Annual report pursuant to Section 13 and 15(d)

NOTE 7: EQUITY TRANSACTIONS

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NOTE 7: EQUITY TRANSACTIONS
12 Months Ended
Dec. 31, 2018
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]

NOTE 7: EQUITY TRANSACTIONS


Common Stock 


2018


During the year ended December 31, 2018, the Company issued a total of 5,792,829 common shares for compensation to two officers, fair value of $514,916 is recognized as expense during 2018.


During the year ended December 31, 2018, the Company issued an aggregate of 19,186,333 common shares to a related party convertible note holder for conversion of $1,534,907 in principal.


During the year ended December 31, 2018, the Company issued 100,000 common shares for services to a member of the board of directors, fair value of $8,000 is recognized as expense during 2018.


 During the year ended December 31, 2018, the Company issued a total of 376,273 common shares for services to consultants, fair value of $33,300 is recognized as expense during 2018.


2017


During the year ended December 31, 2017, the Company issued 1,000,000 common shares for a debt transfer fee rendered valued at $127,400.


During the year ended December 31, 2017, the Company issued an aggregate of 36,403,968 common shares to convertible note holders for conversion of $2,494,195 in principal and $2,491 in accrued interest.


Options


There were no common stock options issued and no unamortized options expense during the years ended and as of December 31, 2018 and 2017.


The following table presents the stock option activity during the years ended December 31, 2018 and 2017:


           

Weighted

   

Weighted

 
           

Average

   

Average

 
   

Options

   

Exercise Price

   

Remaining Term

 

Outstanding - December 31, 2016

    685,713     $ 4.52       2.62  

Granted

    -       -       -  

Expired

    -       -       -  

Exercised

    -       -       -  

Outstanding - December 31, 2017

    685,713     $ 4.52       0.78  

Granted

    -       -       -  

Expired

    (571,428

)

    3.50       -  

Exercised

    -       -       -  

Outstanding – December 31, 2018

    114,285     $ 9.63       0.75  
                         

Exercisable – December 31, 2018

    114,285     $ 9.63       0.75  

The intrinsic value of the exercisable options as of December 31, 2018 and 2017 was $0 and $0, respectively.


Warrants


In November 2013, the Company issued a lender an aggregate of 310,863 common stock warrants in connection with a note payable. The warrants were exercisable immediately at $1.75 per share and expire on November 30, 2018. These warrants contain a subsequent equity sale reset “down round”, which provides that if the Company sells or grants any option to purchase any common stock of the Company at any effective price per share less than the exercise price of the warrants, the exercise price shall be reduced to equal that lower exercise price. During 2017, the exercise price of these warrants was reset to $0.055 per share.  As the warrants were accounted for as derivative liabilities (due to being tainted by the outstanding convertible debt) at the time the reset was triggered, the change in fair value resulting from the reset of $26,060 was recognized as change in fair value of derivative liabilities.


These warrants were accounted for as derivative liabilities under ASC 815 (see Note 6). The fair value of the warrants of $292,148 was recorded as a debt discount which is being amortized to interest expense over the life of the note.


In August 2014, the Company issued a lender an aggregate of 4,180,000 common stock warrants in connection with a note payable. The warrants were exercisable immediately at $0.50 per share and expire on August 31, 2019. These warrants contain a subsequent equity sale reset “down round”, which provides that if the Company sells or grants any option to purchase any common stock of the Company at any effective price per share less than the exercise price of the warrants, the exercise price shall be reduced to equal that lower exercise price. During 2017, the exercise price of these warrants was reset to $0.055 per share. As the warrants were accounted for as derivative liabilities (due to being tainted by the outstanding convertible debt) at the time the reset was triggered, the change in fair value resulting from the reset of $177,959 was recognized as change in fair value of derivative liabilities.


These warrants were accounted for as derivative liabilities under ASC 815 (see Note 6). The fair value of the warrants of $855,440, of which, $400,000 was recorded as a debt discount which is being amortized to interest expense over the life of the note and $455,440 was expensed as loss on derivative liability.


During the year ended December 31, 2017, the Company granted 72,497 warrants with convertible debt. The fair value of these warrants associated with the notes was determined to be $6,820 as of December 2017, of which $6,820 was recorded as a discount to the related notes. There were no warrants issued during 2018.


The following table presents the stock warrant activity during the years ended December 31, 2018 and 2017:


           

Weighted

   

Weighted

 
           

Average

   

Average

 
   

Warrants

   

Exercise Price

   

Remaining Term

 

Outstanding - December 31, 2016

    7,314,432     $ 0.41       2.62  

Granted

    67,340       0.15       3.00  

Forfeited/expired

    (38,571

)

    1.75       -  

Exercised

    -       -       -  

Outstanding - December 31, 2017

    7,343,192     $ 0.08       2.15  

Granted

    -       -       -  

Forfeited/expired

    (310,863

)

    0.06       -  

Exercised

    -       -       -  

Outstanding – December 31, 2018

    7,032,329     $ 0.08       1.21  
                         

Exercisable – December 31, 2018

    7,032,329     $ 0.08       1.21  

The intrinsic value of the exercisable warrants as of December 31, 2018 was $264,021.