UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2016March 31, 2017

For the transition period from _________ to ________

Commission file numbers 000-32141

NUTRA PHARMA CORP.

(Name of registrant as specified in its charter)

(954) 509-0911

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yesþ No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yesþ No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Noþ

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of November 21, 2016,May 15, 2017, there was 255,391,579382,370,157 shares of common stock.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NUTRA PHARMA CORP.

Nutra Pharma Corp. is referred to hereinafter as “we”, “us” or “our”

Forward Looking Statements

This Quarterly Report on Form 10-Q for the period ending September 30, 2016,March 31, 2017, contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The words or phrases “would be,” “will allow, “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify “forward-looking statements.” We are subject to risks detailed in Item 1(a). All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including: (a) any projections of revenue, gross margin, expenses, earnings or losses from operations, synergies or other financial items; and (b) any statements of the plans, strategies and objectives of management for future operations; and (c) any statement concerning developments, plans, or performance. Unless otherwise required by applicable law, we do not undertake and we specifically disclaim any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

NUTRA PHARMA CORP.

Condensed Consolidated Balance Sheets

See the accompanying notes to the unaudited condensed consolidated unaudited financial statements.

NUTRA PHARMA CORP.

Condensed Consolidated Statements of Operations  

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated unaudited financial statements.

NUTRA PHARMA CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated unaudited financial statements.

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NUTRA PHARMA CORP.

Notes to Unaudited Condensed Consolidated Unaudited Financial Statements

September 30, 2016March 31, 2017

1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Nutra Pharma Corp. (“Nutra Pharma”), is a holding company that owns intellectual property and operates in the biotechnology industry. Nutra Pharma incorporated under the laws of the state of California on February 1, 2000, under the original name of Exotic-Bird.com.Exotic–Bird.com.

Through its wholly-ownedwholly–owned subsidiary, ReceptoPharm, Inc. (“ReceptoPharm”), Nutra Pharma conducts drug discovery research and development activities. In October 2009, Nutra Pharma launched its first consumer product called Cobroxin^®, an over-the-counterover–the–counter pain reliever designed to treat moderate to severe chronic pain. In May 2010, Nutra Pharma launched its second consumer product called Nyloxin^®, an over-the-counterover–the–counter pain reliever that is a stronger version of Cobroxin^® and is designed to treat severe chronic pain. In December 2014, we launched Pet Pain-Away,Pain–Away, an over-the-counterover–the–counter pain reliever designed to treat pain in cats and dogs.

Basis of Presentation and Consolidation

The Condensed Consolidated Unaudited Financial statements and notes are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not contain certain information included in the Company’s Annual Report on Form 10-K10–K for the year ended December 31, 2015.2016. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Interim results are not necessarily indicative of results for a full year. Therefore, the interim Condensed Consolidated Unaudited Financial statements should be read in conjunction with the consolidated financial statementsCondensed Consolidated Unaudited Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K.

The accompanying Unaudited Condensed Consolidated Unaudited Financial Statements include the results of Nutra Pharma and its wholly-ownedwholly–owned subsidiaries Designer Diagnostics Inc. and ReceptoPharm (collectively “the Company”, “us”, “we” or “our”). We operate as one reportable segment. All intercompany transactions and balances have been eliminated in consolidation.

Liquidity and Going Concern

Our Condensed Consolidated Unaudited Financial Statements are presented on a going concern basis, which contemplate the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced recurring, significant losses from operations, and have an accumulated deficit of $52,284,555$54,299,536 at September 30, 2016.March 31, 2017. In addition, we had respectivehave a working capital deficit of of $5,056,090 and a stockholders’ deficitsdeficit of $5,041,224 at September 30, 2016 of $3,966,190 and $52,284,555, respectively.March 31, 2017.  

There is substantial doubt regarding our ability to continue as a going concern which is contingent upon our ability to secure additional financing, increase ownership equity and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.

As of September 30, 2016,At March 31, 2017, we do not have sufficient cash to sustain our operations for the next year and will require additional financing in order to execute our operating plan and continue as a going concern. Since our sales are not currently adequate to fund our operations, we continue to rely principally on debt and equity funding; however proceeds from such funding have not been sufficient to execute our business plan. Our plan is to attempt to secure adequate funding until sales of our pain products are adequate to fund our operations. We cannot predict whether additional financing will be available, and/or whether any such funding will be in the form of equity, debt, or another form. In the event that these financing sources do not materialize, or if we are unsuccessful in increasing our revenues and profits, we will be unable to implement our current plans for expansion, repay our obligations as they become due and continue as a going concern.

The accompanying Unaudited Condensed Consolidated Unaudited Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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Use of Estimates

The accompanying Unaudited Condensed Consolidated Unaudited Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

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financial statements and the reported amounts of revenue and expense. Significant estimates include our ability to continue as going concern, the recoverability of inventories and long-livedlong–lived assets, and the valuation of stock-basedstock–based compensation and certain debt and warrant liabilities. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which would be recorded in the period in which they become known.

Revenue Recognition

In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Provision for sales returns is estimated based on our historical return experience. Revenue is presented net of returns and allowances for returns.

The Company collectsWe collect 100% of the cash proceeds from the sale of its product by its distributor, remits a portion of the cash proceeds received back to the distributor and records the sale on a net basis. In the nine three–months ended September 30, 2016, the CompanyMarch 31, 2017, we collected $178,357$56,382 in gross receipts and recorded $138,556$16,979 as net sales.

Accounting for Shipping and Handling Costs

The Company recordsWe record shipping and handling costs incurred in cost of sales.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three three–months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

The Company grantsWe grant credit without collateral to itsour customers based on the Company’sour evaluation of a particular customer’s credit worthiness. In addition, allowances for doubtful accounts are maintained for potential credit losses based on the age of the accounts receivable and the results of the Company’s periodic credit evaluations of itsour customers’ financial condition. Accounts receivable are written off after collection efforts have been deemed to be unsuccessful. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts, while subsequent recoveries are netted against the provision for doubtful accounts expense. The CompanyWe generally doesdo not charge interest on accounts receivable.

Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts.

Inventories

Inventories, which are stated at the lower of average cost or market, and consist of packaging materials, finished products, and raw venom that is utilized to make the API (active pharmaceutical ingredient). The raw unprocessed venom has an indefinite life for use. The Company regularly reviews inventory quantities on hand.  If necessary it records a provision for excess and obsolete inventory based primarily on its estimates of component obsolescence, product demand and production requirements. Write-downsWrite–downs are charged to cost of goods sold. We performed evaluationsOur inventory is carried net of our inventory during the nine months ended September 30, 2016a valuation allowance of $30,805 at March 31, 2017 and determined no allowances need to be recorded.December 31, 2016.

Financial Instruments and Concentration of Credit Risk

Our financial instruments include cash, accounts receivable, accounts payable, accrued expenses, loans payable, due to officers and derivative financial instruments. Other than certain warrant and convertible instruments (derivative financial instruments) and liabilities to related parties (for which it was impracticable to estimate fair value due to uncertainty as to when they will be satisfied and a lack of similar type transactions in the marketplace), we believe the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable on demand. Our derivative financial instruments are carried at a measured fair value.

Balances in various cash accounts may at times exceed federally insured limits. We have not experienced any losses in such accounts. We do not hold or issue financial instruments for trading purposes. In addition, for the nine three–months ended September 30, 2016,March 31, 2017, there were two customerswas one customer that accounted for 23.5% and 11.1%40.4% of the total revenues, respectively.revenues.

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Derivative Financial Instruments

The Company doesWe do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded

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derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valuedre–valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-basedoption–based simple derivative financial instruments, the Company uses the Black-Scholes option-pricingBlack–Scholes option–pricing model to value the derivative instruments at inception and subsequent valuation dates. For embedded derivatives, the Company uses a Dilution-Adjusted Black-ScholesDilution–Adjusted Black–Scholes method to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessedre–assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-currentnon–current based on whether or not net-cashnet–cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Convertible Debt

The Company bifurcatesWe bifurcate the embedded derivative element in convertible debt which contain conversion features which are not considered to be conventional convertible debt.  The convertible debt is recorded at the bifurcated amount after reducing the proceeds for the liability related to the embedded call provision which is accounted for separately in the accompanying balance sheets.  After recording the initial amount of the debt, the discount related to the bifurcated embedded derivative is amortized as additional interest expense over the term of the debt with the resulting debt discount being accreted over the term of the note.  

Property and Equipment and Long-LivedLong–Lived Assets

Property and equipment is recorded at cost. Expenditures for major improvements and additions are added to property and equipment, while replacements, maintenance and repairs which do not extend the useful lives are expensed. Depreciation is computed using the straight-linestraight–line method over the estimated useful lives of the assets of 3 –  7 years.

Property and equipment consists of the following at September 30, 2016March 31, 2017 and December 31, 2015:2016:

We review our long-livedlong–lived assets for recoverability if events or changes in circumstances indicate the assets may be impaired. At September 30, 2016,March 31, 2017, we believe the carrying values of our long-livedlong–lived assets are recoverable. Depreciation expense for the nine three–months ended September 30,March 31, 2017 and 2016 was $1,874 and 2015 was $6,421 and $9,091,$2,132, respectively.

Advertising

All advertising costs are expensed as incurred.  Advertising costs were approximately $2,834$1,100 and $2,216$500 for the nine three–months ended September 30,March 31, 2017 and 2016, and 2015, respectively.

Income Taxes

We compute income taxes in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 740,Income Taxes(“ASC Topic 740”). Under ASC Topic 740, deferred taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Also, the effect on deferred taxes of a change in tax rates is recognized in income in the period that included the enactment date. Temporary differences between financial and tax reporting arise primarily from the use of different methods to record bad debts and /or sales returns, and inventory reserves.

On an annual basis, we evaluate tax positions that have been taken or are expected to be taken in our tax returns to determine if they are more than likely to be sustained if the taxing authority examines the respective position.  As of September 30, 2016,At March 31, 2017, we do not believe we have a need to record any liabilities for uncertain tax positions or provisions for interest or penalties related to such positions.

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Since inception, we have been subject to tax by both federal and state taxing authorities. Until the respective statutes of limitations expire (which may be as much as 20 years while we have unused net operation losses), we are subject to income tax audits in the jurisdictions in which we operate. The Company’s 20122013 to 20152016 tax returns are subject to examination by Internal Revenue Services and State Taxing Agency’s.

On July 18, 2015, the Company received a notice of penalty charge of $35,296 from IRS for failure to file Forms W-2 for tax period ended at December 31, 2011. During February 2016, the Company signed a payment agreement to pay the penalty. The installment payments started on October 28, 2016.

Stock-BasedStock–Based Compensation

We account for stock-basedstock–based compensation in accordance with FASB ASC Topic 718,Stock Compensation(ASC Topic 718). ASC Topic 718, which requires that the cost resulting from all share-basedshare–based transactions be recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-basedshare–based payment arrangements and requires all entities to apply a fair-value-basedfair–value–based measurement in accounting for share-basedshare–based payment transactions with employees. The statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employeesnon–employees in share-basedshare–based payment transactions.

Net Loss Per Share

Net loss per share is calculated in accordance with ASC Topic 260,Earnings per Share. Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which we incur losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutiveanti–dilutive or have no effect on earnings per share. Any common shares issued as of a result of the exercise of stock options and warrants would come from newly issued common shares from our remaining authorized shares. As of September 30,March 31, 2017 and 2016, and 2015, the following items were not included in dilutive loss as the effect is anti-dilutive:anti–dilutive:

Reclassifications

Certain amounts in the 2015 Condensed Consolidated Unaudited Financial Statements have been reclassified to conform to the current period presentation.  

Recent Accounting Pronouncements

In April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”, is to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. We have adopted the provisions of this ASU for the nine months ended September 30, 2016.

In May 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This ASU is effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented. The retrospective approach requires that an investment for which fair value is measured using the net asset value per share practical expedient be removed from the fair value hierarchy in all periods presented in an entity’s financial statements. Earlier application is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

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In June 2015,FASB issued Accounting Standards Update (“ASU”) No. 2015-10, “Technical Corrections and Improvements” covers a wide range of Topics in the Codification.  The amendments represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Additionally, some of the amendments will make the Codification easier to understand and easier to apply by eliminating inconsistencies, providing needed clarifications, and improving the presentation of guidance in the Codification.Transition guidance varies based on the amendments in this ASU. The amendments in this ASU that require transition guidance are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. All other amendments will be effective upon the issuance of this ASU. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In August 2015,FASB issued Accounting Standards Update (“ASU”) No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In September 2015,FASB issued Accounting Standards Update (“ASU”) No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not been issued. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not yet been made available for issuance. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In February 2016, the FASB issued ASU 2016-02,2016–02,Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-useright–of–use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-022016–02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In March 2016, the FASB issued ASU 2016-09,Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In April 2016, the FASB issued ASU 2016–10201610 Revenue from Contract with Customers (Topic 606): identifying Performance Obligations and Licensing “The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render

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more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In March 2016, the FASB issued Accounting Standards Update 2016-08 Revenue from Contracts with Customers (Topic 606) to clarify implementation guidance on principal versus agent considerations (for reporting revenue on a gross or net basis). The ASU is an amendment to Topic 606, clarifies the implementation guidance, and requires an entity to account for revenue as an agent when another entity controls the specified good or service before that good or service is transferred to the customer. This ASU is effective for annual periods beginning after December 15, 2017. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our presentation of revenue in our results of operations.

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

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2.     FAIR VALUE MEASUREMENTS

Certain assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2016at March 31, 2017 are measured in accordance with FASB ASC Topic 820-10-05,820–10–05,Fair Value Measurements. FASB ASC Topic 820-10-05820–10–05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financialnon–financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.

The statement requires fair value measurement be classified and disclosed in one of the following three categories:

The following table summarizes our financial instruments measured at fair value as of September 30, 2016at March 31, 2017 and December 31, 2015:2016:

The following table shows the changes in fair value measurements using significant unobservable inputs (Level 3) during the nine three–months ended September 30, 2016 for the warrants:March 31, 2017:

(1)  The gain or loss related to the revaluation of our warrant liability is included in “Change in fair value of derivatives” in the accompanying condensed consolidated unaudited statement of operations.

The Company values its warrants using a Dilution-Adjusted Black-ScholesDilution–Adjusted Black–Scholes Model.  Assumptions used include (1) 0.18%0.26% to 0.71% risk-free1.93% risk–free rate, (2) warrant life is the remaining contractual life of the warrants, (3) expected volatility of 204.27%196%–211% (4) zero expected dividends (5) exercise price set forth in the agreements (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted.

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The following table summarizes the significant terms of each of the debentures for which the entire hybrid instrument is recorded at fair value as of September 30, 2016:at March 31, 2017:

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The following table shows the changes in fair value measurements using significant unobservable inputs (Level 3) during the nine three–months ended September 30, 2016March 31, 2017 for the Convertible Notes:

3.     INVENTORIES

Inventories are valued at the lower of cost or market on an average cost basis. At September 30, 2016March 31, 2017 and December 31, 2015,2016, inventories were as follows:

The Company regularly reviews inventory quantities on hand.  If necessary, the Company records a provision for excess and obsolete inventory based primarily on its estimates of component obsolescence, product demand and production requirements. Write-downs and write-offs are charged to cost of goods sold.  We performed evaluations of our inventory at September 30, 2016, the Company did not experience any write downs or write offs.

4.     SETTLEMENT OF ACCOUNTS AND NOTE PAYABLE

On February 10, 2016, the Note holder of a convertible loan of $75,000 with a fair value of $101,810 was assigned and sold to a non-related party in the form of a Convertible Redeemable Note. The Company has recorded a gain of $26,810 in connection with this debt sale (See Note 6 and 7).

During March 2016, the Company issued a total of 1,000,000 shares of the company’s restricted stock to settle the outstanding debt of $10,000 with accrued interest of $1,262 with the Note holder. The shares were recorded at a fair value of $19,900 or $0.0199 per share (See Note 6 and 7). The Company recorded a loss of $8,638 during the nine months ended September 30, 2016.

On May 16, 2016, the Note holder of a convertible loan of $65,000 with a fair value of $229,759 was assigned and sold to a non-related party in the form of a Convertible Redeemable Note. The Company has recorded a gain of $157,759 in connection with this debt sale (See Note 6).

During May 2016, the Company issued a total of 2,500,000 shares of the company’s restricted stock to settle the outstanding debt of $10,000 and accounts payable of $15,000 with the Note holder. The shares were recorded at a fair value of $32,500 or $0.013 per share (See Note 6 and 7). The Company recorded a loss of $7,500 during the nine months ended September 30, 2016.

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During July 2016, the Company issued a total of 10,000,000 shares of the company’s restricted stock to settle the outstanding debt of $50,000 with accrued interest of $2,400 with the Note holder. The shares were recorded at a fair value of $90,000 or $0.009 per share (See Note 6 and 7). The Company recorded a loss of $37,600 during the nine months ended September 30, 2016.

During July 2016, the Company issued 14,000,000 shares of the company’s restricted stock (See Note 7) to settle the outstanding commissions’ payable in aggregate of $70,000 with TCN. The shares were valued at $0.009 per share. The Company recorded a loss of $56,000 as a selling expense during the nine months ended September 30, 2016.

During September 2016, the Company issued a total of 1,250,000 shares of the company’s restricted stock to settle accounts payable of $10,000 with the Note holder. The shares were recorded at a fair value of $11,875 or $0.0095 per share (See Note 7). The Company recorded a loss of $1,875 during the nine months ended September 30, 2016.

During September 2016, the Company issued 550,000 shares of the company’s restricted stock (See Note 7 and 9) to settle the accrued expense in aggregate of $126,000 with a consultant. The shares were valued of $4,510 or $0.0082 per share. The Company recorded a loss of $121,490 during the nine months ended September 30, 2016.

5.     DUE TO OFFICERS

At September 30, 2016 and DecemberMarch 31, 2015,2017, the balance due to our officer and the Companies owned by him is $41,328 and $146,770, respectively.$97,838. The loan is an unsecured demand loan from our President and CEO, Rik Deitsch. The loan bears interest at 4%. During the nine three–months ended September 30, 2016,March 31, 2017, we borrowed $149,951$116,500 and repaid $162,675$74,600 to Mr. Deitsch and the Companies owned by him. In addition, Mr. Deitsch accepted a total of 15,000,000 shares of the Company’s restricted common stock as a repayment to discharge $100,000 of his outstanding loan in June 2016.Subsequent toSeptember 30, 2016 and throughNovember 21, 2016, the Company borrowed$130,000 and repaid$26,500 to its President, RikDeitsch and the Companies owned by him. The amount owed to Mr. Deitsch and its Companies atNovember 21, 2016 was$146,089him (See Note 10).

6.5.     OTHER DEBT

Other debt (Both short-termshort–term and long term) consists of the following at September 30, 2016March 31, 2017 and December 31, 2015:2016:

(1)

During 2010 we borrowed $200,000 from one of our directors. Under the terms of the loan agreement, this loan was expected to be repaid in nine months to a year from the date of the loan along with interest calculated at 10% for the first month plus 12% after 30 days from funding. We are in default regarding this loan. The loan is under personal guarantee by our President and CEO, Rik Deitsch. We repaid principal balance in full as of December 31, 2016. During the nine three–months ended September 30, 2016,March 31, 2017, we made a repaymentthe payment of $75,000. $35,000 and $40,000$10,000 of the repayment was applied to principal and accrued interest, respectively.interest. At September 30, 2016 and DecemberMarch 31, 2015, we owed this director principal balance of $0 and $35,000, respectively.  At September 30, 2016 and December 31, 2015,2017, we owed this director accrued interest of $165,898 and $187,576, respectively.$134,488.

In August 2016, the Companywe issued two Promissory Notes for a total of $200,000 ($100,000 each) to one of our directors’ owned Companies. The notes carry interest at 12% annually and are due on the date that is three three–months from the execution and funding of the note. The notes holder hasDuring the right to convert the notes into shares of Common Stock at a price of $0.008 after the maturity date. In connection with the issuance of these promissory notes, the Company issued 400,000 shares of the Company's common stocks (See Note 7). The Company has recorded a debt discount in the amount of $3,536 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The discount of $1,800 was amortized during the nine three–months ended September 30, 2016. The interest expense for the nine months ended September 30, 2016 is $3,000. At September 30, 2016, theMarch 31, 2017, we repaid principal balance of the loan net of discount is $198,264.$6,365. The loan is in default andnegotiation for settlement. Upon default, the Notes become convertible at $0.008 per share. The convertible note payable, at fair value, was recorded at $111,407. During April 2017, the Notes with accrued interest were restated (See Note 10).

14

(2)

At September 30, 2016,March 31, 2017, the balance of $785,279$992,159 consisted of the following loans:

·

On August 2, 2011 under a settlement agreement with Liquid Packaging Resources, Inc. (“LPR”), the Companywe agreed to pay LPR a total of $350,000 in monthly installments of $50,000 beginning August 15, 2011 and ending on February 15, 2012. This settlement amount was recorded as general and administrative expenses on the date of the settlement. We did not make the December 2011 or January 2012 payments and on January 26, 2012, we signed the first amendment to the settlement agreement where under we agreed to pay $175,000 which was the balance outstanding at December 31, 2011(this includes a $25,000 penalty for non-payment)non–payment). The CompanyWe repaid $25,000 during the threesix months ended March 31, 2012. The CompanyWe did not make all of the payments under such amendment and as a result pursuant to the original settlement agreement, LPR had the right to sell 142,858 shares of the Company’sour free trading stock held in escrow by their attorney and receive cash settlements for a total amount of $450,000 (the initial $350,000 plus total default penalties of $100,000).  The $100,000 default was expensed during 2012.  LPR sold the note to Southridge Partners, LLP (“Southridge”) for consideration of $281,772 in October 2012. The debt has reverted back to the Company.us.

·

As of September 30, 2016, the CompanyAt March 31, 2017, we owed University Centre West Ltd. approximately $55,410, which was assigned and sold to Southridge and subsequently reverted back to the Company.

·

On November 5, 2015, the Company received a loan for a total of $150,000 from a non-related party. During May 2016, the loan was repaid along with interest on average 15% annum. The Company has recorded loan costs in the amount of $12,375 for the loan origination fees paid at inception date. The total loan cost of $12,375 was fully amortized during the nine months ended September 30, 2016.  Amortization for the nine months ended September 30, 2016 was $10,315. The interest expense for the nine months ended September 30, 2016 was $14,229.

·

On May 27, 2016, the Company received a loan for a total of $150,000 from a non-related party. The loan is repaid through scheduled payments through May 25, 2017 along with interest on average 15% annum. The Company has recorded loan costs in the amount of $15,375 for the loan origination fees paid at inception date. The total loan cost of $15,375 is amortized over the term of the loan. Amortization for the nine months ended September 30, 2016 was $5,425. As of September 30, 2016, repayment of $48,017 was made. The interest expense for the nine months ended September 30, 2016 was $12,053. As of September 30, 2016, the principal balance of the loan net of discount is $92,033. The loan was repaid in full on November 14, 2016 (See Note 10).

·

During November, 2015, the Company entered a Revenue Based Factoring Agreement with Qualified Merchant Group, Inc. (“QMG”). QMG purchased $67,500 of the Company’s future receipts for $50,000. In exchange for the purchased amount, the Company authorized QMG to ACH debit $459 daily from the Company’s bank account until QMG has received the purchase amount of $67,500. The loan is under personal guarantee by our President and CEO, Rik Deitsch.  The Company has recorded debt discount of $17,500 at inception date. During May 2016, the loan was repaid in full and the debt discount was fully amortized. Amortization for the debt discount for the nine months ended September 30, 2016 was $14,287.us.

·

In August 2015,April 2016, the Company issued a promissory note to a non-relatednon–related party in the amount of $10,000 bearing interest at 10% annually. The note is due in one year from the execution and funding of the note. The interest expense for the three–months ended March 31, 2017 is $250.

·

In May 2016, the Company issued a promissory note to a non–related party in the amount of $75,000 bearing monthly interest at a rate of 2%. The note iswas due in six months from the execution and funding of the note. InThe loan is in default and negotiation of settlement. The interest expense for the event of the Company's failure to pay the Note in a timely fashion, the Noteholder will receive 100,000 shares restricted, common stock on the date thatthree–months endued March 31, 2017 is 15 business days after the maturity date. The accrued interest as of March 8, 2016 was $1,262. On March 8, 2016, the Company issued a total of 1,000,000 shares of the company’s restricted stock to settle the outstanding debt of $10,000 with accrued interest of $1,262 with the Note holder. The shares were recorded at a fair value of $19,900 or $0.0199 per share (See Note 4 and 7). The Company recorded a loss of $8,638 during the nine months ended September 30, 2016.$4,500.

·

In December 2015,June 2016, the Company issued a promissory note to a non-relatednon–related party in the amount of $10,000$50,000 bearing monthly interest at a rate of 2%. The note iswas due in six months from the execution and funding of the note. On September 21, 2016, we owed principal balanceThe loan is in default and negotiation of $10,000 plus accruedsettlement. The interest of $1,951. The total of $11,951 was assigned and sold to a non-related party inexpense for the form of a Convertible Redeemable Note (See Note 6(3)).three–months endued March 31, 2017 is $3,000.

·

In JanuaryDuring August 2016, the Companywe issued a promissory note to a non-relatednon–related party in the amount of $100,000$150,000 bearing monthly interest at a rate of 2%2.5%. The note iswas due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, the Companywe issued 68,000100,000 shares of the Company'sour common stocks (See Note 7). The Company hasstock. We recorded a debt discount in the amount of $2,969$800 to reflect the value of the common stocksstock as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocksstock and additional paid-inpaid–in capital. The total discount of $2,969 was fully amortized duringas of March 31, 2017. Amortization for the nine debt discount for the three–months ended September 30, 2016.March 31, 2017 was $200. The interest expense for the nine three–months ended September 30, 2016March 31, 2017 is $15, 270.$11,250. During July 2016, the CompanyMarch 2017, we issued a total of 36,00050,000 restricted shares due to the default on repayment. The shares were valued at a fair value of $342.$275 (See Note 7)6). The loan was in default as of March 31, 2017. During August, 2016,April 2017, the principal andNote of $150,000 with accrued interest was repaid in full.restated (See Note 10).

15

·

In JanuaryOn September 26, 2016, the Companywe issued a promissory note to a non-relatednon–related party in the amount of $75,000 bearing interest at 10% annually. The note is due in one year from the execution and funding of the note. In the event of our failure to pay the Note in a timely fashion, the Noteholder would receive 100,000 shares restricted, common stock on the date that is 10 business days after the maturity date.  The interest expense for the three-month period ended March 31, 2017 is $1,875.

·

In October 2016, we issued a promissory note to a non–related party in the amount of $50,000 bearing monthly interest at a rate of 2%. The note is due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, the Companywe issued 350,000600,000 shares of the Company'sour common stocksstock (See Note 7)6). The Company hasWe recorded a debt discount in the amount of $8,915$4,330 to reflect the value of the common stocksstock as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocksstock and additional paid-inpaid–in capital. The total discount of $8,915$4,330 was fully amortized during the nine months ended September 30, 2016.   At June 16, 2016, we owed principal balanceas of $50,000 plus accrued interest of $4,800. The total of $54,800 was assigned and sold to a non-related party in the form of a Convertible Redeemable Note (See Note 6(3)).

·

In May 2016, the Company issued a promissory note to a non-related party in the amount of $75,000 bearing monthly interest at a rate of 2%. The note is due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, the Company issued 500,000 shares of the Company's common stocks (See Note 7). The Company has recorded a debt discount in the amount of $8,036 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The total discount of $8,036 will be amortized over the term of the debt. The interest expense for the nine months ended September 30, 2016 was $7, 200.March 31, 2017.  Amortization for the debt discount for the nine three–months ended September 30,March 31, 2017 was $2,165. The interest expense for the three–months ended March 31, 2017 was $3,000.

·

During November 2016, we received a loan for a total of $150,000 from a non–related party. The loan is repaid through scheduled payments through June 2018 along with interest on average 15% annum. We have recorded loan costs in the amount of $7,875 for the loan origination fees paid at inception date. The total loan cost of $7,875 is amortized over the term of the loan.  Amortization for the three–months ended March 31, 2017 was $6,700.$1,313.  At September 30, 2016,March 31, 2017, repayment of $32,116 was made. The interest expense for the three–months ended March 31, 2017 is $8,858. At March 31, 2017, the principal balance of the loan net of discount is $73,664. The loan is in default and negotiation of settlement.

·

In June 2016, the Company issued a promissory note to a non-related party in the amount of $50,000 bearing monthly interest at a rate of 2%. The note is due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, the Company issued 400,000 shares of the Company's common stocks (See Note 7). The Company has recorded a debt discount in the amount of $4,900 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The total discount of $4,900 will be amortized over the term of the debt. The interest expense for the nine months ended September 30, 2016 was $3,533. Amortization for the debt discount for the nine months ended September 30, 2016 was $2,900. At September 30, 2016, the principal balance of the loan net of discount is $48,000.

·

In April 2016, the Company issued a promissory note to a non-related party in the amount of $10,000 bearing interest at 10% annually. The note is due in one year from the execution and funding of the note. The interest expense for the nine months ended September 30, 2016 is $450.

·

In April 2016, the Company issued a promissory note to a non-related party in the amount of $10,000 bearing interest at 10% annually. The note is due in six months from the execution and funding of the note. During May 2016, the Company issued a total of 2,500,000 shares of the company’s restricted stock to settle the outstanding debt of $10,000 and accounts payable of $15,000 with the Note holder. The shares were recorded at a fair value of $32,500 or $0.013 per share (See Note 4 and 7). The Company recorded a loss of $7,500 during the nine months ended September 30, 2016.

·

In February 2016, the Company issued a promissory note to a non-related party in the amount of $50,000 bearing interest at 10% annually. The note is due in one year from the execution and funding of the note. The interest expense for the nine months ended September 30, 2016 is $2,042. During July 2016, the Company issued a total of 10,000,000 shares of the company’s restricted stock to settle the outstanding debt of $50,000 with accrued interest of $2,400 with the Note holder. The shares were recorded at a fair value of $90,000 or $0.009 per share (See Note 4 and 7). The Company recorded a loss of $37,600 during the nine months ended September 30, 2016.$111,978.

·

During August 2016, the Company issued a promissory noteDecember 2015, our President and CEO, Mr. Deitsch, assigned $80,000 of his outstanding loan to a non-related party in the amount of $150,000 bearing monthly interest at a rate of 2.5%. The note is due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, the Company issued 100,000 shares of the Company's common stocks (See Note 7). The Company has recorded a debt discount in the amount of $800 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The discount of $200 was amortized during the nine months ended September 30, 2016. The interest expense for the nine months ended September 30, 2016 is $5,000. At September 30, 2016, the principal balance of the loan net of discount is $149,400.  In the event of the Company's failure to pay the Note in a timely fashion, the Noteholder will receive 50,000 shares restricted, common stock on the date that is 10 business days after the maturity date.

·

On September 26, 2016, the Company issued a promissory note to a non-related party in the amount of $75,000 bearing interest at 10% annually. The note is due in one year from the execution and funding of the note.

16

(3)

At September 30, 2016, the balance of $1,375,674 consisted of the following convertible loans:

·

In September 2011, the Company borrowed $250,000 from a non-related party.  The principal of this loan were to be repaid with a balloon payment on or before October 1, 2012. On October 19, 2012 the parties amended the notes to extend the due date to May 1, 2013 and include a conversion feature that would allow the holders to convert some or all of their outstanding notes into restricted Company stock at a 15% discount to the average closing market price of the Company's stock traded over the previous 10 days. Interest on these loans is payable monthly beginning in November 2011 with interest calculated at 20%.

With the conversions during 2013 through 2015, the remaining balance of the Note was $75,000 with a fair value of $95,998 at December 31, 2015 and matured on February 3, 2016. On February 10, 2016, the balance of $75,000 with a fair value of $101,810 was assigned and sold to a non-relatednon–related party in the form of a Convertible Redeemable Note. The Company has recorded a gain of $26,810 in connection with this debt sale. The new Notenote carries interest at 8%4% and iswas due on December 7, 2016. The Note reverted back as the promissory note upon maturity date. At March 31, 2017, the principal balance is $80,000 with accrued interest of $6,198.

·

In February 10, 2017, unless previously converted into shares of restricted common stock.we issued a Convertible Promissory Note for $53,000 to a non–related party. The convertible note’s holdernote carries interest at 12% annually and are due November 12, 2017. The Holder has the right to convert the note, untilloan, beginning on the date which is no longer outstandingone hundred eighty (180) days following the date of the Note, into sharescommon stock at a price of Common Stock at fifty-fivesixty percent (55%(60%) of the average of the three lowest VWAPtrading prices of the Company’sour Common Stock for the fifteen trading days preceding the conversion date. In connectionAt March 31, 2017, the principal balance is $53,000 with accrued interest of $871.

(3)

At March 31, 2017, the issuancebalance of $1,921,889 consisted of the following convertible note payable, the Company encountered a day-one derivative loss of $87,251. On March 7, 2016, a conversion of 6,696,428 shares of the company’s restricted stock was made satisfying the Note in full with a fair value of $140,763 (See Note 4 and 7).loans:

·

On March 19, 2014, the Companywe issued two Convertible Debentures in the amount of up to $500,000 each (total $1,000,000) to two non-relatednon–related parties. TheDuring the year ended December 31, 2015, we recorded the first tranche of $15,000 each (total $30,000) of the funds was received during the first quarter of 2014.  The notes carry interest at 8% and are due on the date that is two years from the execution and funding of the note.  On March14, 2016, the maturity was extended by two years to March 19, 2018. The note holders have the right to convert the notes into shares of Common Stock at a price of $0.20. In connection with the issuance of these convertible notes payable, the Company encountered a day-one derivative loss of $18,104. At September 30, 2016,March 31, 2017, these convertible notes payable, at fair value, was recorded at $36,180.$2,546.

·

On February 25, 2015, the CompanyDuring June 2016, we issued a Convertible Debenture in the amount of $68,250 to LG Capital Funding, LLC (“LG”). On August 17, 2015, the principal balance with accrued interest of $70,875 was assigned and sold to Coventry in the form of a Convertible Redeemable Note. During 2015, Coventry made a conversion of total of 1,201,471 shares of the company’s restricted stock satisfying the note in full with a fair value of $172,842. On August 17, 2015, the Company encountered a penalty of $27,300 in connection with prepayment of the LG note. The Company had Coventry make the payment to LG on behalf the Company and issued a Convertible Debentures in the amount of $27,300 to Coventry. The note carries interest at 8% and is due on August 17, 2016, unless previously converted into shares of restricted common stock. Coventry has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty-five percent (55%) of the average of the three lowest VWAP prices of the Company’s Common Stock for the fifteen trading days preceding  the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $21,293. During April, June and July 2016, a conversion of 5,114,285 shares of the company’s restricted stock was made satisfying the Note in full with a fair value of $51,065 (See Note 7).

·

On February 24, 2015, the Company issued a Convertible Debentures in the amount of up to $250,000$72,000 to a non-related party. During the year ended December 31, 2015 and nine months ended September 30, 2016, the Company received the fund fornon–related party as a total of $100,000 and $50,000, respectively. The note carries one time interest at 12% and is due on the date that is two years from the execution and funding of the note.  The note holders have the right to convert the notes into shares of Common Stock at a price of lessor of (a) 0.40 or (b) sixty percent (60%) of the average of the two lowest closing bid prices of the Company’s Common Stock for the twenty trading days preceding the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $102,383 and $113,952 for the nine months ended September 30, 2016 and for the year ended December 31, 2015, respectively. During August through December 2015, the Note holder made conversions for a total of 1,456,440 satisfying $60,870 of the note with a fair value of $131,125. During January through September, 2016, Vista made conversions for a total of 10,029,578 shares of the company’s restricted stock satisfying $79,920 of the note with a fair value of $189,371 (See Note 7). At September 30, 2016, the convertible note payable, at fair value, was recorded at $63,561 netresult of debt discount of $7,473.sale. The Company has recorded loan costs in the amount of $18,870 for the loan origination fees. The loan cost was amortized over the term of the loan.  Amortization for the nine months ended September 30, 2016 was $6,313.

17

·

During April 2015, the Company issued two Convertible Debentures in the amount of $275,000 each (aggregating $550,000) to two non-related parties. The notes carry interest at 8% and are due on the date that is nine months from the execution and funding of the note.  If paid fully in cash by the maturity date, the amount of repayment is $137,500 for each Note plus accrued interest of 8%. The notes holders have the right to convert the notes into shares of Common Stock at a fixed price of $0.10. In the event of default, $275,000 each (aggregating $550,000) plus interest may be paid in the form of conversion into common stock at the lower of: (i) the 0.10 or (ii) 0.45 multiplied by the lowest bid price of the Common Stock during the ten consecutive trading day period immediately preceding the trading day that the Company receives a notice of conversion. In connection with the issuance of these convertible notes payable, the Company encountered a day-one derivative loss of $274,958.

On December 11, 2015, the principal balance of $137,500 with accrued interest of $7,142 was assigned and sold to Coventry in the form of a Convertible Redeemable Note. The Company encountered a penalty of $28,929 in connection with prepayment of the note. The Company had Coventry make the payment to the note holder on behalf the Company and issued a Convertible Debentures in the amount of $28,929 to Coventry. With these assignments, one of the Notes of $275,000 was paid in full.

On January 9, 2016, the other note payable of $275,000 was in default. The Note holder made a conversion of total of 23,548,252 shares of stocks satisfying $113,896 of the notes payable with a fair value of $321,805 during the nine months ended September 30, 2016 (see Note 7). On August 31, 2016, the principal and accrued interest after the conversion was $189,319. The Company repaid the note in full on August 31, 2016.

During April 2015, the Company issued a total of 2,000,000 two year warrants to the notes holders to purchase common stock at an exercise price of $0.35 per share The Company classified embedded conversion features in these warrants as a derivative liability. During December 2015, 1,000,000 warrants were exercised via cashless exercise into 400,000 shares with a fair value of $33,440. The warrants were valued at their fair value of $189,959 and $134 respectively using the Black-Scholes method at the commitment and re-measurement dates of April 9, 2015 and September 30, 2016, respectively.

Also, the Company issued a total of 125,000 shares of common stocks in connection with issuance of these convertible notes payable. The Company has recorded debt discount a total of $232,500 for the warrants issued and origination fees at inception date. The debt discount was fully amortized as of September 30, 2016.  Amortization for the debt discount and loan issuance cost for the nine months ended September 30, 2016 was $3,194.

Following the assignment, the convertible note payable of $144,642, at fair value, was recorded at $368,468 on December 11, 2015. The note carries interest at 8% and is due on December 10, 2016, unless previously converted into shares of restricted common stock. Coventry has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty-five percent (55%) of the average of the three lowest VWAP prices of the Company’s Common Stock for the fifteen trading days preceding  the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $223,826. On December 15, 2015, Coventry made a conversion of 1,322,751 shares of the company’s restricted stock satisfying $50,000 of the note with a fair value of $112,447. During January through March, 2016, Coventry made conversions of a total of 5,494,451 shares of the company’s restricted stock satisfying the note in full with a fair value of $198,546 (See Note 7).

·

Following the assignment of prepayment penalty, the convertible note payable of $28,929, at fair value, was recorded at $73,695 on December 11, 2015. The note carries interest at 8% and is due on December 10, 2016, unless previously converted into shares of restricted common stock. Coventry has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty-five percent (55%) of the average of the three lowest VWAP prices of the Company’s Common Stock for the fifteen trading days preceding  the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $44,766. During July and August, 2016, the Noteholder made conversions of a total of 6,602,142 shares of the company’s restricted stock satisfying the note in full with a fair value of $73,441 (See Note 7).

·

During December 2015, our President and CEO, Mr. Deitsch, assigned $80,000 of his outstanding loan to a non-related party in the form of a Convertible Redeemable Note. The note carries interest at 4% and is due on December 7, 2016, unless previously converted into shares of restricted common stock. The note holder has the right to convert the note, until is no longer outstanding into shares of Common Stock at eighty-five percent (85%) of the average of the three lowest VWAP prices of the Company’s Common Stock for the five trading days preceding the conversion date including the day upon which the notice of conversion is received by the Company. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $28,791. At September 30, 2016, the convertible notes payable, at fair value, was recorded at $92,027.

18

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On December 28, 2015, the Company issued a Convertible Debenture in the amount of $65,000 to a non-related party. The note carries interest at 10% and is due on December 23, 2016, unless previously converted into shares of restricted common stock. The note holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a price of  sixty percent (60%) of the lowest closing bid prices of the Company’s Common Stock for the twenty trading days preceding the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $54,300. The Company also issued 300,000 shares of common stocks as additional consideration. The Company has recorded debt discount of $15,810 for the fair value of stocks issued on the inception date. The debt discount was fully amortized during the nine months ended September 30, 2016. . On June 20, 2016, the balance of $65,000 with accrued interest and fees of $7,000, at fair value of $229,759, was assigned and sold to a non-related party in the form of a Convertible Redeemable Note. The Company has recorded a gain of $157,759 in connection with this debt sale (See Note 4). The new Note of $72,000 carries interest at 8% and is due on June 20, 2017, unless previously converted into shares of restricted common stock. The convertible note’s holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty-fivefifty–five percent (55%) of the average of the three lowest VWAP prices of the Company’sour Common Stock for the fifteen trading days preceding the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $192,863. At September 30, 2016,March 31, 2017, the convertible notes payable, at fair value, was recorded at $135,607.$154,156.

·

On March 3, 2016, the Companywe issued a Convertible Debenture“Back–end Note” in the amount of $100,000 to Coventry Enterprises, LLC (“Coventry”). The Note was funded on September 8, 2016. The note carries interest at 8% and is due on March 3, 2017, unless previously converted into shares of restricted common stock. Coventry has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a fifty-fivefifty–five percent (55%) of the average of the three lowest VWAP pricesclosing bid of the Company’sour Common Stock for the twenty trading days preceding the conversion date. In connection withdate including the issuancedate of the convertible note payable, the Company encountered a day-one derivative lossreceipt of $87,596.conversion notice. During September 2016,March 2017, the Noteholder made a conversion of 5,000,00015,500,000 shares of the company’s restricted stock satisfying the Note of $19,500$43,400 with a fair value of $48,354$78,909 (See Note 7)6). At September 30, 2016,March 31, 2017, the convertible note payable, at fair value, was recorded at $150,077.

On March 3, 2016,$130,861. The Note is in connection with the issuance of the Note, the Company also granted five-year warrants to purchase an aggregate of 2,500,000 shares of the Company’s common stock at an exercise price of $0.03 per share. The Company classified embedded conversion features in these warrants as a derivative liability. The warrants were valued at their fair value of $48,774 and $19,021 using the Black-Scholes method on March 3, 2016 and September 30, 2016, respectively (See Note 8).default.

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On March 3, 2016, the Company31, 2017, we issued an additional “Back-end Note”another convertible denture in the amount of $100,000$80,000 to Coventry Enterprises, LLC (“Coventry”) with the same terms as the original note.. The note carries interest at 8% and is due on March 3, 2017. The Note was funded on September 8, 2016.  In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $148,077. At September 30, 2016, the convertible note payable, at fair value, was recorded at $186,429.

·

During June 2016, the notes payable of $50,000 originated in January 2016 with accrued interest of $4,800 was assigned and sold to a non-related party in the form of a Convertible Redeemable Note(See Note 6(2)). The note carries interest at 8% and is due on June 16, 2017,2018, unless previously converted into shares of restricted common stock. The NoteholderCoventry has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty-fivea fifty–five percent (55%) of the average of the three lowest VWAP pricesclosing bid price of the Company’sour Common Stock for the fifteentwenty trading days preceding the conversion date.date including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, the Company encounteredwe recorded a day-oneday–one derivative loss of $86,251.$108,021. At September 30, 2016,March 31, 2017, the balance of $54,800,convertible note payable, at fair value, was recorded at $103,628.

·

During July 2016, the Company issued a convertible note to a non-related party in the amount of $50,000 bearing monthly interest at a rate of 2.0%. The note holder has the right to convert the notes into shares of Common Stock at a price of $0.05. The note is due in six months from the execution and funding of the note. In connection with the issuance of this note, the Company issued 300,000 shares of the Company's common stocks (See Note 7). The Company has recorded a debt discount in the amount of $2,345 to reflect the value of the common stocks as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stocks and additional paid-in capital. The discount of $1,000 was amortized during the nine months ended September 30, 2016. The interest expense for the nine months ended September 30, 2016 is $2,600.$186,429. At September 30, 2016, the principal balance of the loan net of discount is $48,655. In the event of the Company's failure to pay the Note in a timely fashion, the Noteholder will receive 300,000 shares restricted, common stock on the date that is 10 business days after the maturity date. The loan is under personal guarantee by our President and CEO, Rik Deitsch.

19

·

During September 2016, the notes payable of $10,000 originated in December 2015 with accrued interest of $1,951 was assigned and sold to a non-related party in the form of a Convertible Redeemable Note(See Note 6(2)). The note carries interest at 8% and is due on September 21,March 31, 2017, unless previously converted into shares of restricted common stock. The Noteholder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty-five percent (55%) of the average of the three lowest VWAP prices of the Company’s Common Stock for the twenty trading days preceding  the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-one derivative loss of $15,421. At September 30, 2016, the balance of $11,951, at fair value, was recorded at $22,668.$130,861. The note carries an additional “Back–end Note” with the same terms as the original note that enables the lender to lend the Company another $80,000.

On March 31, 2017, in connection with the issuance of a convertible note of $80,000, we granted three–year warrants to purchase an aggregate of 6,000,000 shares of our common stock at an exercise price of $0.005 per share. The warrants were valued at their fair value of $24,017 using the Black–Scholes method on March 31, 2017. The warrants expire on March 30, 2020 (See Note 7).

·

During April 2016, the Companywe entered into a loan agreement with Greentree Financial Group, Inc. (“Greentree”) in connection with a bridge financing transaction, consisting of certain unsecured convertible promissory notes in principal amount up to $250,000, the first tranche of $50,000 was funded during April 2016 and matures one year from the funding of the Note. The conversion price is lower of $0.10 per share or 60% of the average of the three lowest volume weighted average prices for the ten consecutive trading days immediately prior to but not including the conversion date. In connection with the issuance of the convertible note payable, the Company encounteredwe recorded a day-oneday–one derivative loss of $39,089. At September 30,During November 2016, the convertible note payable, at fair value, was recorded at $86,128.

During April 2016,Noteholder made a conversion of 5,274,262 shares of our restricted stock satisfying the Company issuedNote of $25,000 with a total of 2,000,000 three year warrants to Greentree to purchase common stock at an exercise price of $0.05 per share The Company classified embedded conversion features in these warrants as a derivative liability. The warrants were valued at their fair value of $30,772 and $12,598, respectively using$44,008.  During January 2017, the Black-Scholes method atNoteholder made a conversion of 5,980,861 shares of the commitment and re-measurement datescompany’s restricted stock satisfying the remaining Note of April 4, 2015 and September 30, 2016, respectively($25,000 in full with a fair value of $47,569(See Note 8)6).

·

On March 28, 2016, the Companywe signed an expansion agreement with Brewer and Associates Consulting, LLC (“B+A”) to the original consulting agreement dated on October 15, 2015 for consulting services for twelve months for a monthly fee of $7,000. To relieve the Company'sour cash obligation of $36,000 per original agreement, the Companywe issued three convertible notes for a total of $120,000 which includes the fees due under the original agreement and the new monthly fees due under the expansion agreement. One of the three convertible notes for $40,000 was issued to Greentree, and the other two convertible notes payable for a total of $80,000 were issued to B+A in April 2016.

14

The $40,000 Note of $40,000 to Greentree bears annual interest rate of 12% and conversion price is the lower of $0.10 per share or 60% of the average of the three lowest volume weighted average prices for the ten consecutive trading days immediately prior to but not including the conversion date. In October 2016, Greentree made conversions of a total of 8,603,469 shares satisfying the note payable and accrued interest in full (See Note 10).full.

The $80,000 Notes of $80,000 to B+A bear annual interest rate of 10% and conversion price is equal to 60% of the average of the three lowest volume weighted average prices for the three consecutive trading days immediately prior to but not including the conversion date. In connection with the issuance of these convertible note payable, the Company encountered a day-one derivative loss of $81,996. At September 30, 2016,March 31, 2017, the convertible notes payable, at fair value, was recorded at $197,181.$146,909.

Also,·

During June 2016, the Companynotes payable of $50,000 originated in January 2016 with accrued interest of $4,800 was assigned and sold to a non–related party in the form of a Convertible Redeemable Note (See Note 5(2)). The note carries interest at 8% and is due on June 16, 2017, unless previously converted into shares of restricted common stock. The Noteholder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty–five percent (55%) of the average of the three lowest VWAP prices of our Common Stock for the fifteen trading days preceding  the conversion date. At March 31, 2017, the balance of $54,800, at fair value, was recorded at $117,285.

·

During July 2016, we issued a totalconvertible note to a non–related party in the amount of 2,000,000 three year warrants$50,000 bearing monthly interest at a rate of 2.0%. The note holder has the right to B+A to purchaseconvert the notes into shares of Common Stock at a price of $0.05. The note is due in six months from the execution and funding of the note. In connection with the issuance of this note, we issued 300,000 shares of our common stock at an exercise price(See Note 6). We recorded a debt discount in the amount of $0.05 per share The Company classified embedded conversion features in these warrants$2,345 to reflect the value of the common stock as a derivative liability.reduction to the carrying amount of the convertible debt and a corresponding increase to common stock and additional paid–in capital. The warrants were valueddebt discount was fully amortized. The remaining discount of $1,345 was amortized during the three–months ended March 31, 2017. The interest expense for the year ended March 31, 2017 is $5,667. At March 31, 2017, the convertible note payable at their fair value net of $30,772discount is $8,479. On January 26, 2017, the principal and $12,598, respectively using the Black-Scholes method at the commitment and re-measurement dates of April 4, 2015 and September 30, 2016, respectively(Seeaccrued interest was $56,567. During January 2017, 300,000 shares restricted, common stock were issued due to default on repayment (See Note 8)7).

On May 2, 2016,During January 2017, the Company terminatedNote was restated with principal amount of $56,567 bearing monthly interest rate of 2.5%. The New Note of $56,567 is due on July 26, 2017 and convertible at $0.05 per share. The loan is under personal guarantee by our President and CEO, Rik Deitsch. In connection with the agreement with Greentreeissuance of this note, we issued 300,000 shares of our common stock (See Note 6). We have recorded a debt discount in the amount of $2,413 to reflect the value of the common stock as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stock and additional paid–in capital. The debt discount is working on a definitive settlement agreement that will pay offamortized over the outstanding bridge financing, eliminateterm of the warrants andNote. The discount of $858 was amortized during the three–months ended March 31, 2017. At March 31, 2017, the convertible note payable, at fair value, was recorded at $8,307 net of $40,000 for services.discount of $1,555.

·

During August 2016, wesigned a Secured & Collateralized Convertible Promissory Note for $52,500 to LG Capital Funding, LLC (“LG”). The note carries interest at 8% and is due on August 22, 2017, unless previously converted into shares of restricted common stock. LG has the Companyright to convert the note, until is no longer outstanding  into shares of Common Stock at a price of  sixty percent (60%) of the average of the two lowest trading prices of our Common Stock for the fifteen trading days preceding  the conversion date. The note carries an additional “Back–end Note” with the same terms as the original note that enables the lender to lend to us another $52,500. During February and March 2017, LG made the conversions of a total of 20,971,375 of our restricted stock satisfying the principal balance and accrued interest in full with a fair value of $94,857.

The Back–end Note was funded during March 2017. In connection with the issuance of the convertible note payable, we recorded a day–one derivative loss of $38,404. At March 31, 2017, the convertible note payable, at fair value, was recorded at $107,002.

During February 2017, wesigned a Secured & Collateralized Convertible Promissory Note for $52,500 to LG Capital Funding, LLC (“LG”). The note carries interest at 8% and is due on February 1, 2018, unless previously converted into shares of restricted common stock. LG has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a price of  sixty percent (60%) of the average of the two lowest trading prices of the Company’s Common Stock for the fifteen trading days preceding  the conversion date. The note carries an additional “Back–end Note” with the same terms as the original note that enables the lender to lend to us another $52,500. In connection with the issuance of the convertible note payable, we recorded a day–one derivative loss of $38,374. At March 31, 2017, the convertible note payable, at fair value, was recorded at $108,429.

·

During August 2016, we issued a Convertible Debenture to a non-relatednon–related party in the amount of $51,000. The note carries interest at 12% and matures on May 19, 2017. Unless previously converted into shares of restricted common stock, the Note holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a sixty percent (60%) of the average of the three lowest trading prices of our Common Stock for the twenty trading days preceding the conversion date. During February and March 2017, the Note holder made the conversions of a total of 19,573,258 of our restricted stock satisfying the principal balance and accrued interest in full with a fair value of $98,147.

·

During August 2016, we issued a Convertible Debenture to a non–related party in principal amount up to $225,000, the first tranche of $45,000 was funded during August 2016 and matures one year from the funding of the Note. The note carries interest at 6%. Unless previously converted into shares of restricted common stock, the Note holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a sixty percent (60%) of the average of the three lowest trading prices of the Company’sour Common Stock for the twenty trading days preceding  the conversion date. In connection with the issuance of the convertible note payable, the Company encounteredwe recorded a day-oneday–one derivative loss of $37,932. At September 30, 2016,March 31, 2017, the convertible note payable, at fair value, was recorded at $73,890,$75,450, net of debt discount of $4,125. The Company has$3,000. We have recorded loan costs in the amount of $4,500 for the loan origination fees paid at inception date. The total loan cost of $4,500 was amortized over the term of the loan.  Amortization for the nine three–months ended September 30, 2016March 31, 2017 was $375.  

20$1,838. During March, 2017, the Note holder made a conversion of 8,000,000 shares of stock satisfying $17,117 of the principal balance and $1,000 of accrued interest for a fair value of $31,167. The remaining principal balance of $27,883, at fair value, was recorded at $53,769 net of discount of $1,162.

·

The second tranche of $22,500 was funded during December 2016. We recorded loan costs in the amount of $2,250 for the loan origination fees paid at inception date. The total loan cost of $2,250 was amortized over the term of the loan.  Amortization for the three–months ended March 31, 2017 was $563. At March 31, 2017, the convertible note payable, at fair value, was recorded at $43,113, net of debt discount of $1,500.

·

During AugustSeptember 2016,the Company signednotes payable of $10,000 originated in December 2015 with accrued interest of $1,951 was assigned and sold to a Secured & Collateralizednon–related party in the form of a Convertible Promissory Note for $52,500 to LG Capital Funding, LLC (“LG”).Redeemable Note. The note carries interest at 8% and is due on August 22,September 21, 2017, unless previously converted into shares of restricted common stock. LGThe Noteholder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at fifty–five percent (55%) of the average of the three lowest closing bid prices of our Common Stock for the twenty trading days preceding  the conversion date including the date of receipt of conversion notice. At March 31, 2017, the balance of $11,951, at fair value, was recorded at $22,864.

·

During December, 2016, we issued a Convertible Debenture in the amount of $66,500 to Labrys Fund, LP (“Labrys”). The note carries interest at 12% and is due on June 6, 2017, unless previously converted into shares of restricted common stock. Labrys has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a price of  sixty percent (60%) of the average of the two lowest trading pricesprice of the Company’sour Common Stock for the fifteentwenty trading days preceding  the conversion date. We issued 4,532,810 shares of common stock (the “Returnable Shares”) to Labrys as a commitment fee, provided, however, the Returnable Shares must be returned to our treasury if Labry elects to convert, prior to the date which is one hundred eighty (180) days following the Issue Date, all or any part of the outstanding and unpaid principal amount or interest of this Note into shares of Common Stock. In March 2017, the amendment was signed to waive Labry to return the Commitment Shares back to our treasury (See Note 6). We have recorded a debt discount of $49,861 for the fair value of stock issued on the inception date.  The total loan cost of $49,861 was amortized over the term of the loan.  Amortization for the three–months ended March 31, 2017 was $25,497. At March 31, 2017, the convertible note payable, at fair value, was recorded at $121,752, net of debt discount of $44,478.

During March 2017, we issued another Convertible Debenture in the amount of $66,500 to Labrys. The note carries interest at 12% and is due on September 10, 2017, unless previously converted into shares of restricted common stock. Labrys has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a sixty percent (60%) of the lowest trading price of our Common Stock for the twenty trading days preceding  the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-oneday–one derivative loss of $39,128.$67,987. At September 30, 2016,March 31, 2017, the convertible note payable, at fair value, was recorded at $91,332. The note carries an additional “Back-end Note” with$142,526. During April 2017, a conversion was made to satisfy a portion of the same terms as the original note that enables the lender to lend the Company another $52,500.Note (See Note 9).

·

During AugustDecember 2016, the Companywe issued a Convertible Debenture to a non-relatednon–related party in the amount of $51,000.$110,000. The note carries interest at 12% and matures on May 19,September 8, 2017. Unless previously converted into shares of restricted common stock, the Note holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a sixty percent (60%) of the averagelowest trading prices of our Common Stock for the threetwenty five trading days preceding the conversion date. At March 31, 2017, the convertible note payable, at fair value, was recorded at $235,698.

·

During December 2016, we issued a Convertible Debenture to a non–related party in the amount of $67,500. The note carries interest at 12% and matures on December 8, 2017. Unless previously converted into shares of restricted common stock, the Note holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a sixty percent (60%) of the lowest trading prices of the Company’s Common Stock for the twenty five trading days preceding the conversion date. At March 31, 2017, the convertible note payable, at fair value, was recorded at $146,146.

·

During December 2016, we issueda Secured & Collateralized Convertible Debenture to a non–related party in the amount of $50,000. The note carries interest at 8% and matures on December 23, 2017. Unless previously converted into shares of restricted common stock, the Note holder has the right to convert the note, until is no longer outstanding  into shares of Common Stock at a sixty percent (60%) of the lowest trading prices of our Common Stock for the twenty trading days including the conversion date. At March 31, 2017, the convertible note payable, at fair value, was recorded at $107,262.

·

During January 2017, we issued a Convertible Debenture in the amount of $40,000 to a non–related party. The note carries interest at 8% and is due on January 17, 2018, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note, until is no longer outstanding into shares of Common Stock at a price sixty percent of the lowest closing bid price of our Common Stock for the twenty prior trading days including the conversion date. In connection with the issuance of the convertible note payable, the Company encountered a day-oneday–one derivative loss of $32,901.$30,925. At September 30, 2016,March 31, 2017, the convertible note payable, at fair value, was recorded at $88,311.$85,965.

In the evaluation of these financing arrangements, the Companywe concluded that these conversion features did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The CompanyWe also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.

The CompanyWe elected to account for these hybrid contracts under the guidance of ASC 815-15-25-4.815–15–25–4.  The fair value has been defined as the common stock equivalent value, enhanced by the fair value of the default put plus the present value of the coupon.

The holderholders of thisthese convertible note hasnotes have substantial rights and protections regarding dilution if certain events, including a default were to occur. There are a number of events that could trigger a default, including but not limited to failure to pay principal or interest, failure to issue shares under the conversion feature, breach of covenants, breach of representations and warranties, appointment of a receiver or trustee, judgments, bankruptcy, delisting of common stock, failure to comply with the exchange act, liquidation, cessation of operations, failure to maintain assets, material financial statement restatement, reverse split of borrowers stock, etc. In the event of these events the lender may be entitled to receive significant amounts of additional stock above the amounts for conversion.

Furthermore, there are additional events that could cause the lender to be due additional shares of common stock above and beyond the shares due from a conversion. Some of these events include, but are not limited to a merger or consolidation of theour Company, dividend distribution or spin off, dilutive issuances of the Company’sour stock, etc. If the lender receives additional shares of the Company’sour commons stock due to any of the foregoing events or for other reasons, then this may have an extremely dilutive effect on the shareholders of the Company.existing shareholders. Such dilution would likely result in a significant drop in the per share price of the Company’sour common stock. The potential dilutive nature of this note presents a very high degree of risk to the Companyus and itsour shareholders.

7.6.     STOCKHOLDERS' DEFICIT

Private Placements of Common Stock

During March 2016, the Company sold 916,667 shares of restricted common stock to investors at a price per share of $0.06 and received proceeds of $55,000. The Company issued 916,667 warrants to purchase common stock at an exercise price of $0.10 per share. The warrants expire on March 31, 2017 (See Note 8).

Common Stock Issued for Services

During July 2016, the CompanyFebruary 2017, we signed an agreement with a consultant to provide investor relation services for twelve months. In connection with the agreement, 1,500,000 shares of our restricted common stock were issued. The shares were valued at $0.0075 per share. We recorded an equity compensation charge of $1,634 during the three–months ended March 31, 2017. The remaining unrecognized compensation cost of $9,616 related to non–vested equity–based compensation will be recognized over the remaining vesting and service period.

During January 2017, we signed an agreement with a consultant to provide investor relation services for twelve months. In connection with the agreement, 1,000,000 shares of our restricted common stock were issued. The shares were valued at $0.0087 per share. We recorded an equity compensation charge of $1,788 during the three–months ended March 31, 2017. The remaining unrecognized compensation cost of $6,912 related to non–vested equity–based compensation will be recognized over the remaining vesting and service period.

During November 2016, we signed an agreement with a consultant to provide investor relation services for twelve months. In connection with the agreement, a total of 3,000,000 shares of our restricted common stock were issued. The shares were valued at $0.012 per share. We recorded an equity compensation charge of $17,900 and $9,945 during the three–months ended March 31, 2017 and the year ended December 31, 2016. The remaining unrecognized compensation cost of $8,155 related to non–vested equity–based compensation will be recognized over the remaining vesting and service period.

During July 2016, we signed an agreement with a consultant to provide investor relation services for twelve months. In connection with the agreement, a total of 4,250,000 shares of company’sour restricted common stocksstock were issued. The share wasshares were valued at $0.0084 per share. The CompanyWe recorded an equity compensation charge of $8,901$8,803 and $17,899 during the nine three–months ended September 30,March 31, 2017 and the year ended December 31, 2016. The remaining unrecognized compensation cost of $26,799$8,998 related to non-vested equity-basednon–vested equity–based compensation towill be recognized by the Company over the remaining vesting and service period.

2117

During July 2016, the Companywe signed agreements with a consultant forto provide investor relation services for twelve months. In connection with the agreement, 500,000 shares of company’sour restricted common stocksstock were issued. The share wasshares were valued at $0.0084 per share. The CompanyWe recorded an equity compensation charge of $1,047$1,035 and $2,156 during the nine three–months ended September 30,March 31, 2017 and the year ended December 31, 2016. The remaining unrecognized compensation cost of $3,153$1,059 related to non-vested equity-basednon–vested equity–based compensation towill be recognized by the Company over the remaining vesting and service period.

During July 2016, the Companywe signed agreements with a consultant for investor relation services for three months. In connection with the agreement, 500,000 shares of company’s restricted common stocks were issued. The share was valued at $0.0084 per share. The Company recorded an equity compensation charge of $4,200 during the nine months ended September 30, 2016.

During July 2016, the Company signed agreements with a consultant forto provide investor relation services for six months. In connection with the agreement, 1,200,000 shares of company’sour restricted common stocksstock were issued. The share wasshares were valued at $0.0084 per share. The CompanyWe recorded an equity compensation charge of $5,040$2,499 and $7,581 during the nine three–months ended September 30,March 31, 2017 and the year ended December 31, 2016. The remaining unrecognized compensation cost of $5,040 related to non-vested equity-based compensation to be recognized by the Company over the remaining vesting period.

During July 2016, the Companywe signed agreements with a consultant forto provide investor relation services for twelve months. In connection with the agreement, 500,000 shares of company’sour restricted common stocksstock were issued. The share wasshares were valued at $0.0084 per share. The CompanyWe recorded an equity compensation charge of $1,047$1,036 and $2,156 during the nine three–months ended September 30,March 31, 2017 and the year ended December 31, 2016. The remaining unrecognized compensation cost of $3,153$1,058 related to non-vested equity-basednon–vested equity–based compensation towill be recognized by the Company over the remaining vesting period.

During July 2016, the Companywe signed an agreement with a consultant forto provide investor relation services for twelve months. In connection with the agreement, a total of 625,000 shares of company’s restricted common stocks were issued. The share was valued at $0.009 per share. The Company recorded an equity compensation charge of $1,125 during the nine months ended September 30, 2016. The remaining unrecognized compensation cost of $4,500 related to non-vested equity-based compensation to be recognized by the Company over the remaining vesting period.

During July 2016, the Company signed an agreement with a consultant for legal services. In connection with the agreement, a total of 1,000,000 shares of company’s restricted common stocks were issued as retainer. The share was valued at $0.009 per share. The Company recorded an equity compensation charge of $9,000 during the nine months ended September 30, 2016.

During July 2016, the Company signed an agreement with a consultant for services rendered. In connection with the agreement, 1,000,000 shares of company’s restricted common stocks were issued. The share was valued at $0.009 per share. The Company recorded an equity compensation charge of $9,000 during the nine months ended September 30, 2016.

During April 2016, the Company signed an agreement with Greentree Financial Group, Inc. (“Greentree”) for consulting services for six months. In connection with the agreement, 700,000 shares of company’s restricted common stocks were issued. The share was valued at $0.018 per share. The Company recorded an equity compensation charge of $12,600 during the nine months ended September 30, 2016.

During October 2015, the Company signed an agreement with Brewer and Associates Consulting, LLC (“B+A”)for consulting services for a year. In connection with the agreement, 2,500,000 shares of company’s restricted common stocks were granted. 1,000,000 shares of Common Stock of the Company were issued on the date of execution of the agreement. 500,000 shares of Common Stock of the Company are to be issued quarterly, beginning on the first day of the third month following the effective date. Cash payment of $3,000 is expected to be paid on a monthly basis. The 2,500,000 shares granted are valued at the end of each quarter until the consultants complete their performance in October 2016. The 2,500,000 shares granted were valued at $0.0080 per share which is the stock price at September 30, 2016. The Company has incurred an equity compensation charge of $19,167 as of September 30, 2016. The remaining unrecognized compensation cost of $833 is related to non-vested equity-based compensation. The Company has recorded the $8,000 in equity for the 1,000,000 shares issued and accrued $12,000 in accrued expense as the 1,500,000 shares of stocks granted on January 15, 2016, April 15, 2016 and July 15, 2016 have not been issued as of September 30, 2016 (See Note 9).

During September 2015, the Company signed an agreement with a consultant for investor relation services for twelve months. In connection with the agreement, 250,000 shares of company’s restricted common stocks were issued. The share was valued at $0.12 per share. The Company recorded an equity compensation charge of $7,705 during the year ended December 31, 2015 and $22,295 during the nine months ended September 30, 2016.

During September 2015, the Company signed an agreement with a consultant for investor relation services for twelve months. In connection with the agreement, 300,000 shares of company’s restricted common stocks were issued. The share was valued at $0.12 per share. The Company recorded an equity compensation charge of $9,246 during the year ended December 31, 2015 and $26,754 during the nine months ended September 30, 2016.

22

During August 2015, the Company signed an agreement with a consultant for investor relation services for six months. In connection with the agreement, 750,000 shares of company’s restricted common stocks were issued. The share was valued at $0.15 per share. The Company recorded an equity compensation charge of $92,935 during the year ended December 31, 2015 and $19,565 during the nine months ended September 30, 2016.

During August 2015, the Company signed an agreement with two consultants for investor relation services for six months. In connection with the agreement, 500,000 shares of company’s restricted common stocks were issued. The share was valued at $0.15 per share. The Company recorded an equity compensation charge of $61,957 during the year ended December 31, 2015 and $13,043 during the nine months ended September 30, 2016.

During March 2015, the Company issued 1,250,000 shares of the Company’sour restricted common stock to a consultant for services for a year. The share was valued at $0.104 per share. The Company recorded an equity compensation charge of $101,773 during the year ended December 31, 2015 and $28,227 during the nine months ended September 30, 2016.

Common Stocks Issued to Employees and Directors

During June, 2016, the Board of Directors approved a resolution for the issuance of a total of 10,900,000 shares of the Company’s restricted common stock to directors and employees of the Company. The issuance was valued at $147,150 or $0.0135 per share which was the stock price on the date of issuance.

During July 2016, our Board of Directors approved the appointment of Dan Oran as our Director as well as a stock grant to Mr. Oran for 2,500,000 shares of our common stock as compensation for his service as Director. The share was valued at $23,750 or $0.0095 per share. Dan Oran made an initial investment of $100,000 to fund the operation of the Company. Following the receipt of the initial placement on July 20, 2016, the Company issued 12,500,000 shares in settlement of $100,000.

During July 2016, our Board of Directors approved of Dale Vanderputten, PhD as our Chief Scientific Officer.  The Company granted 2,500,000 shares of common stock as compensation for his service. The share was valued at $30,000 or $0.012 per share.

Common Stock Issued with Debts

In January 2016, in connection with the issuance of a note payable to a non-related party in the amount of $100,000 which is due in six months from the funding of the note, the Company issued a total of 68,000 shares of common stock with a fair value of $2,969 as part of the agreement (See Note 6).

In January 2016, in connection with the issuance of a note payable to a non-related party in the amount of $50,000 which is due in six months from the funding of the note, the Company issued a total of 350,000 shares of common stock with a fair value of $8,915 as part of the agreement (See Note 6).

In May 2016, in connection with the issuance of a note payable to a non-related party in the amount of $75,000 which is due in six months from the funding of the note, the Company issued a total of 500,000 shares of common stock with a fair value of $8,036 as part of the agreement (See Note 6).

In June 2016, in connection with the issuance of a note payable to a non-related party in the amount of $50,000 which is due in six months from the funding of the note, the Company issued a total of 400,000 shares of common stock with a fair value of $4,900 as part of the agreement (See Note 6).

In July 2016, in connection with the issuance of a note payable to a non-related party in the amount of $50,000 which is due in six months from the funding of the note, the Company issued a total of 300,000 shares of common stock with a fair value of $2,345 as part of the agreement (See Note 6).

In August 2016, in connection with the issuance of a note payable to a non-related party in the amount of $150,000 which is due in six months from the funding of the note, the Company issued a total of 100,000 shares of common stock with a fair value of $800 as part of the agreement (See Note 6).

In August 2016, in connection with the issuance of a note payable to a company owned by one of our director in the amount of $100,000 which is due in three months from the funding of the note, the Company issued a total of 200,000 shares of common stock with a fair value of $1,768 as part of the agreement (See Note 6).

In August 2016, in connection with the issuance of a note payable to a company owned by one of our director in the amount of $100,000 which is due in three months from the funding of the note, the Company issued a total of 200,000 shares of common stock with a fair value of $1,768 as part of the agreement (See Note 6).

23

Common Stock Issued for Settlement of Debt and Accounts Payable

During July 2016, the Company issued 14,000,000 shares of the company’s restricted stock (See Note 4) to settle the outstanding commissions’ payable in aggregate of $70,000 with TCN.were issued. The shares were valued at $0.009 per share. The CompanyWe recorded a lossan equity compensation charge of $56,000 as a selling expense$1,387 and $2,543 during the nine three–months ended September 30, 2016.

During September 2016, the Company issued a total of 1,250,000 shares of the company’s restricted stock to settle accounts payable of $10,000 with the Note holder. The shares were recorded at a fair value of $11,875 or $0.0095 per share (See Note 4). The Company recorded a loss of $1,875 during the nine months ended September 30, 2016.

During September 2016, the Company issued 550,000 shares of the company’s restricted stock (See Note 4March 31, 2017 and 9) to settle the accrued expense in aggregate of $126,000 with a consultant. The shares were valued of $4,510 or $0.0082 per share. The Company recorded a loss of $121,490 during the nine months ended September 30, 2016.

During July 2016, the Company issued a total of 10,000,000 shares of the company’s restricted stock to settle the outstanding debt of $50,000 with accrued interest of $2,400 with the Note holder. The shares were recorded at a fair value of $90,000 or $0.009 per share (See Note 4 and 7). The Company recorded a loss of $37,600 during the nine months ended September 30, 2016.

During September 2016, Coventry made a conversion of 5,000,000 shares of the company’s restricted stock satisfying $19,500 of the Note of $100,000 with a fair value of $48,354 (See Note 6).

In June 2016, Mr. Deitsch accepted a total of 15,000,000 shares of the Company’s restricted common stock as a repayment to discharge $100,000 of his outstanding loan (See Note 5). The shares were valued at the note payable amount due to the fact that it was a related party transaction.

During May 2016, the Company issued a total of 2,500,000 shares of the company’s restricted stock to settle the outstanding debt of $10,000 and accounts payable of $15,000 with the Note holder. The shares were recorded at a fair value of $32,500 or $0.013 per share (See Note 4 and 6). The Company recorded a loss of $7,500 during the nine months ended September 30, 2016.

Following the assignment of debt of $144,642 on December 15, 2015, Coventry made a conversion of 1,322,751 shares of the company’s restricted stock satisfying $50,000 of the note with a fair value of $112,447. During January through March, 2016, Coventry made conversions of a total of 5,494,451 shares of the company’s restricted stock satisfying the note in full with a fair value of $198,546 (See Note 6).

Following the assignment of debt of $27,300 in August 2015, Coventry made a conversion of 5,114,285 shares of the company’s restricted stock satisfying the Note in full with a fair value of $51,065 during 2016 (See Note 6).

Following the assignment of debt of $28,929 in December 2015, Coventry made a conversion of 6,602,142 shares of the company’s restricted stock satisfying the Note in full with a fair value of $73,441 during 2016 (See Note 6).

24

During the year ended December 31, 2015 and nine months ended September 30, 2016, Vista made conversions for a total2016. The remaining unrecognized compensation cost of 1,456,440 and 10,029,578 satisfying $60,870 and $79,920 of$1,695 related to non–vested equity–based compensation will be recognized over the note with a fair value of $131,125 and $189,371, respectively (See Note 6).

During January through June, 2016, the Note holder made a conversion of total of 23,548,252 shares of stocks satisfying $113,896 of notes payable of $275,000 originated in April 2015 with a fair value of $321,805(See Note 6).

During March 2016, the Company issued a total of 1,000,000 shares of the company’s restricted stock to settle the outstanding debt of $10,000 with accrued interest of $1,262 with the Note holder. The shares were recorded at a fair value of $19,900 or $0.0199 per share (See Note 4 and 6). The Company recorded a loss of $8,638 during the nine months ended September 30, 2016.remaining vesting period.

Common Stock Issued for Debt Modification

During July 2016, the CompanyMarch 2017, we issued a total of 36,00050,000 restricted shares to a Note holder due to the default on repayment of the promissoryconvertible note of $100,000.$150,000 originated in August 2016(See Note 5). The shares were valued at fair value of $275.

In March 2017, the amendment was signed to waive Labrys’ obligation to return the 4,532,810 Returnable Shares issued as a commitment fee (See Note 5).

During January 2017, we issued a total of 300,000 restricted shares to a Note holder due to the default on repayment of the convertible note of $50,000 originated in July 2016 (See Note 5). The shares were valued at fair value of $2,520.

Common Stock Issued with Indebtedness

In January 2017, in connection with the restatement of a convertible note payable of $56,567, we issued 300,000 shares of our common stock with a fair value of $342$2,413 (See Note 6(2))5).

8.Common Stock Issued for Conversion of Debt

During March 2017, Coventry received 15,500,000 shares of our restricted stock with a fair value of $78,909 upon a $43,400 partial conversion of the $100,000 Note (See Note 5).

During March, 2017, the Note holder received 8,000,000 shares with a fair value of $31,168 upon conversion of $17,117 of the principal balance and $1,000 of accrued interest for the $45,000 Note originated in August 2016 (See Note 5).

During February and March 2017, LG received 20,971,375 of our restricted stock with a fair value of $94,857 upon conversion of the $52,500 Note originated in August 2016 (See Note 5).

18

During February and March 2017, the Note received 19,573,258 of our restricted stock with a fair value of $98,147 upon conversion of the $51,000 Note originated in August 2016 (See Note 5).

During January 2017, Greentree received 5,980,861 shares of our restricted stock with a fair value of $47,569 upon conversion of the remaining $25,000 of the $50,000 Note (See Note 5).

7.     STOCK OPTIONS AND WARRANTS

Common Stock Warrants

On March 31, 2017, in connection with the issuance of an $80,000, we granted three–year warrants to purchase an aggregate of 6,000,000 shares of our common stock at an exercise price of $0.005 per share. The warrants were valued at their fair value of $24,017 using the Black–Scholes method on March 31, 2017. The warrants expire on March 30, 2020 (See Note 5).

On March 3, 2016, in connection with the issuance of a convertible note, the Companywe granted five-yearfive–year warrants to purchase an aggregate of 2,500,000 shares of the Company’sour common stock at an exercise price of $0.03 per share. The warrants were valued at their fair value of $48,774 and $19,021$9,715 using the Black-ScholesBlack–Scholes method onat March 3, 2016 and September 30, 2016, respectively.31, 2017. The warrants expire on March 3, 2021(See Note 6).2021.

On April 4, 2016, in connection with the issuance of convertible notes, the Companywe granted three-yearthree–year warrants to purchase an aggregate of 4,000,000 shares of the Company’sour common stock at an exercise price of $0.05 per share. The warrants were valued at their fair value of $61,544 and $25,196$10,128 using the Black-ScholesBlack–Scholes method on April 4, 2016 and September 30, 2016, respectively.at March 31, 2017. The warrants expire on April 4, 2019(See Note 6).2019.

From time to time,During July 2015, we issue warrants to purchase our common stock. These warrants have been issued for cash in conjunction with the private placementa total of 4,400,000 shares of our common stock.restricted stock and 4,400,000 warrants to settle the outstanding commissions’ payable in aggregate of $59,000 with TCN. The shares were valued at $0.185 per share and the warrants were valued at $0.1009 per share. The warrants expired on June 30, 2016. During October, 2016, warrants were re–priced from exercise prices from $0.20 per share to an exercise price of $0.05 per share, the warrants expired on March 31, 2017.

25During October, 2016, we repriced 19,685,000 from exercise prices from $0.20 per share to an exercise price of $0.05 per share, the warrants expired on March 31, 2017.

During March 2016, the Companywe issued 916,667 warrants to purchase common stock at an exercise price of $0.10 per share. The warrants expireexpired on March 31, 2017 (See Note 7).

A summary of warrants outstanding in conjunction with private placements of common stock were as follows during the nine three–months ended September 30, 2016:March 31, 2017:

The following table summarizes information about fixed-pricefixed–price warrants outstanding as of September 30, 2016March 31, 2017:

As of September 30, 2016,19

At March 31, 2017, the aggregate intrinsic value of all stock options and warrants outstanding and expected to vest was $0. The intrinsic value of each option share is the difference between the fair value of our common stock and the exercise price of such option share to the extent it is “in-the-money”“in–the–money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-moneyin–the–money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $0.0080,$0.0044, closing stock price of our common stock on September 30, 2016.March 31, 2017. There were no in-the-moneyin–the–money warrants at September 30, 2016.March 31, 2017.

9.     COMMITMENTS AND CONTINGENCIES

Operating Leases

In February 2013, Nutra Pharmawe entered into an operating lease for monthly payments of approximately $3,500 for three years and expired in January 2016. In February 2016, Nutra Pharmawe entered into a new operating lease for monthly payments of approximately $3,200 for three years and expires in February 2019.  Our subsidiary ReceptoPharm leases a lab and renewed its operating lease agreement for five years in July of 2012. The lease requiresrequiring monthly payments of approximately $6,400 from August 1, 2012 through August 1, 2017. The lease was renewed in February 2016 for another five years beginningand expires August 1, 2017.

Future minimum payments under these lease agreements including the extension period, are approximately as follows:

We incurred rentRent expense of $87,280 and $94,329 during nine for the three–months ended September 30,March 31, 2017 and 2016 approximated $29,460 and 2015,$25,605, respectively.

The Company sublets approximately 3779 square feet of its space to Nationwide Laboratory Services, Inc. for one year started from April 2015. The rent for the first three months is $1,500 for the first three months, and then the rent will be increased by $100 per month until the sum of $2,200 per month is attained. During the nine months ended September 30, 2016, the Company recorded a rental income of $19,381 which included the rent and utilities. The sub-lease ended on April 30, 2016.

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Consulting Agreements

During July 2015, the Companywe signed an agreement with a consulting company to provide for consulting services for five years. In connection with the agreement, 500,000 shares of company’sour restricted common stocksstock and a one year 8% note of $50,000 with 8% interest were granted. The share wasshares were valued at $0.18 per share. The stocksshares and note payable have not been issued as of September 30, 2016. The Company hasMarch 31, 2017. We have accrued the $142, 500$142,500 in accrued expense and recorded as an equity compensation charge during the year ended December 31, 2015. The accrued balance has not changed as of September 30, 2016.

During July 2015, the Company signed an agreement with a consultant for investor relation services for two months. In connection with the agreement, 400,000 shares of company’s restricted common stocks were granted with a fair value of $84,000.   The share was valued at $0.21 per share. During August 2015, the Company signed an extension agreement with the consultant for a month. In connection with the agreement, 200,000 shares of company’s restricted common stocks were issued with a fair value of $32,000. The share was valued at $0.16 per share.  The stocks have not been issued as of September 30, 2016.  The Company has accrued the $126,000 in accrued expense and recorded as an equity compensation charge during the year ended December 31, 2015. The accrued balance has not changed as of September 30, 2016. During September 2016, the Company issued 550,000 shares of the company’s restricted stock (See Note 4 and 7) to settle the accrued expense of $126,000. The shares were valued of $4,510 or $0.0082 per share. The Company recorded a loss of $121,490 during the nine months ended September 30, 2016.

During October 2015, the Company signed an agreement with a consultant for consulting services for a year. In connection with the agreement, 2,500,000 shares of company’s restricted common stocks were granted. 1,000,000 shares of Common Stock of the Company were issued on the date of execution of the agreement. 500,000 shares of Common Stock of the Company are to be issued quarterly, beginning on the first day of the third month following the effective date. Cash payment of $3,000 is expected to be paid on a monthly basis. The 2,500,000 shares granted are valued at the end of each quarter until the consultants complete their performance in October 2016. The 2,500,000 shares granted were valued at $0.0080 per share which is the stock price at September 30, 2016. The Company has incurred an equity compensation charge of $19,167 as of September 30, 2016. The remaining unrecognized compensation cost of $833 is related to non-vested equity-based compensation. The Company has recorded the $8,000 in equity for the 1,000,000 shares issued and accrued $12,000 in accrued expense as the 1,500,000 shares of stocks granted on January 15, 2016, April 15, 2016 and July 15, 2016 have not been issued as of September 30, 2016 (See Note 7).

On March 28, 2016, the Company signed an expansion agreement with a consulting company to the original consulting agreement dated on October 15, 2015 for consulting services for twelve months for a monthly fee of $7,000. To relieve the Company's cash obligation of $36,000 per original agreement, the Company issued three convertible notes for a total of $120,000 which includes the fees due under the original agreement and the new monthly fees due under the expansion agreement. The three-year warrants to purchase 2,000,000 shares of the Company’s common stock with an exercise price of $0.05 per share were also issued (See Note 6).

Litigation

Patricia Meding, et. al. v. ReceptoPharm, Inc. f/k/a Receptogen, Inc.

On June 1, 2015, ReceptoPharm entered into a settlement agreement with Patricia Meding, a former officer and shareholder of ReceptoPharm.  The settlement relates to a lawsuit filed by Ms. Meding against ReceptoPharm (Patricia Meding, et. al. v. ReceptoPharm, Inc. f/k/a Receptogen, Inc., Index No.: 18247/06, New York Supreme Court, Queens County) in which she claimed to own certain shares of ReceptoPharm stock and claimed to be owed amounts on a series of promissory notes allegedly executed in 2001 and 2002.

The settlement agreement executed on June 1, 2015 provides that ReceptoPharm will pay Ms. Meding a total of $360,000 over 35 months. The first payment of $20,000 was made on July 1, 2015. A second payment of $20,000 was made on August 17, 2015 with 32 subsequent monthly $10,000 payments due on the 15th of every month thereafter. To date, ReceptoPharm has made all monthly payments due under the agreement.  In the event of default on any of the payments due under the settlement agreement, the settlement amount would increase by an additional $200,000.  As of September 30, 2016, the Company hasMarch 31, 2017, we have accrued the legal settlement amount at present value of $172,260$121,337 and an additional contingency of $200,000. The settlement agreement is personally guaranteed by Rik Deitsch, our CEO.

Liquid Packaging Resources, Inc. v. Nutra Pharma Corp. and Erik “Rik” Deitsch 

On April 21, 2011, Nutra Pharma Corp. and its CEO, Erik Deitsch, were named as defendants inLiquid Packaging Resources, Inc. v. Nutra Pharma Corp. and Erik “Rik” Deitsch, Superior Court of Fulton County, Georgia, Civil Action No. 2011-CV-199562.2011–CV–199562. Liquid Packaging Resources, Inc. (“LPR”) claimed that Nutra Pharma Corp. and Mr. Deitsch, directly or through other companies, placed orders with LPR that required LPR to purchase components from third parties. LPR sought reimbursement for those third party expenses in the amount of not less than $359,826.85 plus interest. LPR also sought punitive damages in the amount of not less than $500,000 and attorney's fees.

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Mr. Deitsch and Nutra Pharma Corp. then removed the action to the United States District Court, Northern District of Georgia, Civil Action No. 11-CV-01663-ODE.11–CV–01663–ODE. After removal, LPR amended the Complaint to assert that Nutra Pharma Corp. and Mr. Deitsch were the alter egos of the alleged other companies through whom the subject orders were placed and therefore should be considered one and the same. Mr. Deitsch and Nutra Pharma Corp.  moved to dismiss the Complaint on several grounds including statute of frauds, failure to state a claim, and jurisdiction (only for Mr. Deitsch). Mr. Deitsch and Nutra Pharma Corp. believe the suit is without merit.

After September 30, 2011, at LPR's request, the parties mediated the dispute before LPR responded to the Motion to Dismiss. At the mediation, the parties worked out an agreement whereby Nutra Pharma Corp. would purchase from LPR the components LPR purchased from third parties at an amount slightly less than the principal amount of the suit and on terms acceptable to us. The agreed price was $350,000 payable over a 7 monthsmonth period in equal $50,000 amounts. This agreement was reached by us because it provided tangible value in exchange for the purchase price rather than incurring the expense of litigation, which would likely be substantial and not recouped. While Nutra Pharma Corp.  had counterclaims we could assert, we believe this was a practical resolution. The settlement allowed us to take possession of the components prior to full payment and, in exchange, provided security to LPR in the form of our stock valued at $400,000 at the time of issuance. The stock can only be sold in event of a default of the payment schedule. The litigation was dismissed in August of 2011. We made the August, September and November payments (totaling $150,000) in a timely fashion. We were late for the payment due October 15, 2011 and requested an accommodation from LPR, eventually paying an extra $5,000 towards that payment. At December 31, 2011, Nutra Pharma Corp. had made total payments of $205,000 with an additional $150,000 owed. In order to allow us to skip the December payment, LPR agreed to another accommodation whereby we would pay both the December and January payment with an additional $10,000 on or before January 16, 2012. We were unable to make this payment and on January 26, 2012 signed an amended payment schedule adding an additional $15,000 for a total of $175,000 owed. Our CEO, Rik Deitsch, added additional collateral stock in a separate company that he held personally. $25,000 was paid in January, with subsequent payments of $30,000 due monthly on the 15th of March through the 15th of July, 2012. We failed to make the March payment and was subsequently called in default of the Agreement. Under the original agreement, if we are in default of the agreement, LPR has the right to sell shares of our free trading stock held in escrow by their attorney and receive cash settlements for a total amount of $450,000 representing the new total cash amount due to LPR by the Company.us.

On June 11, 2012, LPR sold their debt to Southridge Partners, LLP in an agreement to be paid out over time. In August, 2013, LPR cancelled their agreement with Southridge Partners, LLP.  As of September 30, 2016,March 31, 2017, LPR continues to hold the collateral stock. We are currently negotiating a settlement with LPR. Upon the settlement of the outstanding debt, LPR will return the collateral shares to the Company.us.

Involuntary Petition of Bankruptcy

On August 31, 2012, certain former ReceptoPharm employees and a former ReceptoPharm consultant filed a Petition for Involuntary Bankruptcy against us in the United States Bankruptcy Court, Southern District of Florida. The Petitioners originally claimed they were owed $990,927 from Nutra Pharma in the form of accrued wages and promissory notes, but amended their claim to $816,662 in a subsequent filing. In response to the Petition, we filed a motion to dismiss the action. On September 30, 2013, the Company entered into a settlement agreement with the Petitioners and the bankruptcy action was dismissed. In full and final satisfaction of all claims, the settlement agreement provides for payment to the Petitioners of a total sum of $350,000. As of September 30, 2016,March 31, 2017, $35,000 has been paid. As set forth below, the Petitioners have now filed a complaint in the 17^th Judicial Circuit in and for Broward County, Florida to recover amounts allegedly owing to them under the settlement agreement.

Paul Reid et al. v. Nutra Pharma Corp. et al.

On August 26, 2016, certain of former ReceptoPharm employees and a former ReceptoPharm consultant filed a lawsuit in the 17^th Judicial Circuit in and for Broward County, Florida against Nutra Pharma and Receptopharm to recover amounts allegedly owing to them under the settlement agreement reached in the involuntary bankruptcy action referenced above.  On September 28, 2016, Nutra Pharma and Receptopharm filed a motion to dismiss the lawsuit.  That motion is currently pending. 

Nutra Pharma and Receptopharm believe that the lawsuit is without merit and also intend to file a counterclaim against these former employees/consultants for misconduct that Nutra Pharma discovered after execution of the aforementioned settlement agreement.  We intend to vigorously contest this matter.

During December 2015, the Petitioner's claims and accruals for a total of $1,085,468 that have passed the statute of limitation were written off, included in the amount was the accrued salary of $815,747, officer’s loan and accrued interest for $129,466, salary and payroll tax payable of $140,255. Since the Petitioners can only reinforce the settlement amount due to passing of statute of limitation, the Company haswe have accrued the settlement for $315,000 and recorded the gain on settlement of $770,968 in other income for the year ended December 31, 2015. The accrued balance for the settlement has not changed as of September 30, 2016.March 31, 2017.

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10.     SUBSEQUENT EVENTS

Promissory Notes payableNote

In OctoberDuring April 2017, the Note of $150,000 originated in August 2016 the Company issuedwith accrued interest $30,250 was restated with a Promissoryprincipal balance of $180,250 (See Note in the amount of $50,000 to a non-related party.5). The note carriesNote bears monthly interest at 2% monthlya rate of 2.5% and is due on the date that isin six months from the execution and fundingrestatement of the note. In connection with the issuancerestatement of this promissory note, the Companywe issued 600,000500,000 shares of the Company'sour common stocks.stock.

On November 14,During April 2017, the principal and accrued interest of the two Promissory Notes originated in August 2016 the Company repaid the loantotaling $200,000 ($100,000 each) to a company owned by one of $150,000 originated on May 27, 2016 (Seeour directors’ were restated. The restated principal balance of $201,818 bears interest at 12% annually and is due October 12, 2017(See Note 6)4).

On November 14, 2016,During April 2017, we issued a Convertible Promissory Note for $33,000 to a non–related party. The note bears interest at 12% annually and is due January 30, 2018. The Holder has the Company received a loan for a total of $150,000 withright to convert the loan, origination feebeginning on the date which is one hundred eighty (180) days following the date of $7,875 fromthe Note, into common stock at a non-related party.price of sixty percent (60%) of the average of the three lowest trading prices of our Common Stock for the fifteen trading days preceding the conversion date.

Due to Officer

Subsequent toMarch 31, 2017 throughMay 15, 2017, we borrowed$39,150and repaid$13,000 to our President, RikDeitsch and the companies owned by him. The loan is repaid through scheduled payments through June 18, 2018 along with interest on average 15% annum.amount owed to Mr. Deitsch and his companies atMay 15, 2017 was$126,043 (See Note 4).  

Common Stock Issued for Debt Conversions

In October and November 2016, the Note holder made conversions of a total of 9,886,525 shares satisfying the remaining of $41,820 of the note payable of $60,870 originated in February 2016.

In October 2016, Greentree made conversions of a total of 8,603,469 shares satisfying the note payable and accrued interest of $42,557 in full for the $40,000 originated inDuring April 2016 (See Note 6).

In October 2016, the Note holder2017, Labry made a conversion of 8,000,00013,631,346 shares of stock satisfying $33,600$21,266 of the note payableprincipal balance and $2,930 of $100,000accrued interest for the Note of $66,500 originated in March 2016.

Warrants

During October,December 2016 19,685,000 warrants expired unexercised and were re-priced from exercise prices from $0.20 per share to an exercise price of $0.05 per share, the expiration dates were extended to March 31, 2017.

Due to officer

Subsequent toSeptember 30, 2016 and throughNovember 21, 2016, the Company borrowed$130,000 and repaid$26,500 to its President, RikDeitsch and the Companies owned by him. The amount owed to Mr. Deitsch and its Companies atNovember 21, 2016 was$146,089 (See Note 5).

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Our business during the thirdfirst quarter of 20162017 has focused upon marketing our homeopathic drugs for the treatment of pain:

·

Nyloxin^® (Stage 2 Pain)

·

Nyloxin^® Extra Strength (Stage 3 Pain)

·

Pet Pain-Away™

We will continue this focus during the remainder of 2016.2017.

During our thirdfirst quarter of 20162017 and thereafter, the following has occurred:

On July 27, 2016,February 15, 2017 we announced that we were featured in an interview aired on Miami’s NBC News affiliate (www.tinyurl.com/NyloxinNBC). The interview took place at our lab facility as well as at the additionsnake farm where our cobras are housed. Our CEO, Rik Deitsch, outlined the history and use of Dan Oran to our Board of Directors.

Dan Oran is 50 years of age. He has more than 27 years of experience as a successful business ownercobra venom in the treatment of pain and other diseases, while focusing on the availability of Nyloxin and Pet Pain-Away. The interview was subsequently distributed nationally throughout US and Israel with extensive knowledge of finances, sales and cost management skills. Mr. Oran is also a seasoned Real Estate investor who owns and manages both commercial and residential properties in South Florida and abroad. Since 2014 he has been the brand builder and consultant for theCybertec Group, a communications technology company. From 2008 through 2014 he owned and managedAboulafia Since 1879, a manufacturer and distributor of electronics equipment. From 1999 through 2008, Mr. Oran owned and managedLav Distributors, a distributor of electronics equipment. Mr. Oran was raised and educated in Israel, moving to the United States in 1990.NBC affiliates.

On July 27, 2016,February 22, 2017 we announced the additionthat Global Small Caps had initiated coverage of Dale Vanderputten, PhD as our Chief Scientific Officer (CSO).

Dale Vanderputten, PhDcompany, including operations and overall shareholder value. The report is 57 years of age. He has been CEO and CSO of the biotechnology companyOmnia Biologics, Inc., headquartered in Rockville, MD since 2003.  From 1999 through 2003 he was COO and CSO of cancer gene therapy companyDirectGene, Inc., headquartered in Annapolis, MD. Dr VanderPutten has held scientific and technology development positions in government, academia and industry from 1980 through 1999 including at the National Institutes of Health, University of Maryland, andProteome Sciences, plc.Dr. VanderPutten received a Bachelor of Sciences degree in Biology and Chemistry from the American University in Washington, DC in 1982, a PhD in Genetics from the George Washington University in 1993 and an MBA from the University of Maryland in 1996. He did his doctoral and post-doctoral training in molecular neuro-biology at the National Institutes of Health.available at: http://tinyurl.com/NPHCreport

On August 30, 2016March 14, 2017 we announced the appointment of Maj. Gen. Kenneth Dowd, US Army (Ret.)that Stockguru.com released an interview with our CEO, Rik Deitsch, through their website. The interview focused on our OTC products as Strategic Advisorwell as our mid to long-term goals for the Company's newly created 'Military & Veterans' business segment. General Dowd will support Nutra Pharma's efforts in presenting the Company's non-opiate, non-narcotic over-the-counter (OTC) pain solution, Nyloxin® to the US Militaryour future drugs for Multiple Sclerosis and the Veteran's Administration.

On September 14, 2016 we announced a manufacturing alliance with Omnia Biologics to clone and produce alpha-cobratoxin for the production of RPI-78M for upcoming clinical trials in Pediatric Multiple Sclerosis.

HIV.

Nyloxin^®/Nyloxin^® Extra Strength

We offer Nyloxin^®/Nyloxin^® Extra Strength as our over-the-counter (OTC) pain reliever that has been clinically proven to treat moderate to severe (Stage 2) chronic pain.

Nyloxin^® and Nyloxin^® Extra Strength are available as a two ounce topical gel for treating joint pain and pain associated with arthritis and repetitive stress, and as a one ounce oral spray for treating lower back pain, migraines, neck aches, shoulder pain, cramps, and neuropathic pain. Both the topical gel and oral spray are packaged and sold as a one-month supply.

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Nyloxin^® and Nyloxin^® Extra Strength offer several benefits as a pain reliever. With increasing concern about consumers using opioid and acetaminophen-based pain relievers, the Nyloxin^® products provide an alternative that does not rely on opiates or non-steroidal anti-inflammatory drugs, otherwise known as NSAIDs, for their pain relieving effects. Nyloxin^® also has a well-defined safety profile. Since the early 1930s, the active pharmaceutical ingredient (API) of Nyloxin^®, Asian cobra venom, has been studied in more than 46 human clinical studies. The data from these studies provide clinical evidence that cobra venom provides an effective treatment for pain with few side effects and has the following benefits:

·

safe and effective;

·

all natural;

·

long-acting;

·

easy to use;

·

non-narcotic;

·

non-addictive; and

·

analgesic and anti-inflammatory.

Potential side effects from the use of Nyloxin^® are rare, but may include headache, nausea, vomiting, sore throat, allergic rhinitis and coughing.

The primary difference between Nyloxin^® and Nyloxin^® Extra Strength is the dilution level of the venom. The approximate dilution levels for Nyloxin^® and Nyloxin^® Extra Strength are as follows:

Nyloxin^®

·

Topical Gel: 30 mcg/mL

·

Oral Spray: 70 mcg/mL

Nyloxin^® Extra Strength

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Topical Gel: 60 mcg/mL

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Oral Spray: 140 mcg/mL

In December 2009, we began marketing Nyloxin^® and Nyloxin^® Extra Strength at www.nyloxin.com. Both Nyloxin^® and Nyloxin^® Extra Strength are packaged in a roll-on container, squeeze bottle and as an oral spray. Additionally, Nyloxin^® topical gel is available in an 8 ounce pump bottle.

In December of 2013, we announced an agreement with MyNyloxin.com for the exclusive rights to market and distribute Nyloxin^® in the Network Marketing channel. MyNyloxin.com provides a business opportunity to their Distributors to earn commissions on the sale of our products through their Distributor groups. In January of 2014, we announced the first product shipments to the MyNyloxin Independent Entrepreneurs (MIEs). MyNyloxin conducts webinars, conference calls and live meetings to support recruitment of new MIEs as well as to provide product and business education. In April of 2014, we announced that MyNyloxin.com had signed an agreement that creates the MyNyloxin Telemarketing Division (MTD). MTD began their telemarketing campaign on April 7 to identify customers for Nyloxin^® as well as potential Distributors for MyNyloxin.com. In June of 2014, we announced that MyNyloxin had begun rolling out a national television campaign to support Nyloxin^® branding and sales. In November of 2014, MyNyloxin.com changed their name to Lumaxa.

We are currently marketing Nyloxin^® and Nyloxin^® Extra Strength as treatments for moderate to severe chronic pain. Nyloxin^® is available as an oral spray for treating back pain, neck pain, headaches, joint pain, migraines, and neuralgia and as a topical gel for treating joint pain, neck pain, arthritis pain, and pain associated with repetitive stress. Nyloxin^® Extra Strength is available as an oral spray and gel application for treating the same physical indications, but is aimed at treating the most severe (Stage 3) pain that inhibits one’s ability to function fully.

Nyloxin^® Military Strength

In December 2012, we announced the availability of Nyloxin^® Military Strength for sale to the United States Military and Veteran's Administration. Over the past few years, the U.S. Department of Defense has been reporting an increase in the use and abuse of prescription medications, particularly opiates. In 2009, close to 3.8 million prescriptions for pain relievers were written in the military. This staggering number was more than a 400% increase from the number of prescriptions written in the military in 2001. But prescription drugs are not the only issue. The most common and seemingly harmless way to treat pain is with non steroidal, anti-inflammatory drugs (NSAIDS). But there are risks. Overuse can cause nausea, vomiting, diarrhea, heartburn, ulcers and internal

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bleeding. In severe cases chest pain, heart failure, kidney dysfunction and life-threatening allergic reactions can occur. It is reported that approximately 7,600 people in America die from NSAID use and some 78,000 are hospitalized. Ibuprofen, also an NSAID has been of particular concern in the military. The terms “Ranger Candy” and “Military Candy” refer to the service men and women who are said to use 800mg doses of Ibuprofen to control their pain. But when taking anti-inflammatory Ibuprofen in high doses for chronic pain, there is potential for critical health risks; abuse can lead to serious stomach problems, internal bleeding and even kidney failure. There are significantly greater health risks when abuse of this drug is combined with alcohol intake. Our goal is that with Nyloxin^®, we can greatly reduce the instances of opiate abuse and overuse of NSAIDS in high risk groups like the US military. The Nyloxin^® Military Strength represents the strongest version of Nyloxin^® available and is approximately twice as strong as Nyloxin^® Extra Strength. We are working with outside consultants to register Nyloxin^® Military Strength and the other Nyloxin^® products for sale to the US government and the various arms of the military as well as the Veteran's Administration. To date, we have been unable to get our products onto the Federal Supply Schedule for eventual sales to governmental agencies or to the US Military, but will continue these efforts. In February of 2016, we announced the addition of Thomas W. Northrop as the Company'sSenior Commercial Development Officer. Mr. Northrop, working with Tri-State Capital Partners, LLC, a New York-based management advisory & investment firm, will be spearheading our efforts to gain approval with the US government buying agencies and the Veterans Administration. On August 30, 2016 we announced the appointment of Maj. Gen. Kenneth Dowd, US Army (Ret.) asStrategic Advisor for the Company's newly created 'Military & Veterans' business segment. General Dowd will support Nutra Pharma's efforts in presenting Nyloxin^® to the US Military and the Veteran's Administration.

International Sales

We are pursuing international drug registrations in Canada, Mexico, India, Central and South America and Europe. Since European rules for homeopathic drugs are different than the rules in the US, we cannot estimate when this process will be completed. On March 25, 2013 we announced the publication of our patent and trademark for Nyloxin^® in India.  We are currently working with potential Distributors in India. In February, 2015 we completed the first test shipments to India. We plan to begin active sales and marketing in India in early 2017.FY2017.

On April 30, 2015 we announced that we had received notification of the acceptance of Nyloxin^® by the China International Exchange and Promotive Association for Medical and Healthcare (CPAM). This process was successfully conducted by the Vancouver Commodities Group (VCG) that had been hired by Nutra Pharma to begin the process of identifying and vetting potential distributors in China. With this approval, we have been working with several groups to find a large distributor for our products in the People's Republic of China. We expect to announce a distribution partner in early 2017.FY2017.

On May 14, 2015 we announced that we had engaged the Nature's Clinic to begin the process of regulatory approval of our Company's Over-the-Counter pain drug, Nyloxin^® for marketing and distribution in Canada. The Nature’s Clinic has already begun setting up their Chatham, Ontario warehouse and expect to complete the approval process to begin distributing Nyloxin^® by mid-2017.

Additionally, we plan to complete several human clinical studies aimed at comparing the ability of Nyloxin^® Extra Strength to replace prescription pain relievers. We have provided protocols to several hospitals and will provide details and timelines when those protocols have been accepted. We cannot provide any timeline for these studies until adequate financing is available.

To date, our marketing efforts have been limited due to lack of funding. As sales increase, we plan to begin marketing more aggressively to increase the sales and awareness of our products.

Pet Pain-Away™

During June of 2013, we announced the launch of our new homeopathic formula for the treatment of chronic pain in companion animals, Pet Pain-Away™. Pet Pain-Away™ is a homeopathic, non-narcotic, non-addictive, over-the-counter pain reliever, primarily aimed at treating moderate to severe chronic pain in companion animals. It is specifically indicated to treat pain from hip dysplasia, arthritis pain, joint pain, and general chronic pain in dogs and cats. The initial product run was completed in December of 2014 and launched through Lumaxa Distributors on December 19, 2014.

In May of 2016, we signed a license agreement to begin the process of creating an infomercial (Direct Response) campaign for Pet Pain-Away™. We expectIn November of 2016, we announced the license agreement with DEG Productions for the marketing and distribution of Pet Pain-Away globally. DEG has the ability to earn the exclusive distribution rights for the product by reaching certain sales milestones. DEG has created their own website (www.getpetpainaway.com) and began airing commercials to start airing by the endin December of 2016. DEG is expected to ramp up their sales and marketing of Pet Pain-Away throughout 2017.

Equine Nyloxin^®

In October of 2013, we announced that we were in the process of launching the newest addition to our line of homeopathic treatments for chronic pain,Equine Nyloxin®, a topical therapy for horses that is packaged as a two piece kit:Nyloxin® Topical Gel comprises Step 1 and a solution of DMSO (dimethylsulfoxide) comprises Step 2. We have been working with trainers and veterinarians in the equine industry and have already identified distributors for the product. TheEquine Nyloxin®represents the Company's first topical solution for the animal market. The product is now undergoing market evaluation and is expected to be commercially available by mid-2017.

Drug Discovery and Pipeline

Nutra Pharma is developing proprietary therapeutic protein products for the biologics market. The Company has two leading drug candidates: RPI-MN and RPI-78M.

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RPI-MN