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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">SpendSmart Networks, Inc. is a Delaware corporation
(“the Company”).  The Company brings value added products and mobile marketing solutions to consumers, merchants,
businesses and government organizations.  The Company is a publicly traded company trading on the OTCQB under the symbol
“SSPC.”  The accompanying unaudited condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary SpendSmart Networks, Inc., a California corporation (SpendSmart-CA). All material intercompany
balances and transactions have been eliminated.  The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December
31, 2016.  The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures
required by accounting principles generally accepted in the United States of America (“GAAP”).  All normal
recurring adjustments which are necessary for the fair presentation of the results for the interim periods are reflected herein.  Operating
results for the three-month periods ended March 31, 2017 and 2016 are not necessarily indicative of results to be expected for
a full year.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2016, the Company’s
audited consolidated financial statements included an opinion containing an explanatory paragraph as to the uncertainty of the
Company’s ability to continue as a going concern. The Company has continued to incur net losses through March 31, 2017 and
have yet to establish profitable operations. These factors among others create a substantial doubt about the Company’s ability
to continue as a going concern. The Company’s unaudited consolidated financial statements as of and for the period ended
March 31, 2017 does not contain any adjustments for this uncertainty.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is currently exploring other
financing means to raise additional required capital which may include the sale of shares of the Company’s preferred or common
stock. All additional amounts raised will be used for our future investing and operating cash flow needs. However, there can be
no assurance that we will be successful in consummating additional financing. This description of our future plans for financing
does not constitute an offer to sell or the solicitation of an offer to buy securities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain reclassifications were made to the 2016
financial statement presentation to conform to the 2017 financial statement presentation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management reviews accounts receivable, short-term
and long-term notes receivable on a monthly basis to determine if any receivables are potentially uncollectible. An allowance for
doubtful accounts is determined based on a combination of historical experience, length of time outstanding, customer credit worthiness,
and current economic trends. We recorded a bad debt expense of $35,211 during the three months ended March 31, 2017 and wrote off
uncollectable accounts during the three months ended March 31, 2017 in the amount of $11,211. As of March 31, 2017, the Company
has recorded an allowance for doubtful accounts of $1,820,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Notes receivable aged over 30 days past due
are considered delinquent and notes receivable aged over 60 days past due with known collection issues are placed on non-accrual
status. Interest revenue is not recognized on notes receivable while on non-accrual status. Cash payments received on non-accrual
receivables are applied towards the principal. When notes receivable on non-accrual status are again less than 60 days past due,
recognition of interest revenue for notes receivable is resumed.  The Company charges interest rates on notes receivable
averaging 13%.  The Company recorded $3,882 in interest income for the three months ended March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The allowance for doubtful accounts on long-term
receivables is the Company's best estimate of the amount of probable credit losses related to the Company's existing note receivables.  The
allowance for doubtful accounts is the Company's best estimate of probable credit losses related to trade receivables and notes
receivable based upon the aging of the receivables, historical collection data, internal assessments of credit quality and the
economic conditions in the business subprime industry, as well as in the economy as a whole. The Company charges off uncollectable
amounts against the reserve in the period in which it determines they are uncollectable. Unearned income on notes receivable is
amortized using the effective interest method.  The Company determines the allowance for doubtful accounts related to
notes receivable based upon a reserve for known collection issues, as well as a reserve based upon aging, both of which are based
upon history of such losses and current economic conditions. Based upon the Company's methodology, the notes receivable balances
with reserves and the reserves associated with those balances are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="22" style="text-align: center"><font style="font-size: 8pt"><b>March 31, 2017</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Gross</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Net</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 40%"><font style="font-size: 8pt">Customer Notes Receivable</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">766,675</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">406,888</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">749,638</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">400,901</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">17,037</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">5,987</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accounts Receivable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,001,665</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">669,461</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">332,204</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="22" style="text-align: center"><font style="font-size: 8pt"><b>December 31, 2016</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Gross</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Net</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 40%"><font style="font-size: 8pt">Customer Notes Receivable</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">793,988</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">414,665</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">767,138</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">399,401</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">26,850</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">15,264</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accounts Receivable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">921,829</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">629,461</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">292,368</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The roll forward of the allowance for doubtful
accounts related to notes receivable and accounts receivable is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Notes Receivable Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 8pt">Accounts Receivable Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
</tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
</tr>
<tr style="vertical-align: bottom">
<td style="width: 60%"><font style="font-size: 8pt">Balance at December 31, 2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 8pt">767,138</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 8pt">399,401</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 8pt">629,461</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">     Incremental (Reduction in) Provision</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(10,378</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,500</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">44,089</font></td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">     Recoveries</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">     Charge offs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(7,122</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(4,089</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Balance at March 31, 2017</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">749,638</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">400,901</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">669,461</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The allowance for doubtful accounts as a percentage
of total receivables was approximately 84% as of March 31, 2017 and approximately 84% as of December 31, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Common stock</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2017,
the Company issued 100,000 shares of common stock and recognized $2,000 expense for services rendered.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2016,
the company issued 1,669,205 shares of common stock and the Company
recognized expense of $132,247 for services rendered.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Tender Offer and Debt Conversion</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Between December 11, 2015 and February 3, 2016,
the Company entered into agreements with investors, pursuant to which on February 3, 2016, warrant holders exercised 12,270,846
Warrants to purchase an aggregate of 12,270,846 shares of our common stock for gross proceeds of $1.84 million. The Company issued
new warrants to purchase an aggregate of 26,479,217 shares of common stock at an exercise price of $0.15 per share, in consideration
for the immediate exercise of the warrants.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Warrants have a cash settlement feature;
as a result, they were classified as a derivative liability and recorded at fair value. Fair value of the Warrants, in the total
amount of $3,918,924 was calculated using the Monte-Carlo model, using the following assumptions: 68.7% expected volatility, a
risk-free interest rate of 0.91%, estimated life of 3 years and no dividend yield. The fair value of the common stock was $0.148.
The transaction was accounted for as an inducement.  ASC 470-20-40 addresses the accounting for altered conversion privileges,
including the issuance of warrants or other securities (not provided for in the original conversion terms) to induce conversion. 
As a result of this transaction, the Company recognized an inducement expense of $3,560,958 equal to the fair value of all securities
and other consideration transferred in the transaction in excess of the fair value of securities issuable pursuant to the original
conversion terms, as of the date of the conversion.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the tender offer, investors
converted $843,751 in Convertible Notes at a conversion price of $0.15 per share into 5,625,013 shares of our common stock.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2017,
the Company issued five Convertible Promissory Notes aggregating $319,000 to related parties. The Convertible Promissory Notes
bear an interest at the rate of 9%, have a six month maturity date, and a voluntary conversion into an upcoming financing in the
event the Company closes the financing and receives gross proceeds totaling at least $200,000. The conversion rate will be at the
same terms of the financing. We recorded $3,815 in interest expense for the three months ended March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2016, the
Company issued two Convertible Promissory Notes to the Daniel Jonathan Blech Trust DTD 9/01/2005 in the amount of $100,000 each.
Mr. Blech, a member of the Company’s board of directors, is the trustee. The Convertible Promissory Notes bear interest at
the rate of 9% has six-month maturity date, and a voluntary conversion into an upcoming financing in the event the Company closes
the financing and receives gross proceeds totaling at least $200,000. The conversion rate will be at the same terms of the financing.
We recorded $5,817 in interest expense for the three months ended March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 19, 2016, the Company issued the following
Convertible Promissory Notes: Joe Proto ($40,000), John Eyler ($40,000), Francis J. Liddy ($20,000), Isaac Blech ($40,000), and
Transpac Investments Ltd. ($40,000). All of the individuals listed are members of the board of directors. The Convertible Promissory
Notes bear interest at the rate of 9%, have a six month maturity date, and a mandatory conversion into an upcoming financing in
the event the Company closes the financing and receives gross proceeds totaling at least $200,000. The conversion rate will be
at the same terms of the financing. We recorded $4,050 in interest expense for the three months ended March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2015, the
Company closed on a private offering and issued and six 9% Convertible Promissory Notes with principal amounts of $300,000, $262,500,
$275,000, $75,000, 50,000, and $150,0000 (the “Notes”) and warrants to purchase 400,002, 350,002, 366,667, 66,667,
100,001, and 200,001 shares of the Company’s common stock (the “Warrant”), respectively. The Company also agreed
to provide piggy-back registration rights to the holders of the Units. The Notes have a term of twelve (12) months, pay interest
semi-annually at 9% per annum and can be voluntarily converted by the holder into shares of common stock at an exercise price of
$0.75 per share, subject to adjustments for stock dividends, splits, combinations and similar events as described in the Notes.
In addition, if the Company issues or sells common stock at a price below the conversion price then in effect, the conversion price
of the Notes shall be adjusted downward to such price but in no event shall the conversion price be reduced to a price less than
$0.50 per share. The Warrants have an exercise price of $0.75 per share and have a term of four years. The holders of the Warrants
may exercise the Warrants on a cashless basis for as long as the shares of common stock underlying the Warrants are not registered
on an effective registration statement. The relative fair value ascribed to the 1,483,340 warrants issued was approximately
$337,118 and was recorded to additional paid-in capital. The embedded conversion feature was bifurcated and accounted for as a
derivative liability at approximately $393,000 on the day of issuance.  The remaining proceeds were allocated based on
the relative fair value of the debt and the warrant, and accordingly, approximately $730,520 of debt discount was recorded and
was amortized over the initial term of the debt using the effective interest method. These notes were modified in second quarter
2016 and again in fourth quarter 2016. See below for further discussion.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the second quarter 2016, the Company
amended four of the outstanding 9% Convertible Promissory Notes with principal amounts of $275,000, $75,000, $50,000, and $150,000
as follows: the maturity dates were extended to November 5, 2016, September 2, 2016, November 22, 2016, and September 26, 2016,
respectively; the conversion price was lowered to $0.15 per share, the provision limiting the conversion price adjustment to that
of the Series C Preferred Stock was removed, and an option to be repaid prior to the maturity date in the event the Company raises
capital in excess of three million dollars was added. The Company also amended the warrant issued in conjunction with the Convertible
Promissory Note reducing the exercise price to $0.15 and issued new warrants to purchase 666,669 shares of the Company's common
stock with a $0.15 exercise price and a three year expiration. According to FASB ASC 470-50, the modification is accounted for
as a debt extinguishment, whereby the new debt instrument is initially recorded at fair value, and that amount is used to determine
the debt extinguishment gain or loss to be recognized and the effective rate of the new instrument. We recognized a loss on the
extinguishment of debt of $415,689 for the year ended December 31, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the fourth quarter 2016, the Company
amended six of the outstanding 9% Convertible Promissory Notes with principal amounts of $300,000, $262,500, $275,000, $75,000,
$50,000, and $150,000 as follows: the maturity dates were extended to May 5, 2017; the interest rate for the extension period was
increased to 15%; the conversion price was changed to the per share price at the time of the next financing of $2,000,000 or greater.
According to FASB ASC 470-50, the modification is accounted for as a debt extinguishment, whereby the new debt instrument is initially
recorded at fair value, and that amount is used to determine the debt extinguishment gain or loss to be recognized and the effective
rate of the new instrument. We recognized a loss on the extinguishment of debt of $58,032 for the year ended December 31, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 15, 2015, the Company issued a
Convertible Promissory Note in the principal amount of $400,000 inclusive of interest. The Note is for a term of six months. The
Note bears interest at twelve percent per annum. The Note is secured by the assets of the Company. The Note may be converted into
shares of the Company’s common stock at $0.75 per share. The Company also issued the holder warrants to purchase 500,000
shares of the Company’s common stock. The proceeds were allocated based on the relative fair value of the debt and the warrant.
The warrants have an exercise price of $0.75 per share and have a term of two years. The relative fair value ascribed to the 500,000
warrants issued was approximately $49,000 and was recorded to additional paid-in capital. This amount will be amortized over the
term of the debt using the effective interest rate method. As part of the closing of the Tender Offer, $200,000 of these notes
converted into 1,333,334 shares of common stock and the investor received common stock and 1,333,333 warrants with a three year
term at an exercise price of $0.15. The remaining $200,000 of notes was paid in February 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2015, the
Company issued Convertible Promissory Notes to investors in the principal amount of $150,000, $150,000, $287,333, and $48,000. The
Notes feature a mandatory conversion feature obligating the holder to participate and apply the principal and interest into a “Qualified
Financing” meaning a financing taking place prior to January 31, 2016, wherein the Company receives gross proceeds totaling
at least $1,000,000. In the event the entire principal plus accrued interest under this Note is not eligible for conversion into
a Qualified Financing, then any remaining balance of this Note shall be converted into restricted common stock at the price of
the Qualified Financing and Holder shall receive three (3) times any warrant coverage provided for in the Qualified Financing.
The Notes bear interest at nine percent per annum and has a maturity date of six months. The embedded conversion feature of the
note was bifurcated and accounted for as a derivative liability at approximately $17,379 on the day of issuance. As part of the
closing of the Tender Offer, these notes converted into 4,291,679 shares of common stock and the investors received 12,875,037
warrants with a three year term at an exercise price of $0.15.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Series A Preferred Stock</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2017 and December 31, 2016, the
Company had 0 shares of Series A Cumulative Convertible Preferred Stock (the “Series A Stock”) outstanding.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Series B Preferred Stock</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2017 and December 31, 2016, the
Company had 0 shares of Series B convertible preferred stock (“Series B Stock”) outstanding.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Series C Convertible Preferred Stock</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2017 and December 31, 2016, the
Company had 3,443,061 shares of Series C convertible preferred stock (“Series C Stock”) outstanding that were issued
to investors for $3.00 per share.  No shares of Series C Stock converted to common shares during the three months ended
March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Options, warrants, and convertible debt outstanding
were all considered anti-dilutive for the three months ended March 31, 2017 and 2016 due to net losses.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following securities were not included in
the diluted net income (loss) per share calculation because their effect was anti-dilutive as of the periods presented:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>For the three months ended</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>March 31,</b></p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Convertible notes</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">91,498,100</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">4,645,054</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Common stock options</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">30,846,946</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">17,088,129</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Investor warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">37,806,931</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">37,960,774</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Compensation warrants</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,285,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">2,098,333</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Excluded potentially dilutive securities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">161,436,977</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">61,792,290</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock Options and Warrants</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Warrant activity (including warrants issued
to investors and for consulting and advisory services) for the three months ended March 31, 2017 and 2016 was as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>For the three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Beginning balance outstanding</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">39,818,347</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">26,397,410</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warrants issued during the period:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expired during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(726,416</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(546,667</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Exercised during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(12,270,853</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">In connection with tender offer exercise</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">26,479,217</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Ending balance outstanding</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">39,091,931</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">40,059,107</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock option activity during the following periods
was as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">    </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>For the three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Beginning balance outstanding</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">26,865,017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">10,337,113</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Options issued during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,698,759</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6,836,016</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Options expired during the period</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(716,830</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(85,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Ending balance outstanding</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">30,846,946</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">17,088,129</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The numbers and exercise prices of all options
and warrants outstanding at March 31, 2017 are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Shares Issuable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Expiration</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fiscal Period</p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 3%"> </td>
<td style="width: 1%"> </td>
<td style="width: 25%; text-align: right"><font style="font-size: 8pt">652,516</font></td>
<td style="width: 3%"> </td>
<td style="width: 3%"> </td>
<td style="width: 1%"> </td>
<td style="width: 25%; text-align: right"><font style="font-size: 8pt">7.85</font></td>
<td style="width: 3%"> </td>
<td style="width: 36%; text-align: center"><font style="font-size: 8pt">2nd Qtr, 2017</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">536,500</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.14</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3rd Qtr, 2017</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,162,088</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.45</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2017</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.60</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2018</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">755,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.26</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2018</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">36,973,317</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.31</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,850,007</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.44</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">2nd Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,309,002</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.92</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3rd Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,603,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.15</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,273,172</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.15</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2020</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,475,789</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.18</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2020</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,288,713</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.12</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,427,605</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.09</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">2nd Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,189,668</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.06</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3rd Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,698,759</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,813,284</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">133,334</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">7.05</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2022</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">69,938,877</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">0.47</font></td>
<td style="padding-bottom: 3pt"> </td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock-based Compensation</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Results of operations for the three months ended
March 31, 2017 and 2016 include stock based compensation costs totaling $280,919 and $433,180, respectively, all of which was charged
to personnel related expenses.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For purposes of accounting for stock based compensation,
the fair value of each option and warrant award is estimated on the date of grant using the Black-Scholes-Merton option pricing
formula. Compensation expense is recognized over the service period. The following weighted average assumptions were utilized for
the calculations during the three months ended March 31, 2017 and 2016:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>For the three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected life (in years)</font></td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">2.50 years</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">2.874 years</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Weighted average volatility</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">202.30</font></td>
<td style="width: 1%"><font style="font-size: 8pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">108.81</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Forfeiture rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">26.07</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">13.58</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.38</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">.96</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected dividend rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.00</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.00</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The weighted average expected option and warrant
term for employee stock options granted reflects the application of the simplified method set out in SEC Staff Accounting Bulletin
No. 107, <i>Share-Based Payment</i> (SAB 107). The simplified method defines the life as the average of the contractual term of
the options and the weighted average vesting period for all options. The Company utilized this approach as its historical share
option exercise experience does not provide a reasonable basis upon which to estimate an expected term. Expected volatilities
are based on the historical volatility of the Company’s stock. The Company estimated the forfeiture rate based on our expectation
for future forfeitures and (for the purpose of computing stock based compensation given the contractual vesting of the Company’s
options and warrants outstanding) the Company assumes that all options and warrants will vest. The risk-free rate for periods
within the contractual life of the option is based on the U.S. Treasury yield in effect at or near the time of grant. The Company
has never declared or paid dividends and has no plans to do so in the foreseeable future.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2017, the Company modified 7,888,172
in outstanding stock options to our former CEO upon his resignation. The new terms extended the exercise date to February 10,
2020 and accelerated vesting on any unvested options. The cancellation and reissuance of these stock options was treated as a modification
under ASC 718 and, accordingly, total stock-based compensation expense related to these awards increased $128,807 during the three
months ended March 31, 2017. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2017, $231,130 of total unrecognized compensation cost related to unvested stock
based compensation arrangements is expected to be recognized over a weighted-average period of 15.5 months.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 26, 2015, the Company entered into
a Business Promissory Note and Security Agreement with Bank of Lake Mills for the principal sum of $200,000 and a daily interest
rate of 0.22%. The total repayment amount including interest and principal was $244,637 to be paid pro-rata weekly ending February
22, 2016. For the three months ended March 31, 2016, we recorded interest expense related to the note of $4,947 and we paid approximately
$70,262 in principal repayments related to the Note. As of February 25, 2016, the note had been fully repaid.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 14, 2015 and September 28, 2015, the
Company entered into Loan Agreements with Alex Minicucci, our former CEO, for the principal sum of $65,000 and $35,000, respectively.
The Loans include an interest rate of 7%. The $35,000 Loan was repaid in February 2016. For the year three months ended March 31,
2017 and 2016, we recorded interest expense related to the loans of $1,132 and $1,343, respectively. The Company extended the terms
related to the $65,000 loan to May 10, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: white">On April
18, 2017, the Company issued a Convertible Promissory Note to the Daniel Jonathan Blech Trust DTD 9/01/2005 in the amount of $45,000.
Mr. Blech, a member of the Company’s board of directors, is the trustee. The Convertible Promissory Note bears interest at
the rate of 9% has six-month maturity date, and a voluntary conversion into an upcoming financing in the event the Company closes
the financing and receives gross proceeds totaling at least $200,000. The conversion rate will be at the same terms of the financing.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 3, 2017, the Company amended one May
5, 2015 9% Convertible Promissory Note with a principal amount of $275,000 as follows: the maturity date was extended to July 7,
2017 and in the event the borrower completes an asset sale or capital raise of more than $275,000, then the Notes shall automatically
immediately become due and payable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 15, 2017, the Company amended one May
5, 2015 9% Convertible Promissory Note with a principal amount of $262,500 as follows: the maturity date was extended to July 7,
2017 and in the event the borrower completes an asset sale or capital raise of more than $275,000, then the Notes shall automatically
immediately become due and payable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company extended credit to its licensees
in the normal course of business and performs credit evaluations of its customers. Loans and accounts receivable are stated at
amounts due from customers net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual
payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors,
including the length of time loan and accounts receivable are past due and the customer's current ability to pay its obligation
to the Company. The Company writes off loans and accounts receivable when they become uncollectible. The Company is no longer entering
into notes with its customers.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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
disclosure of contingent assets and liabilities, fair value of financial instruments, at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could materially
differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements
include recoverability and useful lives of intangible assets, the valuation allowance related to the Company's deferred tax assets,
the allowance for doubtful accounts related and notes and accounts receivable, the fair value of stock options and warrants granted
to employees, consultants, directors, investors and placement agents, and notes and warrant tender offer.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generates revenues primarily in
the form of set up fees, license fees, messaging, equipment and marketing services fees and value added mobile marketing and mobile
commerce services.  License fees are charged monthly for support services.  Set-up fees primarily consist of
fees for website development services (including support and unspecified upgrades and enhancements when and if they are available),
training and professional services that are not essential to functionality. The Company offers two licenses consisting of our Engage
license and our Thrive license. The Company now offers both licenses in a combined package known as the Customer Loyalty System
License (“CLS”).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenues when all of
the following conditions are met:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">there is persuasive evidence of an arrangement;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">the products or services have been delivered to the customer;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">the amount of fees to be paid by the customer is fixed or determinable; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">The collection of the related fees is probable.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Signed agreements are used as evidence of an
arrangement. Electronic delivery occurs when we provide the customer with access to the software. The Company assesses whether
a fee is fixed or determinable at the outset of the arrangement, primarily based on the payment terms associated with the transaction.
The Company assesses collectability of the set-up fee based on a number of factors such as collection history and creditworthiness
of the licensee. If the Company determines that collectability is not probable, revenue is deferred until collectability becomes
probable, generally upon receipt of cash.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">License arrangements may also include set-up
fees for website development, delivery of tablets, professional services and training services, which are typically delivered within
30-60 days of the contract term. In determining whether set-up fee revenues should be accounted for separately from license revenues,
we evaluate whether the set-up fees are considered essential to the functionality of the license using factors such as the nature
of our products; whether they are ready for use by the customer upon receipt; the nature of our implementation services, which
typically do not involve significant customization to or development of the underlying software code; the availability of services
from other vendors; whether the timing of payments for license revenues is coincident with performance of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">services; and whether milestones or acceptance
criteria exist that affect the realizability of the license fee. Substantially all of our set-up fee arrangements are recognized
as the services are performed. Payments received in advance of services performed are deferred and recognized when the related
services are performed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We do not offer refunds and therefore have not
recorded any sales return allowance for any of the periods presented. Upon a periodic review of outstanding accounts and notes
receivable, amounts that are deemed to be uncollectible are written off against the allowance for doubtful accounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred revenue consists substantially of amounts
invoiced in advance of revenue recognition for our products and services described above. We recognize deferred revenue as revenue
only when the revenue recognition criteria are met.  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Debt discount and issuance costs</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Debt issuance costs, including the value of
warrants issued in connection with debt financing and fees or costs paid to lender are presented in the condensed consolidated
balance sheets as a direct deduction from the carrying amount of that debt.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company amortizes the discount to interest
expense over the term of the respective debt using the effective interest method.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all investments with an
original maturity of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in money
market funds, bank certificates of deposit and U.S. government debt securities whose cost equals fair market value.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">From time to time, the Company has maintained
bank balances in excess of insurance limits. The Company has not experienced any losses with respect to cash. Management believes
the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment had been recorded at
cost and depreciated using the straight-line method over the estimated useful lives of the related assets (generally three to five
years). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements
are capitalized and depreciated over their estimated remaining useful lives. Depreciation expense for the three months ended March
31, 2017 and 2016 was $0. Property and equipment has been fully depreciated as of March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for computer software used
in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs
associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs
incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs
incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist
of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project
stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and
(iii) it is probable both that the project will be completed and that the software will be used to perform the function intended.  We
capitalized $0 and $179,646, respectively, in software development related to programming and coding for new product development
for the three months ended March 31, 2017 and 2016, respectively.  Software amortization expense for the three months
ended March 31, 2017 and 2016 was $0 and $110,365, respectively. As of March 31, 2017 all software costs have been fully amortized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company records impairment losses on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets’ carrying amount. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amounts of the assets exceed the estimated fair value of the assets.
There has not been any impairment recorded during the quarters ended March 31, 2017 or 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As part of the income tax provision process
of preparing the Company’s financial statements, the Company is required to estimate the Company’s provision for income
taxes. This process involves estimating current tax liabilities together with assessing temporary differences resulting from differing
treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Management
then assesses the likelihood that the Company deferred tax assets will be recovered from future taxable income and to the extent
believed that recovery is not likely, a valuation allowance is established. Further, to the extent a valuation allowance is established
and changes occur to this allowance in a financial accounting period, such changes are recognized in the Company’s tax provision
in the Company’s condensed consolidated statement of operations. The Company’s use of judgment in making estimates
to determine the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance is
recorded against our net deferred tax assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes the benefit of an uncertain
tax position taken or expected to be taken on the Company’s income tax returns if it is “more likely than not”
that such tax position will be sustained based on its technical merits. The Company does not have any unrecognized tax benefits
or accrued penalties and interest. If such matters were to arise, the Company would recognize interest and penalties related to
income tax matters in income tax expense.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for stock based compensation
arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and
directors based on estimated fair values. The Company uses the Black-Scholes option valuation model to estimate the fair value
of the Company’s stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input
of subjective assumptions to calculate the value of options and warrants. The Company uses historical company data among other
information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company calculates basic earnings per share
(“EPS”) by dividing the Company’s net loss and comprehensive net loss applicable to common shareholders by the
weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS
is computed by dividing net income or net loss and comprehensive net loss applicable to common shareholders by the weighted average
number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as
options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for the common stock warrants
granted and still outstanding as of March 31, 2017 in connection with certain financing transactions (“Transactions”)
in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity" whereby under that provision
they do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the
warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability
is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's
statements of operations. The fair value of the warrants issued by the Company in connection with the Transactions has been estimated
using a Monte Carlo simulation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for certain of its outstanding
warrants issued in fiscal 2010, 2012 and 2013 (“2010 Warrants,” “2012 Warrants” and “2013 Warrants,
respectively) as derivative liabilities. These warrants were determined to be ineligible for equity classification due to provisions
of the respective instruments that may result in an adjustment to their conversion or exercise prices. The Company recognized gains
of $0 and $0 in the fair value of derivatives for the three months ended March 31, 2017 and 2016, respectively. These derivative
liabilities which arose from the issuance of these warrants resulted in an ending balance of derivative liabilities of $0 as of
March 31, 2017 and December 31, 2016, and expired in 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for certain of its outstanding
warrants issued in fiscal 2016 (“2016 Warrants”) as derivative liabilities. The 2016 Warrants were determined to be
ineligible for equity classification due to provisions of the respective instruments that may result in an adjustment to their
conversion or exercise prices. The Company recognized a loss of $66,283 and a gain of $503,105 in the fair value of these derivatives
for the three months ended March 31, 2017 and 2016, respectively. These derivative liabilities which arose from the issuance of
the 2016 Warrants resulted in an ending balance of derivative liabilities of $1,433,181 and $1,366,898 as of March 31, 2017 and
December 31, 2016, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company does not use derivative financial
instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has issued Convertible Notes
with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host
contracts, or (iii) may be net-cash settled by the counterparty. As required by ASC 815, <i>Accounting for Derivative Financial
Instruments and Hedging Activities</i>, in certain instances, these instruments are required to be carried as derivative liabilities,
at fair value, in our financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Convertible Notes issued during the year
ended December 31, 2016 and 2015 are subject to anti-dilution adjustments that allow for the reduction in the Conversion Price,
as defined in the agreement, in the event the Company subsequently issues equity securities including Common Stock or any security
convertible or exchangeable for shares of Common Stock for a price less than the current conversion price. The Company bifurcated
and accounted for the conversion option in accordance with ASC 815 as a derivative liability.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s derivative liability has
been measured at fair value at March 31, 2017 using a Monte-Carlo Simulation. Inputs into the model require estimates, including
such items as estimated volatility of the Company’s stock, estimated probabilities of additional financing, risk-free interest
rate, and the estimated life of the financial instruments being fair valued. In addition, since the conversion price contains an
anti-dilution adjustment, the probability that the Conversion Price of the Notes would decrease as the share price decreased was
also incorporated into the valuation calculation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognized gains of $43,583
and $179 in the fair value of derivatives for the three months ended March 31, 2017 and 2016, respectively. These derivative liabilities
which arose from the issuance of the convertible notes resulted in an ending balance of derivative liabilities of $44,659 and
$88,242 as of March 31, 2017 and December 31, 2016, respectively. Subsequent changes to the fair value of the derivative liabilities
will continue to require adjustments to their carrying value that will be recorded as other income (in the event that their value
decreases) or as other expense (in the event that their value increases). The fair value of these liabilities is estimated using
Monte Carlo pricing models that are based on the individual characteristics of the Company’s warrants, preferred and common
stock, as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses advertising costs as incurred.
The Company has no existing arrangements under which the Company provides or receives advertising services from others for any
consideration other than cash. Advertising expenses (primarily in the form of Internet direct marketing) totaled $67,421 and $31,809
for the three months ended March 31, 2017 and 2016, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">From time
to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related
to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss
when the loss is considered probable. Where a liability is probable and there is a range of estimated losses with no best estimate
in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both
of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it
is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii)
the range of loss can be reasonably estimated. </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">On July 8, 2015,
Intellectual Capital Management, LLC dba SMS Masterminds and SpendSmart Networks, Inc. were named in a potential class-action
lawsuit entitled Peter Marchelos, et al v. Intellectual Capital Management, et al, filed in the United States District Court Eastern
District of New York relating to alleged violations of the Telephone Consumer Protection Act of 1991. This litigation involves
the same licensee and merchant as a previous lawsuit and the same attorneys represent the plaintiffs in this action. The claim
of one of the two plaintiffs was resolved for $1,701. The Company believes the Plaintiff’s allegations have no merit. </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">The company was
served with a lawsuit in February 2017 alleging breach of contract by Bryan Sarlitt. The action relates to the acquisition of
TechXpress in 2014 and additional compensation that Mr. Sarlitt is claiming. The Company believes the Plaintiff’s allegations
have no merit.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">There are no other
legal claims currently pending or threatened against us that in the opinion of our management would be likely to have a material
adverse effect on our financial position, results of operations or cash flows.<font style="color: blue; background-color: white"> </font></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets currently consist of intellectual
property/technology acquired in business combinations under the purchase method of accounting are recorded at fair value net of
accumulated amortization since the acquisition date. Amortization is calculated using the straight line method over the estimated
useful lives of 10 years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews its finite-lived intangible
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of finite-lived intangible
asset may not be recoverable. Recoverability of a finite-lived intangible asset is measured by a comparison of its carrying amount
to the undiscounted future cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which
is determined based on discounted cash flows. Amortization of intangible assets was $13,919 and $48,285 for the three months ended
March 31, 2017 and 2016, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates the recoverability of
identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount
may not be recoverable. Such circumstances could include, but are not limited to (1) a significant decrease in the market value
of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs
significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount
of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net
cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment
loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured
based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on
various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment
requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions
require significant judgment and actual results may differ from assumed and estimated amounts. During the year ended December 31,
2016, the Company recorded an impairment loss of $979,072 related to an intangible asset.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 28, 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers, as amended, (Topic 606), with an effective date for annual reporting periods beginning after
December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 15, 2016. The Company is evaluating the impact, if any, the pronouncement will have on both historical
and future financial positions and results of operations, with an expected completion date of June 30, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
Leases which amended guidance for lease arrangements in order to increase transparency and comparability by providing additional
information to users of financial statements regarding an entity's leasing activities. The revised guidance seeks to achieve this
objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially
all lease arrangements. The guidance, which is required to be adopted in the first quarter of 2019, will be applied on a modified
retrospective basis beginning with the earliest period presented. Early adoption is permitted. We are currently evaluating the
impact of adopting this guidance on our consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2016, the FASB issued ASU 2016-13, "Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), that requires
entities to use a new impairment model based on expected losses. Under this new model an entity would recognize an impairment allowance
equal to its current estimate of credit losses on financial assets measured at amortized cost. ASU 2016-13 is effective for us
beginning January 1, 2020 with early adoption permitted January 1, 2019. Credit losses under the new model will consider relevant
information about past events, current conditions and reasonable and supportable forecasts, resulting in recognition of lifetime
expected credit losses. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates in one reportable segment.
Accordingly, no segment disclosures have been presented herein.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="22" style="text-align: center"><font style="font-size: 8pt"><b>March 31, 2017</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Gross</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Net</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 40%"><font style="font-size: 8pt">Customer Notes Receivable</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">766,675</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">406,888</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">749,638</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">400,901</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">17,037</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">5,987</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accounts Receivable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,001,665</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">669,461</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">332,204</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="22" style="text-align: center"><font style="font-size: 8pt"><b>December 31, 2016</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Gross</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Net</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 40%"><font style="font-size: 8pt">Customer Notes Receivable</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">793,988</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">414,665</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">767,138</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">399,401</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">26,850</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">15,264</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accounts Receivable</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">921,829</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">629,461</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">292,368</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Notes Receivable Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 8pt">Accounts Receivable Reserve</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
</tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Long-Term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Current</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
</tr>
<tr style="vertical-align: bottom">
<td style="width: 60%"><font style="font-size: 8pt">Balance at December 31, 2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 8pt">767,138</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 8pt">399,401</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 8pt">629,461</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">     Incremental (Reduction in) Provision</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(10,378</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,500</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">44,089</font></td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">     Recoveries</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">     Charge offs</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(7,122</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(4,089</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Balance at March 31, 2017</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">749,638</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">400,901</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">669,461</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>For the three months ended</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>March 31,</b></p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Convertible notes</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">91,498,100</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">4,645,054</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Common stock options</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">30,846,946</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">17,088,129</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Investor warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">37,806,931</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">37,960,774</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Compensation warrants</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,285,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">2,098,333</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Excluded potentially dilutive securities</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">161,436,977</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">61,792,290</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>For the three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Beginning balance outstanding</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">39,818,347</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">26,397,410</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warrants issued during the period:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expired during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(726,416</font></td>
<td><font style="font-size: 8pt"> )</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(546,667</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Exercised during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(12,270,853</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">In connection with tender offer exercise</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">26,479,217</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Ending balance outstanding</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">39,091,931</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">40,059,107</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>For the three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">2016</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Beginning balance outstanding</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">26,865,017</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">10,337,113</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Options issued during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,698,759</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6,836,016</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Options expired during the period</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(716,830</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(85,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Ending balance outstanding</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">30,846,946</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">17,088,129</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Shares Issuable</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Expiration</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fiscal Period</p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 3%"> </td>
<td style="width: 1%"> </td>
<td style="width: 25%; text-align: right"><font style="font-size: 8pt">652,516</font></td>
<td style="width: 3%"> </td>
<td style="width: 3%"> </td>
<td style="width: 1%"> </td>
<td style="width: 25%; text-align: right"><font style="font-size: 8pt">7.85</font></td>
<td style="width: 3%"> </td>
<td style="width: 36%; text-align: center"><font style="font-size: 8pt">2nd Qtr, 2017</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">536,500</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.14</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3rd Qtr, 2017</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,162,088</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.45</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2017</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.60</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2018</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">755,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.26</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2018</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">36,973,317</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.31</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,850,007</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.44</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">2nd Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,309,002</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.92</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3rd Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,603,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.15</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2019</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,273,172</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.15</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2020</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,475,789</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.18</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2020</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,288,713</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.12</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1st Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,427,605</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.09</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">2nd Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,189,668</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.06</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3rd Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,698,759</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,813,284</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2021</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">133,334</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">7.05</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center"><font style="font-size: 8pt">4th Qtr, 2022</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">68,053,402</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">0.49</font></td>
<td style="padding-bottom: 3pt"> </td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>For the three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected life (in years)</font></td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">2.50 years</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">2.874 years</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Weighted average volatility</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">202.30</font></td>
<td style="width: 1%"><font style="font-size: 8pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">108.81</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Forfeiture rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">26.07</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">13.58</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.38</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">.96</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected dividend rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.00</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.00</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of quantitative information with respect
to valuation methodology and significant unobservable inputs used for the Company’s warrant derivative liabilities that are
categorized within Level 3 of the fair value hierarchy as of March 31, 2017 and December 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Date of Valuation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">March 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">2017</p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">December 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">2016</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Stock Price</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Volatility (Annual)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">142</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">140</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Number of assumed financings</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total shares outstanding</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">42,475,571</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">41,975,571</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Strike Price</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.34</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.34</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Maturity Date</font></td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/15/2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/15/2019</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected Life</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of quantitative information with respect
to valuation methodology and significant unobservable inputs used for the Company’s conversion option derivative that are
categorized within Level 3 of the fair value hierarchy as of March 31, 2017 and December 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Date of Valuation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">March 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">2017</p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">December 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">2016</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Stock Price</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Volatility (Annual)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">48</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">140</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Strike Price</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.40</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Maturity Date</font></td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/7/2017</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">5/5/2017</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
0.02
0.02
0.02
0.02
1.42
1.40
.48
1.40
1
1
0.01
0.01
0.0134
0.0134
0.0133
0.014
2019-07-15
2019-07-15
2017-07-07
2017-05-05
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements at March 31, 2017:</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"> Carrying Value</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 8pt">Earn out liability</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warrant derivative liability</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Conversion option derivative liability</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements at December 31, 2016:</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"> Carrying Value</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 8pt">Earn out liability</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warrant derivative liability</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Conversion option derivative liability</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 100%; border-top: black 1pt solid; border-bottom: black 1.5pt solid; border-left: black 1pt solid; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements Using Level 3 Inputs</b></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Conversion</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">Warrant</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">Option</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"> </td>
<td style="vertical-align: bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Derivative Liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Derivative Liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Earn-out Liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 8pt">Balance - December 31, 2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Additions during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total (gains) or losses include in net loss</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">66,283</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(43,583)</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">22,700</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Settlements during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Transfers in and/or out of Level 3</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Balance - March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
0
0
1455140
1477840
1455140
0
0
1447840
0
0
88242
44659
88242
0
0
44659
0
0
1366898
1433181
1366898
0
0
1433181
0
0
0
0
0
0
0
0
1433181
1366898
0
66283
0
172452
88242
0
-43583
0
0
0
0
0
0
0
0
0
179646
179
43583
67421
31809
793988
766675
414665
406888
921829
1001665
0
0
767138
749638
399401
400901
26850
17037
15264
5987
1820000
629461
669461
292368
332204
0
0
-10378
1500
0
0
7122
0
0
-4089
11211
3882
100000
1669205
2000
132247
17895859
161436977
61792290
37806931
1285000
30846946
37960774
2098333
17088129
4645054
91498100
39091931
39818347
26397410
40059107
26865017
30846946
10337113
17088129
716830
85000
726416
546667
0
-12270853
0
26479217
4698759
6836016
68053402
652516
536500
1162088
10000
755000
36973317
1850007
1309002
2603000
8273172
1475789
3288713
1427605
1189668
4698759
2813284
133334
0.49
7.85
1.14
6.45
6.6
0.26
0.31
0.44
0.92
1.15
0.15
0.18
0.12
0.09
0.06
0.02
0.02
7.05
2nd Qtr, 2017
3rd Qtr, 2017
4th Qtr, 2017
1st Qtr, 2018
4th Qtr, 2018
1st Qtr, 2019
2nd Qtr, 2019
3rd Qtr, 2019
4th Qtr, 2019
1st Qtr, 2020
4th Qtr, 2020
1st Qtr, 2021
2nd Qtr, 2021
3rd Qtr, 2021
4th Qtr, 2021
1sth Qtr, 2021
4th Qtr, 2022
P2Y6M
P2Y10M13D
2.0230
1.0881
0.2607
0.1358
0.0138
0.0096
0.00
0.00
280919
433180
1132
1343
0
-288618
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fair value is defined as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most
advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. This guidance also establishes a fair value
hierarchy to prioritize inputs used in measuring fair value as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 36px; padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 1: Observable inputs such as quoted prices in active markets;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 36px; padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 36px; padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 12pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company’s financial instruments
are cash and cash equivalents, accounts receivable, notes receivable, notes payable, accounts payable and derivative liabilities.
The recorded values of cash equivalents and accounts payable approximate their fair values based on their short-term nature. The
fair value of derivative liabilities is estimated using option pricing models that are based on the individual characteristics
of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility,
remaining expected life, risk-free interest rate and, in some cases, credit spread. The derivative liabilities and earn-out liabilities
are the only Level 3 fair value measures.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of quantitative information with
respect to valuation methodology and significant unobservable inputs used for the Company’s warrant derivative liabilities
that are categorized within Level 3 of the fair value hierarchy as of March 31, 2017 and December 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Date of Valuation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">March 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2017</p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">December 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2016</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Stock Price</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Volatility (Annual)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">142</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">140</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Number of assumed financings</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total shares outstanding</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">42,475,571</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">41,975,571</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Strike Price</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.34</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.34</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Maturity Date</font></td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/15/2019</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/15/2019</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected Life</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of quantitative information with
respect to valuation methodology and significant unobservable inputs used for the Company’s conversion option derivative
that are categorized within Level 3 of the fair value hierarchy as of March 31, 2017 and December 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Date of Valuation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">March 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2017</p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">December 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2016</p></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Stock Price</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Volatility (Annual)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">48</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">140</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Strike Price</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free Rate</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.40</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Maturity Date</font></td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/7/2017</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">5/5/2017</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At March 31, 2017 and December 31, 2016,
the estimated Level 3 fair values of the liabilities measured on a recurring basis are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements at March 31, 2017:</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"> Carrying Value</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 8pt">Earn out liability</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warrant derivative liability</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Conversion option derivative liability</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements at December 31, 2016:</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"> Carrying Value</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 8pt">Earn out liability</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warrant derivative liability</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Conversion option derivative liability</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables present the activity for Level 3 liabilities
for the three months ended March 31, 2017:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 100%; border-top: black 1pt solid; border-bottom: black 1.5pt solid; border-left: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements Using Level 3 Inputs</b></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Conversion</font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">Warrant</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">Option</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"> </td>
<td style="vertical-align: bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Derivative Liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Derivative Liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Earn-out Liability</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 8pt">Balance - December 31, 2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Additions during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total (gains) or losses include in net loss</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">66,283</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(43,583)</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">22,700</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Settlements during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Transfers in and/or out of Level 3</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Balance - March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i></i></b></p>
231130
P15M15D
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loans Receivable and Accounts Receivable</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company extended credit to its licensees
in the normal course of business and performs credit evaluations of its customers. Loans and accounts receivable are stated at
amounts due from customers net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual
payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors,
including the length of time loan and accounts receivable are past due and the customer's current ability to pay its obligation
to the Company. The Company writes off loans and accounts receivable when they become uncollectible. The Company is no longer entering
into notes with its customers.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Use of Estimates</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 disclosure of contingent assets and liabilities, fair value of financial instruments, at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could materially
differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements
include recoverability and useful lives of intangible assets, the valuation allowance related to the Company's deferred tax assets,
the allowance for doubtful accounts related and notes and accounts receivable, the fair value of stock options and warrants granted
to employees, consultants, directors, investors and placement agents, and notes and warrant tender offer.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Revenue Recognition</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company generates revenues primarily
in the form of set up fees, license fees, messaging, equipment and marketing services fees and value added mobile marketing and
mobile commerce services.  License fees are charged monthly for support services.  Set-up fees primarily consist
of fees for website development services (including support and unspecified upgrades and enhancements when and if they are available),
training and professional services that are not essential to functionality. The Company offers two licenses consisting of our Engage
license and our Thrive license. The Company now offers both licenses in a combined package known as the Customer Loyalty System
License (“CLS”).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes revenues when all
of the following conditions are met:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">there is persuasive evidence of an arrangement;</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">the products or services have been delivered to the customer;</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">the amount of fees to be paid by the customer is fixed or determinable; and</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 5%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="width: 95%; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">The collection of the related fees is probable.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Signed agreements are used as evidence of
an arrangement. Electronic delivery occurs when we provide the customer with access to the software. The Company assesses whether
a fee is fixed or determinable at the outset of the arrangement, primarily based on the payment terms associated with the transaction.
The Company assesses collectability of the set-up fee based on a number of factors such as collection history and creditworthiness
of the licensee. If the Company determines that collectability is not probable, revenue is deferred until collectability becomes
probable, generally upon receipt of cash.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">License arrangements may also include set-up
fees for website development, delivery of tablets, professional services and training services, which are typically delivered within
30-60 days of the contract term. In determining whether set-up fee revenues should be accounted for separately from license revenues,
we evaluate whether the set-up fees are considered essential to the functionality of the license using factors such as the nature
of our products; whether they are ready for use by the customer upon receipt; the nature of our implementation services, which
typically do not involve significant customization to or development of the underlying software code; the availability of services
from other vendors; whether the timing of payments for license revenues is coincident with performance of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">services; and whether milestones or acceptance
criteria exist that affect the realizability of the license fee. Substantially all of our set-up fee arrangements are recognized
as the services are performed. Payments received in advance of services performed are deferred and recognized when the related
services are performed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not offer refunds and therefore have
not recorded any sales return allowance for any of the periods presented. Upon a periodic review of outstanding accounts and notes
receivable, amounts that are deemed to be uncollectible are written off against the allowance for doubtful accounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred revenue consists substantially
of amounts invoiced in advance of revenue recognition for our products and services described above. We recognize deferred revenue
as revenue only when the revenue recognition criteria are met.  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Debt discount and issuance costs</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Debt issuance costs, including the value
of warrants issued in connection with debt financing and fees or costs paid to lender are presented in the condensed consolidated
balance sheets as a direct deduction from the carrying amount of that debt.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company amortizes the discount to interest
expense over the term of the respective debt using the effective interest method.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cash and cash equivalents</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company considers all investments with
an original maturity of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in money
market funds, bank certificates of deposit and U.S. government debt securities whose cost equals fair market value.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time, the Company has maintained
bank balances in excess of insurance limits. The Company has not experienced any losses with respect to cash. Management believes
the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Property and Equipment</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property and equipment had been recorded
at cost and depreciated using the straight-line method over the estimated useful lives of the related assets (generally three to
five years). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements
are capitalized and depreciated over their estimated remaining useful lives. Depreciation expense for the three months ended March
31, 2017 and 2016 was $0. Property and equipment has been fully depreciated as of March 31, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Software Capitalization</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for computer software
used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software
costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met.
Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying
costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally
consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary
project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project,
and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended.  We
capitalized $0 and $179,646, respectively, in software development related to programming and coding for new product development
for the three months ended March 31, 2017 and 2016, respectively.  Software amortization expense for the three months
ended March 31, 2017 and 2016 was $0 and $110,365, respectively. As of March 31, 2017 all software costs have been fully amortized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Valuation of Long-Lived Assets</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company records impairment losses on
long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets’ carrying amount. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amounts of the assets exceed the estimated fair value of the assets.
There has not been any impairment recorded during the quarters ended March 31, 2017 or 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income Tax Expense Estimates and Policies</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 45pt"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As part of the income tax provision process
of preparing the Company’s financial statements, the Company is required to estimate the Company’s provision for income
taxes. This process involves estimating current tax liabilities together with assessing temporary differences resulting from differing
treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Management
then assesses the likelihood that the Company deferred tax assets will be recovered from future taxable income and to the extent
believed that recovery is not likely, a valuation allowance is established. Further, to the extent a valuation allowance is established
and changes occur to this allowance in a financial accounting period, such changes are recognized in the Company’s tax provision
in the Company’s condensed consolidated statement of operations. The Company’s use of judgment in making estimates
to determine the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance is
recorded against our net deferred tax assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes the benefit of an
uncertain tax position taken or expected to be taken on the Company’s income tax returns if it is “more likely than
not” that such tax position will be sustained based on its technical merits. The Company does not have any unrecognized tax
benefits or accrued penalties and interest. If such matters were to arise, the Company would recognize interest and penalties related
to income tax matters in income tax expense.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Stock-Based Compensation</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for stock based compensation
arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and
directors based on estimated fair values. The Company uses the Black-Scholes option valuation model to estimate the fair value
of the Company’s stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input
of subjective assumptions to calculate the value of options and warrants. The Company uses historical company data among other
information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Loss per Share</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company calculates basic earnings per
share (“EPS”) by dividing the Company’s net loss and comprehensive net loss applicable to common shareholders
by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted
EPS is computed by dividing net income or net loss and comprehensive net loss applicable to common shareholders by the weighted
average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents,
such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Derivatives - Warrant Liability</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for the common stock
warrants granted and still outstanding as of March 31, 2017 in connection with certain financing transactions (“Transactions”)
in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity" whereby under that
provision they do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies
the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in
the Company's statements of operations. The fair value of the warrants issued by the Company in connection with the Transactions
has been estimated using a Monte Carlo simulation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for certain of its
outstanding warrants issued in fiscal 2010, 2012 and 2013 (“2010 Warrants,” “2012 Warrants” and “2013
Warrants, respectively) as derivative liabilities. These warrants were determined to be ineligible for equity classification due
to provisions of the respective instruments that may result in an adjustment to their conversion or exercise prices. The Company
recognized gains of $0 and $0 in the fair value of derivatives for the three months ended March 31, 2017 and 2016, respectively.
These derivative liabilities which arose from the issuance of these warrants resulted in an ending balance of derivative liabilities
of $0 as of March 31, 2017 and December 31, 2016, and expired in 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for certain of its
outstanding warrants issued in fiscal 2016 (“2016 Warrants”) as derivative liabilities. The 2016 Warrants were determined
to be ineligible for equity classification due to provisions of the respective instruments that may result in an adjustment to
their conversion or exercise prices. The Company recognized a loss of $66,283 and a gain of $503,105 in the fair value of these
derivatives for the three months ended March 31, 2017 and 2016, respectively. These derivative liabilities which arose from the
issuance of the 2016 Warrants resulted in an ending balance of derivative liabilities of $1,433,181 and $1,366,898 as of March
31, 2017 and December 31, 2016, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Derivatives – Bifurcated Conversion
Option in Convertible Notes</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company does not use derivative financial
instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has issued Convertible Notes
with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host
contracts, or (iii) may be net-cash settled by the counterparty. As required by ASC 815, <i>Accounting for Derivative Financial
Instruments and Hedging Activities</i>, in certain instances, these instruments are required to be carried as derivative liabilities,
at fair value, in our financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Convertible Notes issued during the
year ended December 31, 2016 and 2015 are subject to anti-dilution adjustments that allow for the reduction in the Conversion Price,
as defined in the agreement, in the event the Company subsequently issues equity securities including Common Stock or any security
convertible or exchangeable for shares of Common Stock for a price less than the current conversion price. The Company bifurcated
and accounted for the conversion option in accordance with ASC 815 as a derivative liability.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company’s derivative liability
has been measured at fair value at March 31, 2017 using a Monte-Carlo Simulation. Inputs into the model require estimates, including
such items as estimated volatility of the Company’s stock, estimated probabilities of additional financing, risk-free interest
rate, and the estimated life of the financial instruments being fair valued. In addition, since the conversion price contains an
anti-dilution adjustment, the probability that the Conversion Price of the Notes would decrease as the share price decreased was
also incorporated into the valuation calculation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognized gains of $43,583
and $179 in the fair value of derivatives for the three months ended March 31, 2017 and 2016, respectively. These derivative liabilities
which arose from the issuance of the convertible notes resulted in an ending balance of derivative liabilities of $44,659 and $88,242
as of March 31, 2017 and December 31, 2016, respectively. Subsequent changes to the fair value of the derivative liabilities will
continue to require adjustments to their carrying value that will be recorded as other income (in the event that their value decreases)
or as other expense (in the event that their value increases). The fair value of these liabilities is estimated using Monte Carlo
pricing models that are based on the individual characteristics of the Company’s warrants, preferred and common stock, as
well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fair value of assets and liabilities</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fair value is defined as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most
advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. This guidance also establishes a fair value
hierarchy to prioritize inputs used in measuring fair value as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 36px; padding: 0.75pt; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 1: Observable inputs such as quoted prices in active markets;</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 36px; padding: 0.75pt; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellpadding="0" style="width: 100%">
<tr>
<td style="vertical-align: top; width: 36px; padding: 0.75pt; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">●</font></td>
<td style="padding: 0.75pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font-size: 8pt">Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company’s financial instruments
are cash and cash equivalents, accounts receivable, notes receivable, notes payable, accounts payable and derivative liabilities.
The recorded values of cash equivalents and accounts payable approximate their fair values based on their short-term nature. The
fair value of derivative liabilities is estimated using option pricing models that are based on the individual characteristics
of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility,
remaining expected life, risk-free interest rate and, in some cases, credit spread. The derivative liabilities and earn-out liabilities
are the only Level 3 fair value measures.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of quantitative information with
respect to valuation methodology and significant unobservable inputs used for the Company’s warrant derivative liabilities
that are categorized within Level 3 of the fair value hierarchy as of March 31, 2017 and December 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Date of Valuation</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">March 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2017</p></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">December 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2016</p></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 78%; text-align: left"><font style="font-size: 8pt">Stock Price</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Volatility (Annual)</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">142</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">140</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Number of assumed financings</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Total shares outstanding</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">42,475,571</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">41,975,571</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Strike Price</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Risk-free Rate</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.34</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.34</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Maturity Date</font></td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/15/2019</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/15/2019</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Expected Life</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of quantitative information with
respect to valuation methodology and significant unobservable inputs used for the Company’s conversion option derivative
that are categorized within Level 3 of the fair value hierarchy as of March 31, 2017 and December 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Date of Valuation</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">March 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2017</p></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">December 31,</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2016</p></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 78%; text-align: left"><font style="font-size: 8pt">Stock Price</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">0.02</font></td>
<td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Volatility (Annual)</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">48</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">140</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Strike Price</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">N/A</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Risk-free Rate</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.40</font></td>
<td style="text-align: left"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Maturity Date</font></td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">7/7/2017</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">5/5/2017</font></td>
<td style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At March 31, 2017 and December 31, 2016,
the estimated Level 3 fair values of the liabilities measured on a recurring basis are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements at March 31, 2017:</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"> Carrying Value</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-align: left"><font style="font-size: 8pt">Earn out liability</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Warrant derivative liability</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Conversion option derivative liability</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font-size: 8pt"></font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 1.5pt; text-align: center"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Fair Value Measurements at December 31, 2016:</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"> Carrying Value</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 1</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 2</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Level 3</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-align: left"><font style="font-size: 8pt">Earn out liability</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 0%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Warrant derivative liability</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Conversion option derivative liability</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="padding-bottom: 3pt; text-align: left"> </td>
<td style="border-bottom: black 1.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="padding-bottom: 3pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The following tables present the activity for
Level 3 liabilities for the three months ended March 31, 2017:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 100%; border-top: black 1pt solid; border-bottom: black 1.5pt solid; border-left: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements Using Level 3 Inputs</b></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">Conversion</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="text-align: left"> </td></tr>
<tr>
<td style="vertical-align: bottom; text-align: left"> </td>
<td style="vertical-align: bottom; text-align: left"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">Warrant</font></td>
<td style="vertical-align: bottom; text-align: left"> </td>
<td style="vertical-align: bottom; text-align: left"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt">Option</font></td>
<td style="vertical-align: bottom; text-align: left"> </td>
<td style="vertical-align: bottom; text-align: left"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Derivative Liability</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Derivative Liability</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Earn-out Liability</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%; text-align: left"><font style="font-size: 8pt">Balance - December 31, 2016</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">1,366,898</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">88,242</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">1,455,140</font></td>
<td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Additions during the period</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Total (gains) or losses include in net loss</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">66,283</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">(43,583)</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">22,700</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Settlements during the period</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Transfers in and/or out of Level 3</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font-size: 8pt">Balance - March 31, 2017</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,433,181</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">44,659</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1,477,840</font></td>
<td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Advertising</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company expenses advertising costs as
incurred. The Company has no existing arrangements under which the Company provides or receives advertising services from others
for any consideration other than cash. Advertising expenses (primarily in the form of Internet direct marketing) totaled $67,421
and $31,809 for the three months ended March 31, 2017 and 2016, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><b><i>Litigation</i></b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">From time
to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related
to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss
when the loss is considered probable. Where a liability is probable and there is a range of estimated losses with no best estimate
in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both
of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it
is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii)
the range of loss can be reasonably estimated. </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><b><i> </i></b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">On July 8,
2015, Intellectual Capital Management, LLC dba SMS Masterminds and SpendSmart Networks, Inc. were named in a potential class-action
lawsuit entitled Peter Marchelos, et al v. Intellectual Capital Management, et al, filed in the United States District Court Eastern
District of New York relating to alleged violations of the Telephone Consumer Protection Act of 1991. This</font> litigation involves
the same licensee and merchant as a previous lawsuit and the same attorneys represent the plaintiffs in this action. The claim
of one of the two plaintiffs was resolved for $1,701. The Company believes the Plaintiff’s allegations have no merit. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The company was served with a lawsuit in
February 2017 alleging breach of contract by Bryan Sarlitt. The action relates to the acquisition of TechXpress in 2014 and additional
compensation that Mr. Sarlitt is claiming. The Company believes the Plaintiff’s allegations have no merit.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="color: windowtext">There are
no other legal claims currently pending or threatened against us that in the opinion of our management would be likely to have
a material adverse effect on our financial position, results of operations or cash flows.</font><font style="color: blue; background-color: white"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Intangible assets</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Intangible assets currently consist of intellectual
property/technology acquired in business combinations under the purchase method of accounting are recorded at fair value net of
accumulated amortization since the acquisition date. Amortization is calculated using the straight line method over the estimated
useful lives of 10 years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company reviews its finite-lived intangible
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of finite-lived intangible
asset may not be recoverable. Recoverability of a finite-lived intangible asset is measured by a comparison of its carrying amount
to the undiscounted future cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which
is determined based on discounted cash flows. Amortization of intangible assets was $13,919 and $48,285 for the three months ended
March 31, 2017 and 2016, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company evaluates the recoverability
of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying
amount may not be recoverable. Such circumstances could include, but are not limited to (1) a significant decrease in the market
value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of
costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying
amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future
net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment
loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured
based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on
various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment
requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions
require significant judgment and actual results may differ from assumed and estimated amounts. During the year ended December 31,
2016, the Company recorded an impairment loss of $979,072 related to an intangible asset.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Recently Issued Accounting Pronouncements</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 28, 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers, as amended, (Topic 606), with an effective date for annual reporting periods beginning after
December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 15, 2016. The Company is evaluating the impact, if any, the pronouncement will have on both historical
and future financial positions and results of operations, with an expected completion date of June 30, 2017.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
Leases which amended guidance for lease arrangements in order to increase transparency and comparability by providing additional
information to users of financial statements regarding an entity's leasing activities. The revised guidance seeks to achieve this
objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially
all lease arrangements. The guidance, which is required to be adopted in the first quarter of 2019, will be applied on a modified
retrospective basis beginning with the earliest period presented. Early adoption is permitted. We are currently evaluating the
impact of adopting this guidance on our consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2016, the FASB issued ASU 2016-13,
"Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU
2016-13), that requires entities to use a new impairment model based on expected losses. Under this new model an entity would recognize
an impairment allowance equal to its current estimate of credit losses on financial assets measured at amortized cost. ASU 2016-13
is effective for us beginning January 1, 2020 with early adoption permitted January 1, 2019. Credit losses under the new model
will consider relevant information about past events, current conditions and reasonable and supportable forecasts, resulting in
recognition of lifetime expected credit losses. We are currently evaluating the impact of adopting this guidance on our consolidated
financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Segments</i></b></p>
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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company operates in one reportable segment.
Accordingly, no segment disclosures have been presented herein.</p>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
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