NOTE 8 - STOCKHOLDERS’ DEFICIENCY

Recapitalization

On November 8, 2017, the shareholders of the Company voted for approval and adoption of an amendment to the Articles of Incorporation, as amended, to increase the number of authorized shares of common stock from 450,000,000 shares to 700,000,000 shares. The Certificate of Amendment to the Articles of Incorporation have been filed with the Secretary of State of Nevada.

Board of Directors fees

On September 11, 2017, the board of directors granted to each of its Directors warrants to purchase 500,000 shares of common stock at an exercise price of $.07 per share. The warrants have a term of five years and vest immediately. The warrants were valued at $166,668 using the Black Scholes pricing model relying on the following assumptions: volatility 175.54%; annual rate of dividends 0%; discount rate 1.71%. In addition, each director is entitled to receive $10,000 for each annual term served.

On September 28, 2018, the board of directors granted to each of its five (5) Directors warrants to purchase 500,000 shares of common stock at an exercise price of $.14 per share. The 2,500,000 warrants have a term of five years and vest immediately. The warrants were valued at $384,065 using the Black Scholes pricing model relying on the following assumptions: volatility 178.54%; annual rate of dividends 0%; discount rate 2.96%. In addition, each director is entitled to receive $10,000 for each annual term served.

The Company recorded directors’ fees of $424,065 and $206,668 for the years ended December 31, 2018 and 2017, respectively, representing the cash fees and the value of the vested warrants described above.

Stock Based Compensation

On April 20, 2017, the Company entered into a Limited License Agreement (“License Agreement”) with NutriQuest, LLC (“NutriQuest”), as disclosed in a Form 8-K filed on April 26, 2017. Pursuant to the License Agreement, the Company issued NutriQuest warrants to purchase 687,227 shares of common stock valued at $39,189 using the Black Scholes pricing model relying on the following assumptions: volatility 175.75%; annual rate of dividends 0%; discount rate 1.78%. The warrants are exercisable at $.08 per share and expire five (5) years from the date of issuance. The License Agreement provides that the Company is obligated to pay a termination fee to NutriQuest if the parties are unable to agree upon quality and volume delivered standards.

During the year ended December 31, 2017, the Company issued warrants to purchase 67,600,000 shares of common stock. In the first quarter, the Company issued warrants to purchase 500,000 shares of common stock at an exercise price of $.10 with a term of 5 years pursuant to an agreement as a financial consultant. The warrants were valued at $33,148 using the Black Scholes pricing model relying on the following assumptions: volatility 175.05%; annual rate of dividends 0%; discount rate 1.87%. In the third quarter, the Company issued warrants to purchase 16,250,000 shares of common stock at an exercise price of $.06 to $.07 with a term of 5 years pursuant to agreements with financial consultants. The warrants were valued at $923,430 using the Black Scholes pricing model relying on the following assumptions: volatility 175.61% to 175.58%; annual rate of dividends 0%; discount rate 1.63% to 1.79%. Also, in the third quarter, the Company issued warrants to purchase 250,000 shares of common stock at an at an exercise price of $.07 with a term of 5 years pursuant to an agreement with a research consultant. The warrants were valued at $16,667 using the Black Scholes pricing model relying on the following assumptions: volatility 175.61%; annual rate of dividends 0%; discount rate 1.63%. During the quarter ended December 31, 2017, the Company issued warrants to HEP Investments LLC (a related party) to purchase 50,000,000 shares of common stock at an exercise price of $.10 with a term of 5 years pursuant to an approval of the board of directors relating to the additional funding of $2.5 million through the 11% convertible note. See Note 7 - Convertible Debt. The warrants were valued at $4,274,761 using the Black Scholes pricing model relying on the following assumptions: volatility 175.10%; annual rate of dividends 0%; discount rate 2.09%. Also, in the fourth quarter, the Company issued warrants to purchase 600,000 shares of common stock at an exercise price of $.10 with a term of 5 years pursuant to an agreement as a financial consultant. The warrants were valued at $57,212 using the Black Scholes pricing model relying on the following assumptions: volatility 176.09%; annual rate of dividends 0%; discount rate 2.11%.

During the year ended December 31, 2018, pursuant to Board of Directors authorization, the Company issued warrants to purchase 56,334,081 shares of common stock. In the first quarter, the Company issued warrants to purchase 2,326,504 shares of common stock at an exercise price of $.11 with a term of 5 years to an investment banker. The warrants were valued at $245,040 using the Black Scholes pricing model relying on the following assumptions: volatility 177.09%; annual rate of dividends 0%; discount rate 2.69%. In the second quarter, the Company issued warrants to HEP Investments LLC (a related party) to purchase 25,000,000 shares of common stock at an exercise price of $.10 with a term of 5 years pursuant to an approval of the board of directors relating to the additional funding of $2 million through a combination of sales of common stock and the issuances of 11% convertible notes (at a conversion price of $.10) to HEP Investments through the 11% convertible note. See Note 7 - Convertible Debt. The warrants were valued at $4,274,761 using the Black Scholes pricing model relying on the following assumptions: volatility 175.10%; annual rate of dividends 0%; discount rate 2.09%. Further, the Company issued warrants to purchase 1,000,000 shares of common stock at an exercise price of $.11 with a term of 5 years to a consultant (Executive Director of Asia Operations – see Note 10 – Related Party Transactions). The warrants were valued at $163,798 using the Black Scholes pricing model relying on the following assumptions: volatility 176.10%; annual rate of dividends 0%; discount rate 2.77%. In the fourth quarter, the Company issued warrants to HEP Investments LLC (a related party) to purchase 25,000,000 shares of common stock at an exercise price of $.10 with a term of 5 years pursuant to an approval of the board of directors relating to the additional funding of $2 million through a combination of sales of common stock and the issuances of 11% convertible notes (at a conversion price of $.10) to HEP Investments through the 11% convertible note. See Note 7 - Convertible Debt. The warrants were valued at $3,377,387 using the Black Scholes pricing model relying on the following assumptions: volatility 179.73%; annual rate of dividends 0%; discount rate 2.65%. Also in the fourth quarter, the Company issued warrants to purchase 3,007,577 shares of common stock at an exercise price of $.13 with a term of 5 years to an investment banker. The warrants were valued at $374,511 using the Black Scholes pricing model relying on the following assumptions: volatility 180.13%; annual rate of dividends 0%; discount rate 2.65%.

Stock Issuances

During the year ended December 31, 2017, in connection with the issuance of $4,000,000 in principal of 11% Convertible Debenture the Company issued to HEP Investments 1,935,714 shares of common stock valued at $144,000 and a five-year warrant to purchase 4,000,000 shares of common stock at an exercise price of $.10 per share. The Company also issued 250,000 shares of common stock valued at $22,500 as discussed in Note 10 - Settlement of Litigation – Related Party.

During the year ended December 31, 2018, in connection with the issuance of $1,968,800 in principal of 11% Convertible Debenture the Company issued to HEP Investments 552,672 shares of common stock valued at $64,397 and various five-year warrant(s) to purchase 1,543,801 shares of common stock at an exercise price of $.10 per share (see Note 7 – Convertible Debt). In addition, the Company received proceeds of $3,433,813 from the issuance of 34,338,129 shares of common stock.

Executive Compensation

As compensation for serving as Chief Financial Officer, the Company, quarterly, will issue warrants to purchase 50,000 shares of common stock to Philip M. Rice at the prevailing market price with a term of 5 years, provided that the preceding quarterly and annual filings were submitted in a timely and compliant manner, at which time such warrants would vest.

On March 31, 2017, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.08. The warrants were valued at $3,317 using the Black Scholes pricing model relying on the following assumptions: volatility 175.53%; annual rate of dividends 0%; discount rate 1.93%. On May 12, 2017, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.09. The warrants were valued at $4,283 using the Black Scholes pricing model relying on the following assumptions: volatility 176.74%; annual rate of dividends 0%; discount rate 1.93%. On August 11, 2017, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.06. The warrants were valued at $2,863 using the Black Scholes pricing model relying on the following assumptions: volatility 177.01%; annual rate of dividends 0%; discount rate 1.74%. On October 19, 2017, the Company issued warrants to purchase 50,000 shares of common stock at $.09. The warrants were valued at $4,290 using the Black Scholes pricing model relying on the following assumptions: volatility 176.02%; annual rate of dividends 0%; discount rate 1.98%.

On February 21, 2018, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.11. The warrants were valued at $5,255 using the Black Scholes pricing model relying on the following assumptions: volatility 177.09%; annual rate of dividends 0%; discount rate 2.69%. On April 23, 2018, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.10. The warrants were valued at $4,762 using the Black Scholes pricing model relying on the following assumptions: volatility 174.51%; annual rate of dividends 0%; discount rate 2.83%. On August 14, 2018, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.12. The warrants were valued at $5,737 using the Black Scholes pricing model relying on the following assumptions: volatility 177.70%; annual rate of dividends 0%; discount rate 2.77%. On November 14, 2018, the Company issued the CFO warrants to purchase 50,000 shares of common stock at $.14. The warrants were valued at $7,695 using the Black Scholes pricing model relying on the following assumptions: volatility 180.26%; annual rate of dividends 0%; discount rate 2.95%.

On November 8, 2017, the board of directors granted to Andrew Dahl, CEO warrants to purchase 10,000,000 shares of common stock at an exercise price of $.08 per share. The warrants have a term of five years and vest immediately. The warrants were valued at $762,649 using the Black Scholes pricing model relying on the following assumptions: volatility 176.02%; annual rate of dividends 0%; discount rate 1.99%.

.99%.

On November 8, 2017, the board of directors granted to Philip Rice, CFO, warrants to purchase 6,000,000 shares of common stock at an exercise price of $.08 per share. The warrants have a term of five years and vest immediately. The warrants were valued at $457,589 using the Black Scholes pricing model relying on the following assumptions: volatility 176.02%; annual rate of dividends 0%; discount rate 1.99%.

During the year ended December 31, 2018, the Company issued the following warrants pursuant to offers of employment with three employees: 1) to purchase 500,000 shares of common stock at an exercise price of $.10 with a term of 5 years (these warrants were valued at $33,045 using the Black Scholes pricing model relying on the following assumptions: volatility 175.59%; annual rate of dividends 0%; discount rate 2.36%); 2) to purchase 500,000 shares of common stock at an exercise price of $.11 with a term of 5 years (these warrants were valued at $81,897 using the Black Scholes pricing model relying on the following assumptions: volatility 176.04%; annual rate of dividends 0%; discount rate 2.81%); and 3) to purchase 1,000,000 shares of common stock at an exercise price of $.11 with a term of 5 years (these warrants were valued at $163,798 using the Black Scholes pricing model relying on the following assumptions: volatility 176.10%; annual rate of dividends 0%; discount rate 2.77%). These warrants will vest one year from issuance (June 19, 2019) (the Company has recorded $87,508 as stock-based compensation during the year ended December 31, 2018, the remaining cost will be amortized over the course of the vesting period).

Common Stock Warrants

A summary of the status of the Company’s warrants is presented below.

Warrants outstanding and exercisable by price range as of December 31, 2018 were as follows: