What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2018-04-02 compared with 2017-03-31 · 400 added, 724 removed, 40 unchanged (97% of the section changed)

MARKET FOR REGISTRANT’S COMMON

EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On September 15, 2015, the Financial Industry

Regulatory Authority (“FINRA”) cleared a request to establish a market in shares of our Common Stock.

On October 8,

2015, OTC Markets Group announced that the Company was verified for trading on the OTCQB®

Venture Market, and shares of our

Common Stock are currently quoted under the symbol “SQFL”.

Presently, shares of our Common Stock not subject to restriction

are eligible for trading in the OTCQB®

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

September 15, 2015, the Financial Industry Regulatory Authority (“FINRA”) cleared a request to establish a market

in shares of our Common Stock.

On October 8, 2015, OTC Markets Group announced that the Company was verified for trading on the

Venture Market, and shares of our Common Stock are currently quoted under the symbol “SQFL”.

shares of our Common Stock not subject to restriction are eligible for trading in the OTCQB®

Venture Market.

However, to the Company's knowledge, only a small percentage of our

total issued and outstanding shares of Common Stock have been deposited with broker/dealers as of the date of this prospectus,

and only a small number of shares of our Common Stock have been offered for sale.

Therefore, while our shares of Common Stock

are eligible for trading, a liquid public market has not yet developed.

We cannot predict the future prices at which our shares

will trade, or the liquidity of a public market for our shares of Common Stock, should one develop.

However, to the

Company's knowledge, only a small percentage of our total issued, and outstanding shares of Common Stock have been deposited with

broker/dealers as of the date of this prospectus, and only a small number of shares of our Common Stock have been offered for

Therefore, while our shares of Common Stock are eligible for trading, a liquid public market has not yet developed.

predict the future prices at which our shares will trade, or the liquidity of a public market for our shares of Common Stock,

should one develop.

As of March 30, 2018, there were 116 holders

2 unchanged sentences

security brokers, dealers, and registered clearing agencies.

Dividend Policy

We have not paid any cash dividends on our

Common Stock and have no present intention of paying any dividends on the shares of our Common Stock.

Holders of our Series A

Preferred Stock receive interest paid quarterly, at a rate of six percent (6%) per year, and rank senior with respect to interest

on junior securities, dividends, distributions or liquidation preference.

Our current policy is to retain earnings, if any, for

use in our operations and in the development of our business.

Our future dividend policy will be determined from time to time

by our Board.

Recent Sales of Unregistered Securities;

Holders of our Series A Preferred

Stock receive dividends paid quarterly, at a rate of six percent (6%) per year, and rank senior with respect to interest on junior

securities, dividends, distributions or liquidation preference.

Our current policy is to retain earnings, if any, for use in our

operations and in the development of our business.

Our future dividend policy will be determined from time to time by our Board.

Sales of Unregistered Securities;

Use of Proceeds from Registered Securities

On March 1, 2017, we issued 200,000 shares

of Series A Preferred Stock to a holder of our Convertible Notes, in connection with such holder’s Note Amendment and election

to convert the full principal balance of its outstanding Convertible Note, at a conversion price of $0.25 per share.

Stock Incentive Plan Information

The following table sets forth equity compensation

plan information as of December 31, 2016:

On March 23, 2018, the Company issued 120,000

shares of Common Stock to Mr.

Campi, which vested on December 31, 2017, pursuant to the Campi Agreement

On March 23, 2018, the Company issued 120,000

shares of Common Stock to Mr.

Wells, which vested on January 1, 2018, pursuant to the Wells Agreement.

Incentive Plan Information

following table sets forth equity compensation plan information as of December 31, 2017:

of securities to be issued upon exercise of outstanding options, warrants and rights

1 unchanged sentence

exercise price of outstanding options, warrants and rights

of securities remaining available for future issuance under equity compensation plans

(excluding securities reflected in column (a))

of securities remaining available for future issuance under equity compensation plans (excluding securities reflected

in column (a)

Equity compensation

plans approved by security holders:

Stock Incentive Plan (1)

compensation plans not approved by security holders

The November 2015

Grants and April 2017 Grants are discussed in more detail below in the subsection entitled “Issued and Outstanding Equity

Awards.”

For the purposes of calculating the weighted-average exercise price, the exercise prices of issued

and outstanding options range from $0.60 per share to $4.00 per share.

2015 Stock Incentive Plan

compensation plans approved by security holders

grants authorized by the Board on November 15, 2015, which are discussed in more detail below, options to purchase up to 150,000

shares of Common Stock were granted with an exercise price to be determined by the Company.

For the purposes of

calculating the weighted-average exercise price, an exercise price of $1.00 per share was assumed, based on the sales price

of the Company’s securities in a private placement on or about the time of the grant.

The 2015 Stock Incentive Plan

On April 27, 2015 and on June 8, 2016, our

Board and the holders of a majority of our issued and outstanding shares of Common Stock, respectively, approved the Company’s

2015 Stock Incentive Plan (the “Incentive Plan”).

Under the Incentive Plan, the Board has the sole authority to implement,

interpret, and/or administer the Incentive Plan unless the Board delegates (i) all or any portion of its authority to implement,

interpret, and/or administer the Incentive Plan to a committee of the Board, or (ii) the authority to grant and administer awards

under the Incentive Plan to an officer of the Company.

The Incentive Plan relates to the issuance of up to 5,000,000 shares of

Common Stock, subject to adjustment, and shall be effective for ten (10) years, unless earlier terminated.

No single participant

under the Incentive Plan may receive more than 25% of all options awarded in a single year.

Any employee of the Company or an affiliate,

a director, or a consultant to the Company or an affiliate may be an “Eligible Person”

April 27, 2015 and on June 8, 2016, our Board and the holders of a majority of our issued and outstanding shares of Common Stock,

respectively, approved the Company’s 2015 Stock Incentive Plan (the “Incentive Plan”).

Under the Incentive Plan,

Incentive Plan provides Eligible Persons the opportunity to participate in the enhancement of shareholder value by the award of

options and Common Stock, granted as stock bonus awards, restricted stock awards, deferred share awards and performance-based

awards, under the Incentive Plan.

The Company may make payment of bonuses and/or consulting fees to certain Eligible Persons in

options and Common Stock, or any combination thereof.

Certain options to be granted to employees

under the Incentive Plan are intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the

Internal Revenue Code of 1986, as amended (the “Code”), while other options granted under the Incentive Plan will

be nonqualified options not intended to qualify as Incentive Stock Options ISOs (“Nonqualified Options”), either or

both as provided in the agreements evidencing the options described.

The Incentive Plan further provides that awards

granted under the Incentive Plan cannot be exercised until a majority of the Company’s shareholders have approved the Incentive

As of March 25, 2016, a majority of the Company’s shareholders had not yet approved the Incentive Plan,

Stock Options

The Board, or the appointed committee, shall

have sole and absolute discretionary authority (i) to determine, authorize, and designate those persons pursuant to the Incentive

Plan who are to receive options under the Incentive Plan, (ii) to determine the number of shares of Common Stock to be covered

by such options and the terms thereof, (iii) to determine the type of option granted (ISO or Nonqualified Option), and (iv) to

determine other such details concerning the vesting, termination, exercise, transferability and payment of such options.

The Committee

shall thereupon grant options in accordance with such determinations as evidenced by a written option agreement.

Subject to the

express provisions of the Incentive Plan, the committee shall have discretionary authority to prescribe, amend and rescind rules

and regulations relating to the Incentive Plan, to interpret the Incentive Plan, to prescribe and amend the terms of the option

agreements and to make all other determinations deemed necessary or advisable for the administration of the Incentive Plan.

The exercise price per share for Common Stock

of options granted under the Incentive Plan shall be determined by the Committee, but in no case shall be less than one hundred

percent (100%) of the fair market value of Common Stock (determined in accordance with the Incentive Plan at the time the option

is granted), provided that, with respect to ISOs granted to a person who holds ten percent (10%) or more of the total combined

voting power of all classes of stock of the Company, the exercise price per share for Common Stock shall not be less than 110%

of the fair market value of the Common Stock.

The fair market value of the Common Stock with respect to which ISOs may be exercisable

for the first time by any Eligible Person during any calendar year under all such plans of the Company and its affiliates shall

not exceed $100,000, or such other amount provided in Section 422 of the Code.

Bonus and Restricted Stock Awards

The Board, or the applicable committee, may,

in its sole discretion, grant awards of Common Stock in the form of bonus awards and restricted stock awards.

Each stock award

agreement shall be in such form and shall contain such terms and conditions as the Board, or the committee, deems appropriate.

The terms and conditions of each stock award agreement may change from time to time and need not be uniform with respect to Eligible

Persons, and the terms and conditions of separate stock award agreements need not be identical.

Deferred Stock Awards

The Board, or the committee, may authorize

grants of shares of Common Stock to be awarded at a future date upon such terms and conditions as the Board, or the committee,

may determine.

Such awards shall be conferred upon the Eligible Person as consideration for the performance of services and subject

to the fulfillment of specified conditions during the deferral period.

Each deferred stock award agreement shall be in such form

and shall contain such terms and conditions as the Board, or the committee, deems appropriate.

The terms and conditions of each

deferred stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the

terms and conditions of separate deferred stock award agreements need not be identical.

Performance Share Awards

The Board, or the committee, may authorize

grants of shares of Common Stock to be awarded upon the achievement of specified performance objectives, upon such terms and conditions

the Board has the sole authority to implement, interpret, and/or administer the Incentive Plan unless the Board delegates (i)

all or any portion of its authority to implement, interpret, and/or administer the Incentive Plan to a committee of the Board,

or (ii) the authority to grant and administer awards under the Incentive Plan to an officer of the Company.

The Incentive Plan

relates to the issuance of up to 5,000,000 shares of Common Stock, subject to adjustment, and shall be effective for ten (10)

years, unless earlier terminated.

No single participant under the Incentive Plan may receive more than 25% of all options awarded

in a single year.

employee of the Company or an affiliate, a director, or a consultant to the Company or an affiliate may be an “Eligible

Person”

under the Incentive Plan.

The Incentive Plan provides Eligible Persons the opportunity to participate in the enhancement

of shareholder value by the award of options and Common Stock, granted as stock bonus awards, restricted stock awards, deferred

share awards and performance-based awards, under the Incentive Plan.

The Company may make payment of bonuses and/or consulting

fees to certain Eligible Persons in options and Common Stock, or any combination thereof.

options to be granted to employees under the Incentive Plan are intended to qualify as Incentive Stock Options (“ISOs”)

pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), while other options granted

under the Incentive Plan will be nonqualified options not intended to qualify as Incentive Stock Options ISOs (“Nonqualified

Options”), either or both as provided in the agreements evidencing the options described.

Board, or the appointed committee, shall have sole and absolute discretionary authority (i) to determine, authorize, and designate

those persons pursuant to the Incentive Plan who are to receive options under the Incentive Plan, (ii) to determine the number

of shares of Common Stock to be covered by such options and the terms thereof, (iii) to determine the type of option granted (ISO

or Nonqualified Option), and (iv) to determine other such details concerning the vesting, termination, exercise, transferability

and payment of such options.

The Committee shall thereupon grant options in accordance with such determinations as evidenced by

a written option agreement.

Subject to the express provisions of the Incentive Plan, the committee shall have discretionary authority

to prescribe, amend and rescind rules and regulations relating to the Incentive Plan, to interpret the Incentive Plan, to prescribe

and amend the terms of the option agreements and to make all other determinations deemed necessary or advisable for the administration

of the Incentive Plan.

exercise price per share for Common Stock of options granted under the Incentive Plan shall be determined by the Committee, but

in no case shall be less than one hundred percent (100%) of the fair market value of Common Stock (determined in accordance with

the Incentive Plan at the time the option is granted), provided that, with respect to ISOs granted to a person who holds ten percent

(10%) or more of the total combined voting power of all classes of stock of the Company, the exercise price per share for Common

Stock shall not be less than 110% of the fair market value of the Common Stock.

The fair market value of the Common Stock with

respect to which ISOs may be exercisable for the first time by any Eligible Person during any calendar year under all such plans

of the Company and its affiliates shall not exceed $100,000, or such other amount provided in Section 422 of the Code.

and Restricted Stock Awards

Board, or the applicable committee, may, in its sole discretion, grant awards of Common Stock in the form of bonus awards and

restricted stock awards.

Each stock award agreement shall be in such form and shall contain such terms and conditions as the Board,

or the committee, deems appropriate.

The terms and conditions of each stock award agreement may change from time to time and need

not be uniform with respect to Eligible Persons, and the terms and conditions of separate stock award agreements need not be identical.

Board, or the committee, may authorize grants of shares of Common Stock to be awarded at a future date upon such terms and conditions

as the Board, or the committee, may determine.

Such awards shall be conferred upon the Eligible Person upon the achievement of

specified performance objectives during a specified performance period, such objectives being set forth in the grant and including

a minimum acceptable level of achievement and, optionally, a formula for measuring and determining the number of performance shares

to be issued.

Each performance share award agreement shall be in such form and shall contain such terms and conditions as the

Board, or the committee, deems appropriate.

The terms and conditions of each performance share award may change from time to time

and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate performance share award agreements

need not be identical.

If the Company shall effect a subdivision

or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the

number of shares of the Common Stock outstanding, without receiving consideration therefore in money, services or property, then

(i) the number, class, and per share price of shares of Common Stock subject to outstanding options and other awards under the

Incentive Plan and (ii) the number of and class of shares then reserved for issuance under the Incentive Plan and the maximum

number of shares for which awards may be granted to an Eligible Person during a specified time period shall be appropriately and

proportionately adjusted.

The Board, or a committee, shall make such adjustments, and its determinations shall be final, binding

and conclusive.

Change in Control

If the Company is merged or consolidated with

another entity or sells or otherwise disposes of substantially all of its assets to another company while options or stock awards

remain outstanding under the Incentive Plan, unless provisions are made in connection with such transaction for the continuance

of the Incentive Plan and/or the assumption or substitution of such options or stock awards with new options or stock awards covering

the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of

shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted

award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the stock option or

stock award agreement, will terminate immediately as of the effective date of any such merger, consolidation or sale.

Federal Income Tax Consequences

Subject to other customary terms, the Company

may, prior to certificating any Common Stock, deduct or withhold from any payment pursuant to a stock option or stock award agreement

an amount that is necessary to satisfy any withholding requirement of the Company in which it believes, in good faith, is necessary

in connection with U.S.

federal, state, local or transfer taxes as a consequence of the issuance or lapse of restrictions on such

Common Stock.

Outstanding Equity Awards

On November 15, 2015, the Board authorized

the Company to grant certain securities under the Incentive Plan and Directors Compensation Plan, in the aggregate amount of up

to 3,810,000 options to purchase shares of Common Stock at exercise prices ranging from $0.60 per share to $1.80 per share, vesting

entirely in two years from the date of the grant, and up to 75,000 shares of Common Stock, which vested immediately.

Such awards shall be conferred upon the Eligible Person as consideration for the

performance of services and subject to the fulfillment of specified conditions during the deferral period.

Each deferred stock

award agreement shall be in such form and shall contain such terms and conditions as the Board, or the committee, deems appropriate.

The terms and conditions of each deferred stock award agreement may change from time to time and need not be uniform with respect

to Eligible Persons, and the terms and conditions of separate deferred stock award agreements need not be identical.

Board, or the committee, may authorize grants of shares of Common Stock to be awarded upon the achievement of specified performance

objectives, upon such terms and conditions as the Board, or the committee, may determine.

Such awards shall be conferred upon

the Eligible Person upon the achievement of specified performance objectives during a specified performance period, such objectives

being set forth in the grant and including a minimum acceptable level of achievement and, optionally, a formula for measuring

and determining the number of performance shares to be issued.

Each performance share award agreement shall be in such form and

shall contain such terms and conditions as the Board, or the committee, deems appropriate.

The terms and conditions of each performance

share award may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions

of separate performance share award agreements need not be identical.

the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend,

or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving consideration therefore

in money, services or property, then (i) the number, class, and per share price of shares of Common Stock subject to outstanding

options and other awards under the Incentive Plan and (ii) the number of and class of shares then reserved for issuance under

the Incentive Plan and the maximum number of shares for which awards may be granted to an Eligible Person during a specified time

period shall be appropriately and proportionately adjusted.

The Board, or a committee, shall make such adjustments, and its determinations

shall be final, binding and conclusive.

the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to

another company while options or stock awards remain outstanding under the Incentive Plan, unless provisions are made in connection

with such transaction for the continuance of the Incentive Plan and/or the assumption or substitution of such options or stock

awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate

adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been

continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless

otherwise specified in the stock option or stock award agreement, will terminate immediately as of the effective date of any such

merger, consolidation or sale.

Income Tax Consequences

to other customary terms, the Company may, prior to certificating any Common Stock, deduct or withhold from any payment pursuant

to a stock option or stock award agreement an amount that is necessary to satisfy any withholding requirement of the Company in

which it believes, in good faith, is necessary in connection with U.S.

federal, state, local or transfer taxes as a consequence

of the issuance or lapse of restrictions on such Common Stock.

and Outstanding Equity Awards

November 15, 2015, the Board authorized the Company to grant certain securities under the Incentive Plan and Directors Compensation

Plan, in the aggregate amount of up to 3,810,000 options to purchase shares of Common Stock at exercise prices ranging from $0.60

per share to $1.80 per share, vesting entirely in two years from the date of the grant, and up to 75,000 shares of Common Stock,

which vested immediately (collectively, the “November 2015 Grants”).

As of March 30, 2018, the Company has entered

into Option Award Agreements with thirteen grantees, pursuant to awards granted on November 15, 2015 under the Incentive Plan,

consisting of up to 3,660,000 options to purchase shares of Common Stock, of which options to purchase up to 2,010,000 shares

of Common Stock vested on November 15, 2015, options to purchase up to 950,000 shares of Common Stock vested on November 15, 2016,

and options to purchase up to 850,000 shares of Common Stock will vest on November 15, 2017.

In addition, the Company entered

into Stock Award Agreements with two grantees to issue 75,000 shares of Common Stock, which vested immediately and were issued

by the Company in 2016.

As of March 30, 2017, the Company had not yet entered into Option Award Agreements with respect to grants

of options to purchase up to 150,000 shares of Common Stock under the Incentive Plan.

into Option Award Agreements with thirteen grantees of the November 2015 Grants, pursuant to awards granted on November 15, 2015

under the Incentive Plan, consisting of up to 3,660,000 options to purchase shares of Common Stock, of which options to purchase

up to 2,010,000 shares of Common Stock vested on November 15, 2015, options to purchase up to 950,000 shares of Common Stock vested

on November 15, 2016, and options to purchase up to 700,000 shares of Common Stock vested on November 15, 2017.

In addition, the

Company entered into Stock Award Agreements with two grantees of the November 2015 Grants to issue 75,000 shares of Common Stock,

which vested immediately and were issued by the Company in 2016.

In addition, the Board terminated November 2015 Grants of options

to purchase up to 150,000 shares of Common Stock.

On April 19, 2017, the Company’s Board

of Directors authorized the Company to grant certain securities under the Incentive Plan, or any successor plan , consisting of,

in the aggregate, options to purchase up to 2,150,000 shares of our Common Stock at exercise prices ranging from $3.00 per share

to $5.00 per share, vesting on June 30, 2017, December 31, 2017, December 31, 2018 and December 31, 2019 (collectively, the “April

2017 Grants”).

As of March 30, 2018, the Company has entered

into Stock Option Agreements with three grantees of the April 2017 Grants, thereby issuing, in the aggregate, options to purchase

up to 450,000 shares of our Common Stock, with 225,000 of such options having vested on June 30, 2017 with an exercise price of

$3.00 per share and 225,000 of such options having vested on December 31, 2017 with an exercise price of $4.00 per share.

March 30, 2018, the Company had not yet entered into Stock Option Agreements with the other grantees of the April 2017 Grants,

and therefore had not issued up to 1,700,000 options to purchase shares of our Common Stock pursuant to the April 2017 Grants.

SELECTED FINANCIAL DATA

As a “smaller reporting company”,

we are not required to provide the information required by this Item.

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with

the consolidated audited financial statements and notes thereto included in Part II, Item 8 of this Form 10-K.

The following discussion

contains forward-looking statements.

Forward-looking statements are not guarantees of future performance and our actual results

may differ significantly from the results discussed in the forward-looking statements.

Factors that might cause such differences

include, but are not limited to, those discussed under the explanatory note labeled “Forward-Looking Statements”

at the beginning of this report.

We assume no obligation to revise or update any forward-looking statements for any reason, except

as required by law.

US Dollars are denoted herein by “USD”,

“$”

a “smaller reporting company”, we are not required to provide the information required by this Item.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and

results of operations should be read in conjunction with the consolidated audited financial statements and notes thereto included

in Part II, Item 8 of this Form 10-K.

The following discussion contains forward-looking statements.

Forward-looking statements

are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking

Factors that might cause such differences include, but are not limited to, those discussed under the explanatory note

labeled “Forward-Looking Statements”

found at the beginning of this report.

We assume no obligation to revise or update

any forward-looking statements for any reason, except as required by law.

Dollars are denoted herein by “USD”, “$”

and “dollars”.

9 unchanged sentences

The plug also includes

a second structural element allowing it to revolve with a releasable latching which, when engaged, provides a retention force

between the socket and the plug to prevent disengagement.

The socket and plug can be detached by releasing the latch, disengaging

the electric power from the plug.

The socket is designed to replace the support bar incorporated in electric junction boxes, and

the plug can be installed in light fixtures, ceiling fans and wall sconce fixtures.

We currently manufacture and sell ceiling

fans and lighting fixtures branded with the General Electric logo and manufactured under General Electric’s strict guidance,

pursuant to the License Agreement between us and General Electric.

Our ceiling fans and lighting fixtures are manufactured by

several well established factories in the Peoples Republic of China.

Most, if not all, of these factories have been in business

for over 20 years and follow strict human rights and sustainability protocols.

Our ceiling fans and lighting fixtures offer unique

designs, and are manufactured with and without the SQL Technology.

We currently manufacture and sell ceiling

fans and lighting fixtures branded with the General Electric logo and manufactured under GE’s strict guidance, pursuant

to a License Agreement between us and General Electric.

Our ceiling fans and lighting fixtures offer unique designs, and are manufactured

with and without the SQL Technology.

a second structural element allowing it to revolve with a releasable latching which, when engaged, provides a retention force between

the socket and the plug to prevent disengagement.

The socket and plug can be detached by releasing the latch, disengaging the electric

power from the plug.

The socket is designed to replace the support bar incorporated in electric junction boxes, and the plug can

be installed in light fixtures, ceiling fans and wall sconce fixtures.

We currently manufacture and sell ceiling fans

and lighting fixtures branded with the General Electric logo and manufactured under General Electric’s strict guidance, pursuant

to the License Agreement between us and General Electric.

Our ceiling fans and lighting fixtures are manufactured by several well-established

factories in the Peoples Republic of China.

Most, if not all, of these factories have been in business for over 20 years and follow

strict human rights and sustainability protocols.

In December 2016, the SQL Technology was in

included the 2017 National Electrical Code (NEC).

The Company is developing smart home technology

applications for products using the SQL Technology called “Smart SQL”, which incorporate Bluetooth and Wi-Fi capabilities

to enable remote control and automation of such products and appliances.

The Company believes that the combination of its quick

connect technology, the inclusion of Smart SQL and its growing product lines will uniquely position the Company in the marketplace.

Results of Operations

the years ended

and administrative expenses

from Operations

Income / (Expense)

loss per share - basic and diluted

We had recorded revenue of $7,014,978 for the year ended

December 31, 2016, as compared to revenue of $2,885,007 for the year ended December 31, 2015.

The 143.2% increase in revenue was

associated with additional SKU’s offered and increased sales activity with existing customers.

Sales increased through all

sales channels, including internet sales for our customers.

The Company is currently in the process of

transitioning its product portfolio to advanced technologies, along with a new sales methods and marketing strategy, which will

include unique, innovative advanced technologies (the “Smart SQL”).

of Operations

Year Ended December 31,

Cost of sales

Selling, general and

administrative expenses

Depreciation and amortization

Loss on impairment

Total operating expenses

Loss from Operations

Other Income / (Expense)

Net loss per share - basic and diluted

Net revenue increased to $7,700,948 for the

year ended December 31, 2017, from revenue of $7,014,978 for the year ended December 31, 2016.

This increase in revenues is associated

with steady market acceptance and resulting sales.

Cost of Sales

We had a cost of sales of $6,379,728 for the

year ended December 31, 2017, as compared to a cost of sales of $6,136,395 for the year ended December 31, 2016.

The increase in

cost of sales was associated with expanded offering and increase in sales noted above.

The increase is

associated with the increase in sales and increased product offering.

We had gross profit of $1,321,220 for the year

ended December 31, 2017 as compared to gross profit of $878,583 for the year ended December 31, 2016.

The gross profit as a percent

of sales was 12.5% in 2016, as compared with 14.1% in 2015.

This change in gross profit as a percent of sales is primarily due

to the introduction of new SKU’s into the market place.

Gross Profit as a percent of sales materially improved as the year

General and Administrative Expenses

General and administrative

expense increased $1,629,608 during the year ended December 31, 2016 to $6,866,355, from

$5,236,747 for the year ended December 31, 2015.

The increases in the general and administrative expenses

were primarily due to additional business activity including:

$857,100 Consulting

expenses, $769,000 paid with equity, for business and web activities

Warehouse and product quality/production oversite

Commission expense associated with increased sales

Tooling and trade for manufacturing quality reviews

Payroll and related expenses

Insurance for liability, Directors and Officers and Health

Facility rent expense

Increased travel

Marketing expense

Offsetting the above expenses

was a $35,200 decrease in Accounting and Legal fees

As a percent of sales, gross

profit was 17.16% and 12.52% for the years ended December 31, 2017 and 2016, respectively.

The increase in gross profit as a percent

of sales is attributable to improved pricing and better volume vendor discounts on the cost of sales and the introduction of new

items with higher profit margins.

Selling, General and Administrative Expenses

Selling, general and administrative expense

(SG&A) increased $1,357,355 to $8,223,710 during the year ended December 31, 2017, from $6,866,355 for the year ended December

For the year ended December 31, 2017, SG&A includes depreciation and amortization expenses of $2,497,408, plus a

$600,000 loss resulting from an asset impairment.

For the year ended December 31, 2016 SG&A included Depreciation and Amortization

expense of $2,482,604.

The increase in SG&A in 2017 was primarily due to the increase in personnel and additional product

Loss from Operations

Loss from operations represents the change in general

and administrative expenses offset by the gross profit on sales for the periods presented.

Other Income (Expense)

Total other expenses of $92,460,085 represent

the following:

($41,129,336) non-cash loss on the conversion of convertible debt to preferred shares and common shares.

The shares exchanged for the debt were valued at $3.40 per share, the closing price closest to the conversion option date.

($43,634,482) non-cash derivative expense on outstanding warrants, as a result of the share value increasing from $1.00 to $2.00, based on the Company’s recent OTC closing price of common stock and the impact on the Black Scholes calculation of the intrinsic value of the equity component.

($9,678,390) in non-cash derivative expense associated with the fair value of options granted and warrants issued during the 2016.

These non-cash charges to Other Income/(Expense)

were partially offset by a decrease in interest payments of $1,874,652 due to the maturity of the convertible debt instruments,

and by a $2,949,714 non-cash gain on debt extinguishment.

Net Loss and Net Loss per Share

The Company’s net loss and net loss per

share for the year ended December 31, 2016 was ($98,447,857), or ($2.60) per share, as compared ($26,890,210), or ($0.76) per share

for the year ended December 31, 2015.

Given the reasons explained above, our loss increased by ($71,557,647) for the year ended

December 31, 2016.

Loss from operations increased $914,718 to

$6,902,490 during the year ended December 31, 2017, from $5,987,772 for the year ended December 31, 2016.

The increase was due

to an increase in SG&A, which was partially offset by an increase in gross profit on sale.

Loss from operations includes Depreciation

and Amortization expenses of $2,497,708 and $2,482,604 for the years ended December 31, 2017 and 2016, respectively.

It also includes

a $600,000 loss on the impairment of an asset for the year ended December 31, 2017.

Income (Expense )

Total other expenses, mostly non-cash charges,

decreased $72,643,892 to $19,816,195 for the year ended December 31.

The decline in other expenses was due to decreases in non-cash

amortization of derivative liabilities and derivative expenses, as a result of an exercise of Note Warrants held by the Company’s

holders of Series A Preferred Stock, and a non-cash charge in 2016 of $41,129,336 related to the conversion of Convertible Notes

into the Company’s Series A Preferred Stock and Common Stock.

Additionally, the Company's interest expense

was reduced by $686,133 to $294,735 for the year ended December 31, 2017, from $980,867 for the year ended December 31, 2016.

Loss and Net Loss per Share

The Company incurred a net loss for the year

period ended December 31, 2017 of $26,718,685 and $0.55 per share, as compared to the year period ended December 31, 2016, where

the net loss was approximately $98,447,858 or $2.60 per share.

Liquidity and Capital Resources

To date, the Company has not generated sufficient revenue

to cover its operating costs and continues to operate with negative cash flow.

As a result, the Company has raised additional

funds through the sale of its Common Stock.

The Company has also entered into a Line of Credit with a third party which will supply

it with $10,000,000 to support its purchase orders, inventory and other working capital needs.

As of December 31, 2016, the Company

had $6,887,264 available under the Line of Credit, which expires December 31, 2017.

In order for the Company to achieve sufficient

working capital to support its operations and sales growth, the Company may be required to find additional financing to replace

the expiring facility or raise additional capital to fund its working capital needs.

It currently has no such financing commitment

For the year ended December 31, 2016, the Company

used ($6,460,289) of cash for operations as compared with ($3,767,470) used for the same period in 2015.

The increase in cash used

for operations was due to the Company’s net loss of ($98,447,857), offset by non-cash expenses of $43,634,481 change in derivative

liability, $9,678,390 loss in derivative expense and $41,129,336 loss in extinguishment of debt and by non-cash expenses for depreciation

and amortization totaling $2,971,491.

Net funds used for working capital was ($3,118,962) due to an increase in accounts receivable

(562,515), ($2,142,565) increase in inventory, ($493,432) decrease in GE royalty payable, partially offset by an increase of $252,367

in accounts payable.

For the year ended December 31, 2016, cash flows used

($43,694) for investing activities as compared with ($59,478) used for the same period in 2015.

The investments were for patents

costs and fixed assets.

Cash flows provided from financing activities amounted

to $9,855,160 in cash equivalents for the year ended December 31, 2016, as compared with $3,036,327 during the same period in

The company received $7,460,000 from the proceeds of Common Stock, $3,572,545 from the conversion of notes and interest

into Common Stock and preferred stock, $2,997,814 in proceeds from the line of credit, net of repayments, $200,000 in proceeds,

net of repayments from a related party.

These amounts were offset by ($4,314,233) in repayment of the convertible notes at maturity

and ($30,966) in Preferred Stock dividend payments.

As a result of the above operating, investing and financing

activities, the Company provided $3,675,020 in cash equivalents for the year ended December 31, 2016, as compared with ($790,621)

As of December 31, 2017, the Company had $4,877,720

in cash on hand.

To date, the Company has not generated sufficient revenue to cover its operating costs and continues to operate

with negative cash flow.

As a result, the Company has raised additional funds through the sale of its Common Stock.

maintains a Line of Credit with a third party which will supply it with $10,000,000 to support its purchase orders, inventory and

other working capital needs.

As of December 31, 2017, the Company had $6,543,268 available under the Line of Credit, which expires

January 10, 2019.

For the Company to achieve sufficient working capital to support its operations and sales growth, the Company

may be required to find additional financing to replace the expiring facility or raise additional capital to fund its working capital

It currently has no such financing commitment in place.

For the year ended December 31, 2017, the

Company used $4,349,173 of cash for operations as compared with $6,166,446 used for the same period in 2016.

The decrease in cash

used for operations was primarily due to the establishing of inventory levels in 2016 that remained stable in 2017, while increased

general and administrative costs in 2017 were partially offset by increased gross profit.

For the year ended December 31, 2017, cash

flows used was $241,653 for investing activities as compared with $43,694 used for the same period in 2016.

The investments were

for patents costs and fixed assets.

Cash flows provided from financing activities

amounted to $5,342,658 in cash equivalents for the years ended December 31, 2017, as compared with $9,855,160 during the same period

The company received $5,365,000 from the proceeds of Common Stock, which includes the exercise of $3.00 stock purchase

warrants generating $5,000,000 in cash equivalents, $100,000 from the conversion of Convertible Notes and interest into shares

of Common Stock and Series A Preferred Stock, $227,395 in proceeds from the Line of Credit, net of repayments.

These amounts were

partially offset by $200,000 in repayment of the convertible notes at maturity and $149,737 in Series A Preferred Stock dividend

As a result of the above operating, investing

and financing activities, the Company provided $751,832 in cash equivalents for the year ended December 31, 2017, as compared with

$3,675,020 used during the same period in 2016.

The Company had $4,125,888 in cash and cash equivalents at December 31, 2016, as compared

to $450,868 at December 31, 2015.

The Company had $4,877,720 in cash and cash equivalents at December 31, 2017, as

compared to $4,125,888 at December 31, 2016.

The Company had a working capital deficit of

$(21,419,526) as of December 31, 2016, as compared to $(28,174,512) as of December 31, 2015, which includes $24,083,314 in derivative

A majority of the Company’s sales do not require

the Company to take delivery of inventory.

Production of the SQL Technology and fixtures will be originated upon receipt of FOB

(free on board) purchase contracts from customers.

Upon the completion of each purchase contract, the finished products will be

transported from the manufacturer directly to the ports and loaded on vessels secured by the customer, upon which the products

become the property of the customer.

Subsequent Events

On March 24, 2017, the holder of our one-year Common Stock

Purchase Warrant, issued on April 4, 2016, to purchase up to 1,666,667 shares of our Common Stock at an exercise price of $3.00

per share, exercised such warrant in full upon tender of $5,000,000 in cash to the Company.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements

Critical Accounting Policies and Estimates

For a discussion of our accounting policies and related

items, please see below and the Notes to the Financial Statements included in this report.

The preparation of financial statements in conformity

generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts

reported in our financial statements and accompanying notes.

Such estimates and assumptions impact both assets and

liabilities, including but not limited to:

net realizable value of accounts receivable and inventory, estimated useful lives and

potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments

and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities

and estimates of the probability and potential magnitude of contingent liabilities.

Making estimates requires management to exercise significant

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances

that existed at the date of the financial statements, which management considered in formulating its estimate could change in

the near term due to one or more future non-conforming events.

Accordingly, actual results could differ significantly from estimates.

Recently Issued Accounting Pronouncements

In April 2015, the FASB issued Accounting Standards

2015-03, Interest—Imputation of Interest (Topic 835-30):

Simplifying the Presentation of Debt Issuance Costs (“ASU

2015-03”).

ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance

sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

The recognition and

measurement guidance for debt issuance costs is not affected by ASU 2015-03.

ASU 2015-03 is effective for financial statements

issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.

The Company has reclassified

debt issuance costs from prepaid expenses and other current assets and other assets as a reduction to debt in the condensed consolidated

balance sheets.

In July 2015, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update No.

2015-11, Inventory (Topic 330):

Simplifying the Measurement of

Inventory (“ASU 2015-11”), which applies guidance on the subsequent measurement of inventory.

ASU 2015-11 states that

an entity should measure inventory at the lower of cost and net realizable value.

Net realizable value is the estimated selling

price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation.

excludes inventory measured using last-in, first-out or the retail inventory method.

ASU 2015-11 is effective for interim and annual

reporting periods beginning after December 15, 2016.

Early adoption is permitted.

The Company is not planning to early adopt ASU

2015-11 and is currently evaluating ASU 2015-11 to determine the potential impact to its condensed consolidated financial statements

and related disclosures.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation,

which is intended to simplify the accounting for share-based payment award transactions.

The new standard will modify several

aspects of the accounting and reporting for employee share-based payments and related tax accounting impacts, including the presentation

in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well

as the accounting for award forfeitures over the vesting period.

The guidance is effective for fiscal years beginning after December

15, 2016, including interim periods within that year, and will be adopted by the Company in the first quarter of fiscal 2017.

The Company anticipates the new standard will result in an increase in the number of shares used in the calculation of diluted

earnings per share and will add volatility to the Company’s effective tax rate and income tax expense.

The magnitude of

such impacts will depend in part on whether significant employee stock option exercises occur.

Other pronouncements issued by the FASB or other authoritative

accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the

Company’s financial position, results of operations or cash flows.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable

are recorded at the invoiced amount and do not bear interest.

The Company extends unsecured credit to its customers in the ordinary

course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts.

The Company recognizes an allowance for losses on accounts

receivable in an amount equal to the estimated probable losses net of recoveries.

The allowance is based on an analysis of historical

bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable

customer accounts considered at risk or uncollectible.

Inventory consist of finished goods purchased, which are

valued at the lower of cost or market value, with cost being determined on the first-in, first-out method.

periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated

changes in future demand.

Valuation of Long-Lived Assets and Identifiable

Intangible Assets

The Company reviews for impairment of long-lived assets

and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any

asset may not be recoverable.

In the event of impairment, the asset is written down to its fair market value.

Property and Equipment

Property and equipment is stated at cost, less accumulated

depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an

asset may not be recoverable.

Depreciation of property and equipment is provided utilizing

the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets.

Expenditures for maintenance

and repairs are charged to expense as incurred.

Upon sale or retirement of property and equipment, the

related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of

Intangible Asset - Patent

The Company developed a patent for an installation device

used in light fixtures and ceiling fans.

Costs incurred for submitting the applications to the United States Patent and Trademark

Office for these patents have been capitalized.

Patent costs are being amortized using the straight-line method over the related

15 year lives.

The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and

filing date from the United States Patent and Trademark Office.

The Company incurs certain legal and related costs in

connection with patent applications.

The Company capitalizes such costs to be amortized over the expected life of the patent to

the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company.

The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future

economic benefit of the patent will be maintained or increased and a successful defense is probable.

Capitalized patent defense

costs are amortized over the remaining expected life of the related patent.

The Company’s assessment of future economic

benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation

could result in a material impairment charge up to the carrying value of these assets.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value

based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount

that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction

between market participants.

As such, fair value may be based on assumptions that market participants would use in pricing an

asset or liability.

The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair

value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to

measure fair value:

Observable inputs that reflect quoted market prices in active markets for identical

assets or liabilities.

Inputs reflect quoted prices for identical assets or liabilities in markets

that are not active;

quoted prices for similar assets or liabilities in active markets;

inputs other than quoted prices that are observable for the assets or liabilities;

inputs that are derived principally from or corroborated by observable market data by

correlation or other means.

Unobservable inputs reflecting the Company’s assumptions incorporated

in valuation techniques used to determine fair value.

These assumptions are required

to be consistent with market participant assumptions that are reasonably available.

The carrying amounts of the Company’s financial

assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain

notes payable and notes payable –

related party, approximate their fair values because of the short maturity of these instruments.

The Company accounts for its derivative liabilities, at

fair value, on a recurring basis under Level 3.

Embedded Conversion Features

The Company evaluates embedded conversion features within

convertible debt under ASC 815 “Derivatives and Hedging”

to determine whether the embedded conversion feature(s) should

be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC

470-20 “Debt with Conversion and Other Options”

for consideration of any beneficial conversion features.

The Company does not use derivative instruments to hedge

exposures to cash flow, market, or foreign currency risks.

The Company evaluates all of it financial instruments, including stock

purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at

its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to

For option-based simple derivative financial instruments,

the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as

equity, is re-assessed at the end of each reporting period.

The Company has reserved for issuance 27,952,586 shares

of Common stock associated with conversion features on Series A Preferred Stock, warrants and options.

These shares have been

reserved for issuance by the Company’s stock transfer agent, and accordingly, no derivative liability has been calculated

on these shares.

Stock-Based Compensation - Employees

The Company accounts for its stock based compensation

in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles

of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification.

Pursuant to paragraph

718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received

for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value

of the equity instrument issued, whichever is more reliably measurable.

The measurement date used to determine the fair value

of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable

that performance will occur.

If the Company is a newly formed corporation or shares

of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum

(based on sales to third parties) (“PPM”), or weekly or monthly

price observations

would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due

to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments

is estimated on the date of grant using a Black-Scholes option-pricing valuation model.

The ranges of assumptions for inputs are

term of share options and similar instruments:

The expected life of options and similar

instruments represents the period of time the option and/or warrant are expected to be

Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards

Codification the expected term of share options and similar instruments represents the

period of time the options and similar instruments are expected to be outstanding taking

into consideration of the contractual term of the instruments and employees’

exercise and post-vesting employment termination behavior into the fair value (or calculated

value) of the instruments.

Pursuant to paragraph 718-10-S99-1, it may be appropriate

to use the simplified method, i.e., expected term = ((vesting term + original contractual

term) / 2), if (i) A company does not have sufficient historical exercise data to provide

a reasonable basis upon which to estimate expected term due to the limited period of

time its equity shares have been publicly traded;

(ii) A company significantly changes

the terms of its share option grants or the types of employees that receive share option

grants such that its historical exercise data may no longer provide a reasonable basis

upon which to estimate expected term;

or (iii) A company has or expects to have significant

structural changes in its business such that its historical exercise data may no longer

provide a reasonable basis upon which to estimate expected term.

The Company uses the

simplified method to calculate expected term of share options and similar instruments

as the Company does not have sufficient historical exercise data to provide a reasonable

basis upon which to estimate expected term.

volatility of the entity’s shares and the method used to estimate it.

to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses

the calculated value method shall disclose the reasons why it is not practicable for

the Company to estimate the expected volatility of its share price, the appropriate industry

sector index that it has selected, the reasons for selecting that particular index, and

how it has calculated historical volatility using that index.

The Company uses the average

historical volatility of the comparable companies over the expected contractual life

of the share options or similar instruments as its expected volatility.

a company are thinly traded the use of weekly or monthly price observations would generally

be more appropriate than the use of daily price observations as the volatility calculation

using daily observations for such shares could be artificially inflated due to a larger

spread between the bid and asked quotes and lack of consistent trading in the market.

annual rate of quarterly dividends.

An entity that uses a method that employs different

dividend rates during the contractual term shall disclose the range of expected dividends

used and the weighted-average expected dividends.

The expected dividend yield is based

on the Company’s current dividend yield as the best estimate of projected dividend

yield for periods within the expected term of the share options and similar instruments.

An entity that uses a method that employs different risk-free rates shall disclose

the range of risk-free rates used.

The risk-free interest rate is based on the U.S.

yield curve in effect at the time of grant for periods within the expected term of the

share options and similar instruments.

Generally, all forms of share-based payments, including

stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the

awards’

grant date, based on estimated number of awards that are ultimately expected to vest.

The expense resulting from share-based payments is recorded

in general and administrative expense in the statements of operations.

Equity Instruments Issued to Parties Other Than

Employees for Acquiring Goods or Services

accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic

505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC Section 505-50-30, all transactions in

which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair

value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the

performance is complete or the date on which it is probable that performance will occur.

If the Company is a newly formed corporation

or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement

memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily

price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack

of consistent trading in the market.

The fair value of share options and similar instruments

is estimated on the date of grant using a Black-Scholes option-pricing valuation model.

The ranges of assumptions for inputs are

term of share options and similar instruments:

Pursuant to Paragraph 718-10-50-2(f)(2)(i)

of the FASB Accounting Standards Codification the expected term of share options and

similar instruments represents the period of time the options and similar instruments

are expected to be outstanding taking into consideration of the contractual term of the

instruments and holder’s expected exercise behavior into the fair value (or calculated

value) of the instruments.

The Company uses historical data to estimate holder’s

expected exercise behavior.

If the Company is a newly formed corporation or shares of

the Company are thinly traded the contractual term of the share options and similar instruments

is used as the expected term of share options and similar instruments as the Company

does not have sufficient historical exercise data to provide a reasonable basis upon

which to estimate expected term.

volatility of the entity’s shares and the method used to estimate it.

to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses

the calculated value method shall disclose the reasons why it is not practicable for

the Company to estimate the expected volatility of its share price, the appropriate industry

sector index that it has selected, the reasons for selecting that particular index, and

how it has calculated historical volatility using that index.

The Company uses the average

historical volatility of the comparable companies over the expected contractual life

of the share options or similar instruments as its expected volatility.

a company are thinly traded the use of weekly or monthly price observations would generally

be more appropriate than the use of daily price observations as the volatility calculation

using daily observations for such shares could be artificially inflated due to a larger

spread between the bid and asked quotes and lack of consistent trading in the market.

annual rate of quarterly dividends.

An entity that uses a method that employs different

dividend rates during the contractual term shall disclose the range of expected dividends

used and the weighted-average expected dividends.

The expected dividend yield is based

on the Company’s current dividend yield as the best estimate of projected dividend

yield for periods within the expected term of the share options and similar instruments.

An entity that uses a method that employs different risk-free rates shall disclose

the range of risk-free rates used.

The risk-free interest rate is based on the U.S.

yield curve in effect at the time of grant for periods within the expected term of the

share options and similar instruments.

Pursuant to ASC paragraph 505-50-25-7, if fully vested,

non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services

(no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any

obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached.

A grantor shall

recognize the equity instruments when they are issued (in most cases, when the agreement is entered into).

Whether the corresponding

cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements

of paragraph 505-50-45-1) depends on the specific facts and circumstances.

Pursuant to ASC paragraph 505-50-45-1, a grantor may

conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity

instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific

performance is required by the grantee in order to retain those equity instruments).

Such an asset shall not be displayed as contra-equity

by the grantor of the equity instruments.

The transferability (or lack thereof) of the equity instruments shall not affect the

balance sheet display of the asset.

This guidance is limited to transactions in which equity

instruments are transferred to other than employees in exchange for goods or services.

Section 505-50-30 provides guidance on

the determination of the measurement date for transactions that are within the scope of this Subtopic.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an

entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period

of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions.

Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid

cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments.

A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty

has the right to exercise expires unexercised.

Pursuant to ASC paragraph 505-50-30-S99-1, if the Company

receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments

are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered

issued until they vest).

Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Income Tax Provision

From the inception of the Company and through November

6, 2012, the Company was taxed as a pass-through entity (a limited liability company) under the Internal Revenue Code and was

not subject to federal and state income taxes;

accordingly, no provision had been made.

The financial statements reflect the Company’s transactions

without adjustment, if any, required for income tax purposes for the period from November 7, 2012 to December 31, 2012.

loss generated by the Company for the period January 1, 2012 to November 6, 2012 has been excluded from the computation of income

The Company accounts for income taxes under Section 740-10-30

of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected

future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred

tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities

using enacted tax rates in effect for the year in which the differences are expected to reverse.

Deferred tax assets are reduced

by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.

tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those

temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in

tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting

Standards Codification (“Section 740-10-25”).

Section 740-10-25 addresses the determination of whether tax benefits

claimed or expected to be claimed on a tax return should be recorded in the financial statements.

Under Section 740-10-25, the

Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position

will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized

in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty

(50) percent likelihood of being realized upon ultimate settlement.

Section 740-10-25 also provides guidance on de-recognition,

classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences

between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit

carry-backs and carry-forwards.

The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated

balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of

the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability.

In addition, the

Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions.

In management’s opinion,

adequate provisions for income taxes have been made for all years.

If actual taxable income by tax jurisdiction varies from estimates,

additional allowances or reversals of reserves may be necessary.

The Company’s tax returns are subject to examination

by the federal and state tax authorities for the years ended 2012 through 2016.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and

had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting

periods ended December 31, 2016 and 2015.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting

Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include

(i) affiliates of the Company;

(ii) Entities for which investments in their equity securities would be required, absent the election

of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity

method by the investing entity;

(iii) trusts for the benefit of employees, such as pension and profit-sharing trusts that are

managed by or under the trusteeship of management;

(iv) principal owners of the Company;

(v) management of the Company;

parties with which the Company may deal if one party controls or can significantly influence the management or operating policies

of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests;

and (vii) other parties that can significantly influence the management or operating policies of the transacting parties or that

have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or

more of the transacting parties might be prevented from fully pursuing its own separate interests.

The consolidated financial statements shall include disclosures

of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the

ordinary course of business.

However, disclosure of transactions that are eliminated in the preparation of consolidated or combined

financial statements is not required in those statements.

The disclosures shall include:

(i) the nature of the relationship(s)

(ii) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed,

for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding

of the effects of the transactions on the financial statements;

(iii) the dollar amounts of transactions for each of the periods

for which income statements are presented and the effects of any change in the method of establishing the terms from that used

in the preceding period;

and (iv) amounts due from or to related parties as of the date of each balance sheet presented and, if

not otherwise apparent, the terms and manner of settlement.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

As a “smaller reporting company”, we are not

required to provide the information required by this Item.

$23,271,348 as of December 31, 2017, which includes $19,175,754 in non-cash derivative liabilities, as compared to a working deficit

of $21,419,526 as of December 31, 2016, which included $24,083,314 in non-cash derivative liabilities.

majority of the Company’s sales do not require the Company to take delivery of inventory.

Production of the SQL Technology

and fixtures will be originated upon receipt of FOB (free on board) purchase contracts from customers.

Upon the completion of

each purchase contract, the finished products will be transported from the manufacturer directly to the ports and loaded on vessels

secured by the customer, upon which the products become the property of the customer.

Financial Measures

supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, management uses adjusted

net income (loss) to evaluate operating and financial performance and believes the measure is useful to investors because it eliminates

the impact of certain noncash and/or other items that management does not consider to be indicative of the Company’s performance

from period to period.

Management also believes this non-GAAP measure is useful to investors to evaluate and compare the Company’s

operating and financial performance across periods, as well as facilitating comparisons to others in the Company’s industry.

use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss), plus interest income;

interest expense;

depreciation and amortization;

unrealized derivative gains and losses, non-recurring income and expenses, and stock-based compensation

We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the

effect of the expenses that we exclude in Adjusted EBITDA.

non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with

generally accepted accounting principles in the United States of America.

These non-GAAP financial measures exclude significant

expenses and income that are required by accounting principles generally accepted in the United States of America (“GAAP”)

to be recorded in the company’s financial statements and are subject to inherent limitations.

Investors should review the

reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures that are included below.

The following

table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods

Year Ended December 31,

Adjusted EBITDA reconciliation to Net Income (Loss):

Net (loss) income

Other Income / (Expense)

Depreciation and amortization

Loss on impairment

Interest expense

Derivative expenses

Change in fair value of embedded derivative liabilities

Loss on debt extinguishment - net

Warrant expense

Option expense

Amortization of Debt Discount

Gain on debt settlement

Gain on exchange

Gain on Debt Extinguishment

Total adjustment

Adjusted EBITDA

Net Income (Loss) per share - basic and diluted

The following

table presents a reconciliation of Adjusted Accumulated deficit reconciliation for each of the periods presented:

Year Ended December 31,

Adjusted Accumulated deficit reconciliation to Net Income (Loss):

Accumulated deficit

$ (168,050,716 )

$ (141,182,294 )

$ (42,703,470 )

$ (15,813,260 )

$ (8,519,517 )

Other Income / (Expense)

Depreciation and amortization¹

Loss on impairment

Interest expense

Derivative expenses

(11,403,137 )

Change in fair value of embedded derivative liabilities

(77,215,799 )

(62,802,607 )

(19,168,125 )

Loss on debt extinguishment - net

(42,402,067 )

(41,142,067 )²

Warrant expense

Option expense

Amortization of Debt Discount

Common stock issued for service

Founder shareholders

Gain on debt settlement

Gain on exchange

Gain on Debt Extinguishment

Total adjustment

(153,661,387 )

(130,747,784 )

(35,805,096 )

Total Adjusted Accumulated deficit

$ (14,389,329 )

$ ( 10,55,620 )

$ (6,451,890 )

Includes amortization of the GE License agreement

of $9,755,534;

and $0 for the years 2017 through 2013, respectively.

(2) Primarily represents conversion of Convertible Notes into the Company’s Preferred Stock and Common Stock resulting in a $41,310,119 non-cash loss due to the difference between the conversion rate and the market value at the time of conversion, and a gain of $3,288,909 reflecting the cost basis of the Convertible Notes that were converted into Common Stock during the fourth quarter of 2016.

Balance Sheet Arrangements

do not have any off-balance sheet arrangements

Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance

with accounting principles generally accepted in the United States (“GAAP”).

The preparation of these consolidated

financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues,

costs and expenses and related disclosures.

We base our estimates on historical experience, as appropriate, and on various other

assumptions that we believe to be reasonable under the circumstances.

Changes in the accounting estimates are reasonably likely

to occur from period to period.

Accordingly, actual results could differ significantly from the estimates made by our management.

We evaluate our estimates and assumptions on an ongoing basis.

To the extent that there are material differences between these

estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash

flows will be affected.

We believe that the following critical accounting policies involve a greater degree of judgment and complexity

than our other accounting policies.

Accordingly, these are the policies we believe are the most critical to understanding and evaluating

our consolidated financial condition and results of operations.

preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires management to make

estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.

estimates and assumptions impact both assets and liabilities, including but not limited to:

net realizable value of accounts receivable

and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets,

estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded

as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities.

estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect

of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered

in formulating its estimate could change in the near term due to one or more future non-conforming events.

Accordingly, actual

results could differ significantly from estimates.

Accounting Pronouncements

Notes to the Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Data”

accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

a “smaller reporting company”, we are not required to provide the information required by this Item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be included in this

report appear as indexed in the appendix to this report beginning on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

financial statements required to be included in this report appear as indexed in the appendix to this report beginning on page

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity