The Company’s common stock activity for the three months ended March 31, 2018 is as follows:

Common Stock

Shares Issued for Services – During the period ended March 31, 2018, the Company issued 4,748,514 common shares to employees and vendors for services rendered with a fair value of $3,269,747 and are expensed based on fair market value of the stock price at the date of grant. Included in these issuances were 4,500,000 shares of common stock with a fair value of $1,539,000 granted to officers and a director of the Company for services rendered.

Shares Issued from Stock Subscription. For the period ended March 31, 2018, the Company issued 16,409,067 common shares to investors for net cash proceeds of $2,278,500.

Shares Issued from Conversion of Note Payable - During the period ended March 31, 2018, the Company issued 7,383,006 shares of common stock upon conversion of notes payable and accrued interest of $1,187,243 (see Note 4 and 6).

Shares Issued Upon Exercise of Put Option - In January and February 2018, the Company issued Put Notices to Kodiak and issued 3,048,105 shares of common stock in exchange for cash of $1,000,000. In addition, the Company also issued Kodiak the prorated warrants to purchase 2,000,000 shares of common stock at $0.25 per share.

Shares Issued for Accrued Salary - On March 28, 2018 the Company converted the CEO’s accrued salary of $582,333 into 407,226 shares of common stock with a fair value of $582,333 at the date of conversion.

Shares Issued from Exercise of Warrants - During the period months ended March 31, 2018, a total of 1,281,000 warrants were exercised in a cash and cashless exercised in exchange for 1,011,856 common shares. The Company received cash of $22,000 upon exercise of the warrants.

Stock Options

Effective October 16, 2014, the Company adopted the 2014 Stock Option Plan (the “Plan”) under the administration of the board of directors to retain the services of valued key employees and consultants of the Company.

At its discretion, the Company grants share option awards to certain employees and non-employees, as defined by ASC 718, Compensation—Stock Compensation, under the 204 Stock Option Plan (the “Plan”) and accounts for its share-based compensation in accordance with ASC 718.

A summary of option activity for the three months ended March 31, 2018 is presented below.

During the three months ended March 31, 2018, the Company granted stock options to employees and consultants to purchase a total 906,272 shares of common stock for services rendered. The options have an average exercise price of $0.26 per share, expire in five years and vest on grant date or over a period of three years from grant date. Total fair value of these options at grant date was $164,165 using the Black-Scholes Option Pricing model with the following average assumptions: life of 5 years; risk free interest rate of 2.56%; volatility of 184% and dividend yield of 0%.

The total stock compensation expense recognized relating to vesting of these stock options for the three months ended March 31, 2018 amounted to $1,341,207. As of March 31, 2018, total unrecognized stock-based compensation expense was $3,549,739 which is expected to be recognized as an operating expense through February 2021.

The fair value of share option award is estimated using the Black-Scholes method based on the following weighted-average assumptions:

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based upon the Company’s current dividend rate and future expectations.

Warrants

The Company has the following warrants outstanding as of March 31, 2018 all of which are exercisable:

For the three months ended March 31, 2018, the Company issued warrants to note holders to purchase a total of 1,000,000 shares of common stock. The warrants are exercisable at an average price of $0.14 per share and will expire in January 2023. A total of 500,00 warrants issued were accounted as derivative liability (see Note 6).

On February 21, 2018, the Company issued 2,000,000 warrants as part of the exercise of our put option with Kodiak. The exercise price of the 2,000,000 warrants is $0.25 per share and expire on February 20, 2023.

During the three months ended March 31, 2018, a total of 1,281,000 warrants were exercised and converted into 1,011,856 common shares at a weighted average exercise price of $0.17. The Company received $22,000 upon exercise of the warrants.