NOTE 7 – STOCKHOLDERS’ DEFICIT 

Common stock issued for services and settlements

On January 6, 2016, the Company entered into an agreement with an investment banker to provide general financial advisory and investment banking services. Services included, but not limited to in the agreement are to provide a valuation analysis of the Company, assist management and advise the Company with respect to its strategic planning process and business plans including an analysis of markets, positioning, financial models, organizational structure, potential strategic alliances, capital requirements, potential national listing and working closely with the Company’s management team to develop a set of long and short-term goals with special focus on enhancing corporate and shareholder value. The Agreement is for an initial term of six months. The Company shall pay a non-refundable fee accruing at the rate of $10,000 per month, for the term of the agreement. These advisory fee payments will be accrued and deferred for payment until the earlier of 1) closing of the financing described in the agreement, 2) a closing of interim funding at which point fifty percent (50%) of the outstanding monthly advisory fee will be payable on the last day of the month following closing of the interim financing or 3) the termination of the agreement. The Company has issued to the investment banker 912,000 vested shares of the Company’s common stock as of the execution date of this agreement.  In addition, the Company has issued warrants for the purchase of 302,000 shares of the Company’s common stock. The warrants have a 5-year term and an exercise price of $0.30.  As of September 30, 2016, the Company has accrued $60,000 which is unpaid and is recorded in accrued expenses on the Company’s consolidated balance sheet.

On January 22, 2016, Warrant Holders were granted 2,100 shares of common stock in exchange for existing 5,250 warrants resulting in a loss on settlement of $630 charged to operations.

On April 1, 2016, the Company issued a warrant exercisable into 2.5 million shares with a term of five years and exercise price of $0.35 per share in conjunction with a Securities Purchase Agreement (see Note 3).  The Warrants also contain certain anti-dilution provisions that apply in connection with any stock split, stock dividend, stock combination, recapitalization or similar transactions as well as a potential adjustment to the exercise price based on certain events. The relative fair value of the warrants of $466,031 was recorded as a debt discount and will be amortized to interest expense over the term of the debt.

On April 1, 2016, the Company issued 200,000 three-year warrants with an exercise price of $0.40 to the placement agent as additional compensation for arrangement of financing through the Securities Purchase Agreement (see Note 3).  The fair value of the warrants of $43,272 was recorded as a discount and will be amortized to interest expense over the term of the debt.

The Company issued 253,977 shares of common stock for consulting services rendered valued at the quoted trading price on the respective grant date resulting in consulting expense of $35,000 in the nine months ended September 30, 2016.

In May 2016, the Company issued 125,000 shares of common stock for consulting services valued at the quoted trading price on the respective grant date resulting in prepaid consulting expense of $27,400 to be amortized over the three-month agreement term.

In August 2016, the Company’s Board of Directors approved a new class of Preferred Stock, “Series A”.  The Articles of Amendment Designating Preferences, Rights and Limitations of the Series A were filed with State on October 31, 2016.  The Series A authorized 500,000 of the Company’s 10 million “blank check” preferred stock with a stated value of $10 per share, an 8% cumulative dividend payable when and if declared by the Board and a provision to convert into the Company’s common stock at $0.18 per share.  If the holder elects to convert the Series A to common stock, the cumulative dividend amount will also be converted to common stock.  The Series A is redeemable by the holder after 3 years including all unconverted stated value and accrued dividends.  For shareholders who invested in previous private placements, the Company is offering on a case by case basis, the ability to convert the existing amount invested into an equivalent amount in the Series A on the condition that they invest an equivalent additional amount in the Series A.  As of September 30, 2016, several of the company’s shareholders had expressed interest in participating and the Company has received prepayments in the amount of $140,000 which have been recorded as accrued expenses, a current liability, as of September 30, 2016.  (See Note 9)