ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The following information represents securities sold by the Company within the past three years which were not registered under the Securities Act. Included are sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities.
? On 26 January 2018 the Company agreed to issue $1,200,000 in shares of our common stock, valued as of that date, to Jason Remillard under the transaction in which we acquired substantially all of the assets of Myriad Software Productions, LLC. This equated to 1,200,000,000 shares of our common stock, none of which have been issued to Mr. Remillard. The issuance was exempt under Section 4(a)(2) of the Securities Act.
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? On or about February 6, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Blue Citi LLC (“Blue Citi”) under which Blue Citi would purchase $500,000 in 8% interest accruing, convertible notes, maturing 18 months after issue. Subsequently, the Company and Blue Citi reached a verbal agreement to extend the SPA to $1,000,000. Each note was previously convertible at the option of Blue Citi into common shares at a 25% discount to the lowest trading price during the ten consecutive trading days immediately preceding the date of conversion. See, below, the discussion for the September 30, 2018 transactions involving the Restructuring Agreement and the Consolidated Note.
? On March 16, 2018, the Company converted $2,000 of a promissory note into 40,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On March 20, 2018, the Company converted $1,750 of a promissory note into 35,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2).
? On April 18, 2018, the Company converted $3,100 of a promissory note into 62,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On April 19, 2018, the Company converted $3,150 of a promissory note into 63,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On 29 June 2018 the Company agreed to issue 100,000,000 shares of our common stock, and an additional 100,000,000 shares upon satisfaction of certain conditions, to Mr. Remillard under the transaction in which we acquired all of the shares of Data443. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? Through Data443, we have signed consulting contracts with a team of consultants and advisors, of which, four provide senior leadership to the Company in corporate development, technology development, finance, operations, and sale and marketing, with the others providing services in administration, marketing, sales, and engineering. Additionally, we engage junior and mid-level engineering consultants on a project-by-project basis to further develop technology and to implement services for prospective clients. Collectively, the team is paid approximately $200,000 each quarter. Additionally, we have granted stock and stock options to some of these consultants and advisors as part of their compensation or in lieu of cash to reduce cash outlays. Grants of stock and stock options are awarded selectively to consultants upon their start dates, and every quarter thereafter throughout the term of their engagement at a fixed dollar amount. Each grant of stock and stock options is irrevocable, and some stock grants include registration rights; however, each grant of stock is restricted until the one-year anniversary from the grant date, and each grant of stock options vests on the one-year anniversary of the grant date. For the nine-month period ended September 30, 2018: (i) 133,567,651 common shares were granted as restricted stock awards; and, (ii) options to purchase 182,550,551 common shares were granted. The exercise prices for the grants of stock options range from $0.0014 to $0.018. One of our consulting contracts is with Myriad Software. Of the shares and options reserved for consultants during the period ending September 30, 2018, approximately 36,055,901 common shares and 36,287,144 in stock options were granted to Myriad Software. Of the approximately $400,000 payable to consultants and advisors in the period ending September 30, 2018, $30,000 of the Company’s consultant expense was due to Myriad Software for services rendered by Jason Remillard during the period. None of the shares committed under this paragraph have been issued as of the date of this Statement. These shares have been recorded as common shares issuable and included in additional paid-in capital – stock subscription within our financial statements for the period ending September 30, 2018 and have not been included in the total number of issued and outstanding shares reflected herein.
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? On July 2, 2018, the Company converted $10,000 of a promissory note into 200,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On August 9, 2018, the Company converted $5,000 of a promissory note into 100,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On September 30, 2018, the Company entered into a Debt Restructuring Agreement with Blue Citi (the “Restructuring Agreement”). Pursuant to the Restructuring Agreement, the parties agreed, among other things, to combine all of the Convertible Notes and other amounts owed to Blue Citi into a single note dated 30 September 2018 (the “Consolidated Note”). The Consolidated Note made the Convertible Notes null and void, and provided for, among other things, (i) an original principal amount of $829,680; (ii) 8% annual interest; (iii) 18-month maturity; (iv) reduction in the conversion discount from 25% to 10%, meaning that the Conversion Note, at the option of Blue Citi, is convertible into common shares at a price equal to 90% of the lowest trading price during the ten consecutive trading days immediately preceding the date of conversion; and, (v) Blue Citi waived all known and unknown breaches under the Convertible Notes. The outstanding principal for the Consolidated Note as of September 30, 2018 was $829,680. Based on this amount, and the Company’s lowest stock price of $0.0056 per share during the preceding ten day period, the Consolidated Note is convertible into approximately 148,157,143 shares of our common stock. However, the Consolidated Note contains a limiter prohibiting the holder from converting if the conversion would cause the holder to own more than 4.99% of the Company’s then outstanding common stock after giving effect to the conversion of the stock. The issuance of the Consolidated Note was exempt under Section 4(a)(2) of the Securities Act.
? On October 12, 2018, the Company issued to AFT Funding Corp. the Company’s promissory note in the amount of $110,000 in exchange for $100,000 in net proceeds. The note provides for a maturity date of July 16, 2019; 8% interest; and, the right of the holder to convert all amounts due into shares of the Company’s common stock at a price equal to 70% of the lesser of (i) the lowest price for our common stock during the 20-days preceding the conversion; or, (ii) the lowest price for our common stock for the 20-days preceding the issuance of the note. The issuance of the note was exempt under Section 4(a)(2) of the Securities Act.
? On 16 October 2018, the Company converted $20,000 of a promissory note into 400,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On 22 October 2018 the Company agreed to issue 164,533,821 shares of our common stock Modevity, LLC under the transaction in which we acquired substantially all of the assets of Modevity, LLC. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? On October 23, 2018, the Company issued to Smea2z LLC the Company’s promissory note in the amount of $220,000 in exchange for $200,000 in net proceeds. The note provides for a maturity date of July 23, 2019; 8% interest; and, the right of the holder to convert all amounts due into shares of the Company’s common stock at a price equal to 70% of the lesser of (i) the lowest price for our common stock during the 20-days preceding the conversion; or, (ii) the lowest price for our common stock for the 20-days preceding the issuance of the note. The issuance of the note was exempt under Section 4(a)(2) of the Securities Act.
? On 15 November 2018 the Company converted $5,000 of a promissory note into 100,000,000 shares of its common stock. The issuance was exempt under Section 4(a)(2) of the Securities Act.
? From October 01, 2018 through December 13, 2018, Blue Citi loaned to the Company an additional $175,000, which amount is to be added to the Consolidated Note and subject to the same terms and conditions therein. These amounts added to the Consolidated Note was exempt under Section 4(a)(2) of the Securities Act.
? On December 20, 2018 the Company issued a total of 252,016,130 restricted shares of its common stock for subscriptions of $500,000. The Company received the entire amount of the proceeds. In connection with the issuance of the shares, the Company also issued to the subscribers warrants to acquire a total of 50,403,226 shares of our common stock at a strike price of $0,003 per share, with a cashless exercise feature and a five (5) year term. The issuance was exempt under Section 4(a)(2) of the Securities Act.
