GLFH Galenfeha Inc (PK)

Galenfeha, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

NOTE 1 - NATURE OF BUSINESS

Galenfeha was incorporated on March 14, 2013 in the state of Nevada. Our corporate office is located at 420 Throckmorton Street, Suite 200, Ft. Worth Texas 76102, and our telephone number is 1-817-945-6448. Our website is www.galenfeha.com.

We are engineering, product development, and manufacturing company that generates revenue by receiving royalties from products we developed, providing engineering, regulatory, and business consulting services across numerous disciplines, such as aerospace, automotive, and medical, and by making investments in companies that our management team feels to be undervalued. Our objective is to be a vehicle that assembles a team and finances the development of groundbreaking new technology that is resistant to adverse economic and market fluctuations.

With the recent sale of our stored energy division, and our oil and gas equipment division, we have moved the Company in the direction our founder originally envisioned.

A condensed version of our 2018 Statement of Work is as follows:

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a working capital deficit and has incurred net losses and net cash used in operations since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to achieve a level of profitability. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States (See Note 2 regarding the assumption that the Company is a “going concern”). Certain prior period amounts have been reclassified to conform to current period presentation.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Daylight Pumps, Inc. All significant inter-company accounts and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions also affect the reported amounts of revenues, costs, and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

REVENUE RECOGNITION

The Company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed and determinable price with a reasonable assurance of collection, passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations, pursuant to the guidance provided by Accounting Standards Codification (“ASC”) Topic 605. For sales to all customers, including manufacturer representatives, distributors or their third-party customers, these criteria are met at the time product is delivered. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations are fulfilled. In addition, judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured. The Company estimates customer product returns based on historical return patterns and reduces sales and cost of sales accordingly.

During the year ended December 31, 2017, 100% of royalty income received was from single related party customer.

During the year ended December 31, 2016, 100% of sales were to a single related party customer. These revenue generating activities have been discontinued (see Note 16).

CASH AND CASH EQUIVALENTS

All cash, other than held in escrow, is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents. Cash at December 31, 2017 and December 31, 2016 was $469 and $129,973, respectively.

ACCOUNTS RECEIVABLE

Accounts receivable represents the uncollected portion of amounts recorded as revenues. Management performs periodic analyses to evaluate all outstanding accounts receivable to estimate an allowance for doubtful accounts that may not be collectible, based on the best facts available to management. Management considers historical collection patterns, accounts receivable aging trends and specific identification of disputed invoices in its analyses. After all reasonable attempts to collect a receivable have failed, the receivable is directly written off. As of December 31, 2017 and December 31, 2016, the balance of the allowance for doubtful accounts was $0 and $0, respectively.

As of December 31, 2017, the Company didn’t have any outstanding accounts receivable. As of December 31, 2016, accounts receivable from a single related party customer comprised 100% of accounts receivable.

An impairment loss of $44,825 was recognized against inventory assets held for sale during the year ended December 31, 2016.

PROPERTY AND INTANGIBLE ASSETS

Property, plant and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to ten years for furniture, fixtures, and equipment and forty years for improvements. Total depreciation and amortization expense related to property and equipment was $0 and $25,711 for the years ended December 31, 2017 and 2016. Expenditures for repairs and maintenance are charged to expense as incurred. Intangible asset consisted of a customer list acquired in the Daylight Pumps acquisition. Amortization is computed using the straight-line method over the estimated useful life of three years. Total amortization expense related to intangible asset was $0 and total depreciation expense related to property and equipment was $0 for the year ended December 31, 2017. Total amortization expense related to intangible asset was $7,599 and total depreciation expense related to property and equipment was $18,112 for the year ended December 31, 2016.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. An impairment loss is recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. When impairment is identified, the carrying amount of the asset is reduced to its estimated fair value. Assets to be disposed of are recorded at the lower of net book value or fair market value less cost to sell at the date management commits to a plan of disposal. There were impairments of $0 and $9,271 to long-lived assets for the Company’s years ended December 31, 2017 and 2016.

GOODWILL

Goodwill is carried at cost and is not amortized. The Company tests goodwill for impairment on an annual basis at the end of each fiscal year, relying on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and marketplace date. Company management uses its judgment in assessing whether goodwill has become impaired between annual impairment tests according to specifications set forth in ASC 350. The Company completed an evaluation of goodwill at December 31, 2017 and 2016 and recognized an impairment loss of $0 and $389,839, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs, predominately internal labor costs and costs of materials, are charged to expense when incurred. The Company expensed research and development costs of $3,788 and $0 for the years ended December 31, 2017 and 2016, respectively.

ADVERTISING EXPENSES

Advertising expenses are expensed as incurred. The Company expensed advertising costs of $1,225 and $9,478 for the years ended December 31, 2017 and 2016, respectively.

SHIPPING AND HANDLING CHARGES

The Company incurs costs related to shipping and handling of its manufactured products. These costs are expensed as incurred as a component of cost of sales. Shipping and handling charges related to the receipt of raw materials are also incurred, which are recorded as a cost of the related inventory.

DEFERRED INCOME TAXES AND VALUATION ALLOWANCE

The Company accounts for income taxes under FASB ASC 740 Topic “Income Taxes.” Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets were recognized at December 31, 2017 and 2016.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per share is calculated in accordance with FASB ASC 260 topic, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.

Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at December 31, 2017 and 2016. During the years ended December 31, 2017 and 2016, the Company excluded 0 and 300,000 options, respectively, from the calculation of diluted loss per share as their inclusion would have been anti-dilutive.

FAIR VALUE ACCOUNTING

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC 820, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company utilized level 3 inputs to estimate the fair value of its derivative instruments using the Black-Scholes Option Pricing Model. There were no outstanding assets or liabilities measured on a recurring basis at December 31, 2017 or 2016 other than marketable securities (see note 5).

SHARE-BASED EXPENSES

FASB ASC 718 “Compensation – Stock Compensation” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights.

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, “Equity – Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

Aggregate share-based expenses (including options and common stock) for the years ending December 31, 2017 and 2016 were $(12,750) and $(11,629) respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Management does not expect the adoption of any recently issued accounting pronouncements to have a material impact on the Company’s present or future financial statements.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, ranging from three to forty years.

Depreciation expense related to property and equipment was $0 and $18,112 for the years ended December 31, 2017 and 2016, respectively.

During the year ended December 31, 2016, the Company disposed all of its manufacturing assets, furniture and equipment, and leasehold improvements when the Company sold its stored energy division to Fleaux Services of Louisiana, LLC, a related party. All of the manufacturing assets, furniture and equipment, and leasehold improvements were on hand and used at the manufacturing facility in Shreveport, Louisiana. As of December 31, 2016 the Company had closed this office and terminated any leases relating these facilities.

NOTE 5 – INVESTMENTS

Marketable securities are accounted for on a specific identification basis. As of December 31, 2017 and 2016, we held available for sale marketable securities with an aggregate fair value of $54,495 and $0 respectively. As of December 31, 2017, all of our marketable securities were invested in publicly traded equity holdings. Marketable securities were classified as current based on the percentage of the equity controlled by the Company as well as our intended use of the assets. The Company recognized unrealized gains, for the twelve months ended December 31, 2017 and 2016 in the amounts of $1,003 and $0, respectively. The Company recognized realized gains, for the twelve months ended December 31, 2017 and 2016 in the amounts of $9,656 and $0, respectively.

The Company's assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 at December 31, 2017, was as follows:

During twelve months ended December 31, 2017, the Company raised a total of $49,805 from margin loan associate with its brokerage account and repaid $49,805 during the same period. As of December 31, 2017, the company has a $0 balance in this margin loan account.

NOTE 6 – NOTES PAYABLE

On May 12, 2016, the Company incurred a loan of $5,625 relating to the renewal of their commercial general liability insurance. The note has an interest rate of 8.00%, payable in payments of $583 for 10 months. Additionally in May of 2016, the Company incurred a loan of $5,746 relating to the renewal of their workers compensation, commercial property, and commercial automobile insurance. The loan balance increased by $6,798 on September 27, 2016 due to an additional workers compensation assessment after auditing the prior payroll period. The note has an interest rate of 0.00%, payable in payments of $936, $1,223, $599, and $7.669 in months one, two, three and four, respectively, and $509 per month for the remaining four months. The Company has cancelled all insurance policies financed under these agreements and the outstanding balance on these finance agreements was $0 as of December 31, 2017 and 2016.

On May 12, 2016, the Company entered into a Promissory Note Agreement with Diane Moore, a related party, in the amount of $100,000. The note bears an interest rate of 5% per annum until the balance is paid in full. Repayment of the loan is due on or before December 31, 2016. The note was paid in full on November 16, 2016 leaving a balance due of $0 as of December 31, 2016, and the holder agreed to forego any accrued interest due under the terms of the note.

On August 23, 2016, the Company entered into a Promissory Note Agreement with Kevin L. Wilson, in the amount of $350,000. The note bears an interest rate of 11 ½ % per annum from the date until the principal is paid in full. This note may be prepaid in whole or in part, without penalty. All outstanding principal, interest and fees shall be due and payable on or before August 23, 2017. As of December 31, 2016, the principal and interest due on the note is $364,336 (the accrued interest of $14,336 is presented as accounts payable in the consolidated balance sheet). This note was assumed by the purchaser in the sale of the Company’s Daylight Pumps division. It is classified as liabilities held for sale as of December 31, 2016. This note was assumed by the purchaser of the pumps division on March 9, 2017. The total amount of accrued interest due of $20,125 under the note was paid in full by the purchaser in the sale of the Company’s Daylight Pumps division.

NOTE 7 – CONVERTIBLE LOANS

As of November 4, 2016, the Company had terminated and extinguished all of the convertible notes the Company entered into during the first and second quarters of 2016.

February 2016 Note

Effective February 29, 2016 the Company entered into a Convertible Promissory Note (“Vista Note”) with Vista Capital Investments, LLC pursuant to which the Company issued Vista Capital Investments, LLC a convertible note in the amount of $275,000 with an original issue discount in the amount of $25,000. The principal amount due Vista Capital Investments, LLC is based on the consideration paid. The maturity date is two years from the effective date of each payment. On February 29, 2016 the Company received consideration of $75,000 for which an original issue discount of $7,500 was recorded. In addition, the Company recognized a discount of $5,625 on fees paid upon entering into this agreement and recognized accrued interest under the Vista Note totaling $16,500. There were no additional borrowings under the Vista Note during the twelve months ended December 31, 2017 and 2016. The Vista Note carries an interest rate of 6% which shall be applied on the issuance date to the original principal amount.

The Vista Note provides Vista Capital Investments, LLC the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 70% of the lowest trade price in the 25 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 9) an additional discount of $72,775 was recorded. On September 1, 2016 Vista converted $9,951 of the Vista Convertible Note into a total of 790,000 shares of Common Stock at a fair value of $0.01260 per share. On September 28, 2016 Vista converted $10,200 of the Vista Convertible Note into a total of 2,000,000 shares of Common Stock at a fair value of $0.0051 per share. See Note 9.

Amortization of the debt discount totaled $102,400 for the twelve months ended December 31, 2016 and $0 during December 31, 2017. The principal balance due, net of the amortized discount under the Vista Note was $0 at December 31, 2017 and 2016.

March 2016 Note

Effective March 2, 2016 the Company entered into a Convertible Promissory Note (“JMJ Note”) with JMJ Financial pursuant to which the Company issued JMJ Financial a convertible note in the amount of $500,000 with an original issue discount in the amount of $50,000. The principal amount due JMJ is based on the consideration paid. The maturity date is two years from the effective date of each payment. On March 2, 2016 the Company received consideration of $100,000 for which an original issue discount of $10,000 was recorded. In addition, the Company recognized a discount of $7,500 on fees paid upon entering into this agreement. There were no additional borrowings under the JMJ Note during the twelve months ended December 31, 2016. If the Company doesn’t repay the JMJ Note on or before 90 days from the effective date the Company may not make further payments on this JMJ Note prior to the maturity date and a one-time interest charge of 12% will be applied to the principal amount. Since no payments were made on the note on or before 90 days from the effective date of the note, accrued interest due was recorded in the amount of $13,200 on June 1, 2016 which shall be applied to the original principal balance. Interest paid under the JMJ Note totaled $17,672 at December 31, 2016.

The JMJ Note provides JMJ Financial the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 25 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 9) an additional discount of $96,374 was recorded. On September 12, 2016 JMJ converted $8,820 of the JMJ Convertible Note into a total of 700,000 shares of Common Stock at a fair value of $0.01260 per share. On September 21, 2016 JMJ converted $9,000 of the JMJ Convertible Note into a total of 750,000 shares of Common Stock at a fair value of $0.01200 per share. On September 28, 2016 JMJ converted $7,344 of the JMJ Convertible Note into a total of 1,200,000 shares of Common Stock at a fair value of $0.006120 per share. On October 5, 2016 JMJ converted $7,800 of the March 2016 JMJ Convertible Note into a total of 1,300,000 shares of Common Stock at a fair value of $0.006000 per share. On October 18, 2016 JMJ converted $9,000 of the March 2016 JMJ Convertible Note into a total of 1,500,000 shares of Common Stock at a fair value of $0.006000 per share. On October 25, 2016 JMJ converted $10,152 of the March 2016 JMJ Convertible Note into a total of 1,800,000 shares of Common Stock at a fair value of $0.005640 per share. See Note 9.

Amortization of the debt discount totaled $142,116 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the JMJ Note was $0 at December 31, 2017 and 2016.

April 2016 Note

Effective April 22, 2016 the Company entered into a Convertible Promissory Note (“Auctus Note”) with Auctus Fund, LLC pursuant to which the Company issued Auctus Fund, LLC a convertible note in the amount of $75,000. The maturity date is January 22, 2017. On April 22, 2016 the Company received consideration of $75,000. In addition, the Company recognized a discount of $6,750 on fees paid upon entering into this agreement. The Auctus Note carries an interest rate of 10% which shall be applied on the issuance date to the original principal amount. Interest paid under the Auctus Note totaled $17,672 for the twelve months ended December 31, 2016.

The Auctus Note provides Auctus Fund, LLC the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 25 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 9) an additional discount of $62,625 was recorded. Amortization of the debt discount totaled $75,000 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the Auctus Note was $0 at December 31, 2017 and 2016.

May 2016 Note

Effective April 18, 2016 the Company entered into a Convertible Promissory Note (“Adar Note”) with Adar Bays, LLC pursuant to which the Company issued Adar Bays, LLC a convertible note in the amount of $52,500 with an original issue discount in the amount of $2,500. The maturity date is April 18, 2017. On May 12, 2016 the Company received consideration of $50,000 for which an original issue discount of $2,500 was recorded. In addition, the Company recognized a discount of $6,250 on fees paid upon entering into this agreement. The Adar Note carries an interest rate of 8% which shall be applied on the issuance date to the original principal amount. Interest paid under the Adar Note totaled $27,207 for the twelve months ended December 31, 2016.

The Adar Note provides Adar Bays, LLC the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 20 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. As a result of the derivatives calculation (see Note 9) an additional discount of $39,550 was recorded. Amortization of the debt discount totaled $52,500 for the twelve months ended December 31, 2016. The principal balance due, net of the amortized discount under the Adar Note was $0 at December 31, 2017 and 2016.

June 2017 Note

Effective June 8, 2017 the Company entered into a Convertible Promissory Note (“Power Up Note One”) with Power Up Lending Group, Ltd. pursuant to which the Company issued Power Up Lending Group, Ltd. a convertible note in the amount of $43,000. The maturity date is March 20, 2018.

On June 8, 2017 the Company received consideration of $40,000. In addition, the Company paid legal fees of $3,000 associated with the entering into this agreement and thus recognized a liability of $43,000 associated with the Power Up Note One. The Company recognized a discount of $3,000 on fees paid upon entering into this agreement. There were no additional borrowings under the Power Up Note One during the twelve months ended December 31, 2017. The Power Up Note carries an interest rate of 12% per annum from the Issue Date until the principal amount becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. Any amount of principal or interest on the Power Up Note which is not paid when due shall bear interest at the rate of 22% per annum from the due date thereof until the same is paid. Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. Since no payments were made on this note on or before 180 days from the effective date of the note, accrued interest due was recorded in the amount of $4,029 on December 10, 2017. Interest paid under the Power Up Note One totaled $0 at December 31, 2017. The note was declared in default on November 20, 2017 with a default penalty of $21,500 added onto the principal. The default penalty has been accounted for as interest expense as of December 31, 2017.

The Power Up Note provides Power Up Lending Group, Ltd. the right, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 15 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. Power Up Lending Group, Ltd. shall have the right to convert at any time during the period beginning on the date which is one hundred eighty days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, each in respect of the remaining outstanding principal amount of this Note. As a result of the derivatives calculation (see Note 9) an additional discount of $53,471 was recorded. On December 13, 2017, Power Up Lending converted $8,000 of the Power Up Note One into a total of 740,741 shares of Common Stock at a fair value of $0.0108 per share. On December 20, 2017, Power Up Lending converted $13,000 of the Power Lending Note One into a total of 2,166,667 shares of Common Stock at a fair value of $0.006 per share.

Amortization of the debt discount totaled $17,149 for the twelve months ended December 31, 2017. The principal balance due under the Power Up Lending Note One was $43,500 at December 31, 2017.

July 2017 Note

Effective July 5, 2017 the Company entered into a Convertible Promissory Note (“Power Up Note Two”) with Power Up Lending Group, Ltd. pursuant to which the Company issued Power Up Lending Group, Ltd. a convertible note in the amount of $33,000. The maturity date is March 20, 2018.

On July 5, 2017 the Company received consideration of $30,000. In addition, the Company paid legal fees of $3,000 associated with the entering into this agreement and thus recognized a liability of $33,000 associated with the Power Up Note Two. The Company recognized a discount of $3,000 on fees paid upon entering into this agreement. There were no additional borrowings under the Power Up Note Two during the twelve months ended December 31, 2017. The Power Up Note Two carries an interest rate of 12% per annum from the Issue Date until the principal amount becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. Any amount of principal or interest on the Power Up Note which is not paid when due shall bear interest at the rate of 22% per annum from the due date thereof until the same is paid. Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Company recognized accrued interest due under the Power Up Note Two totaling $2,800.

The Power Up Note Two provides Power Up Lending Group, Ltd. the right, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the lowest trade price in the 15 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible. Power Up Lending Group, Ltd. shall have the right to convert at any time during the period beginning on the date which is one hundred eighty days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, each in respect of the remaining outstanding principal amount of this Note. Due to the one hundred eighty day restriction; the Company didn’t record debt discounts or derivative liabilities associated with the Power Up Note Two. The Company evaluated the note for beneficial conversion feature noting none.

Amortization of the interest expense and costs associated with this note totaled $4,024 for the twelve months ended December 31, 2017. The principal balance due under the Power Up Note Two was $33,000 at December 31, 2017.

NOTE 8 – CONVERTIBLE LOANS – RELATED PARTY

The Company issued a convertible promissory note to a related party in 2014 for $250,000 (see Note 13). The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options. The Beneficial Conversion Feature ("BCF") of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

The BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a discount on the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants and the debt on an allocated fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.

The note is convertible into common stock of the Company at $0.50 per share. The intrinsic value of the beneficial conversion feature was determined to be $125,000 at the commitment date and the discount is being amortized over the one year life of the promissory note. As of December 31, 2016, $125,000 of the discount has been amortized as interest expense. Interest amortized for the years ended December 31, 2017 and 2016 was $0 and $0, respectively. The Company repaid $125,000 under this note during the year ended December 31, 2015, and $125,000 during the year ended December 31, 2016. The outstanding balance was $0 as of December 31, 2017 and 2016.

This conversion option was accounted for as a derivative liability during the year ended December 31, 2016 resulting in a reclassification of the fair value of the derivative liability of $6,175 from equity (see Note 9).

Interest expense accrued on the convertible promissory note was $0 and $0 for the years ended December 31, 2017 and 2016, respectively. The note matured on November 7, 2015 and is currently paid in full. The note was unsecured, bearing interest at 7% per annum and was convertible into common stock at $0.50 per share. The note was paid in full on November 16, 2016 and the holder agreed to forego any accrued interest due under the terms of the note.

NOTE 9 – DERIVATIVE LIABILITY

During the year ended December 31, 2017 and 2016, the Company identified conversion features embedded within its convertible debt. The Company has determined that the conversion feature of the Notes represents an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. Therefore, the fair value of the derivative instruments have been recorded as liabilities on the balance sheet with the corresponding amount recorded as discounts to the Notes. Such discounts will be accreted from the issuance date to the maturity date of the Notes. The change in the fair value of the derivative liabilities will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. The fair values of the embedded derivative liabilities were determined using the Black-Scholes valuation model on the issuance dates with the assumptions in the table below.

The change in fair value of the Company’s derivative liabilities for the years ended December 31, 2017 and 2016 is as follows:

The gain (loss) on the change in fair value of derivative liabilities for the year ended December 31, 2017 and 2016 totaled $(18,352) and $129,054, respectively.

The fair value at the issuance and re-measurement dates for the convertible debt treated as derivative liabilities are based upon the following estimates and assumptions made by management for the year ended December 31, 2017 and 2016:

NOTE 10 - SHAREHOLDERS’ EQUITY

PREFERRED STOCK

The authorized stock of the Company consists of 20,000,000 preferred A shares and 30,000,000 preferred B shares with a par value of $0.001.

During 2016, four officers and directors of the Company exchanged 27,347,563 common shares for 27,347,563 Series B preferred shares. During the first quarter of 2017, one officer and one director exchanged 7,568,537 common shares for 7,568,537 Series A preferred shares. During the second quarter of 2017, one officer converted 818,537 of preferred stock Series A back to same number of common stock. During the third quarter of 2017, one related party exchanged 550,000 common shares for 550,000 shares of preferred stock Series A.

As of December 31, 2017, 7,300,000 shares of the Company’s preferred stock Series A were issued and outstanding. As of December 31, 2016, zero shares of the Company’s preferred stock Series A were issued and outstanding.

As of December 31, 2017 and 2016, 27,347,563 shares of the Company’s preferred stock Series B were issued and outstanding.

On December 20, 2016, shareholders of the company approved an amendment to the Bylaws for the creation of preferred stock. The preferred class of stock will consist of two (2) series, Series A, and Series B. All affiliates of the company who purchased stock during the formation of the company and who purchased stock for financing activities at prices below market will move their common shares into the Series B preferred stock, effective immediately. The Series B votes 1:1; is subject to all splits the same as common; converts back to common 1:1; and cannot be converted back to common for resale in the open market until a 30 day VWAP (volume weighted average price) of $.45 cents has been met in the Company’s public trading market. All future sales of company securities by affiliates will adhere to rules and regulations of the Commission.

Affiliates who purchased stock at offering prices that were current at the time of purchase, and affiliates who make open market purchases and are directly responsible for a merger/acquisition that brings retained earnings to the company, can convert these common shares 1:1 into Series A preferred stock. Series A votes 1:1; converts back to common 1:1; is not subject to splits in order to facilitate mergers, acquisitions, or meeting the requirements of a listed exchange; and cannot be converted back to common for resale in the open market until a 30 day VWAP of $3.50 per share has been met in the Company’s public trading market. All future sales of company securities by affiliates will adhere to rules and regulations of the Commission.

COMMON STOCK

The authorized stock of the Company consists of 150,000,000 common shares with a par value of $0.001.

As of December 31, 2017 and 2016, 64,407,408 and 69,318,537 shares of the Company’s common stock were issued and outstanding.

 In July 2016, the Company entered into an agreement for the issuance of 1,000,000 common shares for consulting services. The shares are to be transferred in four quarterly installments of two hundred fifty thousand shares on or before the fifth day of the following months: August 2016, October 2016, January 2017, and April 2017. On August 5, 2016, the Company issued 250,000 shares under this award. On October 5, 2016, the Company issued another 250,000 shares under this award. Since inception through December 31, 2016, $17,530 was expensed under this award.

On September 1, 2016, Vista converted $9,954 of the February 2016 Vista Convertible Note into a total of 790,000 shares of Common Stock at a fair value of $0.01260 per share. See Note 7.

On September 12, 2016, JMJ converted $8,820 of the March 2016 JMJ Convertible Note into a total of 700,000 shares of Common Stock at a fair value of $0.01260 per share. See Note 7.

On September 21, 2016, JMJ converted $9,000 of the March 2016 JMJ Convertible Note into a total of 750,000 shares of Common Stock at a fair value of $0.01200 per share. See Note 7.

On September 28, 2016, JMJ converted $7,344 of the March 2016JMJ Convertible Note into a total of 1,200,000 shares of Common Stock at a fair value of $0.006120 per share. See Note 7.

On September 28, 2016, Vista converted $10,200 of the February 2016 Vista Convertible Note into a total of 2,000,000 shares of Common Stock at a fair value of $0.0051 per share. See Note 7.

On October 5, 2016, JMJ converted $7,800 of the March 2016 JMJ Convertible Note into a total of 1,300,000 shares of Common Stock at a fair value of $0.006000 per share. See Note 7.

On October 18, 2016, JMJ converted $9,000 of the March 2016 JMJ Convertible Note into a total of 1,500,000 shares of Common Stock at a fair value of $0.006000 per share. See Note 7.

On October 25, 2016, JMJ converted $10,152 of the March 2016 JMJ Convertible Note into a total of 1,800,000 shares of Common Stock at a fair value of $0.005640 per share. See Note 7.

On January 18, 2017 the company extinguished the remainder of the Consulting Agreement with Asher Oil & Gas Exploration in Natchez, Mississippi; and Lane Murray, of Jackson, Mississippi. The Company issued a one-time payment to the consultants of $40,000, which included the cancellation of any additional stock issuance, and the return of the 500,000 shares of Galenfeha common stock previously issued in Quarters 3 and 4 of 2016. The terms of this agreement previously included a $50,000 non-refundable retainer, as well as 1,000,000 shares of Galenfeha, Inc. (GLFH) common stock, to be issued in four quarterly installments. As of December 31, 2016, the consultants had received the retainer and a total of 500,000 shares of Galenfeha, Inc. common stock, per the agreement. The 500,000 shares of Galenfeha, Inc. common stock have been returned and cancelled; and no further stock will be issued pursuant to this agreement. Due to the forfeiture of the unvested shares, total $12,750 expense was reversed during the three months ended March 31, 2017. The consultants will keep their initial $50,000 non-refundable retainer.

On January 20, 2017 an offer was extended to Mr. Ron Barranco for the position of Chief Technology Officer. Mr. Barranco accepted this position on January 20, 2017. Mr. Barranco converted 2,000,000 shares of common stock to preferred stock Series A on January 20, 2017 and 818,537 shares of common stock to preferred stock Series A on February 21, 2017. On April 18, 2017 the Company received notice that Mr. Barranco was declining our employment offer and resigning as Chief Technology Officer. Management agreed to Mr. Barranco’s resignation terms on May 1, 2017 and pursuant to such Mr. Barranco returned 818,537 shares of preferred stock Series A back to common stock.

On July 20, 2017; the Company bought back 18,537 shares of common stock through a brokerage account for a total price of $677 and cancelled the 18,537 shares of common in August 2017.

On December 13, 2017, Power Up Lending converted $8,000 of the June 2017 Power Up Lending Note One into a total of 740,741 shares of Common Stock at a fair value of $0.0108 per share. See Note 7.

On December 20, 2017, Power Up Lending converted $13,000 of the June 2017 Power Up Lending Note One into a total of 2,166,667 shares of Common Stock at a fair value of $0.006 per share. See Note 7.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company entered into two lease agreements for office and research/warehouse facilities in Louisiana. The office lease is $10,200 per year for 24 months beginning May 1, 2014. Beginning in May of 2016 this lease became month to month and is $850 per month. The research/warehouse facility lease is $2,600 per month for 24 months beginning on November 1, 2014. Both leases in Louisiana were terminated in November of 2016.

Additionally, the Company leases space in Fort Worth, Texas for corporate facilities for $99 monthly or $1,188 per year. The terms of this lease are also month to month.

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

On September 15, 2016, the Company entered into a Cooperative Endeavor and Joint Marketing Agreement with T&L Consolidated, LLC whereby T&L Consolidated, LLC was engaged to locate and identify interested parties to the Company and assist with brokering the sale of the timer and Daylight Pump division to such third parties. Upon a sale of Daylight Pumps to a customer identified by T&L, the parties agree to the following distribution of the sales proceeds. The first $650,000 shall be paid to the Galenfeha, thereafter the next $650,000 shall be paid to T&L, and anything in excess of $1,300,000 shall be split equally between the Company and T&L. On March 9, 2017, the Company finalized the sale of the Daylight Pump division to Fleaux Services, LLC without the facilitation of T&L Consolidated, LLC, and thus terminated the Cooperative Endeavor and Joint Marketing Agreement. As of December 31, 2017 and 2016 nothing has been paid to this third party.

Galenfeha entered into an Independent Sales Contract with Electromax Power Solutions, LLC (EPS) with an initial two year term beginning October 2016 and ending October 2018. This contract shall automatically renew on the two year anniversary for an additional one year term. EPS shall facilitate sales of Galenfeha products, affiliated products, and equipment to customers. Galenfeha shall pay EPS 20% of all new initial and sustained revenue derived by EPS’s efforts, involvement, sales, and any other activities brought forth by EPS to Galenfeha. Net sales revenue shall be measured as the product sales price less cost of goods sold according to generally accepted accounting principles. As of December 31, 2017 and 2016, the Company do not anticipate using the services of Electromax Power Solutions, LLC, and nothing has been paid to this third party in the twelve months ending December 31, 2017 and 2016.

NOTE 12 – RELATED PARTY TRANSACTIONS

On May 12, 2016, the Company entered into a Promissory Note Agreement with Diane Moore, a related party, in the amount of $100,000. The note bears an interest rate of 5% per annum until the balance is paid in full. Repayment of the loan is due on or before December 31, 2016. The note was paid in full on November 16, 2016 leaving a principal and interest balance due of $0 as of December 31, 2016, and the holder agreed to forego any accrued interest due under the terms of the note.

On November 16, 2016, the Company entered into an agreement with Fleaux Services, LLC for the sale of the company’s battery and stored energy division, which includes, but is not limited to, all inventory, support equipment, and office operations located at 9204 Linwood Avenue, Suite 104 and 105, Shreveport, LA 71106. Mr. Trey Moore is the President/CEO of Fleaux Services, and also is a Director of Galenfeha, Inc. The sale is for a cash consideration of $350,000 USD; plus a 3% royalty on all Galenfeha-style batteries sold over the course of the next two years from the date this purchase agreement was executed. The cash consideration was for $175,000 in inventory and $175,000 for business good-will and was provided directly by Fleaux Services in cash. The sale includes all future sales, future purchase orders resulting from previous negotiations, and all intellectual property related to Galenfeha, Inc. battery manufacturing and distribution. Fleaux Services, LLC will assume responsibility for expenses related to the Galenfeha, Inc. battery division that includes previous expenses incurred for sales meetings that secured future purchase orders. All contractual agreements between the Galenfeha Inc. battery division and outside parties, including, but not limited to, consultants, suppliers, distributors, and sales representatives, become the responsibility of Fleaux Services, LLC. This includes all suppliers’ outstanding invoices for materials not yet delivered and support equipment that will be relinquished to Fleaux Services, LLC upon the execution of this agreement. Galenfeha, Inc. will retain payments on all current outstanding purchase orders invoiced before the date of this purchase agreement. A gain on the sale of the battery and stored energy division of $15,008 was recognized as a capital transaction during 2016. During the twelve months ending December 31, 2017 the Company received royalty payment of $10,000 from Fleaux Services, LLC relating to the sale of Galenfeha-style batteries. The Company didn’t receive any royalty payments from Fleaux Services, LLC relating to the sale of Galenfeha-style batteries during the twelve months ending December 31, 2016.

On November 4, 2016, Mr. James Ketner, Galenfeha’s Chairman and CEO made a cash contribution to the Company in the amount of $100,000 in exchange for a note that has a fixed repayment of $110,000. The note is unsecured, bears no interest, and can be repaid by the Company when the funds become available. The note can be renegotiated between Galenfeha and Mr. Ketner if both parties agree to the terms. There were no principal repayments on the note for the twelve months ending December 31, 2016, and the principal balance due under the note as of December 31, 2016 was $110,000. Principal repayments made under the note for the twelve months ending December 31, 2017 totaled $84,000, and the principal balance due under the note as of December 31, 2017 was $26,000.

On March 9, 2017, the Company entered into an agreement with Fleaux Services, LLC for the sale of the Company’s Daylight Pumps division, which includes, but in not limited to, all inventory located at 9204 Linwood Avenue, Suite 104 and 105, Shreveport, LA 7116, as well as all usage rights for the name “Daylight Pump.” The sale is for cash consideration of $25,000, and Fleaux Services, LLC will assume the responsibility of a promissory note held by Kevin L. Wilson in the amount of $350,000 and all accrued interest due since the date of issuance on August 23, 2016. The sale will include all future pump sales, future purchase orders resulting from previous negotiations, and all intellectual property related to Daylight Pumps. A gain on the sale of the Daylight Pumps division of $52,291 was recognized as a capital transaction during 2017.

On August 4, 2017, Davis Leimbrook, the Chief Financial Officer of Fleaux Services, LLC, had 550,000 shares of common stock originally purchased in the open market transferred from common stock to preferred stock Series A.

Falcon Resources, LLC & MarionAv, LLC are two companies owned by Board Members, Trey Moore, and Lucien Marioneaux, Jr. These related party entities provide flight services to employees and directors of the Company. The total amount paid for flight services to Falcon Resources, LLC was $0 and $6,600 for the years ended December 31, 2017 and 2016, respectively. The total amount paid for flight services to MarionAv, LLC was $0 and $5,050 for the years ended December 31, 2017 and 2016, respectively.

Galenfeha sells a portion of its finished goods to Fleaux Services, LLC, a company owned by Board Member, Trey Moore. During the year ended December 31, 2017 and December 31, 2016, sales to the related company totaled $0 and $94,005, respectively. As of December 31, 2017 and 2016, the Company had outstanding receivables from the related party company of $0 and $14,189, respectively. During the year ended December 31, 2016, the Company paid Fleaux Services, LLC $17,032 for inventory and shop supply purchases. .

Galenfeha purchases component parts used in the assembly of inventory items from River Cities Machine, LLC, a company owned by Board Member and former President and CEO, Lucien Marioneaux, Jr. During the year ended December 31, 2017 and 2016, purchases from the related company totaled $0 and $960, respectively.

In addition, during the twelve months ended December 31, 2017 and 2016, the Company generated revenue of $0 and $720, respectively, from Board Member and former President and CEO, Lucien Marioneaux, Jr.

Galenfeha agreed to pay Lucien Marioneaux, Jr., Board Member and former President & CEO, an auto allowance of $1,500 per month beginning May 2015, and the Company terminated this agreement effective October 1, 2016. For the twelve months ending December 31, 2017 and 2016, the Company paid a total of $0 and $13,500, respectively, to Mr. Marioneaux.

NOTE 13 – UNCERTAIN TAX POSITIONS

The Company received a letter on May 17, 2016 from the Caddo-Shreveport Sales and Use Tax Commission informing them of a parish sales and use tax audit scheduled to begin on June 28, 2016. The audit period covered is January 1, 2013 through May 31, 2016. The audit is currently under way and no judgments or assessments have been issued. Management is of the opinion that this audit will not result in any material change in the Company’s financial results.

NOTE 14 – INCOME TAX

We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forward, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the period March 14, 2013 (date of inception) through December 31, 2017 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the consolidated balance sheet. The Company is in the process of filing appropriate returns for the Company.

The component of the Company’s deferred tax assets as of December 31, 2017 and 2016 are as follows:

The 2017 Act reduces the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. For net operating losses (NOLs) arising after December 31, 2017, the 2017 Act limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income. In addition, NOLs arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation. The 2017 Act would generally eliminate the carryback of all NOLs arising in a tax year ending after 2017 and instead would permit all such NOLs to be carried forward indefinitely.

The approximate net operating loss carry forward was approximately $2,000,000 as of December 31, 2017 and will start to expire in 2033. The Company did not pay any income taxes during 2017 or 2016.

NOTE 15 – DISCONTINUED OPERATIONS – STORED ENERGY AND DAYLIGHT PUMP DIVISIONS

On November 16, 2016, the Company entered into an agreement with Fleaux Services, LLC for the sale of the Company’s battery and stored energy division, which includes, but is not limited to, all inventory, support equipment, and office operations located at 9204 Linwood Avenue, Suite 104 and 105, Shreveport, LA 71106. The sale is for a cash consideration of $350,000 USD; plus a 3% royalty on all Galenfeha-style batteries sold over the course of the next two years from the date this purchase agreement was executed. The cash consideration was for $175,000 in inventory and $175,000 for business good-will and was provided directly by Fleaux Services in cash. The sale includes all future sales, future purchase orders resulting from previous negotiations, and all intellectual property related to Galenfeha, Inc. battery manufacturing and distribution. Fleaux Services, LLC will assume responsibility for expenses related to the Galenfeha, Inc. battery division that includes previous expenses incurred for sales meetings that secured future purchase orders. All contractual agreements between the Galenfeha Inc. battery division and outside parties, including, but not limited to, consultants, suppliers, distributors, and sales representatives, become the responsibility of Fleaux Services, LLC. This includes all suppliers’ outstanding invoices for materials not yet delivered and support equipment that will be relinquished to Fleaux Services, LLC upon the execution of this agreement. Galenfeha, Inc. will retain payments on all current outstanding purchase orders invoiced before the date of this purchase agreement. A gain on the sale of the battery and stored energy division of $15,008 was recognized as a capital transaction.

On March 9, 2017, the Company entered into an agreement with Fleaux Services, LLC for the sale of the Company’s Daylight Pumps division, which includes, but in not limited to, all inventory located at 9204 Linwood Avenue, Suite 104 and 105, Shreveport, LA 7116, as well as all usage rights for the name “Daylight Pump.” The sale is for cash consideration of $25,000, and Fleaux Services, LLC will assume the responsibility of a promissory note held by Kevin L. Wilson in the amount of $350,000 and all accrued interest due since the date of issuance on August 23, 2016. The sale will include all future pump sales, future purchase orders resulting from previous negotiations, and all intellectual property related to Daylight Pumps. During 2016, the Company recognized an aggregate impairment loss on this asset group of $443,935 to recognize the asset group at the lower of fair value or carrying value.

The Company recognized the sale of its stored energy division and Daylight Pumps division as a discontinued operation, in accordance with ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.”

The following table provides the details of the assets and liabilities held for sale of our discontinued Daylight Pump division:

The following table provides income and expenses of discontinued operations for the years ended December 31, 2017 and 2016, respectively.

NOTE 16 – OPTIONS

During the year ended December 31, 2015, the Company granted an aggregate of 2,050,000 options to a military sales representative and three employees. Col. Ashton Naylor (Ret) received 100,000 options exercisable at $0.25 per share, Chris Watkins received 750,000 options exercisable at $0.25 per share, Jeff Roach received 1,000,000 options exercisable at $0.20 per share, and Brian Nallin received 200,000 options exercisable at $0.20 per share. These options expire on April 1, 2016; June 11, 2020, February 1, 2017, and December 31, 2017 respectively. The options granted to Brian Nallin vest immediately and the other options vest in equal tranches over periods ranging from 2 to 5 years. The aggregate fair value of the option grants was determined to be $430,839 using the Black-Scholes Option Pricing Model and the following assumptions: volatilities between 218% and 396%, risk free rates between .27% and 1.74%, expected terms between 1 and 5 years and zero expected dividends. The fair value of the award is being expensed over the vesting periods. $0 and $65,360 was expensed during the year ended December 31, 2017 and December 31, 2016, respectively, $94,519 was reversed from option expense due to non-vested options forfeited for the year ended December 31, 2016, and $0 remains to be expensed over the remaining vesting period.

As of December 31, 2015, there were 2,050,000 options outstanding of which 925,000 were exercisable. During 2016, 1,750,000 of these options were forfeited. As of December 31, 2016, there were 300,000 options outstanding which were exercisable. The 300,000 options expired during the first quarter of 2017. There are no remaining options at December 31, 2017. The range of exercise prices and remaining weighted average life of the options outstanding at December 31, 2015 were $0.20 to $0.25 and 2.37 years, respectively. The aggregate intrinsic value of the outstanding options at December 31, 2017 and 2016 was $0. The exercise price and remaining weighted average life of the options outstanding at December 31, 2017 and 2016 were $0 and 0 years, respectively. The aggregate intrinsic value of the outstanding options at December 31, 2017 and 2016 was $0. All options mentioned above are for employees that are no longer with the company.