Note

Warrants

Warrants Issued Concurrently with

Spring

201

Unit Offering

During the

three

months ended

March 31, 2018,

pursuant to the terms of our Spring

2018

Unit Offering (see Note

), we issued a warrant to purchase up to an aggregate

333,333

shares of our common stock at an exercise price of

$0.48

per share to the investor in the Spring

2018

Offering, a member of our board of directors. The warrant expires

April 20, 2023

The relative fair value of the warrant resulted in

$49,306

recorded as a discount on our convertible notes on our consolidated balance sheet in the period issued.

The Company

may

“call” these warrants, requiring the holder to exercise their warrants within

days or forever lose the rights to do so, if the following conditions have been met: (i) the shares of common stock underlying the warrants are registered with the SEC and (ii) the Company’s common stock closes for

consecutive trading days at or above

two

times the exercise price.

Warrants Issued Concurrently with Line of Credit Offering

During the

three

months ended

March 31, 2018,

pursuant to the terms of our Line of Credit (see Note

“Line of Credit, matures

September 1, 2019”),

we issued warrants to purchase up to an aggregate

390,000

shares of our common stock at an exercise price of

$0.35

per share. These warrants expire

March 1, 2023.

The relative fair value of these warrants resulted in

$85,002

recorded as a discount on our “convertible notes payable and line of credit” on our consolidated balance sheet in the period issued.

The Company

may

“call” these warrants, requiring the holder to exercise their warrants within

consecutive trading days at or above

two

times the exercise price.

Warrants Issued Concurrently with Note Payable

During the

three

months ended

March 31, 2018,

pursuant to the terms of the note payable. (see Note

“Note payable, matures

March 8, 2020”),

we issued warrants to purchase up to an aggregate

150,000

shares of our common stock at an exercise price of

$0.35

per share. At the end of each month

6,250

warrants vest as long as the note payable is outstanding. Although the note matures

March 8, 2020,

the investor

may

call the note at any time after

June 30, 2018.

Thus, a minimum of

25,000

warrants will vest, and the fair value of these warrants totaled

$6,500.

Of this amount

$1,625

was recorded as interest expense and the remaining

$4,875

is recorded as a discount on our consolidated balance sheet in the period issued. These warrants expire

February 28, 2023.

Warrants Issued to Summer

2017

Unit Offering Investors

Pursuant to the Summer

2017

Unit Offering, we issued warrants to purchase the number of shares of stock equal to each investor’s investment amount, divided by the “unit price” set forth in a “pricing supplement”. The offering documents assured the investors that in the event a subsequent pricing supplement offered a lower conversion or exercise price, prior investors would be given those favorable terms. On

February 12, 2018,

we issued a

third

pricing supplement, lowering the unit price to

$0.30.

As a result of this reduction, the number of shares purchasable pursuant to warrants issued to prior investors increased by an aggregate

416,478

shares. Additionally, during the

three

months ended

March 31, 2018,

we accepted

two

final investments in the aggregate amount of

$80,000,

pursuant to the

third

pricing supplement, and issued these investors warrants to purchase an aggregate

266,667

shares. The relative fair value of these warrants, including the increase in purchasable shares, resulted in

$103,322

recorded as a discount on our consolidated balance sheet in the period issued.

Warrants Issued Concurrently with One Year Convertible Notes

We have accepted

$250,000

investments and issued

one

-year OID convertible notes on

three

occasions:

July 8, 2016,

December 30, 2016,

and

July 17, 2017.

In addition to the notes, the investors received warrants on each of those

three

dates to purchase an aggregate

400,000

shares of our common stock. These warrants were initially exercisable at

$0.65

per share (for

July 2016

warrants),

$0.70

per share (for

December 2016

warrants), and

$0.65

per share (for

July 2017

warrants), and expire

five

years from the date of grant. Each of the warrants contain a provision that the exercise price

may

be reduced in the event we sell our common stock or issue warrants to

third

parties at a lower prices, with particular exclusions, the details of which are available in our Form

-K. The exercise price of these warrants has decreased, and the number of shares increased, on multiple occasions prior to

December 31, 2017,

most recently on

December 11, 2017,

at which time the exercise price was reduced to

$0.394

per share, and the number of shares issuable pursuant to the warrants, in the aggregate, increased from the original

1,200,000

shares, to

2,081,216.

February 22, 2018,

we sold shares of our common stock to Lincoln Park Capital at

$0.25

per share (see Note

). Since these securities were sold at less that the then previously adjusted

$0.394

warrant exercise price, the exercise price of the warrants were decreased from

$0.394

$0.25

per share, and the number of shares issuable pursuant to the warrants increased by an aggregate

1,198,784

shares. The fair value of the warrants issued totaled

$297,439

and is recorded as a deemed dividend in our equity statement for the

three

months ended

March 31, 2018.

We have certain warrants outstanding to purchase our common stock, at various prices, as described in the following table:

	Number of
	Shares			Price Range
As of March 31, 201 7
Outstanding as of December 31, 2016		20,035,114		$	0.125	–	1.00
Issued		219,298				0.70
Exercised		(510,000	)			0.30
Outstanding as of March 31, 2017		19,744,412			0.125	–	1.00

As of March 31, 2018
Outstanding as of December 31, 2017		22,104,817		$	0.125	–	1.00
Issued		2,611,513			0.25	–	0.48
Exercised		—				—
Outstanding as of March 31, 2018		24,716,330		$	0.125	–	1.00

The fair value of each award grant is estimated on the date of grant using the Black-Scholes option-pricing model. The determination of expense of warrants issued for services or settlement also uses the option-pricing model. The principal assumptions we used in applying this model were as follows for the

three

months ended

March

31:

	2017			201 8
Risk free interest rate		1.93	%			2.54%
Expected volatility		297	%			252%
Expected dividend yield		—				—
Forfeiture rate		—				—
Expected life in years		5			5	-	10

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock.