NOTE 10 – STOCKHOLDERS’ EQUITY (DEFICIT)

On December 31, 2016, two of the Company’s creditors converted their loans totaling $299,000 of principal and $2,000 of interest into 43,623 shares of common stock. The shares were issued at $6.90. No gain or loss was recognized on the conversion.

On April 4, 2017, the Company’s Board of Directors determined it was in the best interest of the Company to issue additional shares to Paul Bershin and Alan Diamante in consideration for funds previously loaned to the Company. Accordingly, the Company issued 127,053 shares of common stock to Paul Bershin at $0.90 per share and issued 161,546 shares of common stock to Alan Diamante at $0.90 per share. As the notes have been previously converted to equity in a prior period, the stock issuance, which was valued at $259,739, was expensed and recorded as a loss on conversion of debt in the accompanying statement of operations.

On April 4, 2017, the Company received $250,000 from two of its investors for the purchase of 3,787,879 shares of common stock at $0.066 per share. As of December 31, 2017, the shares have not yet been issued; therefore, the $250,000 has been credited to a stock payable account.

On August 18, 2017, the Company received $150,000 from an investor for the purchase 2,272,727 shares of common stock at $0.066 per share. As of December 31, 2017, the shares have not yet been issued; therefore, the $150,000 has been credited to a stock payable account.

On August 25, 2017, the Company authorized the issuance of 1,208,784 shares of common stock to our President, Ross Sklar, in consideration for his forfeiture of warrants to purchase 1,116,667 shares of the Company’s common stock. This transaction was originally accounted for under ASC 718-20-35-8. The Company accounted for the stock issuance based on the incremental cost of the fair value over the fair value of the cancelled warrants on the date of cancellation. The aggregate fair value of the warrants cancelled totaled $855,814 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $0.23, 2.00% risk free rate, 31.91% volatility and expected life of the options of 8.06 years. The fair value of the shares issued was $4,351,624 based on the closing price of the stock of $0.12 on August 25, 2017, resulting in a net increase in fair value of $3,495,810 as of September 30, 2018. The Company subsequently obtained a valuation of the stock price on August 25, 2017 from a third-party valuation firm. The valuation determined that the value of the stock was $0. The Company reversed the accounting on the original entry during the fourth quarter so that no additional expense was recognized on the shares issued.

In October 2017, the Company received $200,000 from investors for the purchase of 3,030,303 shares of common stock at $0.066 per share. As of December 31, 2017, the shares have not yet been issued; therefore, the $150,000 has been credited to a stock payable account.

Refer to Note 9 for related party equity transactions.