On August 1, 2018, the Company amended its Articles of Incorporation to implement a reverse stock split in the ratio of 1 share for every 25 shares of common stock and to reduce the number of authorized common stock from 250,000,000 to 50,000,000. No fractional shares were issued from such aggregation of common stock, upon the reverse split; any fractional share was rounded up and converted to the nearest whole share of common stock. As a result, 186,994,384 shares of the Company’s common stock were exchanged for 7,479,775 shares of the Company's common stock resulting in the transfer of $1,795 from common stock to additional paid in capital. These amendments were approved and filed of record by the Delaware Secretary of State on August 1, 2018 and effective on August 1, 2018. FINRA declared the Company’s 1-for-25 reverse stock split market effective as of August 8, 2018. These financial statements have been retroactively restated to reflect the reverse stock split.

As of September 30, 2018 and December 31, 2017, the Company had 105,000 and 110,000 shares of Series A Convertible Preferred Stock, respectively, issued at $10 per share, paying a 5% cumulative annual dividend and convertible for common stock at a price of $4.385 per share, as adjusted for the Company’s reverse stock split. For the nine months ended September 30, 2018, preferred shareholders earned, but were not paid $40,507 in annual dividends, or equivalent to 9,238 common shares based on a conversion price of $4.385 per share. As of September 30, 2018 and December 31, 2017, cumulative and unpaid dividends were $179,507 and $146,918, or equivalent to 40,937 and 33,505 common shares based on a conversion price of $4.385 per share, respectively.

										Intrinsic
						Wtd Avg.				Value
	Number of			Wtd Avg.		Remaining				of
	Options			Exercise Price		Term		Exercisable		Options
Outstanding at December 31, 2017		1,003,836		$	4.69		2.64		891,087	$	1,356,188
Granted		73,440			6.32		5.00				-
Exercised		(8,667	)		3.88
Forfeited/Expired		(43,362	)		9.69
Outstanding at September 30, 2018		1,025,247		$	4.60		2.35		933,304	$	5,257,173

On March 9, 2018, the Company granted an aggregate of 60,390 options to employees as compensation for services rendered. The options are exercisable at $6.45 per share for five years with (i) 37,890 options vesting 50%

over the first year on the first day of each month beginning January 1, 2018 through December 1, 2018, 25% vesting over the year on the first day of each month from January 1, 2019 through December 1, 2019 and 25% vesting over the year on the first day of each month beginning January 1, 2020 through December 1, 2020; (ii) 12,500 options vesting 50% on January 1, 2018, 50% vesting over the year on each month beginning on January 1, 2019 for 24 months; and (iii) 10,000 options fully vesting on January 1, 2018. The exercise price was determined using the 10-day average closing price beginning with the closing price on January 9, 2018. The value on the grant date of the options

was $298,914.

On April 12, 2018, the Company granted 6,000 options to purchase the Company’s common stock for services rendered at an exercise price of $6.20 per share for five years with 2,000 options vesting immediately and 1,000 options vesting every 90 days thereafter. The exercise price was determined using the 10-day average closing price beginning with the closing price on March 12, 2018. The value on the grant date of the options was $29,694.

On May 31, 2018, the Company granted an aggregate of 7,050 options to employees as compensation for services rendered. The options are exercisable at $5.30 per share for five years with 50% of options vesting upon one year employee anniversary and 50% vesting at a rate of 1/24 per month thereafter. The exercise price was determined using the 10-day average closing price beginning with the closing price on May 16, 2018. The value on the grant date of the options was $33,130.

Option grants during the nine months ended September 30, 2018 were valued using the Black-Scholes pricing model. Significant assumptions used in the valuation include expected term of 2.50 to 3.50 years, expected volatility of 160.87% to 163.85%, risk free interest rate of 2.45% to 2.65%, and expected dividend yield of 0%.

								Intrinsic
						Wtd Avg.		Value
	Number of			Wtd Avg.		Remaining		of
	Warrants			Exercise Price		Term		Warrants
Outstanding at December 31, 2017		1,919,906		$	4.98		2.61	$	1,656,083
Granted		253,244		$	5.66
Exercised		(127,525	)	$	6.25
Forfeited/Expired		(164,584	)		7.13
Outstanding at September 30, 2018		1,881,041		$	4.66		2.23	$	9,391,094

On April 17, 2018, the Company granted 127,525 warrants for services rendered. The warrants are exercisable at $6.25 per share through May 16, 2018. The fair value of the warrants of $109,207 was charged to current operations.

In September 2018, the Company issued 40,000 warrants in connection with the issuance of convertible notes payable. The warrants are exercisable at $2.50 through five years from the date of issuance. The aggregate fair value of the warrants (up to the net note proceeds) was charged as a debt discount against the convertible notes.

Warrants issued during the nine months ended September 30, 2018 were valued using the Black-Scholes pricing model. Significant assumptions used in the valuation include expected term of 0.08 to 5.0 years, expected volatility of 159.81% to 162.35%, risk free interest rate of 1.68% to 2.96%, and expected dividend yield of 0%.

For the three and nine months ended September 30, 2018 and 2017, the Company has incurred warrant-based expense of $0 and $110,600 and $12,762 and $71,545, respectively. There was no outstanding unamortized stock compensation expense related to warrants as of September 30, 2018.

Restricted stock units issued as of January 1, 2018			156,340
Granted			38,334
Total Restricted stock units issued at September 30, 2018			194,674
Vested at September 30, 2018			156,408
Unvested restricted stock units as of September 30, 2018			38,266

On March 27, 2018, the Company granted 38,334 RSUs, on a post-split basis, for services provided. 20,000 of such RSUs began vesting May 1, 2018, and will vest each calendar month at a rate of 1,667 RSUs per month, whereby the RSUs would vest provided that services are not terminated by the Company or the grantee. 18,333 RSU’s vested immediately. The settlement date for such RSUs is (i) April 1, 2025 or (ii) the date on which the Company undergoes a change of control during the seven-year term of the award.

As of September 30,2018, no RSUs have been settled.

The fair value of the RSU’s at grant date was $247,250.

For the three and nine months ended September 30, 2018 and 2017, the Company has incurred RSU-based expense of $32,398 and $336,625 and $213,281 and $315,364, respectively. The outstanding unamortized stock compensation expense related to RSUs was $63,803 (which will be recognized through April 2019) as of September 30, 2018.