NOTE 8 - STOCKHOLDERS’ DEFICIENCY

Board of Directors fees

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Philip M. Rice (CFO and a Director) in January, 2015, at an exercise price of $.09 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $3,664 using the Black Scholes pricing model relying on the following assumptions: volatility 128.38%; annual rate of dividends 0%; discount rate 0.68%.  In addition, Mr. Rice is entitled to receive $10,000 for each annual term served.

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Thomas K. Cox in June, 2015, at an exercise price of $.15 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $6,185 using the Black Scholes pricing model relying on the following assumptions: volatility 155.43%; annual rate of dividends 0%; discount rate 1.09%.  In addition, Mr. Cox is entitled to receive $10,000 for each annual term served.

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to John B. Payne in July, 2015, at an exercise price of $.09 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $4,876 using the Black Scholes pricing model relying on the following assumptions: volatility 155.43%; annual rate of dividends 0%; discount rate 0. 109%.  In addition, Mr. Payne is entitled to receive $10,000 for each annual term served.

On September 10, 2015, the board of directors amended its policy for the compensation of its directors. The Board granted to each of its five (5) Directors warrants to purchase 250,000 shares of common stock at an exercise price of $.10 per share. The warrants have a term of five years and vest immediately. The unvested portion of the previously granted warrants were cancelled due to the Company’s change to a program where all director warrant grants are made once per year at the same time. In addition, each director is entitled to receive $10,000 for each annual term served.  As such, Mr. Cox’s unvested warrant of 36,986 shares, Ms. Masterson’s warrant of 959 shares, Mr. Payne’s warrant of 42,740 shares and Mr. Rice’s unvested warrant of 15,890 shares, were cancelled.

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 125,000 shares of common stock to Robert O. Rondeau, a new Director, in March 2016, at an exercise price of $.09 per share.  The warrants have a term of five years and vest immediately.  The warrants were valued at $10,588 using the Black Scholes pricing model relying on the following assumptions: volatility 168.01%; annual rate of dividends 0%; discount rate 0.97%.  In addition, Mr. Rondeau will receive $10,000 for each annual term served, paid quarterly.

On September 10, 2016, the board of directors granted to each of its Directors warrants to purchase 250,000 shares of common stock at an exercise price of $.05 per share. The warrants have a term of five years and vest immediately. The warrants were valued at $59,125 using the Black Scholes pricing model relying on the following assumptions: volatility 171.58%; annual rate of dividends 0%; discount rate 0.79%.  In addition, each director is entitled to receive $10,000 for each annual term served.

The Company recorded directors’ fees of $109,713 and $166,679 for the years ended December 31, 2016 and 2015, respectively, representing the cash fees and the value of the vested warrants described above.

Stock Based Compensation

On April 23, 2015, the Company issued 500,000 shares of common stock valued at $30,000, to an investor relations consulting firm. On April 15, 2015, the Company issued warrants to purchase 1,875,000 shares of common stock at an exercise price of $.08 with a term of five years pursuant to an agreement with a financial consultant.  The warrants were valued at $133,862 using the Black Scholes pricing model relying on the following assumptions: volatility 143.36%; annual rate of dividends 0%; discount rate 0.15%. On June 26, 2015, the Company issued warrants to purchase 1,250,000 shares of common stock at an exercise price of $.08 with a term of five years pursuant to an agreement with a financial consultant.  The warrants were valued at $151,443 using the Black Scholes pricing model relying on the following assumptions: volatility 150.93%; annual rate of dividends 0%; discount rate 1.75%. On August 1, 2015, the Company issued 461,539 shares of common stock valued at $46,154, to an investor relations consulting firm. On September 10, 2015, the Company issued warrants to purchase 400,000 shares of common stock at an exercise price of $.10 with a term of five years to four of its consultants (100,000 warrants per consultant) working in research and development.  The warrants have a term of five years and are fully vested.  The warrants were valued at $36,540 using the Black Scholes pricing model relying on the following assumptions: volatility 152.53%; annual rate of dividends 0%; discount rate 0. 075%.

On May 19, 2016, the Company issued warrants to purchase 14,500,000 shares of common stock at an exercise price of $.08 with a term of 5 years pursuant to agreements with financial consultants.  The warrants were valued at $1,095,063 using the Black Scholes pricing model relying on the following assumptions: volatility 170.07%; annual rate of dividends 0%; discount rate 0.89%.  On September 19, 2016, the Company issued 3,500,000 shares of common stock, valued at $175,000, to an investor relations consulting firm.  On November 17, 2016, the Company issued warrants to purchase 400,000 shares of common stock at an exercise price of $.09 with a term of 5 years pursuant to agreements with financial consultants.  The warrants were valued at $21,381 using the Black Scholes pricing model relying on the following assumptions: volatility 173.41%; annual rate of dividends 0%; discount rate 1.04%.

Stock Issuances

On January 14, 2015, the Company received proceeds of $30,000 from the issuance of 600,000 shares of common stock.  

On January 23, 2015, the Company received proceeds of $13,500 from the issuance of 270,000 shares of common stock.  

On February 17, 2015, the Company received proceeds of $5,000 from the issuance of 100,000 shares of common stock.  

On February 27, 2015, in connection with the issuance of $227,500 in principal of an 11% Convertible Debenture, the Company issued 81,900 shares of common stock valued at $8,190 and a warrant to purchase 227,500 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $21,150 using the Black Scholes pricing model relying on the following assumptions: volatility 138.3%; annual rate of dividends 0%; discount rate 0.63%. See Note 7 - Convertible Debt.  

On March 27, 2015, in connection with the issuance of $135,000 in principal of an 11% Convertible Debenture, the Company issued 151,329 shares of common stock valued at $13,050 and a warrant to purchase 135,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $21,150 using the Black Scholes pricing model relying on the following assumptions: volatility 138.9%; annual rate of dividends 0%; discount rate 0.61%. See Note 7 - Convertible Debt.  

On April 17, 2015, in connection with the issuance of $217,800 in principal of an 11% Convertible Debenture, the Company issued 112,011 shares of common stock valued at $7,841 and a warrant to purchase 217,800 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $13,326 using the Black Scholes pricing model relying on the following assumptions: volatility 143.3%; annual rate of dividends 0%; discount rate 1.31%. See Note 7 - Convertible Debt.  

On May 1, 2015, in connection with the issuance of $237,200 in principal of an 11% Convertible Debenture, the Company issued 121,989 shares of common stock valued at $8,539 and a warrant to purchase 237,200 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $14,531 using the Black Scholes pricing model relying on the following assumptions: volatility 143.7%; annual rate of dividends 0%; discount rate 1.50%. See Note 7 - Convertible Debt.  

On June 26, 2015, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 69,231 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $30,012 using the Black Scholes pricing model relying on the following assumptions: volatility 150.9%; annual rate of dividends 0%; discount rate 1.75%. See Note 7 – Convertible Debt.  

On July 7, 2015, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 90,000 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $22,972 using the Black Scholes pricing model relying on the following assumptions: volatility 150.8%; annual rate of dividends 0%; discount rate 1.55%. See Note 7 - Convertible Debt.  

On September 2, 2015, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 81,818 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $25,221 using the Black Scholes pricing model relying on the following assumptions: volatility 152.3%; annual rate of dividends 0%; discount rate 0.72%. See Note 7 - Convertible Debt.  

On October 8, 2015, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 112,500 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $18,065 using the Black Scholes pricing model relying on the following assumptions: volatility 152.8%; annual rate of dividends 0%; discount rate 0.65%. See Note 7 - Convertible Debt.  

On October 29, 2015, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 112,500 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $18,065 using the Black Scholes pricing model relying on the following assumptions: volatility 152.3%; annual rate of dividends 0%; discount rate 0.75%. See Note 7 - Convertible Debt.

On January 27, 2016, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 180,000 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $8,018 using the Black Scholes pricing model relying on the following assumptions: volatility 158.1%; annual rate of dividends 0%; discount rate 0.84%. See Note 7 - Convertible Debt.  

On March 1, 2016, in connection with the issuance of $750,000 in principal of an 11% Convertible Debenture, the Company issued 337,500 shares of common stock valued at $27,000 and a warrant to purchase 750,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $44,371 using the Black Scholes pricing model relying on the following assumptions: volatility 167.7%; annual rate of dividends 0%; discount rate 0.85%. See Note 7 - Convertible Debt.  

On May 16, 2016, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 112,500 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $18,746 using the Black Scholes pricing model relying on the following assumptions: volatility 170.1%; annual rate of dividends 0%; discount rate 0.79%. See Note 7 - Convertible Debt.  

On July 26, 2016, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 180,000 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $11,523 using the Black Scholes pricing model relying on the following assumptions: volatility 170.3%; annual rate of dividends 0%; discount rate 0.75%. See Note 7 - Convertible Debt.  

On August 25, 2016, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 150,000 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $13,939 using the Black Scholes pricing model relying on the following assumptions: volatility 170.8%; annual rate of dividends 0%; discount rate 0.78%. See Note 7 - Convertible Debt.  

On October 20, 2016, in connection with the issuance of $250,000 in principal of an 11% Convertible Debenture, the Company issued 128,571 shares of common stock valued at $9,000 and a warrant to purchase 250,000 shares of common stock at an exercise price of $.10 per share.  The warrants were valued at $16,419 using the Black Scholes pricing model relying on the following assumptions: volatility 173.2%; annual rate of dividends 0%; discount rate 0.84%. See Note 7 - Convertible Debt.

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 April 6, 2015, the Company issued warrants to purchase 50,000 shares of common stock at $.085. The warrants were valued at $3,800 using the Black Scholes pricing model relying on the following assumptions: volatility 143.17%; annual rate of dividends 0%; discount rate 1.31%. On May 13, 2015, the Company issued warrants to purchase 50,000 shares of common stock at $.08. The warrants were valued at $3,582 using the Black Scholes pricing model relying on the following assumptions: volatility 143.464%; annual rate of dividends 0%; discount rate 1.57%.  On August 13, 2015, the Company issued warrants to purchase 50,000 shares of common stock at $.11. The warrants were valued at $5,019 using the Black Scholes pricing model relying on the following assumptions: volatility 152.05%; annual rate of dividends 0%; discount rate 0.72%.  On November 13, 2015, the Company issued warrants to purchase 50,000 shares of common stock at $.08.  The warrants were valued at $3,652 using the Black Scholes pricing model relying on the following assumptions: volatility 151.81%; annual rate of dividends 0%; discount rate 1.2%.

On March 29, 2016, the Company issued warrants to purchase 50,000 shares of common stock at $.08.  The warrants were valued at $3,771 using the Black Scholes pricing model relying on the following assumptions: volatility 169.28%; annual rate of dividends 0%; discount rate 0.78%.  On May 13, 2016, the Company issued warrants to purchase 50,000 shares of common stock at $.08.  The warrants were valued at $3,777 using the Black Scholes pricing model relying on the following assumptions: volatility 170.23%; annual rate of dividends 0%; discount rate 0.76%.  On August 12, 2016, the Company issued warrants to purchase 50,000 shares of common stock at $.07.  The warrants were valued at $3,307 using the Black Scholes pricing model relying on the following assumptions: volatility 170.83%; annual rate of dividends 0%; discount rate 0.71%.  On November 14, 2016, the Company issued warrants to purchase 50,000 shares of common stock at $.10.  The warrants were valued at $4,745 using the Black Scholes pricing model relying on the following assumptions: volatility 173.53%; annual rate of dividends 0%; discount rate 1.00%.  

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, 2016 were as follows: