ASC No. 820:
|
|
September 30, 2016
|
|
|
|
Fair Value
|
|
|
Input Level
|
|
Available for sale marketable securities:
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
63,325
|
|
|
|
Level
1
|
|
The
fair value of our available for sale securities is determined based on quoted market prices for identical securities on a quarterly
basis.
Derivative
Instruments
Our
debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances
may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.
Our
derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative
liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options
that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes
option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return,
our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life
of the option.
Reclassifications
For
comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation
used in 2016. These reclassifications have no impact on net loss.
Recently
Issued Accounting Pronouncements
The
Financial Accounting Standards Board has recently issued accounting pronouncements, most of which represent technical corrections
to the accounting literature or application to specific industries, which are not expected to have a material impact on the Company’s
financial position, results of operations or cash flows. We do not believe that the adoption of any recently issued accounting
standards will have a material effect on our financial position and results of operations.
3.
JOINT
VENTURE AND
INVESTMENT IN EQUITY SECURITIES
On
June 16, 2016, the Company entered into a Definitive Agreement with Inventergy Innovations, LLC (“Inventergy”), a
subsidiary of Inventergy Global, Inc. (NASDAQ: INVT). The Company partnered with Inventergy to monetize three (3) GTX Patents.
Upon signing the Agreement, the Patents were assigned to an Inventergy subsidiary, and Inventergy assigned a 45% interest in the
entity to GTX. Inventergy is also obligated to make a sequence of quarterly payments to GTX in 2017, which payments represent
non-refundable advances against future royalty and other payments. Pursuant to a non-exclusive license back to GTX, GTX will still
retain all use rights of the 3 patents.
In addition to the Definitive Agreement, the
Company entered into a Consulting Agreement with Inventergy for a period of eighteen months. The Company was issued 42,500 shares
of restricted common stock of INVT, of which 1/6
th
of the stock vests at the close of each calendar quarter and Inventergy
agreed to make five monthly payments to GTX totaling $250,000 through December 2016 as compensation. As of September 30, 2016,
$125,000 of the cash compensation had been recognized. As of September 30, 2016, we owned 42,500 shares of restricted common
stock of INVT valued $63,325.
The Company uses the equity method to account
for its investment in the Inventergy subsidiary. Under the equity method, the Company recognizes its share of the earnings and
losses of the subsidiary as they accrue instead of when they are realized. As of September 30, 2016, the Company’s investment
in the subsidiary was $0.
4.
RELATED
PARTY TRANSACTIONS
In
order to preserve cash for other working capital needs, various officers and members of management have agreed to accrue, and
defer payment of, portions of their salaries since fiscal 2011.
On
September 30, 2016 management has elected to transfer accrued salaries into long-term convertible promissory notes, due on December
31, 2018, the total amount of salaries converted was $318,671. The notes will bear a 10% annual interest rate. Management shall
have the right, but not the obligation to convert up to 50% of the amount advanced and accrued interest into shares, warrants
or options of common or preferred stock of the Company at $0.01 per share.
As of September 30, 2016 and December 31, 2015, the Company owed
$295,131 and $291,451, respectively for such accrued wages.
5.
DEBT
The
following table summarizes the components of our short-term borrowings:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
Q4 2014 Convertible Notes
|
|
$
|
126,000
|
|
|
$
|
126,000
|
|
Q1 2015 Convertible Notes
|
|
|
60,000
|
|
|
|
150,000
|
|
Q2 2015 Convertible Notes
|
|
|
200,000
|
|
|
|
200,000
|
|
Q3 2015 Convertible Notes
|
|
|
45,000
|
|
|
|
84,000
|
|
Q4 2015 Convertible Notes
|
|
|
-
|
|
|
|
196,250
|
|
Q1 2016 Convertible Notes
|
|
|
140,000
|
|
|
|
-
|
|
Q2 2016 Convertible Notes
|
|
|
302,181
|
|
|
|
-
|
|
Q3 2016 Convertible Notes
|
|
|
507,671
|
|
|
|
-
|
|
Total convertible notes
|
|
|
1,380,852
|
|
|
|
756,250
|
|
Less: Debt discount
|
|
|
(279,303
|
)
|
|
|
-
|
|
Convertible notes, net of debt discount
|
|
|
1,101,549
|
|
|
|
756,250
|
|
|
|
|
|
|
|
|
|
|
Current portion of convertible notes
|
|
$
|
626,303
|
|
|
$
|
556,250
|
|
|
|
|
|
|
|
|
|
|
Long-term convertible notes
|
|
$
|
475,246
|
|
|
$
|
200,000
|
|
On
January 15, 2016, we received an additional installment of $15,000 from an accredited investor relating to the 7.5% Convertible
Debenture entered into on October 9, 2015. On April 15, 2016, this note was sold to a private investor pursuant to the Exchange
Agreement as described below.
On
January 27, 2016, pursuant to a Note Purchase Agreement with an unaffiliated third party (the “Investor”) relating
to the sale of an unsecured convertible promissory note and warrant. The third party purchased an additional unit for $25,000
and a principal balance of $30,000. The convertible promissory note is divided into units (“Units”), each in the principal
amount of $30,000, with equal installments of $1,000 due sequentially every week until $30,000 has been repaid and warrants to
purchase 1,250,000 shares of common stock at an exercise price of $0.015 per share. The convertible promissory notes are due on
November 25, 2016, subject to certain conditions and restrictions set forth in the notes. The convertible promissory note has
a relative fair value of $23,899 and the warrants has a relative fair value of $6,101 at the date of issuance determined using
the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free
interest rate of 0.88% (ii) estimated volatility of 171% (iii) dividend yield of 0.00% and (iv) expected life of the warrants
of 25 months. The convertible note is convertible into shares of common stock based on the volume weighted average of the closing
price per share for the 20 consecutive trading days prior to the conversion date if there is any outstanding principal balance
due after the expiration due date. As of September 30, 2016, $5,000 cash installment payments have been made toward lowering the
outstanding principal balance. On September 14, 2016, we consolidated all of these Investor’s notes into a single note valued
at $120,000. The note is due December 16, 2016 and carries an OID of 20%.
On
February 5, 2016, an accredited investor with a convertible note of $30,000, converted their outstanding principal balance into
2,250,000 shares of common stock at a conversion price of $0.015.
On
February 8, 2016, we entered into a Note and Share Purchase Agreement with an unaffiliated third party (the “Investor”)
relating to the sale of an unsecured convertible promissory note. The convertible promissory note is divided into units (“Units”),
each in the principal amount of $30,000. The notes are due on December 31, 2016, subject to certain conditions and restrictions
set forth in the notes. The convertible notes are convertible into shares of common stock at $0.01 per share. On February 8, 2016
the Investor purchased two $25,000 units (for a total of $50,000).
During
the period ended September 30, 2016, we made a cash payment of $23,000 to an accredited investor to reduce the outstanding balance
on his loans.
On
March 16, 2016, we entered into a Loan Agreement with an independent accredited investor relating to the sale of a convertible
promissory note and warrant. As a result, we issued convertible notes with a total principal balance of $55,000 and warrants to
purchase 2,500,000 shares of common stock at an exercise price of $0.0125 per share. The convertible promissory note has a relative
fair value of $33,379 and the warrants has a relative fair value of $21,621 at the date of issuance determined using the Black-Scholes
option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.05%
(ii) estimated volatility of 221% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of 3 years. The Convertible
Note carries an original issue discount of 10%, mature on March 16, 2017 with a 12% interest rate and are convertible into common
stock of the Company at 60% of the lowest closing price over a five day period immediately prior to but not including the Conversion
Date. However, the conversion price shall not be lower than $0.005 per share.
On
March 16, 2016, we entered into a Loan Agreement with an independent accredited investor relating to the sale of a convertible
promissory note and warrant. As a result, we issued convertible notes with a total principal balance of $25,000 and warrants to
purchase 500,000 shares of common stock at an exercise price of $0.0125 per share. The convertible promissory note has a relative
fair value of $19,455 and the warrants has a relative fair value of $5,545 at the date of issuance determined using the Black-Scholes
option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.05%
(ii) estimated volatility of 221% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of 3 years. The Convertible
Note carries an original issue discount of 10%, mature on March 16, 2017 with a 12% interest rate and are convertible into common
stock of the Company at 60% of the lowest closing price over a five day period immediately prior to but not including the Conversion
Date. However, the conversion price shall not be lower than $0.005 per share.
On
April 15, 2016, the Company entered into an Exchange Agreement (the “Exchange Agreement”) and a Lock-Up Agreement
(the “Lock-Up Agreement”) with a private investor (the “Investor”). Pursuant to the Exchange Agreement, the
Company agreed to issue the Investor two promissory notes in the amount of $234,619 and $29,327 (the “Notes”),
respectively, in exchange for a 7.5% Convertible Debenture purchased by the Investor from a third party (the “Original
Note”). The Company has also granted the Investor a right of first refusal on all future Company financings over the
next twelve months. Via the Exchange Agreement, the Company was able to extend the maturity dates of the Notes to May 10,
2016 and October 15, 2016, respectively. Pursuant to the Lock-Up Agreement, the Investor has agreed not to sell any shares
acquired from conversion of the Note until May 10, 2016. The convertible notes are convertible into shares of common stock at
49% of the lowest traded price in the prior thirty trading days. As a result of the Exchange Agreement, we recognized a
loss on extinguishment of debt of $29,327.
On
April 18, 2016, the Company entered into a Loan Agreement with a private investor in connection with a bridge financing transaction,
consisting of an Unsecured Convertible Promissory Note in principal amount of $25,000 and three-year warrants to purchase 500,000
shares of the Company’s common stock with an exercise price of $0.0125 per share. The convertible promissory note has a
relative fair value of $20,872 and the warrants has a relative fair value of $4,128 at the date of issuance determined using the
Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest
rate of 0.90% (ii) estimated volatility of 215% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of 3 years.
The Convertible Note carries an original issue discount of 10%, mature on April 14, 2017 with a 12% interest rate and are convertible
into common stock of the Company at 60% of the lowest closing price over a five day period immediately prior to but not including
the Conversion Date. However, the conversion price shall not be lower than $0.005 per share.
On
May 6, 2016, the Company entered into a Note Purchase Agreement with an unaffiliated third party (the “Investor”)
relating to the sale of an unsecured convertible promissory note. The third party purchased an additional unit for $25,000 and
a principal balance of $30,000. The convertible promissory note is divided into units (“Units”), each in the principal
amount of $25,000, with equal installments of $1,000 due sequentially every week until $30,000 has been repaid. The convertible
promissory notes are due on December 2, 2016, subject to certain conditions and restrictions set forth in the notes. The convertible
note is convertible into shares of common stock based on the volume weighted average of the closing price per share for the 20
consecutive trading days prior to the conversion date if there is any outstanding principal balance due after the expiration due
date. On June 14, 2016, we consolidated all of these Investor’s notes into a single note valued at $120,000. The note is
due December 16, 2016 and carries an OID of 20%.
On May 10, 2016, we issued a total of 8,201,811
shares of common stock to two investors upon the conversion of $50,000 in debt from Convertible Notes that were issued
in the first quarter of 2015 and the second quarter of 2016.
On
June 7, 2016, we issued a total of 6,500,000 shares of common stock to an investor upon the conversion of $23,888 in debt from
a Convertible Note that was issued in the second quarter of 2016.
On
June 14, 2016, we received $45,000 from a noteholder who consolidated the remaining balance of $55,000 in notes into a $100,000
convertible note with an OID of 20%. The convertible note matures on December 16, 2016, without interest, and is convertible into
common stock of the Company at the lowest traded price in the 5 days prior to the conversion. The noteholder will received 2,000,000
shares of common stock for the origination of this loan. These shares were issued on August 5, 2016.
On
June 28, 2016, a noteholder assigned his remaining balance of $60,000 to another investor who consolidated it with that investor’s
$40,000 convertible note. The new convertible note matures on December 31, 2016, without interest, and is convertible into common
stock of the Company at the lower of 49% of the lowest traded price in the prior 30 days or $0.005 per share. On July 25, 2016,
the noteholder converted their outstanding principal balance into 16,773,833 shares of common stock at a conversion price of $0.003577
per share.
On
July 8, 2016, we raised $150,000 related to a Warrant and Note Purchase Agreement with unaffiliated third parties (the “Investors”)
relating to the sale of unsecured convertible promissory notes. The promissory notes are divided into
units (“Units”), each in the principal amount of $31,500. The Convertible Note carries an original issue discount
of 26%, mature on December 31, 2017 and are convertible into common stock of the Company at $0.015 per share, subject to adjustment
and mandatory conversion. On July 8, 2016, the Investors had purchased the minimum raise required of six $25,000 Units (for a
total of $150,000). The Agreement comes with two 3-year warrants, one to purchase 1,050,000 shares of common stock at $0.015 per
share and the other to purchase 525,000 shares of common stock at $0.03 per share. The convertible promissory notes have a relative
fair value of $134,019 and the warrants have a relative fair value of $54,981 at the date of issuance determined using the Black-Scholes
option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 0.71%
(ii) estimated volatility of 200% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of 3 years.
On July 10, 2016, we issued a total of 5,000,000
shares of common stock to an investor for converting $17,885 in debt from a Convertible Note that closed in the first quarter
of 2016.
On
August 3, 2016, we issued a total of 5,000,000 shares of common stock to an investor for converting $19,845 in debt from a Convertible
Note that closed in the first quarter of 2016.
On
August 16 2016, we issued a total of 2,500,000 shares of common stock to an investor for converting $10,168 in debt from a Convertible
Note that closed in the first quarter of 2016.
On
August 26, 2016, we issued a total of 5,000,000 shares of common stock to an investor for converting $19,600 in debt from a Convertible
Note that closed in the first quarter of 2016.
On
September 19, 2016, we issued a total of 10,000,000 shares of common stock to an investor for converting $30,380 in debt from
a Convertible Note that closed in the first quarter of 2016.
Derivative
liabilities
The conversion features embedded in the convertible
notes were evaluated to determine if such conversion feature should be bifurcated from its host instrument and accounted for as
a freestanding derivative. In the convertible notes with variable conversion terms, the conversion feature was accounted
for as a derivative liability. The derivatives associated with the term convertible notes were recognized as a discount to the
debt instrument and the discount is amortized over the expected life of the notes with any excess of the derivative value over
the note payable value recognized as additional interest expense at the issuance date. Amortization of the debt discount totaled
$623,675 and $0 during the periods ended September 30, 2016 and 2015, respectively.
The
derivative liability was calculated using the Black Scholes method over the expected terms of the convertible debentures, with
a risk free rate of 2% and volatility of 107% as of September 30, 2016. Included in Derivative Income in the accompanying consolidated
statements of operations is income arising from the change in fair value of the derivatives of $537,738 and $13,490 during the
periods ended September 30, 2016 and 2015, respectively.
6.
EQUITY
Common
Stock
On
January 20, 2016, we issued 5,921,592 shares of common stock (valued at $45,000) to reduce accrued management salaries and 1,500,000
shares of common stock (valued at $11,400) various consultants and accredited investors.
On
February 5, 2016, an accredited investor with a convertible note of $30,000, converted their outstanding principal balance into
2,000,000 shares of common stock at a conversion price of $0.015 per share and was issued an additional 250,000 shares of common
stock at a price of $0.015 per share.
On
March 3, 2016, we issued 4,250,000 shares of common stock (valued at $55,250) to 3 advisors for services rendered.
On
March 16, 2016, we hired Greentree Financial Group to assist with financial matters throughout 2016. We are compensating Greentree
Financial for their services with 2,500,000 shares of common stock (valued at $25,000) that we issued in March 2016 in connection
with their engagement.
On
May 4, 2016, we issued 4,250,000 shares of common stock (valued at $42,500) to 5 various consultants.
On
May 10, 2016, we issued 3,000,000 shares of common stock (valued at $30,000) to reduce accrued management salaries and 1,250,000
shares of common stock (valued at $12,500) to 5 board of directors for their services.
On
May 10, 2016, we issued a total of 8,201,811 shares of common stock to two investors for converting $50,000 in debt from Convertible
Notes that was issued in the first quarter of 2015 and the second quarter of 2016.
On
June 7, 2016, we issued a total of 6,500,000 shares of common stock to an investor for converting $23,888 in debt from a Convertible
Note that was issued in second quarter of 2016.
On
July 10, 2016, we issued a total of 5,000,000 shares of common stock to an investor for converting $17,885 in debt from a Convertible
Note that closed in the first quarter of 2016.
On
July 25, 2016, we issued a total of 16,773,833 shares of common stock to an investor for converting $60,000 in debt from a Convertible
Note that closed in the first quarter of 2015.
On
August 3, 2016, we issued a total of 5,000,000 shares of common stock to an investor for converting $19,845 in debt from a Convertible
Note that closed in the first quarter of 2016.
On
August 5, 2016, we issued 10,800,000 shares of common stock (valued at $86,400) to five consultants for services performed.
On
August 16 2016, we issued a total of 2,500,000 shares of common stock to an investor for converting $10,168 in debt from a Convertible
Note that closed in the first quarter of 2016.
On August 26, 2016, we issued a total of 5,000,000
shares of common stock to an investor for converting $19,600 in debt from a Convertible Note that closed in the first quarter
of 2016.
On
September 15, 2016, we issued 1,500,000 shares of common stock (valued at $12,000) to reduce accrued management salaries and 1,000,000
shares of common stock (valued at $8,000) to 4 board of directors for their services.
On
September 15, 2016, we issued 750,000 shares of common stock (valued at $6,000) to two consultants for services performed.
On
September 19, 2016, we issued a total of 10,000,000 shares of common stock to an investor for converting $30,380 in debt from
a Convertible Note that closed in the first quarter of 2016.
The
Company issued the following shares of common stock during the nine months ended September 30, 2016:
|
|
Value of Shares
|
|
|
Number of Shares
|
|
Shares issued for services rendered
|
|
$
|
254,300
|
|
|
|
26,550,000
|
|
Shares issued for accrued expenses
|
|
|
87,000
|
|
|
|
10,421,592
|
|
Shares issued for conversion of debt
|
|
|
262,094
|
|
|
|
60,975,644
|
|
Total
|
|
$
|
603,394
|
|
|
|
97,947,236
|
|
Shares
issued for services rendered were to various members of management, the Board of Directors, employees and consultants and are
expensed as Stock-Based Compensation in the accompanying consolidated statement of operations. Shares issued for conversion of
debt relate to conversion of the convertible notes discussed in Note 4.
Common
Stock Warrants
Since
inception, the Company has issued warrants to purchase shares of the Company’s common stock to shareholders, consultants
and employees as compensation for services rendered and/or through private placements.
On
January 27, 2016, 1,250,000 warrants were issued to an accredited investor as part of their Note and Share Purchase Agreement.
The warrants expire on February 26, 2018 at an exercise price of $0.015.
On
March 16, 2016, 3,000,000 warrants were issued to two accredited investors as part of their Loan Agreements. The warrants expire
on March 16, 2019 at an exercise price of $0.0125.
On
April 18, 2016, 500,000 warrants were issued to an accredited investor as part of the Note and Share Purchase Agreement. The warrant
expires on April 18, 2019 at an exercise price of $0.0125.
On
May 6, 2016, 1,250,000 warrants were issued to an accredited investor as part of the Note and Share Purchase Agreement. The warrant
expires on December 16, 2018 at an exercise price of $0.015.
On
May 16, 2016, 3,300,000 warrants were issued to consultant as part of their Advisory Services Agreement. The warrants expire on
May 16, 2019 at an exercise price of $0.015.
On July 1, 2016, 4,200,000 series “A”
warrants and 2,100,000 series “B” warrants were issued to an accredited investor as part of the Note and Warrant Purchase
Agreement. The series A and B warrants expires on July 1, 2019 at an exercise price of $0.015 for the series A and $0.030 for
the series B warrants.
On
July 8, 2016, 2,100,000 series “A” warrants and 1,050,000 series “B” warrants were issued to two accredited
investors as part of the Note and Warrant Purchase Agreement. The series A and B warrants expires on July 8, 2019 at an exercise
price of $0.015 for the series A and $0.030 for the series B warrants.
A
summary of the Company’s warrant activity and related information is provided below:
|
|
Exercise Price $
|
|
|
Number
of
Warrants
|
|
Outstanding and exercisable at December 31, 2015
|
|
|
0.015
- 0.02
|
|
|
|
11,150,000
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
Warrants granted
|
|
|
0.0125
- 0.03
|
|
|
|
18,750,000
|
|
Warrants expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding and exercisable at September 30, 2016
|
|
|
0.0125
- 0.03
|
|
|
|
29,900,000
|
|
Stock Warrants as of September 30, 2016
|
|
Exercise
|
|
|
Warrants
|
|
|
Remaining
|
|
|
Warrants
|
|
Price
|
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.020
|
|
|
|
9,900,000
|
|
|
|
1.32
|
|
|
|
9,900,000
|
|
$
|
0.015
|
|
|
|
13,350,000
|
|
|
|
2.35
|
|
|
|
13,350,000
|
|
$
|
0.0125
|
|
|
|
3,500,000
|
|
|
|
2.50
|
|
|
|
3,500,000
|
|
$
|
0.030
|
|
|
|
3,150,000
|
|
|
|
2.77
|
|
|
|
3,150,000
|
|
Common
Stock Options
Under
the Company’s 2008 Equity Compensation Plan (the “2008 Plan”), we are authorized to grant stock options intended
to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended,
non-qualified options, restricted and unrestricted stock awards and stock appreciation rights to purchase up to 7,000,000 shares
of common stock to our employees, officers, directors and consultants, with the exception that ISOs may only be granted to employees
of the Company and its subsidiaries, as defined in the 2008 Plan. After adjusting for expired and estimated pre-vesting forfeitures,
options for approximately 2,235,000 shares were still available for grant under the 2008 Plan as of September 30, 2016.
Stock
option activity under the 2008 Plan for the nine months ended September 30, 2016 is summarized as follows:
|
|
Shares
|
|
|
Weighted Average Exercise
Price
|
|
|
Weighted Average Remaining
Contractual Life (in years)
|
|
|
Grant Date Fair Value
|
|
Outstanding at December 31, 2015
|
|
|
452,493
|
|
|
$
|
0.08
|
|
|
|
0.84
|
|
|
$
|
46,901
|
|
Options granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options cancelled/ forfeited/ expired
|
|
|
(452,493
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(46,901
|
)
|
Outstanding at September 30, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
The
Company recognizes option expense ratably over the vesting periods. As all outstanding options had vested as of December 31, 2012,
we have recognized no compensation expense related to options granted under the 2008 Plan during the nine months ended September
30, 2016 and 2015, however these options did expire after their 3 year period.
7.
SUBSEQUENT
EVENTS
On
October 14, 2016, we issued a total of 2,400,000 shares of common stock to an investor upon the conversion of $12,000 in debt
from a Convertible Note that closed in the first quarter of 2016.
On October 28, 2016, we issued a total
of 4,000,000 shares of common stock to an investor upon the conversion of $20,000 in debt from a Convertible Note that closed
in the first quarter of 2016.