NOTE 14 – EQUITY TRANSACTIONS

Common Stock – Authorized common stock of the Company consists of 70,000,000 shares of $.001 par value, of which 56,528,575 shares were issued or issuable and outstanding at December 31, 2017.

Preferred Stock – Authorized preferred stock consists of 5,000,000 shares of preferred stock, $.001 par value, no shares of preferred stock are issued and outstanding.

2017 Common Stock Transactions

In 2017 the Company issued 13,496 shares of $.001 par value common stock in connection with the cashless exercise of 166,666 options.

In 2017, the Company issued 300,000 shares of $.001 par value common stock valued at $174,000 in connection with a settlement agreement. (See Note 11)

In 2017, the Company issued 1,500,000 shares of $.001 par value common stock valued at $1,009,000 in connection with the late payment penalty due on short-term notes. (See Note 10)

In 2017, the Company recorded 190,000 shares of $.001 par value common stock valued at $130,000 as issuable to short-term note holders as required under their respective agreements. (See Note 10)

In 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $1.00 to Richard Robertson in connection with his employment agreement dated January 9, 2017. At the date of issuance 100,000 shares vested immediately and the remaining 900,000 options vest over a period of four years in a series of 16 successive equal quarterly vesting of 56,250 options commencing March 31, 2017 and ending December 31, 2020. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $102,354. The assumptions used in calculating such value include a risk-free interest rate of 1.89%, expected volatility of 36.87%, an expected life of 5.5 years and a dividend rate of 0.

In 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $0.70 to Don Moorhead in connection with his consulting agreement dated May 1, 2017. The options vest over a period of two years in a series of 8 successive equal quarterly installments of 125,000 commencing July 1, 2017 and ending April 1, 2019. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $231,514. The assumptions used in calculating such value include a risk-free interest rate of 1.84%, expected volatility of 39.17%, an expected life of 4.5 years and a dividend rate of 0.

2016 Common Stock Transactions

In 2016, we issued 600,000 shares of common stock for $300,000 of proceeds.

In 2016, we issued 250,000 shares of common stock upon exercise of common stock warrants, receiving proceeds of $125,000.

In 2016, we received $29,900 in proceeds for the extension of common stock warrants.

In 2016, we issued 100,000 shares of common stock in consideration of a $25,000 common stock subscription payment.

Warrants

In 2017, we received $155,500 in proceeds for the extension of common stock warrants. A balance of $5,300 is owed by warrant holders for the extension of their warrants. Certain warrant holders were offered the extensions at no additional cost to the warrant holder and the Company recorded stock based compensation expense of $83,677 for those warrant holders granted extensions without compensation to the Company.

In connection with services provided to the Company in 2017, the Company issued warrants to acquire 200,000 shares of common stock. The warrants exercisable for five years at $0.70 per share were valued at $31,300 using the Black Scholes valuation method. The assumptions used in the valuation of the warrants were; common stock price $0.63, expected life 5 years, volatility 28.72% and discount rate 1.92%.

In connection with the 2016 issuance of a $200,000 secured short term note payable that we issued a warrant was issued to purchase 500,000 shares of our common stock at $0.50 per share, exercisable over four years. The warrant was valued at $97,181 using a Black Scholes valuation and was charged to interest over the sixty days term of the note. The assumptions used in the valuation of the warrant were; common stock price $0.62, expected life 2 year, volatility 37.89% and discount rate 1.25%. The note was paid in full in 2016.

In connection with the issuance of convertible debt in 2016 noted above, the Company issued warrants to acquire 71,000 shares of common stock as an inducement to enter into the transaction. The warrants exercisable for five years at $0.85 per share were valued at $4,900 using the Black Scholes valuation method. The assumptions used in the valuation of the warrants were; common stock price $0.60, expected life 2.5 years, volatility 36.71% and discount rate 1.14%.

A summary of warrant activity for the years ended December 31, 2017 and December 31, 2016 is presented as follows: