(

)

EQUITY

TRANSACTIONS:

The Company expensed

$83,420

and

$118,680

in employee and board member stock compensation in

2018

and

2017,

respectively. These shares were valued using quoted market values. The Company accrues stock compensation expense over the period earned for employees and board members. In

2018,

the Company did

not

issue shares of Common Stock as a bonus. In

2017,

the Company issued

292,000

shares of Common Stock to

eight

board members, the Company’s secretary, and to employees as a bonus.

April 2014,

we entered into a

one

-year agreement with Scarsdale Equities, LLC (“Scarsdale”), which was subsequently extended, to act as our financial advisor and exclusive placement agent. Under the agreement, Scarsdale is entitled to a fee with respect to each private placement of debt or equity securities of the Company in an amount equal to

of the proceeds of such financing raised by Scarsdale, and a

seven

-year warrant to purchase

of the securities issued as a part of such financing raised by Scarsdale, with an exercise price equal to

100%

of the offering price of the securities sold during the term of the agreement. The foregoing compensation terms were modified for private placements effected in

2017,

resulting in the compensation described in more detail below. The agreement also provides for payment of the above fees for any financing within

one

year of the expiration of the term, with investors identified by Scarsdale during the term. N. Scott Fine, the Company’s Chief Executive Officer and Chairman of the Board, was a principal of Scarsdale at the time we initially retained Scarsdale as our financial adviser, and his son is currently employed by Scarsdale, is active on our account and serves as our Secretary.

February 23, 2017,

the Company issued

5,754,832

“Units” at a purchase price of

$0.35

per Unit in a private placement, each Unit consisting of

one

share of Common Stock, and a

seven

-year warrant to purchase an additional share of Common Stock at an exercise price of

$0.35,

for aggregate gross proceeds to the Company of approximately

million. Scarsdale acted as financial advisor to the Company in connection with the private placement and was paid a cash fee of approximately

$153,000,

and it and its designees were issued

seven

-year warrants to purchase

164,074

Units at an exercise price of

$0.35

per Unit. A

$10,000

cash fee was also paid to another party with respect to this private placement.

October 2017,

the Company completed a private placement of

15,500

preferred stock “Units” at a purchase price of

$100

per Unit, each Unit consisting of

one

share of Series B Convertible Preferred Stock (“Series B Preferred Stock”) convertible into

400

shares of Common Stock, and

seven

-year warrants to purchase

400

shares of Common Stock at an exercise price of

$0.25

per share. The Series B Preferred Stock was automatically converted into Common Stock on

May 23, 2018,

when the Company increased its authorized shares of Common Stock, which resulted in the Company having a sufficient number of authorized and unissued shares of Common Stock to permit the conversion or exercise, as applicable, of all outstanding shares of preferred stock, warrants and other convertible securities. The Series B Preferred Stock had a liquidation preference of

$100

per share, was

not

redeemable, and did

not

entitle the holder to special dividends. Scarsdale acted as financial advisor to the Company in connection with the private placement and was paid a cash fee of

$60,000,

and it and its designees were issued

seven

-year warrants to purchase

600

Units at an exercise price of

$100

per Unit.

April 2018,

the Company completed a private placement of

20,100

“Units”, at a price of

$100

per Unit, resulting in gross proceeds to the Company of

$2,010,000.

Each Unit consisted of

one

share of Series B Preferred Stock convertible into

400

shares of Common Stock, and

seven

-year warrants to purchase

400

shares of Common Stock at an exercise price of

$0.25

per share. Prior to

March 31, 2018,

the Company received

$74,983

in advance from these investors. Scarsdale acted as financial advisor to the Company in connection with the private placement and was paid a cash fee of

$50,000.

May 23, 2018,

at a special meeting of shareholders, the Company’s shareholders approved amendments to the Company’s Articles of Incorporation increasing the number of authorized shares of Common Stock from

100,000,000

shares to

500,000,000

shares, and deleting references to the Series A Preferred Stock, which was

longer outstanding. Following the meeting, the Company filed Articles of Amendment to its Article of Incorporation which resulted in the automatic conversion of each outstanding share of Series B Preferred Stock into

400

shares of Common Stock, increasing the number of outstanding shares of Common Stock by

14,240,000.

December 2018,

the Company completed a private placement of

3,519,963

common stock “Units” at a price of

$0.65

per Unit, resulting in gross proceeds to the Company of

$2,342,034,

of which

$130,063

was received in

January 2019

and is reflected in the accompanying balance sheet as a stock subscription receivable. Each Unit consisted of

one

share of common stock and a

seven

-year warrant to purchase

one

share of common stock at an exercise price of

$0.65

per share.

The following table presents the number of Common Stock warrants outstanding:

Warrants outstanding, December 31, 2016			8,677,500
Issued			11,954,831
Exercised			-
Expired			-
Warrants outstanding, December 31, 2017			20,632,331
Issued			11,559,963
Exercised			-
Expired			-
Warrants outstanding, December 31, 2018			32,192,294

The following table presents the number of Common Stock warrants outstanding, their exercise price, and expiration dates at

December 31, 2018:

Warrants Issued	Exercise Price		Expiration Date

240,000	$	0.25	April 2021
103,500	$	1.00	July 2021
156,000	$	0.50	July 2022
78,000	$	0.50	August 2022
8,100,000	$	0.25	June 2023
5,754,831	$	0.35	February 2024
6,200,000	$	0.25	October 2024
8,040,000	$	0.25	April 23, 2025
3,519,963	$	0.65	December 2025
32,192,294

In addition, there are

seven

-year warrants outstanding at

December 31, 2018

to purchase

480,000

Units sold in our

May 2016

private placement at an exercise price of

$0.25

per Unit,

164,074

Units sold in our

February 2017

private placement at an exercise price of

$0.35

per Unit, and

600

Units sold in our

October 2017

private placement at an exercise price of

$100

per Unit.