PCSV PCS Edventures Com Inc (PK)

Notes to the Financial Statements

September 30, 2016

(Unaudited)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

PCS Edventures.com, Inc. (the Company) develops and markets STEAM (Science, Technology, Engineering, Arts, and Math) education products comprised of curriculum and materials. With its acquisition of Thrust-UAV in February, 2016, the Company is also in late-stage development of a first person view (FPV) racing drone, which it intends to assemble and market primarily through distributors. The Company has used this racing-drone technology to create an education drone (also FPV) for the classroom to be used as a platform to teach STEAM topics. This initiative is also in late stage development. The Company sells its education products into all 50 U.S. states as well as into international markets. Most of the Company’s domestic education business is conducted with schools and entities that cater to after-school programs for students. Most of the Company’s international business is conducted with governmental agencies in that local market. The Company anticipates revenue from its FPV racing drone to come from both domestic and international sources. The Company expects that the vast majority of its education drone sales will be domestic. The Company anticipates recognizing its first meaningful revenues from its FPV racing drone division during its third fiscal quarter of 2017.

The financial statements presented herein are those of the Company.

In October 1994, the Company exchanged common stock on a one-for-one basis for common stock of PCS Schools, Inc. As a result of this exchange, PCS Schools, Inc. became a wholly-owned subsidiary of the Company. In the late 1990s, the Company divested the stand-alone learning labs to focus on the creation of turn-key lab modules coupled with web-based technology for use in the classroom and afterschool programs.

On March 27, 2000, the Company changed its name from PCS Education Systems, Inc. to PCS Edventures!. com, Inc.

In August 2001, the Company successfully completed an SB-2 registration filing with the Securities and Exchange Commission (the “SEC”) and began trading publicly on the OTC Bulletin Board.

On November 30, 2005, the Company entered into an agreement with 511092 N.B. LTD., a Canadian corporation (LabMentors), to exchange the Company’s common stock for common stock of 511092 N.B. LTD., which exchange was completed in December, 2005, with LabMentors becoming a wholly-owned subsidiary. In December 2005, the name of this subsidiary was formally changed to PCS LabMentors, Ltd.. The Company divested LabMentors, the wholly-owned subsidiary, in August of 2013.

In January, 2012, the Company committed to a business plan enhancement, which included the opening, operating, and licensing of EdventuresLab private learning centers and launched a pilot program in the spring of 2012. An additional LeraningLab was opened in Eagle, Idaho in June of 2014.

On January 31, 2013, the Company formed a subsidiary called Premiere Science, Inc., incorporated and registered in the State of Idaho. The subsidiary is 100% wholly-owned by the Company and was formed to use as an additional sales and marketing tool to gain other business opportunities. There were no operations for the subsidiary during the quarter ended September 30, 2016.

On September 26, 2014, the shareholders voted for the proposal to grant the Board of Directors the authority to change the name of the Company in a fashion that will remove the “.com” from its name, but retain the current brand.

On July 23, 2015, the Board of Directors resolved that the name of the Company be changed to PCS Edventures!, Inc. No amendment to the Company’s Articles of Incorporation regarding this name change has been filed, although the Company anticipates that, following the assignment of a new Cusip Number and the required filing with the Financial Industry Regulatory Authority (“FINRA”), this name change will become effective.

On February 15, 2016, the Company acquired Thrust-UAV, a private company engaged in the development and assembly of FPV racing drones, for $109,000.

NOTE 2 - UNAUDITED FINANCIAL STATEMENTS

The September 30, 2016, financial statements presented herein are unaudited, and in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows. Such financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016.

The operating results for the six-month period ended September 30, 2016, are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2017.

NOTE 3 - GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The established sources of revenues are not presently sufficient to cover the Company’s operating costs. The Company has accumulated significant losses, accounts payable and generated negative cash flows. The combination of these items raises substantial doubt about its ability to continue as a going concern. Management’s plans to alleviate this adverse position are as follows:

The Company’s strategy to remove the going concern doubt is to focus attention on increasing STEAM education sales through both channel partners and its direct sales force, and to bring to market its FPV racing drone and STEAM education drone product lines from Thrust-UAV. The Company expects its first revenues from its FPV racing drone and STEAM education drone during Q3FY2017.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Concentration of Credit Risk

The Company extends credit to customers and is therefore subject to credit risk. The Company performs initial and ongoing credit evaluations of its customers’ financial condition and does not require collateral. An allowance for doubtful accounts is recorded to account for potential bad debts. Estimates are used in determining the allowance for doubtful accounts and are based upon an assessment of selected accounts and as a percentage of remaining accounts receivable by aging category. In determining these percentages, the Company evaluates historical write-offs, and current trends in customer credit quality, as well as changes in credit policies. At September 30, 2016, and 2015, Stemfinity, one of the Company’s major customers, accounted for 23.9% and 52.5% of the Company’s accounts receivable, respectively.

Intangible asset amortization expense for the six months ended September 30, 2016, and 2015 was $50,896 and $0, respectively.

Fixed asset depreciation expense for the six months ended September 30, 2016, and 2015, was $5,535 and $14,316, respectively.

Note Payable

On February 12, 2016, the Company entered into a note payable of $84,000. The note does not bear a stated interest rate, as it has a set nine payment arrangement of $9,333 per month for nine months starting on April 1, 2016, with the final payment due on December 1, 2016. There was no accrued interest and the principal balance was $18,666 as of September 30, 2016.

On February 12, 2016, the Company entered into a note payable of $24,547. The note does not bear a stated interest rate, as it has a set nine payment arrangement of $2,727 per month for nine months starting on April 1, 2016, with the final payment due on December 1, 2016. There was no accrued interest and the principal balance was $5,455 as of September 30, 2016.

On May 1, 2014, the Company entered into a 36 month note payable of $20,000. The note bears interest at twelve percent (12%) per annum. The Company had paid $14,465 in principal, leaving a balance of $5,535 at September 30, 2016. Total interest accrued as of September 30, 2016, was $3,002.

On April 11, 2014, the Company entered into a 36 month note payable of $60,000. The note bears interest at twelve percent (12%) per annum. The Company has paid $43,858 in principal, leaving a balance of $16,142 at September 30, 2016. Total interest accrued as of September 30, 2016, was $1,524.

Convertible Note Payable – Related Party

On October 21, 2014, the Company entered into at 10% Convertible Promissory Note with a current board member and shareholder, in the amount of $200,000, convertible into shares of common stock of the Company at the market price of $0.04 per share. The original note due date of October 22, 2015, was extended until April 30, 2016. The debt discount was calculated as $50,000. O n April 29, 2016, the note was converted, along with $30,521 in accrued interest, into 5,763,014 shares of common stock. Due to conversion within the terms of the note, no gain or loss was recognized.

Note Payable – Related Party

On June 8, 2016, the Company executed a promissory note with one of its shareholders and board members, for $340,000 at 10% interest per annum that consolidated the following notes: February 6, 2016, for $100,000; March 16, 2016, for $100,000; April 1, 2016, for $100,000; and April 19, 2016 for $40,000. This promissory note is secured with the Company’s inventory, fixed and liquid assets, property, equipment, intangible assets and intellectual property, and the Company’s net loss carry forward. The promissory note is due December 31, 2016. Total interest accrued as of September 30, 2016, for all four promissory notes discussed above totaling $340,000 and combined on June 8, 2016 was $18,882.

On April 18, 2012, the Company entered into a long-term promissory note with one of its employees and board members for $25,000 with an interest rate of seven and one-half percent (7.5%) per annum. The balance is due in full on or before April 18, 2017. Monthly payments are required for interest only to the Lender’s financial intuition. On September 30, 2016, $6,034 over the interest only payment had been paid resulting in an ending principal amount of $18,966. No interest is accrued for this note payable. Total interest paid during the quarter ending September 30, 2016, was $307.

Line of Credit

On September 13, 2011, the Company drew down a line of credit at a financial institution in the amount of $39,050. The line of credit bears interest at 17.5% per annum. The Company makes variable monthly payments. For the period ending September 30, 2016, the Company paid $1,224 in principal. Since inception, the Company has paid $23,662 in principal, leaving a balance of $15,389 payable. Total interest paid during the period ending September 30, 2016, was $499.

Note Payable, Related Party, Long Term

On January 13, 2012, the Company entered into two separate promissory notes in the amount of $35,000 each for an aggregate amount of $70,000. The notes bear interest at nine percent (9%) per annum and were previously due and payable on or before January 10, 2013. Minimum monthly payments of 1.5% of the loan balances are required and are submitted to the Lenders’ financial institution. The notes were amended April 1, 2013, and re-written with a new principal amount of $32,100 each for an aggregate amount of $64,200. The notes bear interest at nine percent (9%) per annum and are due and payable on or before April 1, 2020. The underlying loan requires that the Company pay to the Lenders’ financial institution monthly payments of $1,033 on or before the 1st day of each month, beginning May 1, 2013, and continuing each month in like amounts until the final payment due on April 1, 2020. The Company had paid $32,289 in principal, leaving a balance of $37,711 at September 30, 2016, on these notes. No interest is accrued for these notes payable. Total Interest paid during the quarter ending September 30, 2016, was $762.

On October 21, 2014, the Company executed a promissory note with one of its shareholders and board members in the amount of $870,457. The note, originally due May 31, 2015, was non-convertible, had an interest rate of ten percent (10%) per annum, was secured by accounts receivable, fixed assets, intellectual property, and the Company’s net loss carry forward, and was used to finance operations and purchase inventory. This note’s due date was extended to September 30, 2015, and included new cash loaned to the Company of $175,000. This note includes $7,957 of accrued interest on the paid off notes listed below: $50,000 of the February 11, 2014 note; $250,000 of the Convertible long term related party note; $145,000 of the note dated May 7, 2014; $29,500 of the June 27, 2014 note; $105,000 of the note dated July 21, 2014; $210,000 of the note dated July 28, 2014; $25,000 of the note dated August 8, 2014; and $123,000 of the note dated August 20, 2014. $22,222 of interest was rolled into principal on January 1, 2015 resulting in a principal balance of $892,679. On June 8, 2016, this note was combined with the January 22, 2015, promissory note, at ten percent (10%) per annum, with the principal balance of $400,000, resulting in a new note with a balance due of $1,292,679, due July 1, 2018. This promissory note is secured with the Company’s inventory, fixed and liquid assets, property, equipment, intangible assets and intellectual property, and the Company’s net loss carry forward. The accrued interest for the $1,292,679 consolidated note was $206,826 as of September 30, 2016.

On January 22, 2015, the Company issued 2,000,000 warrants to a shareholder and board member with a 36 month term to purchase “restricted” Rule 144 common stock, no par value (the “Shares”), at a purchase price of $0.04 per share of common stock (the “Exercise Price”) as consideration for the issuance of a promissory note in the amount of $400,000 from the Company. These warrants are fully vested and exercisable. The warrants were evaluated for embedded derivatives in accordance with ASC 815 and were found to not include any embedded derivatives. The warrants attached to the note were valued using the Black Scholes Valuation Model. The assumptions used in the model included the historical volatility of the Company’s stock of 180%, and the risk-free rate for the periods within the expected life of the warrant based on the U.S. Treasury yield curve in effect of 0.35%. The resulting fair value was $66,717. This value was recorded as a debt discount and fully amortized as of March 31, 2016. On June 8, 2016, this note was combined with the January 22, 2015, promissory note, at 10% per annum, with the principal balance of $400,000, resulting in a new note with a balance of $1,292,679, due July 1, 2018. The accrued interest for the $1,292,679 was $206,826 as of September 30, 2016.

On February 17, 2015, and April 20, 2015, the Company executed promissory notes with one of its shareholders and board members for $135,000 each at ten percent (10%) interest per annum, due June 30, 2015, secured by accounts receivable on completed contracts to finance operations and purchase inventory. The principal on the April 20, 2015, note was paid down to $40,000. The Lender had provided the Company with extensions of due dates for both notes through June 30, 2016. The principal on the February 17, 2015, note of $135,000 was combined with the $40,000 remaining principal on the April 20, 2015, note into a $175,000 note due January 15, 2019. The accrued interest on the $175,000 note, on September 30, 2016, was $31,766.

On June 8, 2016, the Company executed a promissory note with one of its shareholders and board members for $1,292,679. The note is due July 1, 2018, has an interest rate of ten percent (10%) per annum, and is secured by inventory, fixed assets, intellectual property, and the Company’s net loss carry forward. This promissory note for $1,292,679, combined and replaced the October 21, 2014, promissory note for $892,679 and the January 16, 2015, promissory note for $400,000 as detailed in the table below.

On June 8, 2016, the Company executed promissory notes with one of its shareholders and board members for $175,000. The note is due January 15, 2019, has an interest rate of ten percent (10%) per annum, and is secured by inventory, fixed assets, intellectual property, and the Company’s net loss carry forward. This promissory note for $175,000 combined and replaced the promissory note dated February 17, 2015 and March 5, 2015, for $135,000 and the unpaid principal balance of $40,000 remaining on the promissory note dated April 20, 2015, per the table below. The accrued interest on the $175,000 note, on September 30, 2016, was $31,766.

Convertible Note Payable – Non-related party

On August 1, 2012, the Company issued amendments to the convertible note agreements (convertible into common stock at a rate of $0.15 per share) in the aggregate amount of $215,000 and extended the due date with repayment in the amount of $40,000 per quarter to begin April, 2013, with the final payment due in August, 2014, to include any remaining balance due at that time. In consideration for extending the due date of the promissory notes, the expiration dates on the warrants issued (fully expensed in the prior period) on March 31, 2011, which were subsequently extended to June 27, 2014, were amended and extended again an additional three years, making the new expiration dates August 1, 2017. At the Lenders’ sole option, Lenders may elect to receive payment of their respective notes and all accrued interest in “restricted” common stock of the Company at the price per share of said common stock at the same rate as the warrants. On June 7, 2013, the Company executed an amendment to the loan transaction. The amended transaction involved the extension of the promissory notes from April 30, 2013 to April 30, 2016, with the Lenders waiving any default under the previous note. The Company made interest payments to each of the eight note holders for all accrued interest from August 1, 2012 to April 30, 2013 for consideration of the extension. On the fourth extension, all accrued interest was combined with the original principal amount as of July 31, 2012. On July 13, 2015, three non-related party conversions with a principal balance of $102,033, combined with the accrued interest to date of $17,894, were converted to 799,514 shares of common stock. As of September 30, 2016, the ending principal balance was $90,696. Interest accrued as of September 30, 2016 was $27,258.

NOTE 10 – NOTE RECEIVABLE

On July 31, 2013, the Company signed a Memorandum of Understanding with a Canadian company owned by Joseph Khoury (“JAK”) proposing a purchase agreement in which JAK shall purchase LabMentors from PCS for USD $150,000. JAK has agreed to assume 100% of LabMentors outstanding liabilities and to pay the remainder of the USD $150,000 through a note payable. The Company note receivable in the amount of $50,740, carries an annual interest rate of 3% compounded annually and is to be paid over a period of 60 months in equal monthly payments beginning in month 13 of the 60 month period. This sale was finalized during the period ending September 30, 2013. On April 14, 2015, JAK informed PCS of the potential closure of LabMentors and an inability to meet its note obligations. LabMentors had made three note payments as of the date of the notification totaling $3,399. In evaluation of the notes potential for collectability, a note allowance was accrued to the full amount of the note receivable balance. The note receivable principal balance at June 30, 2015, was $49,513. The note receivable principal balance at September 30, 2016, was $49,513. The note receivable allowance balance at September 30, 2016 is $49,513, resulting in a net $0 balance for this note receivable.

On August 10, 2016, the Company entered into a note receivable with one of its consultants for the amount of $21,198, with an interest rate of eighteen percent (18%) per annum, and secured by future payables owed to the consultant by the Company for services rendered. Interest and principal are due by January 31, 2017.

NOTE 11 – ACCOUNTS RECEIVABLE

The Company had accounts receivable of $752,922 net of an allowance for $2,096 for the fiscal year ended March 31, 2016. This accounts receivable balance included a major international customer’s final work orders; a major domestic customer’s annual sales order; and an international customer’s lab royalty fees. All international outstanding accounts receivable balances were paid within terms. The Company had an accounts receivable balance of $192,643, net of allowance of $2,096 as of September 30, 2016.

NOTE 12 – INVENTORY

The Company had inventory of $192,527 net of an inventory reserve of $3,391 for the fiscal year ended March 31, 2016. The inventory reserve is consideration for obsolete and slow moving inventories. The March 31, 2016, inventory balance reflected the shipment of the two major customer orders mentioned in Note 11. The majority of summer camp sales span February through June, 2016. Summer camp components are generally purchased within the week ordered to keep inventories lean. The Company had an inventory balance of $342,686 net of an inventory reserve of $3,391 as of September 30, 2016. The growth in inventory on-hand is due to receipt of an ocean container of our proprietary BrickLab product.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

a. Operating Lease Obligation

The Company leases its main office under a non-cancelable lease agreement accounted for as an operating lease. On December 31, 2013, the Company signed an amendment to the existing lease to reduce the leased square feet to 5,412 for $6,765 per month for the 12 months ending December 31, 2014.  On February 1, 2015, the Company signed a new lease to reduce the square feet to 3,609 for $4,511 per month for the 12 months ending January 31, 2016. The Company signed a lease amendment for the main office space on May 11, 2016, for $15.48 per square feet or $4,647 per month for the 12 months expiring May 31, 2017. Rent expense for the corporate offices was $32,676 and $29,397 for the six months ended September 30, 2016, and 2015, respectively, and $54,135 and $77,869 for the 12 months ended March 31, 2016, and 2015, respectively, under this lease arrangement.

The Company leases additional warehouse space in Boise, Idaho. Originally, this warehouse space consisted of approximately 2,880 square feet. The lease expired in June 2012. This lease was extended for 24 months, beginning July 1, 2012. The lease was extended to a new term ending October 31, 2015. The Company signed a sixth amendment on April 15, 2015, to lease additional warehouse space of approximately 1,400 square feet adjacent to the existing leased space to April 30, 2016. The Company moved all warehousing to the new facility, vacating and completing the lease agreement ending April 30, 2016.

On March 15, 2016, the Company leased a warehouse, office space, and manufacturing facility of approximately 10,000 square feet for $6,300 per month for 12 months. On April 28, 2016, the Company moved all inventories, property, plant, and equipment to this new warehouse facility. Rent expense for the new warehouse location was $37,800 and $0 for the six months ended September 30, 2016, and 2015, respectively, and $3,150 and $0 for the 12 months ended March 31, 2016, and 2015, respectively.

The Company leased an additional learning lab site in Eagle, Idaho, in the first quarter of FY2015. The lease has a three-year term for 1,050 square feet, for an annual base rent of $16,640 or $1,387 per month, with three percent (3%) growth per year.

b. Litigation

On or about May 18, 2015, the Company was named as a co-defendant in a legal action related to one of its employees, alleged to have been driving an automobile negligently while on work related services for the Company, and causing damages to the plaintiffs in the action. The action was brought in the District Court of the Fourth Judicial District of the State of Idaho, in and for the County of Ada, Civil Action number CV PI 1507419. The insurance carrier indicated the claim would not be supported if the employee was not on company business, which the Company asserted was the case. The Company engaged legal counsel to represent it in this matter. On October 25, 2016, the case was dismissed with prejudice.

On October 13, 2015, the Company filed a Summons and Complaint against a person the Company contracted to promote the Company. The complaint primarily involved defamation and breach of contract. The Complaint was unresolved at quarter end as the Company was in negotiations with the person to settle this dispute. In early October, an agreement was reached and both parties signed a confidential agreement. The matter was settled amicably.

c. Contingencies

None.

NOTE 14 - STOCKHOLDERS’ EQUITY

a. Common Stock

During the six months ended September 30, 2016, the Company expensed amounts related to stock options and warrants granted in the current period as well as prior periods valued at $15,149.

During the six months ended September 30, 2016, an employee exercised 70,000 options earned from an Incentive Stock Option (ISO) Agreement dated January 14, 2014. The ISO Agreement option price was $0.0362 per exercised share of “restricted” common stock, totaling $2,534.

During the six months ended September 30, 2016, the Company issued 200,000 shares of Rule 144 “restricted” common stock shares to an employee. The shares were valued based on the fair market price of $0.08, the closing price of the Company’s common stock at the date of grant, for a total of $16,000.

During the six months ended September 30, 2016, the Company issued a total of 75,000 Rule 144 “restricted” common stock shares in two transactions to a contractor for services. On April 26, 2016, the Company issued 50,000 shares valued at $0.08, based on the common stock closing price of the Company on the date of grant. On May 10, 2016, the Company issued 25,000 Rule 144 “restricted” common stock shares valued at $0.09, based on the common stock closing price of the Company on the date of grant. The cumulative stock compensation for services totaled $6,250.

During the six months ended September 30, 2016, the Company issued a total of 5,763,014 Rule 144 “restricted” common stock shares . On October 21, 2014, the Company entered into a ten percent (10%) convertible promissory note with a current board member and shareholder in the amount of $200,000 convertible into shares of common stock of the Company at the closing market price of $0.04 on such date. O n April 29, 2016, the note was converted, along with $30,521 in accrued interest, into 5,763,014 shares of common stock. Due to conversion within the terms of the note, no gain or loss was recognized.

During the six months ended September 30, 2016, the Company issued a total of 6,250,000 Rule 144 “restricted” common stock shares from a private equity sale offering on July 18, 2016, at a price of $0.08 totaling $500,000.

During the six months ended September 30, 2016, the Company accrued $265,000 in stock payable due to the September 28, 2016, offer of 5,076,922 shares of its common stock for $330,000 comprised of “restricted securities” as defined under Rule 144 of the SEC, solely to “accredited investors.” The purchase price was $0.065 per share. The $65,000 variance between the sale proceeds of $265,000 and $330,000 was due to the sale of 1,000,000 shares at $0.065 finalized on October 1, 2016.

During the six months ending September 30, 2016, $6,480 in accrued Restricted Stock Units payable was reversed. Stock compensation in the form of Restricted Stock Units is only authorized for independent directors. The current Board of Directors does not have a qualifying independent member.

b. Preferred Stock

The Company has 20,000,000 authorized shares of preferred stock. As of September 30, 2016, there were no preferred shares issued or outstanding.

NOTE 15 - BASIC AND DILUTED NET LOSS PER COMMON SHARE

Basic net losses per common share for the three month periods ended September 30, 2016, and 2015, are based on 87,507,204 and 74,917,541, respectively, of weighted average common shares outstanding. Dilutive net loss per common share for the six month periods ended September 30, 2016, and 2015, are based on 83,982,390 and 74,356,534 respectively, of weighted average common shares outstanding.

NOTE 16 - DILUTIVE INSTRUMENTS

Stock Options and Warrants

The Company is required to recognize expense of options or similar equity instruments issued to employees using the fair-value-based method of accounting for stock-based payments in compliance with the financial accounting standard pertaining to share-based payments. This standard covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Application of this standard requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior. Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking over the expected term of the award.

On August 31, 2016, an employee of the Company exercised 70,000 options for “restricted” common stock issued during the period ended September 30, 2016. The options vest over a three-year period, are exercisable at $0.0362 per share, and are valued at $2,534 which represented the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.

The Board of Directors resolved on July 14, 2016, to increase the Company authorized common stock from 100,000,000 shares with no par value to 150,000,000 shares of common stock with no par value. The resolution was ratified on September 23, 2016, by the shareholders at the Annual Meeting. The Articles Of Amendment were filed with the Idaho Secretary of State on September 23, 2016 (Exhibit 33.1).

January 1, 2014, the Company granted 40,000 incentive options each to three employees per year for three years. These options were issued as incentive compensation to the employees. The options were valued using the Black-Scholes valuation model. The options have an expected volatility rate of 259.07% calculated using the Company stock price for a three-year period. A risk-free interest rate of 0.26% - 0.76% was used to value the options. The total value of these options was $17,726. The options vest over a three-year period and are exercisable at a range of $.05 to $0.6 per share, which represented the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan. As of September 30, 2016, $12,801 of the total value was expensed. $1,509 was expensed in the six months ending September 30, 2016.

February 1, 2014, the Company granted 40,000 incentive options to one employee per year for three years. These options were issued as incentive compensation to the employee. The options were valued using the Black-Scholes valuation model. The options have an expected volatility rate of 258.20% calculated using the Company stock price for a three-year period. A risk-free interest rate of 0.41% - 0.64% was used to value the options. The total value of these options was $4,107. The options vest over a three-year period and are exercisable at a range of $.03 to $0.6 per share, which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan. As of September 30, 2016, $3,762 of the total value was expensed. $900 was expensed in the six months ending September 30, 2016.

On November 18, 2015, the Company granted 200,000 stock options to an officer, Robert O. Grover. The expected volatility rate of 186.52% calculated using the Company stock price over the two-year period ending November 17, 2015. A risk-free interest rate of 0.80 % was used to value the options. The options were valued using the Black-Scholes valuation model. The total value of the options was $14,659. The options vest over a three year period and are exercisable at $0.09 per share, which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan. As of September 30, 2016, $12,702 of the total value of the options had been expensed. $7310 was expensed in the six months ending September 30, 2016.

On May 15, 2012, the Company granted 850,000 incentive stock options to an officer, Robert O. Grover. The expected volatility rate of 223.62% calculated using the Company stock price over the period beginning June 1, 2009 through date of issue. A risk-free interest rate of 0.38 % was used to value the options. The options were valued using the Black-Scholes valuation model. The total value of this option was $44,495. The options vest over a three year period and are exercisable at $0.06 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan. As of June 30, 2015, the entire value of the options was expensed.

Warrants

On July 30, 2015, 120,000 common stock warrants were exercised at a price of $.07 per share for a total of $8,400, resulting in the issuance of 120,000 shares of “restricted” common stock.