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<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 1: NATURE OF OPERATIONS</b></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Arcimoto, Inc. (the “Company”) was originally formed on November 21, 2007 as WTP Incorporated, an Oregon Corporation, and later changed its name to Arcimoto, Inc. The Company was founded in order to build products that catalyze the shift to a sustainable transportation system. The first step in this shift has been developing an affordable, daily utility, pure electric vehicle. Over the past ten years, the Company has developed a revolutionary new vehicle platform designed around the needs of everyday drivers. Its main product is the Fun Utility Vehicle® (“FUV”), the first real fossil-free alternative for the vast majority of daily trips. Compared to the average car, the FUV has dropped 3/4 of the weight and 2/3 of the footprint in order to bring the joy of affordable, ultra-efficient, pure electric driving to the masses.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
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<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Risks and Uncertainties</u></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has commenced revenue generating activities, with its first two deliveries to customers in December 2017, one of which was to a related party.  However, the Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments may also include: economic recessions, trends in car manufacturing, consumer taste, availability of inventory, and changes in government policy related to cars and motorcycles, among others, could have a material adverse effect on the Company’s financial condition and the results of its operations.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company currently has limited sales and marketing and/or distribution capabilities and is still in process of setting up facilities to manufacture vehicles on a larger scale. The Company has limited experience in developing, training or managing a sales force and will incur substantial additional expenses when we begin marketing of our current and future products and services. Developing a marketing and sales force is also time consuming and could delay launch of our future products and services. In addition, the Company will compete with companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies. We also do not have a history of higher-scale production and may encounter delays, flaws, or inefficiencies in the process which may prevent or delay us from achieving higher-scale production within the timeline we anticipate. We believe that small scale Retail Series production will commence in the second half of 2018; however, delays in receiving machinery, availability of inventory, and machinery customization could delay such estimates.</p>
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<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company’s industry is characterized by rapid changes in technology and customer demands. As a result, the Company’s products and services may quickly become obsolete and unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and services and enhance our current products and services on a timely and cost-effective basis. Further, the Company’s products and services must remain competitive with those of other companies with substantially greater resources. The Company may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products and services or enhanced versions of existing products and services. Also, the Company may not be able to adapt new or enhanced products and services to emerging industry standards, and the Company’s new products and services may not be favorably received. In addition, we may not have the capital resources to further the development of existing and/or new ones.</p>
</div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 2: GOING CONCERN</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The accompanying financial statements have been prepared on a basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced recurring operating losses and negative operating cash flows since inception.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company generated revenues from product sales for the first time in December 2017. The Company has not achieved positive earnings and operating cash flows to enable the Company to finance its operations internally. Funding for the business to date has come primarily through the issuance of equity securities. We may require additional funding in the future to continue to operate in the normal course of business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Although the Company's objective is to increase its revenues from the sales of its products within the next few years sufficient to generate positive operating and cash flow levels, there can be no assurance that the Company will be successful in this regard. The Company may also need to raise additional capital in order to fund its operations, which it intends to obtain through debt and/or equity offerings. The Company intends to use the proceeds from the Regulation A offering (see Note 6) to fund the Company through the end of 2018. Funds on hand and any follow-on capital, if needed, will be used to invest in its business to expand sales and marketing efforts, enhance its current product by continuing research and development to bring the FUV to retail production, to continue to build out its production facility, and fund operations until positive cash flow is achieved. The need for additional capital may be adversely impacted by uncertain market conditions or approval by regulatory bodies.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Basis of Presentation</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“GAAP”).</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Use of Estimates</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Fair Value Measurements</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company’s financial instruments consist primarily of cash and cash equivalents with original maturities of three months or less and certificates of deposit with original maturities greater than three months. The carrying amounts of such financial instruments approximate their respective<font style="font-family: 'times new roman', times, serif; font-size: 10pt;">estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows. The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, <i>Fair Value Measurements and Disclosures</i>, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color:
initial;"> </p><p
style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The three-level hierarchy for fair value measurements is defined as follows:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0px; margin-bottom: 0px; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="text-align: justify; vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in; text-align: left;">•</td><td style="text-align: justify;">Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px 0pt 27pt; text-align: justify; color: #000000; text-transform: none; text-indent: -9pt; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0px; margin-bottom: 0px; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="text-align: justify; vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in; text-align: left;">•</td><td style="text-align: justify;">Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px 0pt 27pt; text-align: justify; color: #000000; text-transform: none; text-indent: -9pt; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0px; margin-bottom: 0px; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="text-align: justify; vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in; text-align: left;">•</td><td style="text-align: justify;">Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the accompanying financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities of the financial instruments. As of December 31, 2017 and 2016, the Company did not have any level 2 or level 3 instruments.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Cash and Cash Equivalents</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of December 31, 2017, approximately $4.1 million of the Company’s cash and cash equivalents were deposited in one financial institution, which exceed the federally insured limits. Approximately $10 million of the Company’s funds were invested in certificates of deposit with a maximum deposit at any one bank which did not exceed the federally insured limits. As of December 31, 2016, the Company’s cash and cash equivalents were deposited in one financial institution, which at times, exceed the federally insured limits.</p><p
style="font: 10pt/normal 'times new roman', times,
serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Accounts Receivable</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Accounts receivable are reported net of allowance for expected losses. It represents the amount management expects to collect from outstanding balances. Differences between the amount due and the amount management expects to collect are charged to operations in the year in which those differences are determined, with an offsetting entry to a reserve allowance. As of December 31, 2017 and 2016, the Company has no reserve allowance.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Inventory</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Inventory is stated at the lower of cost (using the first-in, first-out method “FIFO”) or market. Inventories consist of purchased electric motors, electrical storage and transmission equipment and component parts. Inventories consist almost entirely of raw materials and component parts as of December 31, 2017 and 2016. Work-in-progress as of December 31, 2017 and 2016 was not significant, and there were no finished goods.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Property and Equipment</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The estimated useful lives for significant property and equipment categories are as follows:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top;"><td style="width: 784px; text-align: justify;">Computer Equipment & Software</td><td style="width: 783px; text-align: justify;">1 – 3 years</td></tr><tr style="vertical-align: top; background-color: white;"><td style="text-align: justify;">Furniture and Fixtures</td><td style="text-align: justify;">2 – 7 years</td></tr><tr style="vertical-align: top;"><td style="text-align: justify;">Machinery and Equipment</td><td style="text-align: justify;">5 – 10 years</td></tr><tr
style="vertical-align: top; background-color: white;"><td style="text-align:
justify;">Leasehold Improvements</td><td style="text-align: justify;">Shorter of useful or lease life</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Offering Costs</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company accounts for offering costs in accordance with FASB ASC 340, <i>Other Assets and Deferred Costs</i>. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity (deficit) upon the completion of an offering or to expense if the offering is not completed. As of December 31, 2016, $40,000 offering costs were capitalized. As of December 31, 2017, all deferred offering costs were charged to stockholders’ equity (deficit) upon the initial close of the Regulation A offering (see Note 6). As of December 31, 2017, offering costs charged to stockholders’ equity were $1,325,842 which includes the offering costs for the Regulation A offering.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Impairment of Long-Lived Assets</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company follows FASB Accounting Standards Codification (“ASC”) 360, <i>Accounting for Impairment or Disposal of Long-Lived Assets</i>. ASC 360 requires that if events or changes in circumstances indicate that the cost of long-lived assets or asset groups may be impaired, an evaluation of recoverability would be performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying value to determine if a write-down to market value would be required. Long-lived assets or asset groups that meet the criteria in ASC 360 as being held for sale are reflected at the lower of their carrying amount or fair market value, less costs to sell.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Customer Deposits</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Customer deposits are generally held in a separate deposit account. Revenue is not recognized on customer deposits until the vehicle is shipped to the customer.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Warranties</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows:
2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial;
text-decoration-color: initial;">The Company will begin recording warranty reserves with the commencement of Retail Series production of the FUV in the second half of 2018. We intend to provide a warranty on all vehicle and production powertrain components and battery pack sales, and we will accrue warranty reserves at the time a vehicle or production powertrain component is delivered to the customer. Warranty reserves include management’s best estimate of the projected cost to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known factors that may impact our evaluation of historical data. We will review our reserves at least quarterly to ensure that our accruals are adequate in meeting expected future warranty obligations, and we will adjust our estimates as needed. Warranty expense will be recorded as a component of cost of revenues in the statement of operations. The portion of the warranty provision which is expected to be incurred within 12 months from the balance sheet date will be classified as current, while the remaining amount will be classified as long-term liabilities.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Revenue Recognition</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company recognizes revenue when the earnings process is complete on vehicle sales. This generally occurs when products are shipped to the customer in accordance with the sales agreement or purchase order, ownership and risk of loss pass to the customer, collectability is reasonably assured, and pricing is fixed or determinable. The Company’s shipping terms are generally F.O.B. shipping point, where title is transferred and revenue is recognized when the products are shipped to customers.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Grant Revenue</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue from grant revenue is recognized in the period during which the conditions under the grant have been met and the Company has made payment for the related expense. Grant revenue was $40,580 and $0 for the years ended December 31, 2017 and 2016, respectively. Management believes the loss of such revenues will not have a material effect on the Company’s operations.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Stock-Based Compensation</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company accounts for stock-based compensation in accordance with FASB ASC 718, <i>Compensation - Stock Compensation</i>. Under the fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option or warrant vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and common warrants.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px;
white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px;
text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company measures compensation expense for its non-employee stock-based compensation under FASB ASC 505-50, <i>Equity-Based Payments to Non-Employees</i>. The fair value of the award issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock and/or the calculated value based on inputs to the Black-Scholes model on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity award is charged directly to stock-based compensation expense and credited to additional paid-in capital.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Advertising Costs</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Advertising costs are recorded as an expense in the period in which we incur the costs or the first time the advertising takes place. Advertising costs expensed were $317,324 and $131,709 for the years ended December 31, 2017 and 2016, respectively.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Research and Development</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Expenses relating to research and development are expensed as incurred. For the years ended December 31, 2017 and 2016, vehicle and battery research and development consisted of $1,451,394 and $974,806, respectively.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Income Taxes</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future,
an adjustment to the deferred tax assets would be charged to operations in the period such determination was
made. The Company has incurred losses for tax purposes since inception and has significant tax losses and tax credit carry forwards. These amounts are subject to valuation allowances as it is uncertain that they will be realized in the next few years.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Net Earnings or Loss per Share</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., common stock warrants and common stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because all common stock warrants and common stock options outstanding were anti-dilutive.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">At December 31, 2017 and 2016, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2017</td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2016</td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1191px; text-align: justify; font-stretch: normal;">Warrants to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times,
serif; width: 142px; text-align: right; font-stretch: normal;">973,004</td><td style="font: 10pt/normal 'times new roman', times,
serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">980,004</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Stock options to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">984,200</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">267,700</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Underwriters warrants</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">122,238</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">47,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; padding-left: 9pt; font-stretch: normal;">Total</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">2,126,442</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">1,247,704</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Recent Accounting Pronouncements</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2;
font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In July 2017, the FASB issued Accounting Standards Update
(“ASU”) No. 2017-11, I “Accounting for Certain Financial Instruments with Down Round Features” and II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In May 2017, the FASB issued ASU-2017-09, Compensation-Stock Compensation (Topic 718) –Modification Accounting”, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect this update to materially affect the Company’s financial statements.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which significantly changes the accounting for operating leases by lessees. The accounting applied by lessors is largely unchanged from that applied under previous guidance. The new guidance requires lessees to recognize lease assets and lease liabilities in the balance sheet, initially measured at the present value of the lease payments, for leases which were classified as operating leases under previous guidance. Lease cost included in the statement of income will be calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Lessees may make an accounting policy election to exclude leases with a term of 12 months or less from the requirement to record related assets and liabilities. The new standard is effective for public companies for fiscal years beginning after December 15, 2018. The Company plans to adopted the new standard effective for periods after December 31, 2018. The Company does not expect the adoption of this standard to have a material impact on its results of operations or cash flows; however, the Company has not determined the impact the adoption of this new standard will have on its financial position</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606)”, which does not change the core principles of ASU No. 2014-09 discussed below, but rather clarifies the implementation guidance in order to eliminate the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance. Under the new guidance, when an entity determines it is a principal in a transaction, the entity recognizes revenue in the gross amount of consideration; however, in transactions where an entity determines it is an agent, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The standard is effective for public companies for annual periods beginning after December 15, 2017. The Company adopted the new standard effective January 1, 2018. The Company does not expect the adoption of this new standard to have a material impact on the Company’s financial position, results of operations or cash flows.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color:
initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px;
letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes existing revenue guidance under U.S. GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The implementation of this new standard will require companies to use more judgment and to make more estimates than under current guidance and to expand their disclosures to include information regarding contract assets and liabilities as well as a more disaggregated view of revenue. The standard, as amended, is effective for public companies for annual periods beginning after December 15, 2017. The Company does not expect the adoption of the standard to have a material impact on its financial position, results of operations or cash flows.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 4: PROPERTY AND EQUIPMENT</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b> </b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As of December 31, 2017 and 2016, our property and equipment, net, consisted of the following:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">December 31,<br />2017</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">December 31,<br />2016</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 1191px; text-align: justify; font-size: 10pt;">Computer equipment and software</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">60,696</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">36,522</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Furniture and fixtures</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">50,996</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">4,157</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Machinery and equipment</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">1,658,976</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">32,393</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Leasehold improvements</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">297,025</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font:
10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">11,824</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Fixed assets in process</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">462,531</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"></td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,530,224</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"></td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">84,896</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Less: accumulated depreciation</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(96,198</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(76,091</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; font-stretch: normal;">Total</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">2,434,026</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">8,805</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Fixed assets in process is comprised primarily of tooling and equipment related to the manufacturing of our vehicles. The total purchase commitments for Fixed assets in process as of December 31, 2017 and 2016 was $573,095 and $0, respectively. Completed assets are transferred to their
respective asset class and depreciation begins when the asset is ready for its intended use.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Depreciation expense during the years ended December 31, 2017 and 2016 was $20,107 and $7,951, respectively.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 5: NOTES PAYABLE</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Notes payable and accrued interest as of December 31, 2017 and 2016 are as follows:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1250.4px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="6">Principal</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="6">Accrued Interest</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom;"><td nowrap="nowrap" style="text-align: justify; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2017</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2016</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2017</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2016</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 650.4px; text-align: left; font-size: 10pt;">Business Development Loan</td><td style="width: 12.8px; font-size: 10pt;"> </td><td style="width: 12.8px; text-align: left; font-size: 10pt;">$</td><td style="width: 112.8px; text-align: right; font-size: 10pt;">     -</td><td style="width: 12.8px; text-align: left; font-size: 10pt;"> </td><td style="width: 12.8px; font-size: 10pt;"> </td><td style="width: 12.8px; text-align: left; font-size: 10pt;">$</td><td style="width: 112.8px; text-align: right; font-size: 10pt;">250,000</td><td style="width: 12.8px; text-align: left; font-size: 10pt;"> </td><td style="width: 12.8px; font-size: 10pt;"> </td><td style="width: 12.8px; text-align: left; font-size: 10pt;">$</td><td style="width: 112px; text-align: right; font-size: 10pt;">    -</td><td style="width: 12px; text-align: left; font-size: 10pt;"> </td><td style="width: 12px; font-size: 10pt;"> </td><td style="width: 12px; text-align: left; font-size: 10pt;">$</td><td style="width: 112px; text-align: right; font-size: 10pt;">-</td><td style="width: 12px; text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; font-size: 10pt;">Convertible Notes Payable</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">275,000</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">3,322</td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Convertible Notes Payable to Related Parties</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td><td style="text-align: left; padding-bottom:
1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">50,000</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">384</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: justify; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">-</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">575,000</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">-</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">3,706</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On December 4, 2015, the Company entered into a $250,000 loan agreement with the City of Eugene Business Development Fund; however, the funds for the loan were not received until April 1, 2016. This loan was secured by substantially all assets of the Company and had an interest rate of 5% per annum. Interest only payments were due monthly from the date of disbursement. The entire unpaid principal balance of the loan, plus accrued interest, was due and payable upon the earlier of the occurrence of a Regulation A offering or October 1, 2017. The note was repaid on September 21, 2017 in full, after the first closing of the Regulation A offering.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the years ended December 31, 2017 and 2016, the Company issued a series of convertible notes with original principal balances of $200,000 and $325,000, respectively, all with the same terms as disclosed below. Of these notes $100,000 and $50,000, respectively, were to related parties. The notes and all accrued interest were due on March 31, 2018. The notes were secured by substantially all assets of the Company and had a stated interest rate of 6% per annum. The notes were convertible on demand at the greater of $5.00 per share or 90% of the active selling price of the Series A-1 Preferred Stock at the time of conversion. Notes totaling $450,000, of which $150,000 was for related parties, with accrued interest thereon of approximately $23,000 were converted to 80,832 shares of common stock on August 31, 2017, at a price of $5.85 per share, which represented 90% of the $6.50 per share price in the Regulation A offering. Notes totaling $75,000 were repaid in cash along with accrued interest thereon of $354.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial;
text-decoration-color: initial;">During September 2017, the Company issued two convertible notes to related parties in the total principal amount of $70,000. The notes and all accrued interest were due on March 31, 2018. These notes were secured by substantially all assets of the Company and had a stated interest rate of 6% per annum. The notes were convertible on demand at the greater of $6.50 per share of common stock or 90% of the active selling price of the common stock at the time of conversion. The notes principal balance of $70,000 and accrued interest of $232 was repaid in cash on September 29, 2017.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">  </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On September 11, 2017, the Company borrowed $5,000 from a related party, no security was issued for the loan. The loan was meant to be a short-term advance and due on demand. The loan was repaid on October 26, 2017 and there is no interest associated with this advance.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">None of the above convertible notes contained a beneficial conversion feature due to the conversion price of the notes being at or above the fair value of the Series A-1 preferred stock or common stock, as applicable, on the issuance date.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIT)</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Stock-Split</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On July 21, 2017, the Board and a majority of common stockholders voted to enact a two-for-one common stock split and increase the authorized common shares to 20,000,000. On July 25, 2017, a majority of the Series A-1 Preferred stockholders voted to convert all 1,434,891 Series A-1 Preferred shares to 2,869,782 common shares. The July 21, 2017, two-for-one common stock split resulted in a conversion rate of two shares of common stock for each share of Series A-1 Preferred stock. In accordance with SEC reporting guidelines, the retrospective application of the stock split has been applied to historical financial information, and the Series A-1 Preferred to common stock conversion was reflected in the accompanying financial statements as if it occurred as of December 31, 2016.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Preferred Stock</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is authorized to issue 5,000,000 shares of preferred stock, no par value, of which 1,500,000 shares were designated as Series A-1 Preferred Stock. As of December 31, 2017 and 2016, there were no shares of Series A-1 Preferred Stock issued and outstanding.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Series A-1 Preferred Stock is convertible at any time after issuance at the option of the holder into shares of common stock at the original issue price of the Series A-1 Preferred Stock. The Series A-1 Preferred Stock is also subject to mandatory conversion provisions upon an initial public offering raising $15 million or more and is not redeemable. To prevent dilution, the conversion price of the Series A-1 Preferred Stock is to be adjusted for any issuance of securities, excluding exempt securities, which change the number of shares of common stock outstanding. The Series A-1 Preferred Stockholders are entitled to equal voting rights to common stockholders on an as-converted basis and receive preference to the common stockholders upon liquidation. During the first two quarters of 2017, 245,100 shares of Series A-1 Preferred Stock were sold for cash proceeds of $1,225,500 under a Regulation D offering. Of these shares, 10,000 were issued to a related party. The Series A-1 Preferred Stock was converted to common stock as noted above.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Common Stock</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is authorized to issue 20,000,000 shares of common stock, no par value, as of December 31, 2017 and 2016.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px;
text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During September and October 2017, the Company issued 2,945,657 shares of common stock in a Regulation A offering at a public offering price of $6.50 per share. We received net proceeds of $18,087,640 after deducting underwriter commissions of $1,051,131 and escrow closing fees of $8,000.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On October 4, 2017, we issued 4,000 shares of common shares at a cost of $5.25 per share were issued to a vendor in exchange for video production services. The price per share was based on the closing quote for the Company’s common stock on the Nasdaq Capital Market the day before the Board of Directors approved the payment. The total cost of $21,000 is included in sales and marketing expenses on the Company’s Statement of Operations.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has reserved a total of 2,000,000 shares of its common stock pursuant to the Equity Incentive Plans (see Note 7). The Company has 1,957,204 and 1,247,704 stock options and warrants outstanding under these plans as of December 31, 2017 and 2016, respectively.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During 2017, the Company has reserved an additional 169,238 shares of its common stock for warrants pursuant to the Underwriter Agreement for the Regulation A offering and other vendor agreements (Note 7). As of December 31, 2017, 139,238 of these warrants have vested.</p></div>
<div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 7: STOCK-BASED PAYMENTS</b></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company grants stock options and warrants pursuant to the 2015 Stock Incentive Plan (“2015 Plan”) and the 2012 Stock Incentive Plan (“2012 Plan”).</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Grants to non-employees are expensed at the earlier of (i) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached and (ii) the date at which the counterparty’s performance is complete</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company uses the following inputs when valuating stock-based awards. The expected life of employee stock options was estimated using the “simplified method,” as the Company has no historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price volatility, the Company uses public company compatibles and historical private placement data as a basis for its expected volatility to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the grant-date.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Stock-based compensation, including stock-options, warrants and stock issued for compensation is included in the statement of operations as follows:</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal;
orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: center;"> </td>
<td style="padding-bottom: 1.5pt;"> </td>
<td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31, <br />2017</td>
<td style="padding-bottom: 1.5pt;"> </td>
<td style="padding-bottom: 1.5pt;"> </td>
<td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31, <br />2016</td>
<td style="padding-bottom: 1.5pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="width: 1191px; text-align: left;">Research and development</td>
<td style="width: 16px;"> </td>
<td style="width: 16px; text-align: left;">$</td>
<td style="width: 142px; text-align: right;">24,000</td>
<td style="width: 16px; text-align: left;"> </td>
<td style="width: 15px;"> </td>
<td style="width: 15px; text-align: left;">$</td>
<td style="width: 141px; text-align: right;">-</td>
<td style="width: 15px; text-align: left;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left;">Sales and marketing</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">27,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="text-align: left;">General and administrative</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">152,734</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">48,375</td>
<td style="text-align: left;"> </td>
</tr>
</table>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">  </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>2015 Stock Incentive Plan</u></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The 2015 Stock Incentive Plan (the “2015 Plan”) of the Company was approved by the written consent of the holders of a majority of the Company’s outstanding common stock. The Plan provides the Company the ability to grant to any employee, director, consultant or advisor who provides services to the Company the opportunity to acquire shares of Common Stock of the Company through the grant of options that are incentive stock options or nonqualified stock options (NQSOs) and/or the grant of restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. The Company reserved 1,000,000 shares of common stock for delivery under the 2015 Plan. Awards that are forfeited generally become available for grant under the plan.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">See below for the weighted average variables used in assessing the fair value at the grant dates:</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 1332px; padding-bottom: 1.5pt;"> </td>
<td style="width: 235px; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"><b>2017</b></td>
</tr>
<tr style="vertical-align: top; background-color: #cceeff;">
<td>Annual dividend yield</td>
<td style="text-align: right;">-</td>
</tr>
<tr style="vertical-align: top; background-color: white;">
<td>Expected life (years)</td>
<td style="text-align: right;">6.0-10.0</td>
</tr>
<tr style="vertical-align: top; background-color: #cceeff;">
<td>Risk-free interest rate</td>
<td style="text-align: right;">1.71-2.46%</td>
</tr>
<tr style="vertical-align: top; background-color: white;">
<td>Expected volatility</td>
<td style="text-align: right;">21.3%-22.1%</td>
</tr>
<tr style="vertical-align: top; background-color: #cceeff;">
<td>Total grant date fair value</td>
<td style="text-align:
right;">$503,260</td>
</tr>
</table>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Employee stock-based compensation expense included in operating expenses for the years ended December 31, 2017 and 2016, was $136,002 and $48,375, respectively.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">For the NQSOs issued in 2017, performance was completed on the date of issue. The fair value of non-employee awards was $22,445 for the year ended December 31, 2017.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Total compensation cost related to non-vested awards not yet recognized as of December 31, 2017 was $429,403 and will be recognized on a straight-line basis through the end of the vesting periods, December, 2020. Future stock option compensation expense related to these options to be recognized during the years ending December 31, 2018, 2019, and 2020 is expected to be approximately $207,000 and $153,000 and $69,000, respectively. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">A summary of stock option activity for the years ended December 31, 2017 and 2016 is presented below for the 2015 Plan:</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Weighted</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Average</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt; font-weight:
bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Weighted</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Remaining</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Average</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Contractual</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Number of</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Exercise</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Life</td>
<td style="font-size: 10pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Shares</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Price</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td>
<td style="text-align: center; font-size: 10pt; font-weight: bold; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">(in Years)</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="width: 1003px; font-size: 10pt;">Options outstanding at December 31, 2015</td>
<td style="width: 16px; font-size: 10pt;"> </td>
<td style="width: 16px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 142px; text-align: right; font-size: 10pt;">275,200</td>
<td style="width: 16px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 16px; font-size: 10pt;"> </td>
<td style="width: 16px; text-align: left; font-size: 10pt;">$</td>
<td style="width: 141px; text-align: right; font-size: 10pt;">2.06</td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 15px; font-size: 10pt;"> </td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 141px; text-align: right; font-size: 10pt;">9.76</td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;">Granted</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Exercised</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(7,500</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">)</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">2.06</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style:
solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Options outstanding at December 31, 2016</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">267,700</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;">$</td>
<td style="text-align: right; font-size: 10pt;">2.06</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">8.76</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;">Granted</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">756,500</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">2.70</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">9.42</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Exercised</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(40,000</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">)</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">2.50</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="padding-bottom: 4pt; font-size: 10pt;">Options outstanding at December 31, 2017</td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">984,200</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">2.71</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">8.97</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="padding-bottom: 4pt; font-size: 10pt;">Options exercisable at December 31, 2017</td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">232,284</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style:
double;">2.06</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">7.76</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
</tr>
</table>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As of December 31, 2017, 15,800 options are still issuable under the 2015 Plan.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>2012 Employee Stock Benefit Plan</u></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Amended and Restated 2012 Employee Stock Benefit Plan (the “2012 Plan”) of the Company was approved by the written consent of the holders of a majority of the Company’s outstanding common stock. The Plan provides the Company the ability to grant to any officer, director, or employee of the Company, or any Consultant, advisor or independent contractor who provides services to the Company, the opportunity to acquire shares of Common Stock of the Company through the grant of warrants and/or the grant of common stock. The Company reserved 1,000,000 shares of common stock for delivery under the Plan. Warrants issued and outstanding as of December 31, 2017 and 2016 were 973,004 and 980,004. Warrants expire ten to fifteen years from the grant date and were vested when issued.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On May 1, 2017, 8,000 warrants were issued to a service provider with a strike price of $2.50 per share and a five-year life. The Black-Scholes variables used in assessing the fair value at the grant date were an expected life of 5 years, risk free interest rate of 1.84% and expected volatility of 21.34%.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On September 20, 2017, 15,000 employee warrants were exercised in a cashless transaction resulting in the issuance of 13,846 common shares.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">A summary of activity under the 2012 Plan for the years ended December 31, 2017 and 2016 is presented below:</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td
style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Weighted</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Average</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Weighted</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Remaining</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Average</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Contractual</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Number of</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Exercise</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Life</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Shares</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Price</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">(in Years)</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="width: 1003px; font-size: 10pt;">Warrants outstanding at December 31, 2015</td>
<td style="width: 16px; font-size: 10pt;"> </td>
<td style="width: 16px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 142px; text-align: right; font-size: 10pt;">980,004</td>
<td style="width: 16px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 16px; font-size: 10pt;"> </td>
<td style="width: 16px; text-align: left; font-size: 10pt;">$</td>
<td style="width: 141px; text-align: right; font-size: 10pt;">0.58</td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 15px; font-size: 10pt;"> </td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 141px; text-align: right; font-size: 10pt;">8.36</td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;">Granted</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Exercised</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size:
10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="padding-bottom: 1pt; font-size: 10pt;">Warrants outstanding at December 31, 2016</td>
<td style="padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">980,004</td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">$</td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">0.58</td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">7.36</td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;">Granted</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">8,000</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">2.50</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">4.33</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Exercised</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">(15,000</td>
<td style="text-align: left; font-size: 10pt;">)</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">0.50</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="padding-bottom: 4pt; font-size: 10pt;">Warrants outstanding at December 31, 2017</td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">973,004</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">0.59</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">6.37</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
</tr>
</table>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal;
-webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As of December 31, 2017, 11,996 warrants are still issuable under the 2012 Plan.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Warrants</u></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The following warrants were issued outside of the 2012 Plan.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors to purchase common stock</td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">Exercise Price</td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">Vested as of December 31,<br />2017</td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">Issued</td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font: 10pt/normal 'times new roman', times, serif; width: 1003px; text-align: left; font-stretch: normal;">Underwriters warrants</td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">7.475</td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">122,238</td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">122,238</td>
<td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors</td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">$</td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; padding-bottom: 1.5pt; font-stretch: normal;">3.200</td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">17,000</td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new
roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">47,000</td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; padding-left: 9pt; font-stretch: normal;">Total</td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: right; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">139,238</td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">169,238</td>
<td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td>
</tr>
</table>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In connection with our Regulation A offering, the Company issued 122,238 warrants to the underwriter with a strike price of $7.475 per share and a five-year life from the offering qualification date. The variables used in the Black-Scholes calculation were similar to those disclosed under the 2015 Plan and 2012 Plan disclosed above, with the exception that the contractual date was used for expected life. The value of the warrants is both an increase and decrease to common stock as a cost of equity, for a net zero effect within the statement of stockholders’ equity.</p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In December 2017, 47,000 warrants were issued to two service providers with strike prices of $3.20 per share and a ten-year life. Of these, 11,000 warrants vest as follows: 5,000 immediately and 1,500 per month over four months. As of December 31, 2017, 5,000 of these were vested with a value of $5,805. The remaining 36,000 warrants are subject to deliverables being met. As of December 31, 2017, deliverables related to 12,000 of these warrants were met and are deemed vested with a value of $13,932 based on inputs to the Black-Scholes model, similar to those disclosed under the 2015 Plan and 2012 Plan above. Future warrants that become vested will be valued each reporting period or as the deliverables are met, as applicable.</p>
</div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 8: INCOME TAXES</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The 2017 Tax Act, which was signed into law on December 22, 2017, has resulted in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income (GILTI). These changes are effective beginning in 2018.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2017 and 2016 are summarized below:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Deferred tax assets:</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2017</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2016</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1179px; text-align: left; padding-left: 9pt; font-stretch: normal;">Share-based compensation expense</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">88,211</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">42,854</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-left: 9pt; font-stretch: normal;">Net operating loss carry forward</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,434,289</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,112,856</td><td
style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Deferred tax liabilities:</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-left: 9pt; font-stretch: normal;">Property and equipment</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">(24,878</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">)</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">(15,387</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">)</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Federal research and development credit</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">259,615</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">178,158</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Oregon research and development credit</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">129,675</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">83,012</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Total deferred tax asset</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,886,912</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,401,493</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Valuation Allowance</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(2,886,912</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(2,401,493</td><td style="font: 10pt/normal 'times new roman',
times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; font-stretch: normal;">Net deferred tax asset</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">  </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In assessing the potential realization of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2017 and 2016, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates. The valuation allowance for deferred tax assets increased approximately $485,000 and $836,000 during the years ended December 31, 2017 and 2016, respectively.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">No federal tax provision has been provided for the years ended December 31, 2017 and 2016 due to the losses incurred during such periods. The Company’s effective tax rate is different from the federal statutory rate of 34% due primarily to operating losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td> </td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">2017</td><td style="padding-bottom: 1.5pt;"> </td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">2016</td><td style="padding-bottom: 1.5pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 1183.81px; text-align: left; padding-left: 5.4pt;">Statutory U.S. Federal tax rate</td><td style="width: 16px;"> </td><td style="width: 16px; text-align: left;"> </td><td style="width: 141px; text-align: right;">34.0</td><td style="width: 16px; text-align: left;">%</td><td style="width: 15px;"> </td><td style="width: 15px; text-align: left;"> </td><td style="width: 141px; text-align: right;">34.0</td><td style="width: 16px; text-align: left;">%</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-left: 5.4pt;">Effect of U.S. tax law change (1)</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">(30.0</td><td style="text-align: left;">%)</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">-</td><td style="text-align: left;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left; padding-left: 5.4pt;">State and local income
taxes–
net of Federal benefit</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">6.6</td><td style="text-align: left;">%</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">6.6</td><td style="text-align: left;">%</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-left: 5.4pt;">Nondeductible expenses and other</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">4.0</td><td style="text-align: left;">%</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">3.0</td><td style="text-align: left;">%</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left; padding-bottom: 1.5pt; padding-left: 5.4pt;">Valuation Allowance</td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(14.6</td><td style="text-align: left; padding-bottom: 1.5pt;">%)</td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(43.6</td><td style="text-align: left; padding-bottom: 1.5pt;">%)</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-bottom: 4pt; padding-left: 5.4pt;">Effective rate tax</td><td style="padding-bottom: 4pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">0.0</td><td style="text-align: left; padding-bottom: 4pt;">%</td><td style="padding-bottom: 4pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">0.0</td><td style="text-align: left; padding-bottom: 4pt;">%</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 100%; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0pt; margin-bottom: 0pt; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in;">(1)</td><td style="text-align: justify;">Due to the Tax Act, our U.S. deferred tax assets and liabilities as of December 31, 2017 were re-measured from 34% to 21%. The change in tax rate resulted in a decrease to our gross U.S. deferred tax assets which is offset by a corresponding decrease to our valuation allowance. This resulted in an adjustment to the Company’s deferred tax assets of $676,000 from the prior period.</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As of December 31, 2017, the Company had net operating loss carry forwards of approximately $8,820,000 which will expire at various dates from 2029 through 2037. The Federal R&D tax credits will expire at various dates from 2032 through 2037, and the Oregon R&D tax credits will expire at various dates from 2018 through 2022.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company policy is to record interest and penalties on uncertain tax positions as income tax expense. The Company may in the future become subject to federal, state and local income taxation though it has not been since its inception. The Company is not presently subject to any income tax audit in any taxing jurisdiction.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows:
2;
font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has identified the United States Federal and Oregon State tax returns as its “major” tax jurisdiction. The United States Federal and Oregon State return years 2014 through 2017 are still subject to tax examination by the United States Internal Revenue Service; however, we do not currently have any ongoing tax examinations.</p>
<div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 9: CUSTOMER DEPOSITS</b></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company has received customer deposits ranging from $100 to $10,100 per order for Retail Series production vehicles and $42,000 per order for Signature Series vehicles for purposes of securing their vehicle production slot. As of December 31, 2017 and 2016, the Company’s balance of deposits received was $399,967 and $386,035, respectively. As of December 31, 2017 and 2016, $231,967 and $386,035, respectively, of these deposits were refundable upon demand. Deposits are included in current liabilities in the accompanying balance sheets. When a customer's order is ready to enter the production process, the customer is notified that if they would like to proceed with the purchase of a vehicle, their deposit will no longer be refundable and any additional deposit required must be paid prior to the start of the manufacturing process.  Customer deposits from related parties total $1,700 and $43,700 as of December 31, 2017 and 2016, respectively.</p>
</div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 10: COMMITMENTS AND CONTINGENCIES</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On September 3, 2017, the Company entered into a lease on 30,000 square feet of commercial industrial office and manufacturing space in Eugene, Oregon. The lease began on October 1, 2017 and will terminate on March 31, 2021. Rent was $25,000 for the first month, then is $12,500 per month for months two through forty-one, and one dollar for month forty-two. See the following table for future minimum rent payments by year.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Years ending December 31:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1379px; text-align: left; font-stretch: normal;">2018</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">150,000</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">2019</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">150,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">2020</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">150,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">2021</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">25,001</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; text-decoration: none; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="background-color: white;">The Company also leased office space from Center Camp, LLC (“Landlord”) whereby the sole member is the Company’s Chief Executive Officer and director.  The triple net lease was for 5,094 usable square feet in Eugene, Oregon.  The lease began on May 1, 2013 and was set to terminate on April 30, 2018.  The lease may be terminated by written notification (90) days in advance of intent to vacate the Premises, provided that the Company pays a termination charge equal to 6 months’ rent.  The Landlord and the Company mutually agreed to terminate the lease as of December 31, 2017, without penalty in order to facilitate the landlord’s sale of the
property.  During the year ended December 31, 2017, $61,200 in rent was paid to Center Camp, LLC.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Rent expense is recognized on a straight-line basis. Total rent expense for the years ended December 31, 2017 and 2016 was $107,645 and $61,740, of these amounts $62,405 and $54,600 was to related parties, respectively.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Underwriter Agreement</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Details in Note 7 above.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Litigation</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is involved in claims and litigation from time to time in the normal course of business. At December 31, 2017, the management of the Company believes there are no pending matters that are expected to have a material adverse effect on the business of the Company, their financial condition, results of operations or cash flows. See also Note 11 Subsequent Events.</p>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>NOTE 11: SUBSEQUENT EVENTS</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Common Stock</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On January 29, 2018, 15,000 employee warrants with an exercise price of $0.50 per share were exercised in a cashless transaction at a market price of $3.77756 per share, which was based on the average of the FUV daily closing prices from January 19-25, 2018, total shares issued were 13,014. These shares meet the requirements for not being restricted from trading.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On January 31, 2018, 14,200 employee options were exercised at a price per share of $2.0605, total proceeds to the Company were $29,259. These shares are restricted from trading.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2018, the Company issued 20,000 shares of restricted common stock to a vendor for investor relations services.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Equipment Financing</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is seeking financing for its capital equipment purchases. Subsequent to December 31, 2017, it has financed a total of $942,474 with monthly payments ranging from $437 to $6,897 and periods ranging from 48 to 60 months.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Litigation</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On March 11, 2018, the Company was served with a lawsuit entitled John R Switzer vs W.R. Hambrecht & Co. LLC et al., case number:
CGC-18-564904, filed in
San Francisco County Superior Court in the State of California.  In this action, the Company been named as defendants along with our directors and certain executive officers at the time of the completion of its Regulation A offering on September 21, 2017. The action purports to be a class action on behalf of all those who purchased the Company’s common stock in its Regulation A offering alleging violations of Section 12(a)(2) and Section 15 of the Securities Act of 1933, as amended.  The plaintiff is seeking damages in an unspecified amount to be proven at trial. In addition, On March 28, 2018, the Company was served with another lawsuit entitled Jay Mendelson v. Arcimoto, Inc. et al., case number CGC-18-565324, filed in San Francisco County Superior Court in the State of California. In this action the Company has also been named as a defendant along with its directors and certain executive officers at the time of the completion of our Regulation A offering on September 21, 2017.  The factual allegations and alleged violations are substantially similar to the Switzer action and the plaintiff is also seeking damages in an unspecified amount to be proven at trial. <font style="background-color: white;">The Company believes these lawsuits are without merit and the Company intends to vigorously defend these actions in court</font>.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Basis of Presentation</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“GAAP”).</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Use of Estimates</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Fair Value Measurements</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company’s financial instruments consist primarily of cash and cash equivalents with original maturities of three months or less and certificates of deposit with original maturities greater than three months. The carrying amounts of such financial instruments approximate their respective<font style="font-family: 'times new roman', times, serif; font-size: 10pt;">estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows. The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, <i>Fair Value Measurements and Disclosures</i>, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The three-level hierarchy for fair value measurements is defined as follows:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0px; margin-bottom: 0px; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="text-align: justify; vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in; text-align: left;">•</td><td style="text-align: justify;">Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px 0pt 27pt; text-align: justify; color: #000000; text-transform: none; text-indent: -9pt; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0px; margin-bottom: 0px; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="text-align: justify; vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in; text-align: left;">•</td><td style="text-align: justify;">Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px 0pt 27pt; text-align: justify; color: #000000; text-transform: none; text-indent: -9pt; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0px; margin-bottom: 0px; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0"
cellpadding="0"><tr style="text-align: justify; vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in; text-align: left;">•</td><td style="text-align: justify;">Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the accompanying financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities of the financial instruments. As of December 31, 2017 and 2016, the Company did not have any level 2 or level 3 instruments.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Cash and Cash Equivalents</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of December 31, 2017, approximately $4.1 million of the Company’s cash and cash equivalents were deposited in one financial institution, which exceed the federally insured limits. Approximately $10 million of the Company’s funds were invested in certificates of deposit with a maximum deposit at any one bank which did not exceed the federally insured limits. As of December 31, 2016, the Company’s cash and cash equivalents were deposited in one financial institution, which at times, exceed the federally insured limits.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Accounts Receivable</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Accounts receivable are reported net of allowance for expected losses. It represents the amount management expects to collect from outstanding balances. Differences between the amount due and the amount management expects to collect are charged to operations in the year in which those differences are determined, with an offsetting entry to a reserve allowance. As of December 31, 2017 and 2016, the Company has no reserve allowance.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Inventory</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Inventory is stated at the lower of cost (using the first-in, first-out method “FIFO”) or market. Inventories consist of purchased electric motors, electrical storage and transmission equipment and component parts. Inventories consist almost entirely of raw materials and component parts as of December 31, 2017 and 2016. Work-in-progress as of December 31, 2017 and 2016 was not significant, and there were no finished goods.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Property and Equipment</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The estimated useful lives for significant property and equipment categories are as follows:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1250.4px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top;"><td style="width: 625.6px; text-align: justify;">Computer Equipment & Software</td><td style="width: 624.8px; text-align: justify;">1 – 3 years</td></tr><tr style="vertical-align: top; background-color: white;"><td style="text-align: justify;">Furniture and Fixtures</td><td style="text-align: justify;">2 – 7 years</td></tr><tr style="vertical-align: top;"><td style="text-align: justify;">Machinery and Equipment</td><td style="text-align: justify;">5 – 10 years</td></tr><tr style="vertical-align: top; background-color: white;"><td style="text-align: justify;">Leasehold Improvements</td><td style="text-align: justify;">Shorter of useful or lease life</td></tr></table></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Offering Costs</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company accounts for offering costs in accordance with FASB ASC 340, <i>Other Assets and Deferred Costs</i>. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity (deficit) upon the completion of an offering or to expense if the offering is not completed. As of December 31, 2016, $40,000 offering costs were capitalized. As of December 31, 2017, all deferred offering costs were charged to stockholders’ equity (deficit) upon the initial close of the Regulation A offering (see Note 6). As of December 31, 2017, offering costs charged to stockholders’ equity were $1,325,842 which includes the offering costs for the Regulation A offering.</p></div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Impairment of Long-Lived Assets</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company follows FASB Accounting Standards Codification (“ASC”) 360, <i>Accounting for Impairment or Disposal of Long-Lived Assets</i>. ASC 360 requires that if events or changes in circumstances indicate that the cost of long-lived assets or asset groups may be impaired, an evaluation of recoverability would be performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying value to determine if a write-down to market value would be required. Long-lived assets or asset groups that meet the criteria in ASC 360 as being held for sale are reflected at the lower of their carrying amount or fair market value, less costs to sell.</p>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Customer Deposits</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Customer deposits are generally held in a separate deposit account. Revenue is not recognized on customer deposits until the vehicle is shipped to the customer.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Warranties</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company will begin recording warranty reserves with the commencement of Retail Series production of the FUV in the second half of 2018. We intend to provide a warranty on all vehicle and production powertrain components and battery pack sales, and we will accrue warranty reserves at the time a vehicle or production powertrain component is delivered to the customer. Warranty reserves include management’s best estimate of the projected cost to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known factors that may impact our evaluation of historical data. We will review our reserves at least quarterly to ensure that our accruals are adequate in meeting expected future warranty obligations, and we will adjust our estimates as needed. Warranty expense will be recorded as a component of cost of revenues in the statement of operations. The portion of the warranty provision which is expected to be incurred within 12 months from the balance sheet date will be classified as current, while the remaining amount will be classified as long-term liabilities.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Revenue Recognition</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company recognizes revenue when the earnings process is complete on vehicle sales. This generally occurs when products are shipped to the customer in accordance with the sales agreement or purchase order, ownership and risk of loss pass to the customer, collectability is reasonably assured, and pricing is fixed or determinable. The Company’s shipping terms are generally F.O.B. shipping point, where title is transferred and revenue is recognized when the products are shipped to customers.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Grant Revenue</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Revenue from grant revenue is recognized in the period during which the conditions under the grant have been met and the Company has made payment for the related expense. Grant revenue was $40,580 and $0 for the years ended December 31, 2017 and 2016, respectively. Management believes the loss of such revenues will not have a material effect on the Company’s operations.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Stock-Based Compensation</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company accounts for stock-based compensation in accordance with FASB ASC 718, <i>Compensation - Stock Compensation</i>. Under the fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option or warrant vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and common warrants.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company measures compensation expense for its non-employee stock-based compensation under FASB ASC 505-50, <i>Equity-Based Payments to Non-Employees</i>. The fair value of the award issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock and/or the calculated value based on inputs to the Black-Scholes model on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity award is charged directly to stock-based compensation expense and credited to additional paid-in capital.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Advertising Costs</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Advertising costs are recorded as an expense in the period in which we incur the costs or the first time the advertising takes place. Advertising costs expensed were $317,324 and $131,709 for the years ended December 31, 2017 and 2016, respectively.</p></div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Research and Development</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Expenses relating to research and development are expensed as incurred. For the years ended December 31, 2017 and 2016, vehicle and battery research and development consisted of $1,451,394 and $974,806, respectively.</p>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Income Taxes</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made. The Company has incurred losses for tax purposes since inception and has significant tax losses and tax credit carry forwards. These amounts are subject to valuation allowances as it is uncertain that they will be realized in the next few years.</p></div>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Net Earnings or Loss per Share</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., common stock warrants and common stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because all common stock warrants and common stock options outstanding were anti-dilutive.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">At December 31, 2017 and 2016, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2017</td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2016</td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1191px; text-align: justify; font-stretch: normal;">Warrants to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">973,004</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">980,004</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color:
white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Stock options to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">984,200</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">267,700</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Underwriters warrants</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">122,238</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">47,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; padding-left: 9pt; font-stretch: normal;">Total</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">2,126,442</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">1,247,704</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table></div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><u>Recent Accounting Pronouncements</u></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In July 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-11, I “Accounting for Certain Financial Instruments with Down Round Features” and II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In May 2017, the FASB issued ASU-2017-09, Compensation-Stock Compensation (Topic 718) –Modification Accounting”, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect this update to materially affect the Company’s financial statements.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">  </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which significantly changes the accounting for operating leases by lessees. The accounting applied by lessors is largely unchanged from that applied under previous guidance. The new guidance requires lessees to recognize lease assets and lease liabilities in the balance sheet, initially measured at the present value of the lease payments, for leases which were classified as operating leases under previous guidance. Lease cost included in the statement of income will be calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Lessees may make an accounting policy election to exclude leases with a term of 12 months or less from the requirement to record related assets and liabilities. The new standard is effective for public companies for fiscal years beginning after December 15, 2018. The Company plans to adopted the new standard effective for periods after December 31, 2018. The Company does not expect the adoption of this standard to have a material impact on its results of operations or cash flows; however, the Company has not determined the impact the adoption of this new standard will have on its financial position</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606)”, which does not change the core principles of ASU No. 2014-09 discussed below, but rather clarifies the implementation guidance in order to eliminate the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance. Under the new guidance, when an entity determines it is a principal in a transaction, the entity recognizes revenue in the gross amount of consideration; however, in transactions where an entity determines it is an agent, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The standard is effective for public
companies
for annual periods beginning after December 15, 2017. The Company adopted the new standard effective January 1, 2018. The Company does not expect the adoption of this new standard to have a material impact on the Company’s financial position, results of operations or cash flows.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes existing revenue guidance under U.S. GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The implementation of this new standard will require companies to use more judgment and to make more estimates than under current guidance and to expand their disclosures to include information regarding contract assets and liabilities as well as a more disaggregated view of revenue. The standard, as amended, is effective for public companies for annual periods beginning after December 15, 2017. The Company does not expect the adoption of the standard to have a material impact on its financial position, results of operations or cash flows.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.</p>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1250.4px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top;"><td style="width: 625.6px; text-align: justify;">Computer Equipment & Software</td><td style="width: 624.8px; text-align: justify;">1 – 3 years</td></tr><tr style="vertical-align: top; background-color: white;"><td style="text-align: justify;">Furniture and Fixtures</td><td style="text-align: justify;">2 – 7 years</td></tr><tr style="vertical-align: top;"><td style="text-align: justify;">Machinery and Equipment</td><td style="text-align: justify;">5 – 10 years</td></tr><tr style="vertical-align: top; background-color: white;"><td style="text-align: justify;">Leasehold Improvements</td><td style="text-align: justify;">Shorter of useful or lease life</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p></div>
<div><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2017</td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: bold 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2016</td><td style="font: bold 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1191px; text-align: justify; font-stretch: normal;">Warrants to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">973,004</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">980,004</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Stock options to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">984,200</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">267,700</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Underwriters warrants</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">122,238</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">47,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; padding-left: 9pt; font-stretch: normal;">Total</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt;
border-bottom-style: double; font-stretch: normal;">2,126,442</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">1,247,704</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table></div>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">December 31,<br />2017</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">December 31,<br />2016</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 1191px; text-align: justify; font-size: 10pt;">Computer equipment and software</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">60,696</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">36,522</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Furniture and fixtures</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">50,996</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">4,157</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Machinery and equipment</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">1,658,976</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">32,393</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Leasehold improvements</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">297,025</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">11,824</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Fixed assets in process</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">462,531</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td
style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"></td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,530,224</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"></td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">84,896</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Less: accumulated depreciation</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(96,198</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(76,091</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; font-stretch: normal;">Total</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">2,434,026</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">8,805</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table>
<div><table style="font: 10pt/normal 'times new roman', times, serif; width: 1250.4px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: justify; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="6">Principal</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="6">Accrued Interest</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom;"><td nowrap="nowrap" style="text-align: justify; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2017</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2016</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2017</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td nowrap="nowrap" style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31,<br />2016</td><td nowrap="nowrap" style="padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 650.4px; text-align: left; font-size: 10pt;">Business Development Loan</td><td style="width: 12.8px; font-size: 10pt;"> </td><td style="width: 12.8px; text-align: left; font-size: 10pt;">$</td><td style="width: 112.8px; text-align: right; font-size: 10pt;">     -</td><td style="width: 12.8px; text-align: left; font-size: 10pt;"> </td><td style="width: 12.8px; font-size: 10pt;"> </td><td style="width: 12.8px; text-align: left; font-size: 10pt;">$</td><td style="width: 112.8px; text-align: right; font-size: 10pt;">250,000</td><td style="width: 12.8px; text-align: left; font-size: 10pt;"> </td><td style="width: 12.8px; font-size: 10pt;"> </td><td style="width: 12.8px; text-align: left; font-size: 10pt;">$</td><td style="width: 112px; text-align: right; font-size: 10pt;">    -</td><td style="width: 12px; text-align: left; font-size: 10pt;"> </td><td style="width: 12px; font-size: 10pt;"> </td><td style="width: 12px; text-align: left; font-size: 10pt;">$</td><td style="width: 112px; text-align: right; font-size: 10pt;">-</td><td style="width: 12px; text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; font-size: 10pt;">Convertible Notes Payable</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">275,000</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">3,322</td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Convertible Notes Payable to Related Parties</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">50,000</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">384</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: justify; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;
border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">-</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">575,000</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">-</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">3,706</td></tr></table></div>
<div><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; widows: 1; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="text-align: center;"> </td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31, <br />2017</td><td style="padding-bottom: 1.5pt;"> </td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">December 31, <br />2016</td><td style="padding-bottom: 1.5pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 1191px; text-align: left;">Research and development</td><td style="width: 16px;"> </td><td style="width: 16px; text-align: left;">$</td><td style="width: 142px; text-align: right;">24,000</td><td style="width: 16px; text-align: left;"> </td><td style="width: 15px;"> </td><td style="width: 15px; text-align: left;">$</td><td style="width: 141px; text-align: right;">-</td><td style="width: 15px; text-align: left;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left;">Sales and marketing</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">27,000</td><td style="text-align: left;"> </td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">-</td><td style="text-align: left;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left;">General and administrative</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">152,734</td><td style="text-align: left;"> </td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">48,375</td><td style="text-align: left;"></td></tr></table></div>
<div><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; widows: 1; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top;"><td style="width: 1332px; padding-bottom: 1.5pt;"> </td><td style="width: 235px; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"><b>2017</b></td></tr><tr style="vertical-align: top; background-color: #cceeff;"><td>Annual dividend yield</td><td style="text-align: right;">-</td></tr><tr style="vertical-align: top; background-color: white;"><td>Expected life (years)</td><td style="text-align: right;">6.0-10.0</td></tr><tr style="vertical-align: top; background-color: #cceeff;"><td>Risk-free interest rate</td><td style="text-align: right;">1.71-2.46%</td></tr><tr style="vertical-align: top; background-color: white;"><td>Expected volatility</td><td style="text-align: right;">21.3%-22.1%</td></tr><tr style="vertical-align: top; background-color: #cceeff;"><td>Total grant date fair value</td><td style="text-align: right;">$503,260</td></tr></table></div>
<div><br class="apple-interchange-newline" /><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="font-size: 10pt;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Weighted</td><td style="font-size: 10pt; font-weight: bold;"> </td></tr><tr style="vertical-align: bottom;"><td style="font-size: 10pt;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Average</td><td style="font-size: 10pt; font-weight: bold;"> </td></tr><tr style="vertical-align: bottom;"><td style="font-size: 10pt;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Weighted</td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Remaining</td><td style="font-size: 10pt; font-weight: bold;"> </td></tr><tr style="vertical-align: bottom;"><td style="font-size: 10pt;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Average</td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Contractual</td><td style="font-size: 10pt; font-weight: bold;"> </td></tr><tr style="vertical-align: bottom;"><td style="font-size: 10pt;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Number of</td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Exercise</td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold;" colspan="2">Life</td><td style="font-size: 10pt; font-weight: bold;"> </td></tr><tr style="vertical-align: bottom;"><td style="font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Shares</td><td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Price</td><td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td><td style="text-align: center; font-size: 10pt; font-weight: bold; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">(in Years)</td><td style="padding-bottom: 1.5pt; font-size: 10pt; font-weight: bold;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 1003px; font-size: 10pt;">Options outstanding at December 31, 2015</td><td style="width: 16px; font-size: 10pt;"> </td><td style="width: 16px; text-align: left; font-size: 10pt;"> </td><td style="width: 142px; text-align: right; font-size: 10pt;">275,200</td><td style="width: 16px; text-align: left; font-size: 10pt;"> </td><td style="width: 16px; font-size: 10pt;"> </td><td style="width: 16px; text-align: left; font-size: 10pt;">$</td><td style="width: 141px; text-align: right; font-size: 10pt;">2.06</td><td style="width: 15px; text-align: left; font-size: 10pt;"> </td><td style="width: 15px; font-size: 10pt;"> </td><td style="width: 15px; text-align: left; font-size: 10pt;"> </td><td style="width: 141px; text-align: right; font-size: 10pt;">9.76</td><td style="width: 15px; text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font-size: 10pt;">Granted</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font-size: 10pt;">Exercised</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td
style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(7,500</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">)</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">2.06</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="padding-bottom: 4pt; font-size: 10pt;">Options outstanding at December 31, 2016</td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">267,700</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">2.06</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">8.76</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font-size: 10pt;">Granted</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">756,500</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">2.70</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">9.42</td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font-size: 10pt;">Exercised</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;">-</td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(40,000</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">)</td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">2.50</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td><td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="padding-bottom: 4pt; font-size: 10pt;">Options outstanding at December 31, 2017</td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">984,200</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left;
font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">2.71</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">8.97</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="padding-bottom: 4pt; font-size: 10pt;">Options exercisable at December 31, 2017</td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">232,284</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">2.06</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">7.76</td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td></tr></table></div>
<div>
<table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Weighted</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Average</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Weighted</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Remaining</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2"> </td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Average</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Contractual</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Number of</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Exercise</td>
<td style="font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt;" colspan="2">Life</td>
<td style="font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Shares</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Price</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: center; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">(in Years)</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="width: 1003px; font-size: 10pt;">Warrants outstanding at December 31, 2015</td>
<td style="width: 16px; font-size: 10pt;"> </td>
<td style="width: 16px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 142px; text-align: right; font-size: 10pt;">980,004</td>
<td style="width: 16px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 16px; font-size: 10pt;"> </td>
<td style="width: 16px; text-align: left; font-size: 10pt;">$</td>
<td style="width: 141px; text-align: right; font-size: 10pt;">0.58</td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 15px; font-size: 10pt;"> </td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
<td style="width: 141px; text-align: right; font-size: 10pt;">8.36</td>
<td style="width: 15px; text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;">Granted</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Exercised</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt;
border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="padding-bottom: 1pt; font-size: 10pt;">Warrants outstanding at December 31, 2016</td>
<td style="padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">980,004</td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">$</td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">0.58</td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1pt; font-size: 10pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">7.36</td>
<td style="text-align: left; padding-bottom: 1pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="font-size: 10pt;">Granted</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">8,000</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">2.50</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">4.33</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="font-size: 10pt;">Exercised</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">(15,000</td>
<td style="text-align: left; font-size: 10pt;">)</td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">0.50</td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt;"> </td>
<td style="text-align: right; font-size: 10pt;">-</td>
<td style="text-align: left; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;">Forfeited or expired</td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 1.5pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">-</td>
<td style="text-align: left; padding-bottom: 1.5pt; font-size: 10pt;"> </td>
</tr>
<tr style="vertical-align: bottom; background-color: #cceeff;">
<td style="padding-bottom: 4pt; font-size: 10pt;">Warrants outstanding at December 31, 2017</td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">973,004</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">$</td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">0.59</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="padding-bottom: 4pt; font-size: 10pt;"> </td>
<td style="text-align: left; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td>
<td style="text-align: right; font-size: 10pt; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">6.37</td>
<td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"></td>
</tr>
</table>
</div>
<div><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; widows: 1; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors to purchase common stock</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">Exercise Price</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">Vested as of December 31,<br />2017</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">Issued</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1003px; text-align: left; font-stretch: normal;">Underwriters warrants</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 142px; text-align: right; font-stretch: normal;">7.475</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">122,238</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">122,238</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">Warrants issued to vendors</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; padding-bottom: 1.5pt; font-stretch: normal;">3.200</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">17,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">47,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; padding-left: 9pt; font-stretch: normal;">Total</td><td style="padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: right; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="text-align: left; padding-bottom: 4pt; font-size: 10pt;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">139,238</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left;
border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">169,238</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table></div>
<div><table style="font: 10pt/normal 'times new roman', times, serif; width: 1551px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Deferred tax assets:</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2017</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;" colspan="2">2016</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1167px; text-align: left; padding-left: 9pt; font-stretch: normal;">Share-based compensation expense</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 140px; text-align: right; font-stretch: normal;">88,211</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 139px; text-align: right; font-stretch: normal;">42,854</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-left: 9pt; font-stretch: normal;">Net operating loss carry forward</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,434,289</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,112,856</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Deferred tax liabilities:</td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td><td style="text-align: right; font-size: 10pt;"> </td><td style="text-align: left; font-size: 10pt;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-left: 9pt; font-stretch: normal;">Property and equipment</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">(24,878</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">)</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">(15,387</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">)</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Federal research and development credit</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">259,615</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">178,158</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Oregon research and development credit</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font:
10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">129,675</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">83,012</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; font-stretch: normal;">Total deferred tax asset</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,886,912</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">2,401,493</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 1.5pt; font-stretch: normal;">Valuation Allowance</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(2,886,912</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 1.5pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-stretch: normal;">(2,401,493</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 1.5pt; font-stretch: normal;">)</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt; font-stretch: normal;">Net deferred tax asset</td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; padding-bottom: 4pt; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-stretch: normal;">-</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; padding-bottom: 4pt; font-stretch: normal;"> </td></tr></table></div>
<p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td> </td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">2017</td><td style="padding-bottom: 1.5pt;"> </td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">2016</td><td style="padding-bottom: 1.5pt;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="width: 1183.81px; text-align: left; padding-left: 5.4pt;">Statutory U.S. Federal tax rate</td><td style="width: 16px;"> </td><td style="width: 16px; text-align: left;"> </td><td style="width: 141px; text-align: right;">34.0</td><td style="width: 16px; text-align: left;">%</td><td style="width: 15px;"> </td><td style="width: 15px; text-align: left;"> </td><td style="width: 141px; text-align: right;">34.0</td><td style="width: 16px; text-align: left;">%</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-left: 5.4pt;">Effect of U.S. tax law change (1)</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">(30.0</td><td style="text-align: left;">%)</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">-</td><td style="text-align: left;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left; padding-left: 5.4pt;">State and local income taxes – net of Federal benefit</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">6.6</td><td style="text-align: left;">%</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">6.6</td><td style="text-align: left;">%</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-left: 5.4pt;">Nondeductible expenses and other</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">4.0</td><td style="text-align: left;">%</td><td> </td><td style="text-align: left;"> </td><td style="text-align: right;">3.0</td><td style="text-align: left;">%</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="text-align: left; padding-bottom: 1.5pt; padding-left: 5.4pt;">Valuation Allowance</td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(14.6</td><td style="text-align: left; padding-bottom: 1.5pt;">%)</td><td style="padding-bottom: 1.5pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">(43.6</td><td style="text-align: left; padding-bottom: 1.5pt;">%)</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="text-align: left; padding-bottom: 4pt; padding-left: 5.4pt;">Effective rate tax</td><td style="padding-bottom: 4pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">0.0</td><td style="text-align: left; padding-bottom: 4pt;">%</td><td style="padding-bottom: 4pt;"> </td><td style="text-align: left; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;"> </td><td style="text-align: right; border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double;">0.0</td><td style="text-align: left; padding-bottom: 4pt;">%</td></tr></table><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 100%; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 0pt; margin-bottom: 0pt; word-spacing: 0px; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top;"><td style="width: 0.25in;"></td><td style="width: 0.25in;">(1)</td><td style="text-align: justify;">Due to the Tax Act, our U.S. deferred tax assets and liabilities as of December 31, 2017 were re-measured from 34% to 21%. The change in tax rate resulted in a decrease to our gross U.S. deferred tax assets which is offset by a corresponding decrease to our valuation allowance. This resulted in an adjustment to the Company’s deferred tax assets of $676,000 from the prior period.</td></tr></table>
<div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">Years ending December 31:</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"> </p><table style="font: 10pt/normal 'times new roman', times, serif; width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; widows: 1; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; width: 1379px; text-align: left; font-stretch: normal;">2018</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; width: 16px; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 141px; text-align: right; font-stretch: normal;">150,000</td><td style="font: 10pt/normal 'times new roman', times, serif; width: 15px; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">2019</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">150,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">2020</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">150,000</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">2021</td><td style="font: 10pt/normal 'times new roman', times, serif; font-stretch: normal;"> </td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;">$</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: right; font-stretch: normal;">25,001</td><td style="font: 10pt/normal 'times new roman', times, serif; text-align: left; font-stretch: normal;"> </td></tr></table></div>
P3Y
P1Y
P7Y
P2Y
P10Y
P5Y
Shorter of useful or lease life
1247704
267700
980004
2126442
122238
47000
984200
973004
4100000
131709
317324
84896
36522
4157
32393
11824
2530224
60696
50996
1658976
297025
462531
76091
96198
0
573095
7951
20107
575000
3706
250000
5000
70000
70000
0.05
0.06
0.06
0.06
2017-10-01
2018-03-31
2018-03-31
2018-03-31
325000
200000
50000
150000
100000
5.00
5.85
6.50
6.50
5.00
0.90
0.90
0.90
0.90
0.90
450000
75000
23000
80832
232
354
1500000
15000000
245100
10000
1225500
Two-for-one
Two-for-one
2000000
2000000
1247704
1957204
6.50
5.25
6.50
1051131
1051131
8000
8000
A majority of the Series A-1 Preferred stockholders voted to convert all 1,434,891 Series A-1 Preferred shares to 2,869,782 common shares.
21000
169238
139238
122238
17000
48375
24000
27000
152734
P5Y0M0D
P6Y0M0D
P10Y0M0D
0.0184
0.0171
0.0246
0.2134
0.213
0.221
503260
275200
980004
267700
980004
984200
973004
756500
8000
15000
14200
7500
40000
7500
232284
2.06
0.58
2.06
0.58
2.71
0.59
2.70
2.50
0.50
2.06
2.50
2.06
P9Y9M3D
P8Y4M9D
P8Y9M3D
P7Y4M9D
P8Y11M19D
P6Y4M13D
P9Y5M1D
P4Y3M29D
P7Y9M3D
7.475
3.200
0.50
169238
122238
47000
1000000
1000000
15800
22445
429403
207000
153000
69000
980004
8000
973004
2.50
P5Y0M0D
15000
P5Y
Of these, 11,000 warrants vest as follows: 5,000 immediately and 1,500 per month over four months. As of December 31, 2017, 5,000 of these were vested with a value of $5,805. The remaining 36,000 warrants are subject to deliverables being met. As of December 31, 2017, deliverables related to 12,000 of these warrants were met and are deemed vested with a value of $13,932 based on inputs to the Black-Scholes model, similar to those disclosed under the 2015 Plan and 2012 Plan.
42854
88211
2112856
2434289
15387
24878
-178158
-259615
-83012
-129675
2401493
2886912
2401493
2886912
0.340
0.340
0.21
0.34
0.066
0.066
0.030
0.040
-0.436
-0.146
0.000
0.000
836000
485000
676000
8820000
Expire at various dates from 2029 through 2037
The Federal R&D tax credits will expire at various dates from 2032 through 2037, and the Oregon R&D tax credits will expire at various dates from 2018 through 2022.
42000
100
10100
43700
1700
386035
231967
150000
150000
150000
25001
30000
5094
The lease began on October 1, 2017 and will terminate on March 31, 2021. Rent was $25,000 for the first month, then is $12,500 per month for months two through forty-one, and one dollar for month forty-two.
12500
61740
25000
107645
61200
The lease began on May 1, 2013 and was set to terminate on April 30, 2018.
Rent was $25,000 for the first month, then is $12,500 per month for months two through forty-one, and one dollar for month forty-two.
54600
62405
15000
3.77756
2.0605
20000
Subsequent to December 31, 2017, it has financed a total of $942,474 with monthly payments ranging from $437 to $6,897 and periods ranging from 48 to 60 months.
29259
Due to the Tax Act, our U.S. deferred tax assets and liabilities as of December 31, 2017 were re-measured from 34% to 21%. The change in tax rate resulted in a decrease to our gross U.S. deferred tax assets which is offset by a corresponding decrease to our valuation allowance. This resulted in an adjustment to the Company's deferred tax assets of $676,000 from the prior period.