Note

Warrants

Warrants issued concurrently with Notes payable

September 19, 2018,

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

“Convertible Note, matures

January 5, 2019”),

we iss ued warrants to purchase up to an aggregate

1,987,500

shares of our common stock at an exercise price of

$0.25

per share. These warrants expire

January 5, 2024.

The relative fair value of these warrants resulted in

$217,394

recorded as a discount on our consolidated balance sheet in the period issued. The discount will amortize to interest expense through the maturity date of the convertible note,

January 5, 2019.

Extension of Convertible Note Maturity Date,

December 18, 2018 (

Vista Capital)

September 12, 2018,

Vista Capital agreed to extend the maturity date of this note to

December 18, 2018 (

See Note

). In return, we issued the note holder a warrant to purchase

1,812,000

shares of our common stock at

$0.25

per share. These warrants expire

September 12, 2023.

The fair value of these warrants resulted in

$488,334

of loss on extinguishment of debt for the

three

months ended

September 30, 2018.

Reduction of Warrant Exercise Price

May 2018,

certain holders of outstanding warrants to purchase common stock received in prior unit offerings paid us cash in exchange for a reduction of the exercise price in their warrant(s). In the aggregate, we received

$148,854

from holders of

warrants which allow for the purchase of an aggregate

4,326,358

shares of our common stock. Exercise prices of these warrants were reduced to

$0.30.

Management determined that the appropriate accounting treatment for the reduction in the exercise price of the warrants was a capital transaction rather than a contract modification treatment analogous to changes in stock option contracts. As such, the fair market value was equal to the cash received,

$148,854.

Warrants Issued Concurrently with Spring

2018

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

333,333

shares of our common stock at an exercise price of

$0.48

per share to the investor in the Spring

2018

Offering. 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” the warrants issued in the Spring

2018

Offering, requiring the holder to exercise their warrant 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.

Pursuant to the Summer

2018

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

September 14, 2018,

we issued a

second

pricing supplement, lowering the unit price to

$0.25.

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

67,777

shares. The fair value of these warrants resulted in

$17,373

recorded as interest expense during the

three

-months ended

September 30, 2018.

Warrants Issued Concurrently with Line of Credit Offering

During the

nine

months ended

September 30, 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 of

430,000

shares of our common stock. Of this amount

390,000

shares of our common stock are at an exercise price of

$0.35

per share and

40,000

shares are at an exercise price of

$0.25

per share. These warrants expire

March 1, 2023.

The relative fair value of these warrants resulted in

$97,966

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

and was recorded as interest expense. These warrants expire

February 28, 2023.

Warrants Issued to Summer

2017

Unit Offering Investors

Pursuant to the Summer

2017

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 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

nine

months ended

September 30, 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 September 30 , 201 7

Outstanding as of December 31, 2016		20,035,114		$	0.125	–	1.00
Issued		2,499,933			0.42	–	0.70
Exercised		(510,000	)			0.30
Expired		(250,000	)		0.25	–	0.30
Outstanding as of September 30, 2017		21,775,047		$	0.125	–	1.00

	Number of
	Shares			Price Range
As of September 30 , 2018

Outstanding as of December 31, 2017		22,104,817		$	0.125	–	1.00
Issued		6,451,013			0.25	–	0.48
Exercised		—				—
Expired		(2,683,400	)			0.40
Outstanding as of September 30, 2018		25,872,430		$	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

nine

months ended

September 30, 2017

and

2018:

	2017				201 8
Risk free interest rate		1.71	–	1.93%		2.54	–	2.96%
Expected volatility		293	–	297%		252	–	277%
Expected dividend yield			—				—
Forfeiture rate			—				—
Expected life in years			5				5

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.