What changed in this filing

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Item 9A. Controls and Procedures

2018-04-02 compared with 2017-03-31 · 2136 added, 1963 removed, 337 unchanged (92% of the section changed)

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report (the

“Evaluation Date”), we carried out an evaluation, under the supervision and with the participation of our management,

including our Principal Executive Officer, who is also serving as our Principal Financial Officer and Principal Accounting Officer,

of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities

Exchange Act of 1934, as amended (the “Exchange Act”).

Based upon this evaluation, our Principal Executive Officer

concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance

that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed,

summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and

that our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that

we file or submit under the Exchange Act is accumulated and communicated to our management including our Principal Executive Officer

as appropriate to allow timely decisions regarding required disclosure.

Because of the inherent limitations in all control systems,

no evaluation of controls can provide absolute assurance that the Company’s disclosure controls and procedures will detect

or uncover every situation involving the failure of persons within the Company to disclose material information otherwise required

to be set forth in the Company’s periodic reports.

Management’s Annual Report on Internal Controls

over Financial Reporting

The Company’s management is also responsible for

establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles.

The Company’s internal control over financial reporting is a process designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with U.S.

generally accepted accounting principles.

Internal control over financial reporting includes

those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly

reflect our transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary

to permit preparation of the financial statements in accordance with U.S.

generally accepted accounting principles, and that our

receipts and expenditures are being made only in accordance with authorizations of our management and directors;

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that

could have a material effect on the financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

In connection with the preparation of our annual financial

statements, management has undertaken an assessment of the effectiveness of our internal control over financial reporting as of

December 31, 2016 based on the framework in Internal Control—Integrated Framework (“1992 Framework”) issued

by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management’s assessment included an evaluation

of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this evaluation, under that framework, management

has concluded that our internal control over financial reporting was not effective as of December 31, 2016.

Our Principal Executive

Officer, who is also serving as our Principal Financial Officer and Principal Accounting Officer, concluded that we have material

weaknesses in our internal control over financial reporting because we do not have an adequate segregation of duties due to a

limited number of employees among whom duties can be allocated.

The lack of segregation of duties is due to the limited nature

and resources of the Company.

This Annual Report does not include an attestation report

of the Company’s registered public accounting firm regarding internal controls over financial reporting.

of Disclosure Controls and Procedures

of the end of the period covered by this report (the “Evaluation Date”), we carried out an evaluation, under the supervision

and with the participation of our management, including our Principal Executive Officer, who is also serving as our Principal

Financial Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls

and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Based upon this evaluation, our Principal Executive Officer concluded that, as of the Evaluation Date, our disclosure controls

and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that are

filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by

the Securities and Exchange Commission’s rules and forms and that our disclosure controls and procedures are designed to

ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and

communicated to our management including our Principal Executive Officer as appropriate to allow timely decisions regarding required

of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Company’s

disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company

to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Management’s

report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities

and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Changes In Internal Controls over Financial Reporting

No changes were made in our internal control over financial

reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter that has materially

affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Annual Report on Internal Controls over Financial Reporting

Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting

to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for

external purposes in accordance with generally accepted accounting principles.

The Company’s internal control over financial

reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with U.S.

generally accepted accounting principles.

Internal control

over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable

detail, accurately and fairly reflect our transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions

are recorded as necessary to permit preparation of the financial statements in accordance with U.S.

generally accepted accounting

principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition

of our assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes

in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

connection with the preparation of our annual financial statements, management has undertaken an assessment of the effectiveness

of our internal control over financial reporting as of December 31, 2017 based on the framework in Internal Control—Integrated

Framework (“1992 Framework”) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing

of the operational effectiveness of those controls.

on this evaluation, under that framework, management has concluded that our internal control over financial reporting was not

effective as of December 31, 2017.

Our Principal Executive Officer, who is also serving as our Principal Financial Officer and

Principal Accounting Officer, concluded that we have material weaknesses in our internal control over financial reporting because

we do not have an adequate segregation of duties due to a limited number of employees among whom duties can be allocated.

lack of segregation of duties is due to the limited nature and resources of the Company.

January 1, 2017, we implemented ASC 606, Revenue from Contracts with Customers.

Although the new revenue standard is expected

to have an immaterial impact on our ongoing net income, we did implement

changes to our processes related to revenue recognition and the control activities within them.

These included the development

of new policies based on the five-step model provided in the new revenue standard, new training, ongoing contract review requirements,

and gathering of information provided for disclosures.

Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal

controls over financial reporting.

Management’s report was not subject to attestation by the Company’s registered

public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s

report in this Annual Report.

in Internal Controls over Financial Reporting

changes were made in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange

Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal

control over financial reporting.

OTHER INFORMATION

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE

The following is a list of our directors and executive

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following is a list of our directors and

executive officers.

All directors serve one-year terms or until each of their successors are duly qualified and elected.

The officers are

elected by our Board.

Chief Executive Officer

are elected by our Board.

Director, Executive Chairman

Chief Executive Officer

Patricia Barron

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Phillips Peter

Campi has served as the Company’s

Chief Executive Officer since November 2014.

Campi founded Genesis Management, LLC in 2009, and retired in 2014 upon accepting

the role of Chief Executive Officer.

Campi has extensive experience in the field of cost management, is recognized as a Founder

of the strategic cost-management discipline known as Activity-Based Cost Management, and is generally recognized as a national

leader in the field of supply chain management.

From December 2007 to December 2008, Mr.

Campi served as the Chief Procurement

Officer and an Executive Vice President for Chrysler LLC, where he was responsible for all worldwide purchasing and supplier quality

Rani Kohen is the Company founder and

Executive Chairman of the Board.

Kohen is a businessman, entrepreneur and inventor of the Company’s technologies,

Kohen has over twenty-five years of experience in the lighting and advance home design industries, as well as in other related

business areas, including founding and running a large chain of retail lighting businesses.

Since founding SQL Technologies, Mr.

Kohen has succeeded in attracting and engaging accomplished and prestigious Board members, talented management and several leading

executives from various electronic industries, including the NFPA, UL, GE and others.

Our Board believes that with Mr.

Kohen’s

leadership and qualifications, his depth of knowledge of the Company’s product and his advanced business strategies, he will

continue to move the Company forward towards achieving its goals.

Campi has served as the Company’s Chief Executive Officer since November 2014.

Campi founded Genesis Management,

LLC in 2009, and retired in 2014 upon accepting the role of Chief Executive Officer.

Campi has extensive experience in the

field of cost management, is recognized as a Founder of the strategic cost-management discipline known as Activity-Based Cost

Management and is generally recognized as a national leader in the field of supply chain management.

From December 2007 to December

Campi served as the Chief Procurement Officer and an Executive Vice President for Chrysler LLC, where he was responsible

for all worldwide purchasing and supplier quality activities.

From September 2003 to January 2007, Mr.

Campi served as the Senior Vice President of Sourcing and Vendor Management

for The Home Depot, where he led the drive for standardization and optimization of The Home Depot Global Supply Chain.

2002 to September 2003, Mr.

Campi served as the Chief Procurement Officer and Vice President for Du Pont Global Sourcing and Logistics.

Campi served as the Senior

Vice President of Sourcing and Vendor Management for The Home Depot, where he led the drive for standardization and optimization

of The Home Depot Global Supply Chain.

From April 2002 to September 2003, Mr.

Campi served as the Chief Procurement Officer and

Vice President for Du Pont Global Sourcing and Logistics.

Prior to 2002, Mr.

Campi led the Global Sourcing activities for GE Power Energy, and held a variety of positions with Federal

Mogul, Parker Hannifin Corporation and Price Waterhouse Coopers.

Campi also serves as a Trustee of Case Western Reserve University,

has served as a Member of the Advisory Board of Directors for three startup companies, and has served as a Member of the Financial

Executives Institute and the Institute of Management Accountants.

Campi led the Global Sourcing activities for GE Power

Energy, and held a variety of positions with Federal Mogul, Parker Hannifin Corporation and Price Waterhouse Coopers.

also serves as a Trustee of Case Western Reserve University, has served as a Member of the Advisory Board of Directors for three

startup companies, and has served as a Member of the Financial Executives Institute and the Institute of Management Accountants.

Campi received his MBA from Case Western Reserve University.

Our Board believes Mr.

Campi’s qualifications to serve as our Chief Executive Officer include his extensive executive and

advisory experience with established and startup companies, his expertise in cost-management, and his qualifications in the field

of supply chain management.

Rani Kohen has served as a Chairman of the Board

since November 2012 and as Executive Chairman since September 2016.

Kohen founded the Company and began development of the

Company’s power plug technology in 2004.

Kohen served as the Company’s Chief Executive Officer until December

Kohen has over twenty-five years in the retail lighting industry.

He opened his first retail lighting showroom in 1988

in Israel, and built the business into the largest chain of retail lighting showrooms in the country.

Our Board believes Mr.

Kohen’s

qualifications to serve as Chairman of our Board include his deep understanding of the Company’s business and products,

his years of experience in the retail lighting industry, and his past experience as the Company’s Chief Executive Officer.

Wells has served as the Company’s

President since August 2016.

Wells has held various senior leadership positions within the General Electric Company.

December 2007 to June 2011, Mr.

Campi’s qualifications to serve

as our Chief Executive Officer include his extensive executive and advisory experience with established and startup companies,

his expertise in cost-management, and his qualifications in the field of supply chain management.

Wells has served as the Company’s President since August 2016.

Wells has held various senior leadership positions

within the General Electric Company.

From December 2007 to June 2011, Mr.

Wells was the General Manager of Consumer Lighting.

From October 2005 to January 2007, Mr.

was the President and Chief Executive Officer for GE Consumer & Industrial for Greater China.

Following his MBA studies, from

October 2002 to October 2005, Mr.

Wells served as Regional Manager for GE Consumer & Industrial’s Southeast Region.

Wells was the President and Chief Executive Officer for GE Consumer & Industrial for

Greater China.

Following his MBA studies, from October 2002 to October 2005, Mr.

Wells served as Regional Manager for GE Consumer

& Industrial’s Southeast Region.

Since 2011, Mr.

Wells served as the Executive Vice President and General Manager of Independence Medical and Home Healthcare Solutions,

now a part of Cardinal Health.

Wells has over fourteen years of experience in finance, sales and general management

Wells served as the Executive Vice President and General Manager of

Independence Medical and Home Healthcare Solutions, now a part of Cardinal Health.

Wells has over fourteen years of

experience in finance, sales and general management with GE.

Wells received his MBA from Case Western Reserve University.

Our Board believes Mr.

qualifications to

serve as our President include his extensive industry experience, executive and advisory experience and his expertise in strategic

Patricia Barron has served as the Company’s

Chief Operations Officer since June 2007.

qualifications to serve as our President include his extensive industry experience, executive

and advisory experience and his expertise in strategic planning.

Barron has served as the Company’s Chief Operations Officer since June 2007.

From April 1989 to June 2007, Ms.

Barron was the President and owner of LTG Services,

Inc., a company focused on safety consulting services, specializing in the review and compliance of electrical products requiring

UL, CSA, and CE certifications.

was the President and owner of LTG Services, Inc., a company focused on safety consulting services, specializing in the review

and compliance of electrical products requiring UL, CSA, and CE certifications.

Prior to that, Ms.

Barron worked as a consultant and engineer in the lighting, safety and approval

industry and from June 1977 to August 1984, worked as an engineering assistant for Underwriters Laboratories in the ceiling fan

Barron received her Master’s in Business Administration in International Business from Georgia State University

Barron worked as a consultant

and engineer in the lighting, safety and approval industry and from June 1977 to August 1984, worked as an engineering assistant

for Underwriters Laboratories in the ceiling fan category.

Barron received her Master’s in Business Administration in

International Business from Georgia State University in 1989.

Our Board believes Ms.

Barron’s qualifications to serve as our Chief Operation Officer include her extensive industry

experience and qualifications, executive experience and her decade of demonstrated commitment and leadership with the Company.

Governor Thomas J.

Ridge has served as a director

since June 2013.

Ridge co-founded Ridge Schmidt Cyber, an executive services firm addressing the increasing demands

of cyber security.

Barron’s qualifications to serve as

our Chief Operation Officer include her extensive industry experience and qualifications, executive experience and her decade

of demonstrated commitment and leadership with the Company.

Ridge has served as a director since June 2013.

Ridge co-founded Ridge Schmidt Cyber, an executive

services firm addressing the increasing demands of cyber security.

In April 2010, Mr.

Ridge became a partner in Ridge Policy Group, a bipartisan, full-service government affairs

and issue management group.

Ridge has served as President and Chief Executive Officer of Ridge Global, LLC, a global strategic

consulting company, since July 2006.

Ridge became a partner in Ridge Policy Group,

a bipartisan, full-service government affairs and issue management group.

Ridge has served as President and Chief Executive

Officer of Ridge Global, LLC, a global strategic consulting company, since July 2006.

From January 2003 to January 2005, Mr.

Ridge served as the Secretary of the United States

Department of Homeland Security, and from 2001 through January 2003, Mr.

Ridge served as the Special Assistant to the President

for Homeland Security.

Ridge served two terms as Governor of the Commonwealth of Pennsylvania from 1995 to 2001, and served

as a member of the U.S.

served as the Secretary of the United States Department of Homeland Security, and from 2001 through January 2003, Mr.

as the Special Assistant to the President for Homeland Security.

Ridge served two terms as Governor of the Commonwealth of

Pennsylvania from 1995 to 2001 and served as a member of the U.S.

House of Representatives from 1983 through 1995.

Ridge currently serves as a member of the board of

two public companies, The Hershey Company and Lifelock, and has previously served on the board of five other public companies.

Ridge is Chairman of the Board of the National Organization on Disability, and serves as a board member on the Board of Public

Finance Management, the Institute for Defense Analysis, the Center for the Study of the Presidency, and the Oak Ridge National

Ridge currently

serves as a member of the board of two public companies, The Hershey Company and Lifelock, and has previously served on the board

of five other public companies.

Ridge is Chairman of the Board of the National Organization on Disability, and serves as a

board member on the Board of Public Finance Management, the Institute for Defense Analysis, the Center for the Study of the Presidency,

and the Oak Ridge National Lab.

Our Board believes Mr.

Ridge’s qualifications to serve as a member of our Board include his vast experience in both

government and industry, his service on other public and private company boards, and his expertise in retail, risk management,

and cyber security.

Phillips Peter has served as a director since November

Ridge’s qualifications to serve as a member of our Board include

his vast experience in both government and industry, his service on other public and private company boards, and his expertise

in retail, risk management, and cyber security.

Peter has served as a director since November 2012.

Since December 2014, Mr.

Peter has served as a Senior Vice President of Ridge Global.

Peter has served as a Senior Vice President of

Ridge Global.

From 1994 to 2014, Mr.

Peter practiced

law at Reed Smith LLP where he focused his practice on legislative and regulatory matters before Congress, the executive branch

of the federal government, and other administrative agencies.

Peter practiced law at Reed Smith LLP where he focused his practice on legislative and regulatory

matters before Congress, the executive branch of the federal government, and other administrative agencies.

Prior to this, Mr.

Peter was an officer at General Electric Company,

where he held executive positions from 1973 to 1994.

He is also a veteran of the U.S.

Peter was an officer at General Electric Company, where he held executive positions from 1973 to 1994.

He is also a veteran of

Our Board believes Mr.

Peter’s

qualifications to serve as a member of our Board include his role as a past advisor to the Company, his extensive experience in

regulatory affairs, his past industry experience, and his demonstrated leadership ability.

Dov Shiff has served as a director since February

Shiff is presently President and Chief Executive Officer of the Shiff Group of Companies.

The Shiff Group owns and operates

hotels and other real estate in Israel, including Hayozem Resorts & Hotels Ltd., Marina Hotel Tel Aviv Ltd.

and Zvidan Investments

Peter’s qualifications to serve as a member of our Board include his role as a past

advisor to the Company, his extensive experience in regulatory affairs, his past industry experience, and his demonstrated leadership

Shiff has served as a director since February 2014.

Shiff is presently President and Chief Executive Officer of the Shiff

Group of Companies.

The Shiff Group owns and operates hotels and other real estate in Israel, including Hayozem Resorts &

Hotels Ltd., Marina Hotel Tel Aviv Ltd.

and Zvidan Investments Ltd.

Our Board believes Mr.

Shiff’s qualifications to serve as a member of our Board include his role as a past advisor

to the Company and his history of success developing and operating new businesses.

Sokolow has served as a director since

November 2015.

Shiff’s qualifications to serve

as a member of our Board include his role as a past advisor to the Company and his history of success developing and operating

new businesses.

Sokolow has served as a director

since November 2015.

Sokolow currently serves as CEO & President of Newbridge Financial, Inc.

and Chairman of its broker dealer

subsidiary, Newbridge Securities Corporation.

and Chairman of its broker

dealer subsidiary, Newbridge Securities Corporation.

Sokolow founded Finance, Inc.

in 1997, which merged with National Holdings Corporation

in 1997, which merged with National Holdings

Corporation (NASDAQ CM:

NHLD), where he served as President and Vice Chairman of its Board of Directors.

Sokolow also founded and served

as Chairman and CEO of Americas Growth Fund, Inc., a closed-end investment management company (NASDAQ:

AGRO) until it was sold.

Sokolow also founded

and served as Chairman and CEO of Americas Growth Fund, Inc., a closed-end investment management company (NASDAQ:

AGRO) until it

Prior to this, Mr.

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(formerly Windmere Corporation (NYSE:

APN)), where he served as

Executive Vice President and General Counsel.

APN)), where he served

as Executive Vice President and General Counsel.

Sokolow, is also a CPA and worked for Ernst Young and KPMG.

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Sokolow also earned a Juris Doctorate degree from

the University of Florida School of Law and a Masters of Law degree in Taxation from the New York University School of Law.

the University of Florida School of Law and a Master of Law degree in Taxation from the New York University School of Law.

Sokolow is on the board of directors, Chairman of the Audit Committee and a member of the Nominations and Corporate Governance

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company boards and his history of executive leadership in developing and operating businesses.

Corporate Governance

Board Structure

We have chosen to separate the Chief Executive Officer

and Board Chairman positions.

We believe that this Board leadership structure is the most appropriate for the Company.

chairman, the founder of the Company, provides us with significant experience in research and development.

Our Chief Executive

Officer is responsible for day to day operations, and brings significant experience to the Company.

Committees of the Board of Directors

On January 5, 2016, we established a separately-designated

standing audit committee (the “Audit Committee”), consisting of two members, Leonard J.

have chosen to separate the Chief Executive Officer and Board Chairman positions.

We believe that this Board leadership

structure is the most appropriate for the Company.

Our chairman, the founder of the Company, provides us with significant

experience in research and development.

Our Chief Executive Officer is responsible for day to day operations and brings significant

experience to the Company.

of the Board of Directors

January 5, 2016, we established a separately-designated standing audit committee (the “Audit Committee”), consisting

of two members, Leonard J.

Sokolow and Rani Kohen.

Sokolow is the Chairman of the Audit Committee and is deemed to be independent and the Board has determined that he is an audit

committee financial expert, as defined in Item 5(d)(5) of Regulation S-K.

The Audit Committee reviews, acts on and

reports to the Board with respect to various auditing and accounting matters, including the recommendations and performance of

independent auditors, the scope of the annual audits, fees to be paid to the independent auditors, and internal accounting and

financial control policies and procedures.

On September 6, 2016, we established a Corporate Development

Committee, consisting of two members, Rani Kohen and Leonard J.

Kohen is the Chairman of the Corporate Development

The purpose of the Corporate Development Committee is to oversee the implementation of the strategic plan and related

initiatives, identify and evaluate corporate development opportunities, develop criteria for use in evaluating potential strategic

investments, assist management to identify critical strategic issues facing the Company and assess potential merger and acquisition

opportunities.

We presently do not have a nominating committee, compensation

committee, or other committee or committees performing similar functions, as our management believes that until this point it

has been premature at the early stage of our management and business development to form such committees.

Moving forward, at such

time as the Board believes that such committees are necessary or desirable, or that we are required to have such committees, we

will take steps to form such committees and adopt charters as may be required to comply with all applicable rules and regulations.

Code of Conduct

The Company does not currently have a Code of Conduct

and Ethics to apply to all of our directors, officers and employees.

In the near future, our Board intends to adopt a code which

intended to promote ethical conduct and compliance with laws and regulations, to provide guidance with respect to the handling

of ethical issues, to implement mechanisms to report unethical conduct, to foster a culture of honesty and accountability, to

deter wrongdoing and to ensure fair and accurate financial reporting.

Upon approval by the Board, a copy of the Code of Conduct

and Ethics will be available at our website www.safetyquicklight.com.

Board Diversity

While we do not have a formal policy on diversity, our

Board considers diversity to include the skill set, background, reputation, type and length of business experience of our Board

members as well as a particular nominee’s contributions to that mix.

Our Board believes that diversity brings a variety

of ideas, judgments and considerations that benefit Safety Quick Lighting and our shareholders.

Although there are many other

factors, the Board seeks individuals with experience in business, financial and scientific research and development.

Board Assessment of Risk

Our risk management function is overseen by our Board.

Our management keeps our Board apprised of material risks and provides our directors access to all information necessary for them

to understand and evaluate how these risks interrelate, how they affect the Company, and how management addresses those risks.

John Campi, as our Chief Executive Officer works closely together with the Board once material risks are identified on how

to best address such risk.

If the identified risk poses an actual or potential conflict with management, our independent directors

may conduct the assessment.

Shareholder Communications

Although we do not have a formal policy regarding communications

with the Board, shareholders may communicate with the Board by writing to us at 4400 North Point Parkway, Suite 154, Alpharetta,

Georgia, 30022, Attention:

Sokolow is the Chairman of the Audit Committee and is deemed to be independent

and the Board has determined that he is an audit committee financial expert, as defined in Item 5(d)(5) of Regulation S-K.

Audit Committee reviews, acts on and reports to the Board with respect to various auditing and accounting matters, including the

recommendations and performance of independent auditors, the scope of the annual audits, fees to be paid to the independent auditors,

and internal accounting and financial control policies and procedures.

September 6, 2016, we established a Corporate Development Committee, consisting of two members, Rani Kohen and Leonard J.

Kohen is the Chairman of the Corporate Development Committee.

The purpose of the Corporate Development Committee is to oversee

the implementation of the strategic plan and related initiatives, identify and evaluate corporate development opportunities, develop

criteria for use in evaluating potential strategic investments, assist management to identify critical strategic issues facing

the Company and assess potential merger and acquisition opportunities.

presently do not have a nominating committee, compensation committee, or other committee or committees performing similar functions,

as our management believes that until this point it has been premature at the early stage of our management and business development

to form such committees.

Moving forward, at such time as the Board believes that such committees are necessary or desirable, or

that we are required to have such committees, we will take steps to form such committees and adopt charters as may be required

to comply with all applicable rules and regulations.

Company does not currently have a Code of Conduct and Ethics to apply to all of our directors, officers and employees.

near future, our Board intends to adopt a code which intended to promote ethical conduct and compliance with laws and regulations,

to provide guidance with respect to the handling of ethical issues, to implement mechanisms to report unethical conduct, to foster

a culture of honesty and accountability, to deter wrongdoing and to ensure fair and accurate financial reporting.

Upon approval

by the Board, a copy of the Code of Conduct and Ethics will be available at our website www.safetyquicklight.com.

we do not have a formal policy on diversity, our Board considers diversity to include the skill set, background, reputation, type

and length of business experience of our Board members as well as a particular nominee’s contributions to that mix.

Board believes that diversity brings a variety of ideas, judgments and considerations that benefit Safety Quick Lighting and our

shareholders.

Although there are many other factors, the Board seeks individuals with experience in business, financial and scientific

research and development.

Assessment of Risk

risk management function is overseen by our Board.

Our management keeps our Board apprised of material risks and provides our

directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect

the Company, and how management addresses those risks.

John Campi, as our Chief Executive Officer works closely together with

the Board once material risks are identified on how to best address such risk.

If the identified risk poses an actual or potential

conflict with management, our independent directors may conduct the assessment.

Communications

we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing

to us at 4400 North Point Parkway, Suite 265, Alpharetta, Georgia, 30022, Attention:

Shareholder Communication.

Shareholders who would like their submission directed to a member of the

Board may so specify, and the communication will be forwarded, as appropriate.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934

requires that the Company’s executive officers, directors and persons who own beneficially more than 10% percent of the

Company’s outstanding Common Stock, file reports of ownership and changes in ownership and furnish the Company with copies

of all Section 16(a) reports so filed.

Based solely on a review of these reports filed with the SEC and certain written representations

furnished to the Company, the Company believes that its executive officers and directors complied with all applicable Section 16(a)

filing requirements during 2016, other than the following:

Sokolow filed a Form 3 with the SEC on

January 1, 2016 in connection with his appointment to the Board on November 15, 2015.

Shiff filed a Form 4 with the SEC on

March 31, 2017, in connection with the conversion of his Convertible Note into shares of Series A Preferred Stock on August 15,

Wells filed a Form 3 with the SEC on March 29, 2017, in connection with his appointment as President on November 7, 2016,

and filed a Form 4 with the SEC on March 29, 2017, in connection with issued and unvested securities in the Wells Agreement dated

August 17, 2016.

Shareholders who

would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.

Section 16(A) Beneficial Ownership Reporting

Section 16(a) of the Securities Exchange Act

of 1934 requires that the Company’s executive officers, directors and persons who own beneficially more than 10% percent

of the Company’s outstanding Common Stock, file reports of ownership and changes in ownership and furnish the Company with

copies of all Section 16(a) reports so filed.

Based solely on a review of these reports filed with the SEC and certain written

representations furnished to the Company, the Company believes that its executive officers and directors complied with all applicable

Section 16(a) filing requirements during 2017, other than the following:

Shiff filed a Form 4 with the SEC on March

31, 2017, in connection with the August 15, 2016 conversion of his Convertible Note into shares of Series A Preferred Stock.

Wells filed a Form 3 with the SEC on March 29, 2017, in connection with his appointment as President on November 7, 2016, and filed

a Form 4 with the SEC on March 29, 2017, in connection with issued and unvested securities in the Wells Agreement dated August

Kohen filed a Form 4 with the SEC on March 31, 2017, in connection with unvested securities the Chairman’s

2 unchanged sentences

securities the Campi Agreement dated September 1, 2016.

Involvement in Legal Proceedings

We know of no pending proceedings to which any director,

member of senior management, or affiliate is either a party adverse to us, or our subsidiaries, or has a material interest adverse

to us or our subsidiaries.

None of our executive officers or directors have (i) been

involved in any bankruptcy proceedings within the last five years, (ii) been convicted in or has pending any criminal proceedings,

(iii) been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type

of business, securities or banking activity or (iv) been found to have violated any federal, state or provincial securities or

commodities law and such finding has not been reversed, suspended or vacated.

Family Relationships

There are no family relationships among the directors

and executive officers.

Certain Relationships and Related Transactions

Unless otherwise stated in this Annual Report, none of

the following parties has, in our fiscal years ended 2015 and 2016, had any material interest, direct or indirect, in any transaction

with us or in any presently proposed transaction that has or will materially affect us:

Barron filed a Form 3 with the SEC on April 27, 2017, in connection

with her employment agreement to serve as Chief Operations Officer effective September 1, 2016.

in Legal Proceedings

know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us,

or our subsidiaries, or has a material interest adverse to us or our subsidiaries.

of our executive officers or directors have (i) been involved in any bankruptcy proceedings within the last five years, (ii) been

convicted in or has pending any criminal proceedings, (iii) been subject to any order, judgment or decree enjoining, barring,

suspending or otherwise limiting involvement in any type of business, securities or banking activity or (iv) been found to have

violated any federal, state or provincial securities or commodities law and such finding has not been reversed, suspended or vacated.

Relationships

are no family relationships among the directors and executive officers.

Relationships and Related Transactions

otherwise stated in this Annual Report, none of the following parties has, in our fiscal years ended 2015 and 2016, had any material

interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially

of our directors or officers;

3 unchanged sentences

laws) of any of the above persons.

We are currently party to the Chairman’s Agreement

(as defined below) with Mr.

Rani Kohen, Executive Chairman and Chairman of the Company’s Board, pursuant to which we are

required to pay cash compensation in the amount of $250,000 per year.

During 2015 and through August 31, 2016, we were a party

to the Kohen Consulting Agreement (as defined below) with Mr.

Kohen, pursuant to which we paid cash compensation in the amount

of $150,000 per year.

Both agreements are more fully described in Item 11 of this report, in the subsection entitled “Narrative

Disclosure to Summary Compensation and Option Tables”.

are currently party to the Chairman’s Agreement (as defined below) with Mr.

Rani Kohen, Executive Chairman and Chairman

of the Company’s Board, pursuant to which we are required to pay cash compensation in the amount of $250,000 per year.

2015 and through August 31, 2016, we were a party to the Kohen Consulting Agreement (as defined below) with Mr.

Kohen, pursuant

to which we paid cash compensation in the amount of $150,000 per year.

Both agreements are more fully described in Item 11 of

this report, in the subsection entitled “Narrative Disclosure to Summary Compensation and Option Tables”.

EXECUTIVE COMPENSATION

As a “smaller reporting company,”

elected to follow scaled disclosure requirements for smaller reporting companies.

Under the scaled disclosure obligations, we

are not required to provide Compensation Discussion and Analysis and certain other tabular and narrative disclosures relating

to executive compensation.

Nor are we required to quantify payments due to the named executives upon termination of employment.

Management believes that the scaled disclosure for the Company’s executive compensation policy and practices is appropriate

because we will are a small publicly-traded company, have a limited number of employees and executives and have a relatively simple

compensation policy and structure.

Named Executive Officers

Our “named executive officers”

fiscal year consisted of the following individuals:

Kohen, Executive Chairman

Campi, our Chief Executive Officer

Wells, President

Barron, Chief Operating Officer

Summary Compensation Table

The table below summarizes all compensation awarded to,

earned by, or paid to our Chief Executive Officer and our two most highly compensated executive officers (the “named executive

officers”

listed above) at the end of our last fiscal year for all services rendered in all capacities to us during the

years during which they served as executive officers.

Where a named executive officer is also a director, all compensation related

to such individuals position as an officer.

a “smaller reporting company,”

we have elected to follow scaled disclosure requirements for smaller reporting companies.

Under the scaled disclosure obligations, we are not required to provide Compensation Discussion and Analysis and certain other

tabular and narrative disclosures relating to executive compensation.

Nor are we required to quantify payments due to the named

executives upon termination of employment.

Management believes that the scaled disclosure for the Company’s executive compensation

policy and practices is appropriate because we will are a small publicly-traded company, have a limited number of employees and

executives and have a relatively simple compensation policy and structure.

Executive Officers

“named executive officers”

for the 2017 fiscal year consisted of the following individuals:

Rani Kohen, Executive

Chief Executive Officer

Mark Wells, President

Compensation Table

table below summarizes all compensation awarded to, earned by, or paid to our Chief Executive Officer and our two most highly

compensated executive officers (the “named executive officers”

listed above) at the end of our last fiscal year for

all services rendered in all capacities to us during the years during which they served as executive officers.

Where a named executive

officer is also a director, all compensation related to such individuals position as an officer.

Name and Principal Position

Chairman, Director

Executive Officer

Operating Officer

(1) Non-equity

Incentive Plan Compensation reflects incentive and bonus compensation or commission payable

pursuant to each individual’s respective employment agreement, typically as a percent

of the Company’s net revenue or sales earned, and in each case as described below.

Kohen was named Executive Chairman on November 7, 2016, effective as of September 1,

Pursuant to the terms of the Chairman’s Agreement (as defined below), Mr.

Stock Awards ($)

Option Awards ($)

Non-equity Incentive Plan Compensation ($) (1)

All Other Compensation

Rani Kohen (2)(3)

Executive Chairman

Chief Executive Officer

Mark Wells (7)

Non-equity Incentive

Plan Compensation reflects incentive compensation and commission payable pursuant to each individual’s respective employment

agreement, typically as a percent of the Company’s net revenue or sales earned, and in each case as described below.

Kohen was named

Executive Chairman on November 7, 2016, effective as of September 1, 2016.

Pursuant to the terms of the Chairman’s Agreement

(as defined below), Mr.

Kohen received or will receive (i) an annual salary of $250,000;

(ii) options to purchase

up to 340,000 shares of Common Stock each year, will vest in its’

(ii) options to purchase up to 340,000

shares of Common Stock each year, will vest in its’

entirety January 1, 2019;

(iii) annual incentive compensation of one half of one percent (0.50%) of the

Company’s net revenue;

(iii) annual incentive compensation of

one half of one percent (0.50%) of the Company’s net revenue;

(iv) a ‘sign-on bonus’

2 unchanged sentences

entirety on January 1, 2020;

(v) a supplemental

bonus consisting of an option to purchase up to 1,500,000 shares of Common Stock at $3.00

per share, accruing in increments of 500,000 shares, each upon the achievement of the

Company’s market capitalization reaching milestones of $300 million, $500 million

and $750 million;

(vi) a supplemental bonus consisting of an option to purchase up to

1,500,000 shares of Common Stock at $4.00 per share, accruing in increments of 500,000

shares, each upon the achievement of the Company’s market capitalization reaching

milestones of $1 billion, $1.5 billion and $2 billion;

and (vii) a supplemental bonus

consisting of an option to purchase up to 1,000,000 shares of Common Stock at $5.00 per

share, accruing in increments of 500,000 shares, each upon the achievement of the Company’s

(v) a supplemental bonus consisting of an option

to purchase up to 1,500,000 shares of Common Stock at $3.00 per share, accruing in increments of 500,000 shares, each upon

the achievement of the Company’s market capitalization reaching milestones of $300 million, $500 million and $750 million;

(vi) a supplemental bonus consisting of an option to purchase up to 1,500,000 shares of Common Stock at $4.00 per share, accruing

in increments of 500,000 shares, each upon the achievement of the Company’s market capitalization reaching milestones

of $1 billion, $1.5 billion and $2 billion;

and (vii) a supplemental bonus consisting of an option to purchase up to 1,000,000

shares of Common Stock at $5.00 per share, accruing in increments of 500,000 shares, each upon the achievement of the Company’s

market capitalization reaching milestones of $2.5 billion and $3 billion.

the first eight months of 2016, Mr.

Kohen was compensated pursuant to a Consulting Agreement,

whereby he was paid an annual fee of $150,000, a $1,000 per month automobile allowance,

and annual incentive compensation equal to one half of one percent (0.50%) of the Company’s

net revenue .

All amounts included for 2015 represent the compensation as previously

disclosed regarding his role solely as Chairman of the Board, including the amount of

“All Other Compensation”, which reflects compensation paid pursuant to the

Kohen Consulting Agreement.

The amounts included for 2016 include compensation paid to

Kohen in his capacity as Chairman as the Board through August 31, 2016, and as both

Executive Chairman and Chairman of the Board thereafter.

November 15, 2015, the Board granted Mr.

Kohen (i) options to purchase up to 400,000

shares of Common Stock at $0.60, which vested November 15, 2015;

(ii) options to purchase

up to 300,000 shares of Common Stock at $0.60, which vested November 15, 2016;

options to purchase up to 400,000 shares of Common Stock at $0.60, which will vest November

The value of the option award was calculated at $2.00 per share;

for assumptions

made in the valuation of the option awards, see Note 2 to our Audited Consolidated Financial

to the terms of the Campi Agreement (as defined

Campi received or will receive (i) an annual salary of $150,000;

options to purchase up to 120,000 shares of Common Stock as a “sign-on bonus”,

which will vest in its’

entirety on December 31, 2017;

(iii) an incentive bonus

of one quarter of one percent (0.25%) of the Company’s net revenue;

adjusted net income;

and (v) options to purchase a number of shares of Common Stock equal

to one half of one percent (0.5%) of the Company’s

quarterly net income , at a strike price to be determined by the Board at the time

For the first eight

months of 2016, Mr.

Kohen was compensated pursuant to a Consulting Agreement, whereby he was paid an annual fee of $150,000,

a $1,000 per month automobile allowance, and annual incentive compensation equal to one half of one percent (0.50%) of the

Company’s net revenue .

All amounts included for 2016 represent the compensation as previously disclosed

regarding his role solely as Chairman of the Board, including the amount of “All Other Compensation”, which reflects

compensation paid pursuant to the Kohen Consulting Agreement.

The amounts included for 2016 include compensation paid to Mr.

Kohen in his capacity as Chairman as the Board through August 31, 2016, and as both Executive Chairman and Chairman of the

Board thereafter.

On November 15,

2015, the Board granted Mr.

Kohen (i) options to purchase up to 400,000 shares of Common Stock at $0.60, which vested November

(ii) options to purchase up to 300,000 shares of Common Stock at $0.60, which vested November 15, 2016;

options to purchase up to 300,000 shares of Common Stock at $0.60, which vested November 15, 2017.

The value of the option

award was calculated at $2.00 per share;

for assumptions made in the valuation of the option awards, see Note 2 to our Audited

Consolidated Financial Statements.

Pursuant to the

terms of the Campi Agreement (as defined below) , Mr.

Campi received or will

receive (i) an annual salary of $150,000;

(ii) options to purchase up to 120,000 shares of Common Stock as a

“sign-on bonus”, which vest on December 31, 2017 and was issued on March 23, 2018;

(iii) an incentive bonus of

one quarter of one percent (0.25%) of the Company’s net revenue;

(iv) 3% of adjusted net income;

and (v) options to

purchase a number of shares of Common Stock equal to one half of one percent (0.5%) of the

Company’s quarterly net income , at a strike price to be determined by the Board at the time of

Pursuant to Mr.

Campi’s previous employment agreement, Mr.

Campi received (i) a gross annual

salary of $102,000 per year;

(ii) 750,000 shares of Common Stock, 250,000 shares of which

vested on May 20, 2015, and 500,000 shares of which vested on December 31, 2015;

(iii) incentive compensation equal to one half of one percent (0.50%) of the Company’s

The value of the stock award was $0.25 per share, based on the value of

shares sold in connection with the Company’s most recent sale of securities in

a private placement as of the time of such agreement.

Wells was named President of the Company on November 7, 2016, effective as of August

Campi received (i) a gross annual salary of $102,000 per year;

shares of Common Stock, 250,000 shares of which vested on May 20, 2015, and 500,000 shares of which vested on December 31,

and (iii) incentive compensation equal to one half of one percent (0.50%) of the Company’s net revenue.

of the stock award was $0.25 per share, based on the value of shares sold in connection with the Company’s most recent

sale of securities in a private placement as of the time of such agreement.

named President of the Company on November 7, 2016, effective as of August 17, 2016.

Pursuant to the terms of the Wells Agreement

(as defined below) , Mr.

Wells received or will receive (i) an annual salary of

(ii) 1,025,000 shares of Common Stock which will vest in its’

on January 1, 2019;

Wells will receive (i) an annual salary of $250,000;

(ii) 1,025,000 shares of Common Stock

which will vest in its’

entirety on January 1, 2019;

(iii) incentive compensation equal to one quarter of one percent

1 unchanged sentence

and (iv) a “sign-on”

120,000 shares of Common Stock , which will vest in its’

entirety on January

Well’s received 100,000 shares of Common Stock pursuant to a consulting agreement

dated June 1, 2015, which vested on June 1, 2016;

the value of the stock award was $2.60

per share, based on the value of shares sold in connection with the Company’s most

recent sale of securities in a private placement as of the time of such vesting.

to the terms of the Barron Agreement (as defined

Barron will received or will receive an annual salary of $120,000,

and incentive compensation equal to one quarter of one percent (0.25%) of the Company’s

Barron received (i) options to purchase up to 200,000 shares of Common Stock at $0.60

per share, which vested November 15, 2015;

(ii) options to purchase up to 150,000 shares

of Common Stock at $1.20 per share, which vested November 15, 2016;

and (iii) options

to purchase up to 150,000 shares of Common Stock at $1.80 per share, which will vest

November 15, 2017.

The value of the option award was calculated at $2.00 per share;

assumptions made in the valuation of the option awards, see Note 2 to our Audited Consolidated

Financial Statements.

Outstanding Equity Awards at December 31, 2016 Fiscal

As of December 31, 2016, the following named executive

officers had the following unexercised options, stock that has not vested, and equity incentive plan awards

120,000 shares of Common Stock , which vested in its’

entirety on January 1, 2018 and was issued on March 23,

received 100,000 shares of Common Stock pursuant to a consulting agreement dated June 1, 2015, which vested on June 1, 2016;

the value of the stock award was $2.60 per share, based on the value of shares sold in connection with the Company’s

most recent sale of securities in a private placement as of the time of such vesting.

Equity Awards at December 31, 2017 Fiscal Year End

of December 31, 2017, the following named executive officers had the following unexercised options, stock that has not vested,

and equity incentive plan awards

Option Awards

not exercisable

2 unchanged sentences

Units of Stock Not Vested

Shares or Units Not Vested

Incentive Plan Awards:

of Unearned Shares, Units or Other Rights Not Vested

Chief Executive Officer

Executive Chairman

Chief Operating Officer

Narrative Disclosure to Summary Compensation and Option

connection with Mr.

appointment as President of the Company, Mr.

Campi withdrew from his position as the Company’s

President effective upon Mr.

Well’s appointment, and has continued in his position as the Company’s Chief Executive

Effective September 1, 2016,

the Company entered into a new Executive Employment Agreement with Mr.

Campi (the “Campi Agreement”), to serve as

the Company’s Chief Executive Officer, which superseded and replaced the executive employment agreement between the Company

Campi dated November 21, 2014.

The Campi Agreement provides that Mr.

Campi will serve for an initial term of one year,

which may be renewed by the mutual agreement of Mr.

of Shares or Units Not Vested

Equity Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights Not Vested

Value of Unearned Shares, Units or Other Rights Not Vested

Disclosure to Summary Compensation and Option Tables

Campi (Chief Executive Officer)

November 2014, the Company entered into an employment agreement with John Campi, its Chief Executive Officer.

The agreement provided

Campi would receive a base salary of $102,000 per year;

(ii) included a sign-on bonus of 750,000 shares of Common Stock,

which has fully vested and all such shares have been issued;

and (iii) included incentive compensation equal to (a) one half of

one percent (0.50%) of the first $20,000,000 of the Company’s annual gross revenue plus one quarter of one percent (0.25%)

of the Company’s annual gross revenue above $20,000,000;

(b) three percent (3%) of the Company’s annual net income,

and (c) five-year options to purchase shares of Common Stock equal to one half of one percent (0.50%) of the Company’s quarterly

net income, with a strike price to be determined at the time such options are granted.

September 1, 2016, the Company entered into a new employment agreement with Mr.

Campi (the “Campi Agreement”).

Campi Agreement provides that Mr.

Campi will serve for an initial term of one year, which may be and was renewed by the mutual

agreement of Mr.

Campi and the Company.

Subject to other customary terms and conditions of

such agreements, the Campi Agreement provides that Mr.

Subject to other customary terms and conditions of such agreements, the Campi Agreement

provides that Mr.

Campi will receive (i) a base salary of $150,000 per year;

(ii) a sign-on

bonus of 120,000 shares of Common Stock, which shall vest in its entirety on December 31, 2017;

(iii) incentive compensation equal

to (a) one quarter of one percent (0.25%) of the Company’s gross revenue and (b) three percent (3%) of the Company’s

annual net income paid in cash on an annual basis;

and (iv) five-year options to purchase shares of Common Stock in an amount

equal to one half of one percent (0.50%) of the Company’s quarterly net income, the exercise price of which will be determined

at the time such options are granted.

Pursuant to the Campi Agreement,

if terminated without cause during the initial term, the Company shall pay to Mr.

Campi (i) an amount calculated by multiplying

the monthly salary, at the time of such termination, times the number of months remaining in the initial term, and (ii) all unpaid

incentive compensation then in effect on a pro rata basis.

In addition, the sign-on shares of Common Stock shall immediately

(ii) a sign-on bonus of 120,000 shares of Common

Stock, which vested in its entirety on December 31, 2017;

(iii) incentive compensation equal to (a) one quarter of one percent

(0.25%) of the Company’s gross revenue and (b) three percent (3%) of the Company’s annual net income paid in cash

on an annual basis;

and (iv) five-year options to purchase shares of Common Stock in an amount equal to one half of one percent

(0.50%) of the Company’s quarterly net income, the exercise price of which will be determined at the time such options are

to the Campi Agreement, if terminated without cause during the initial term, the Company shall pay to Mr.

Campi (i) an amount

calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the initial

term, and (ii) all unpaid incentive compensation then in effect on a pro rata basis.

In addition, the sign-on shares of

Common Stock shall immediately vest.

For any other termination during the initial term, Mr.

Campi shall receive an amount calculated by multiplying fifty percent

of the monthly salary, in effect at the time of such termination, times the number of months remaining in the initial, and shall

not be entitled to incentive compensation payments then in effect, prorated or otherwise.

Campi shall receive an amount calculated

by multiplying fifty percent of the monthly salary, in effect at the time of such termination, times the number of months remaining

in the initial, and shall not be entitled to incentive compensation payments then in effect, prorated or otherwise .

years ended December 31, 2017 and December 31, 2016 Mr.

Campi earned approximately $171,966 and $137,853, respectively, under this

and the agreement associated with performance pay as noted above.

On March 23, 2018, the Company issued the sign-on bonus of 120,000

shares of Common Stock, with vested in its entirety on December 31, 2017.

Wells (President)

August 17, 2016, the Company entered into an Executive Employment Agreement with Mr.

11 unchanged sentences

(the “Wells Compensation Shares”);

(iii) a sign-on bonus of 120,000 shares of Common Stock, with shall vest in its

entirety to Mr.

(iii) a sign-on bonus of 120,000 shares of Common Stock, with vested in its entirety

Wells on January 1, 2018;

and (iv) incentive compensation equal to one quarter of one percent (0.25%) of the Company’s

net revenue, paid in cash on an annual basis.

Pursuant to the Wells Agreement,

if terminated without cause during the initial term, the Company shall pay to Mr.

Wells (i) an amount calculated by multiplying

the monthly salary, at the time of such termination, times the number of months remaining in the Initial Term, and (ii) all unpaid

incentive compensation then in effect.

In addition, the sign-on bonus shares of Common Stock shall immediately vest, and the Wells

Compensation Shares shall vest on a pro rata basis based on the number of days served under the Wells Agreement and the

number of days in the vesting period.

net revenue, paid in cash on an quarterly basis.

to the Wells Agreement, if terminated without cause during the initial term, the Company shall pay to Mr.

Wells (i) an amount

calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the Initial

Term, and (ii) all unpaid incentive compensation then in effect.

In addition, the sign-on bonus shares of Common Stock shall immediately

vest, and the Wells Compensation Shares shall vest on a pro rata basis based on the number of days served under the Wells

Agreement and the number of days in the vesting period.

For any other termination during the initial term, Mr.

Wells shall receive payment of salary,

at the then current rate, and all due but unpaid incentive compensation through the date termination is effective.

On November 25, 2013, we entered

into a Consulting Agreement with our founder and the Chairman or our Board, Rani Kohen (the “Kohen Consulting Agreement”).

Wells shall receive

payment of salary, at the then current rate, and all due but unpaid incentive compensation through the date termination is effective.

years ended December 31, 2017 and December 31, 2016 Mr.

Wells earned approximately $275,559 and $80,763, respectively, under this

and the agreement associated with performance pay as noted above.

On March 23, 2018, the Company issued the sign-on bonus of 120,000

shares of Common Stock, with vested in its entirety to Mr.

Wells on January 1, 2018.

Kohen (Executive Chairman)

November 25, 2013, we entered into a Consulting Agreement with our founder and the Chairman or our Board, Rani Kohen (the “Kohen

Consulting Agreement”).

The term of the Consulting Agreement was for three (3) years, beginning on December 1, 2013.

Subject to the customary terms and

conditions of such agreements, the Consulting Agreement provided that Mr.

Kohen would receive an annual consulting fee of $150,000,

incentive compensation in the form cash, stock and/or options (i) equal to one-half a one percent (0.50%) of our annual gross

and (ii) to be determined by our Board on a project-by-project basis.

Effective September 1, 2016,

the Company entered into a Chairman Agreement with Mr.

Kohen (the “Chairman’s Agreement”), to serve as

the Company’s Executive Chairman and Chairman of the Board, which supersedes and replaced the Consulting Agreement.

The Chairman’s Agreement provides that Mr.

will serve for an initial term of three years, which may be renewed by the mutual agreement of Mr.

to the customary terms and conditions of such agreements, the Consulting Agreement provided that Mr.

Kohen would receive an annual

consulting fee of $150,000, incentive compensation in the form cash, stock and/or options (i) equal to one-half a one percent

(0.50%) of annual net revenue, paid in cash on a quarterly basis.;

and (ii) to be determined by our Board on a project-by-project

September 1, 2016, the Company entered into a Chairman Agreement with Mr.

Kohen (the “Chairman’s Agreement”),

to serve as the Company’s Executive Chairman

and Chairman of the Board, which superseded and replaced the Consulting Agreement.

Chairman’s Agreement provides that Mr.

Kohen will serve for an initial term of three years, which may be renewed by the

mutual agreement of Mr.

Kohen and the Company.

to other customary terms and conditions of such agreements, the Chairman’s Agreement provides that Mr.

Kohen will receive

(i) a base salary of $250,000 per year, which may be adjusted each year at the discretion of the Board;

(ii) stock compensation

equal to 340,000 shares of Common Stock per year, which shall vest on January 1 of the following year (the “Chairman Compensation

Shares”);

(iii) a sign-on bonus of 120,000 shares of Common Stock, with shall vest in its entirety on January 1, 2020;

supplemental bonus compensation of stock options to purchase up to 4,000,000 shares of Common Stock at an exercise price ranging

between $3.00 and $5.00 per share, determined based on the achievement of specified market capitalizations of the Company;

(v) incentive compensation equal to one half of one percent (0.50%) of the Company’s gross revenue paid in cash, stock or

options on an annual basis.

Pursuant to the Chairman’s Agreement, if terminated

without cause during the initial term, the Company shall pay to Mr.

Kohen (i) an amount calculated by multiplying the monthly

salary, at the time of such termination, times the number of months remaining in the initial term, and (ii) all unpaid incentive

compensation then in effect.

In addition, the sign-on shares of Common Stock shall immediately vest, and the Chairman Compensation

Shares shall vest on a pro rata basis based on the number of days served under the Chairman’s Agreement and the number of

days from the beginning of the initial term through August 31, 2019.

Subject to other customary terms and conditions of such agreements, the Chairman’s

Agreement provides that Mr.

Kohen will receive (i) a base salary of $250,000 per year, which may be adjusted each year at the

discretion of the Board;

(ii) stock compensation equal to 340,000 shares of Common Stock each year, which shall vest in its entirety

on January 1, 2019, and each year served thereafter (the “Chairman Compensation Shares”);

(iii) a sign-on bonus of

120,000 shares of Common Stock, with shall vest in its entirety on January 1, 2020;

(iv) supplemental bonus compensation of stock

options to purchase up to 4,000,000 shares of Common Stock at an exercise price ranging between $3.00 and $5.00 per share, determined

based on the achievement of specified market capitalizations of the Company;

and (v) incentive compensation equal to one half

of one percent (0.50%) of the Company’s gross revenue paid in cash, stock or options on an annual basis.

to the Chairman’s Agreement, if terminated without cause during the initial term, the Company shall pay to Mr.

an amount calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining

in the initial term, and (ii) all unpaid incentive compensation then in effect.

In addition, the sign-on shares of Common Stock

shall immediately vest, and the Chairman Compensation Shares shall vest on a pro rata basis based on the number of days served

under the Chairman’s Agreement and the number of days from the beginning of the initial term through the end of the Chairman’s

For any other termination during the initial term, Mr.

shall receive payment, at the then current rate, through the date termination is effective.

Patricia Barron

Barron entered into a three-year Executive Employment

Agreement, effective as of September 1, 2016 (the “Barron Agreement”).

Under the terms of the Barron Agreement, Ms.

Barron will receive (i) an annual salary of $120,000, and (ii) incentive compensation equal to one-quarter

of one percent (0.25%) of net revenue.

In addition, The Board granted Ms.

Barron (a) options to purchase up to 200,000

shares of Common Stock at $0.60 per share, which vested on November 15, 2015;

(b) options to purchase up to 150,000 shares of

Common Stock at $1.20, which vested on November 15, 2016;

and (c) options to purchase up to 150,000 shares of Common Stock at

$1.80, which will vest on November 15, 2017.

Director Compensation

We do not pay cash compensation to our directors for service

on our Board.

Directors are reimbursed for reasonable expenses incurred in attending meetings and carrying out duties

as board members, and in accordance with our Director Compensation Policy.

Director Compensation Table

The following table shows for the fiscal year ended December

31, 2016, certain information with respect to the compensation of all non-employee directors of the Company:

Fees Earned or

Kohen shall receive payment, at the then current rate, through

the date termination is effective.

the years ended December 31, 2017 and December 31, 2016 Mr.

Kohen earned approximately $315.989 and $220.257, respectively, under

this and the agreement associated with performance pay as noted above.

do not pay cash compensation to our directors for service on our Board.

Directors are reimbursed for reasonable expenses

incurred in attending meetings and carrying out duties as board members, and in accordance with our Director Compensation Policy.

Compensation Table

following table shows for the fiscal years ended December 31, 2017, certain information with respect to the compensation of all

non-employee directors of the Company:

Fees Earned or Paid in Cash

Rani Kohen (1)

4 unchanged sentences

Kohen has served as a Chairman of the Board since November 2012.

Fees earned in 2016

in connection with his role as Executive Chairman and as Chairman of the Board have been

reported as Executive Compensation.

Fees earned in 2017 in

connection with his role as Executive Chairman and as Chairman of the Board have been reported as Executive Compensation.

Ridge, Peter, Shiff and Sokolow have each served as a member of our Board since June

2013, November 2012, February 2014, and November 2015, respectively.

Company issued 12,000 shares of Common Stock pursuant to the Director Compensation Policy

in connection with Mr.

Sokolow’s appointment as the Chairman of our Audit Committee

on January 5, 2016.

The value of the shares was based on the value of shares sold in

connection with the Company’s recent sale of securities in a private placement

as of the time of issuance, which was $1.00 per share.

Director Compensation Policy

On November 15, 2015, our Board approved the Company’s

Director Compensation Policy (the “Director Compensation Policy”) applicable to members of the Board who are not employees

of the Company (each, an “Eligible Director”).

Under the Director Compensation, upon election to the Board, a new

Eligible Director shall be entitled to a grant of 50,000 shares of Common Stock and an option to purchase up to 150,000 shares

of Common Stock, vested monthly and fully vested after one year, at a price per share determined as of the date of grant, based

on (i) the prior days’

closing price if there is a public market for Common Stock, or (ii) if there is no public market

for Common Stock, the price per share in our most recently completed private placement of Common Stock or convertible securities

(“Director Options”).

The amount of shares and Director Options shall be prorated based on the date of a new Eligible

Director’s appointment relative to the term remaining, if applicable.

Eligible Directors will also receive Director Options

to purchase either (i) 10,000 shares of Common Stock for each Board meeting in which such Eligible Director attends in person,

or (ii) 5,000 shares of Common Stock for each Board meeting in which such Eligible Director attends telephonically.

Eligible Directors

will also receive Director Options to purchase 25,000 shares of Common Stock following each year in which he or she has served

on the Board.

Director Options will vest monthly over the course of the year following the date such Director Options are granted,

and must be exercised within five years of the grant date.

In addition, the Director Compensation Policy provides

that (i) the chairperson of the Board will receive Director Options to purchase 100,000 shares of Common Stock as an annual retainer,

payable quarterly, unless otherwise provided by an independent compensation agreement;

(ii) the chairperson of the Corporate Governance

and Nominating Committee of the Board, if applicable, will receive Director Options to purchase 25,000 shares of Common Stock

as an annual retainer, payable quarterly;

(iii) the chairperson of the Audit Committee of the Board, if applicable, will receive

a number of shares of Common Stock equal to $12,000, based on the same price per share method applied to Director Options, and

Director Options to purchase 50,000 shares of Common Stock, both as an annual retainer, payable quarterly;

(iv) the chairperson

of the Compensation Committee of the Board, if applicable, will receive Director Options to purchase 30,000 shares of Common Stock

On April 19, 2017, our Board authorized, pursuant to the April 2017 Grants, the Company to

issue options to Mr.

Peter to purchase up to 100,000 shares of Common Stock, with 50,000 of such options having vested on

December 31, 2017 with an exercise price of $3.00 per share and 50,000 of such options vesting on December 31, 2018 with an

exercise price of $4.00 per share.

As of March 30, 2018, all such options have not been issued by the Company to

On April 19, 2017, our Board authorized, pursuant to the April 2017 Grants, the Company to

issue options to Mr.

Ridge to purchase up to 500,000 shares of Common Stock, with 166,667 of such options having vested on

December 31, 2017 with an exercise price of $3.00 per share, 166,667 of such options vesting on December 31, 2018 with an

exercise price of $4.00 per share, and 166,666 of such options vesting on December 31, 2019 with an exercise price of $5.00

As of March 30, 2018, all such options have not been issued by the Company to Mr.

On April 19, 2017, our Board authorized, pursuant to the April 2017 Grants, the Company to

issue options to Mr.

Sokolow to purchase up to 300,000 shares of Common Stock, with 150,000 of such options having vested

on June 30, 2017 with an exercise price of $3.00 per share and 150,000 of such options having vested on December 31, 2017

with an exercise price of $4.00 per share.

As of March 30, 2018, all such options have not been issued by the Company

Compensation Policy

November 15, 2015, our Board approved the Company’s Director Compensation Policy (the “Director Compensation Policy”)

applicable to members of the Board who are not employees of the Company (each, an “Eligible Director”).

Director Compensation, upon election to the Board, a new Eligible Director shall be entitled to a grant of 50,000 shares of Common

Stock and an option to purchase up to 150,000 shares of Common Stock, vested monthly and fully vested after one year, at a price

per share determined as of the date of grant, based on (i) the prior days’

closing price if there is a public market for

Common Stock, or (ii) if there is no public market for Common Stock, the price per share in our most recently completed private

placement of Common Stock or convertible securities (“Director Options”).

The number of shares and Director Options

shall be prorated based on the date of a new Eligible Director’s appointment relative to the term remaining, if applicable.

Directors will also receive Director Options to purchase either (i) 10,000 shares of Common Stock for each Board meeting in which

such Eligible Director attends in person, or (ii) 5,000 shares of Common Stock for each Board meeting in which such Eligible Director

attends telephonically.

Eligible Directors will also receive Director Options to purchase 25,000 shares of Common Stock following

each year in which he or she has served on the Board.

Director Options will vest monthly over the course of the year following

the date such Director Options are granted and must be exercised within five years of the grant date.

addition, the Director Compensation Policy provides that (i) the chairperson of the Board will receive Director Options to purchase

100,000 shares of Common Stock as an annual retainer, payable quarterly, unless otherwise provided by an independent compensation

(ii) the chairperson of the Corporate Governance and Nominating Committee of the Board, if applicable, will receive

Director Options to purchase 25,000 shares of Common Stock as an annual retainer, payable quarterly;

(iii) the chairperson of

the Audit Committee of the Board, if applicable, will receive a number of shares of Common Stock equal to $12,000, based on the

same price per share method applied to Director Options, and Director Options to purchase 50,000 shares of Common Stock, both

as an annual retainer, payable quarterly;

(v) other members of the Audit Committee of the Board, if applicable, will receive Director

Options to purchase 15,000 shares of Common Stock as an annual retainer, payable quarterly;

and (vi) other members of the Corporate

Governance Committee and Nominating and Compensation Committee of the Board, if applicable, will receive Director Options to purchase

10,000 shares of Common Stock as an annual retainer, payable quarterly.

Narrative Disclosure to Summary Compensation and

Option Tables

As of March 30, 2017, the Company has issued shares of

Common Stock and Director Options under the Director Compensation Policy only to Mr.

On January 25, 2016, the Company

issued to Mr.

Sokolow 50,000 shares of Common Stock in connection with his appointment to the Board on November 15, 2016 and Director

Options to purchase up to 150,000 shares of Common Stock at $0.60 per share in connection with his appointment to the Board on

November 15, 2016.

All such amounts were reported as paid in 2015.

In connection with Mr.

Sokolow’s appointment as

the Chairman of our Audit Committee on January 5, 2016, we issued 12,000 shares of Common Stock pursuant to the Director Compensation

Policy, the value of which was based on the value of shares sold in connection with the Company’s recent sale of securities

in a private placement as of the time of issuance, which was $1.00 per share.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information with

respect to the beneficial ownership of Common Stock by:

(i) each director, (ii) each of the executive officers of the

Company, (iii) all current directors and executive officers as a group, and (iv) each stockholder known to the Company

to be the beneficial owner of more than 5% of the outstanding shares of Common Stock.

Unless otherwise indicated in the footnotes to the table,

all information set forth in the table is as of March 15, 2015.

The addresses for the greater than 5% stockholders are set forth

in the footnotes to this table.

Unless otherwise indicated in the footnotes to the table,

all information set forth in the table is as of March 30, 2017, and the address for each director and executive officer of the

(iv) the chairperson of the Compensation Committee of the Board, if applicable, will

receive Director Options to purchase 30,000 shares of Common Stock as an annual retainer, payable quarterly;

(v) other members

of the Audit Committee of the Board, if applicable, will receive Director Options to purchase 15,000 shares of Common Stock as

an annual retainer, payable quarterly;

and (vi) other members of the Corporate Governance Committee and Nominating and Compensation

Committee of the Board, if applicable, will receive Director Options to purchase 10,000 shares of Common Stock as an annual retainer,

payable quarterly.

Disclosure to Summary Compensation and Option Tables

The Company did not issue any Director Options

in 2017, and as of March 30, 2018, the Company has not issued any Director Options in connection with services performed during

fiscal year 2017.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information

with respect to the beneficial ownership of Common Stock by:

(i) each director, (ii) each of the executive officers of the Company,

(iii) all current directors and executive officers as a group, and (iv) each stockholder known to the Company to be the beneficial

owner of more than 5% of the outstanding shares of Common Stock.

Unless otherwise indicated in the footnotes

to the table, all information set forth in the table is as of March 30, 2018, and the address for each director and executive officer

of the Company is:

c/o 4400 North Point Parkway, Suite 265, Alpharetta, GA 30022.

The addresses for the greater than 5% stockholders

are set forth in the footnotes to this table.

Directors and Named Executive Officers

Beneficial Owner

and Nature of Beneficial Ownership (1)

Holdings LLC (2)

Name and Address

of Beneficial Owner

Amount and Nature of Beneficial Ownership (1)

Percent of Class (1)

KRNB Holdings LLC (2)

Phillips Peter (3)

3 unchanged sentences

Patricia Barron (9)

Directors and Officers as a Group (8 persons)

with 5% Beneficial Ownership

All Directors and Officers as a Group (8 persons)

Stockholders with 5% Beneficial Ownership

Name and Address

of Beneficial Owner

and Nature of Beneficial Ownership (1)

7 SQL LLC (10)

Amount and Nature of Beneficial Ownership (1)

Percent of Class (1)

Motek 7 SQL LLC (10)

19101 Mystic Pointe Drive

Aventura, FL 33180

Nagelberg 2003 Revocable Trust DTD

Boulevard, Unit 21 DE

Energy Corporation (12)

99 Coast Boulevard, Unit 21 DE

LaJolla, CA 92037

Pitch Energy Corporation (12)

Ruidoso, NM 88355

3 unchanged sentences

* Less than 1%

(1) Applicable

percentages are based on 48,943,166 shares outstanding, adjusted as required by rules

Beneficial ownership is determined under the rules of the SEC and generally

includes voting or investment power with respect to securities.

Shares of Common Stock

subject to options, warrants and convertible notes currently exercisable or convertible,

or exercisable or convertible within 60 days are deemed outstanding for computing the

percentage of the person holding such securities but are not deemed outstanding for computing

the percentage of any other person.

Unless otherwise indicated in the footnotes to this

table, the Company believes that each of the shareholders named in the table has sole

voting and investment power with respect to the shares of Common Stock indicated as beneficially

owned by them.

Shares of Series A Preferred Stock are convertible, at any time at the

holder’s election, into an equal number of shares of Common Stock.

Rani Kohen beneficially owns these 8,703,969 shares of Common Stock as Manager of KRNB

Holdings LLC, which includes (i) 8,003,969 shares of Common Stock held by KRNB Holdings

LLC and (ii) 700,000 shares of Common Stock issuable upon exercise of options issued

under the Incentive Plan and held by KRNB Holdings LLC.

Phillips Peter beneficially owns 500,000 shares of Common Stock, including (i) 200,000

shares of Common Stock, and (ii) 300,000 shares of Common Stock issuable upon exercise

of options held by Mr.

Thomas Ridge beneficially owns 1,225,000 shares of Common Stock, including (i) 875,000

shares of Common Stock, (ii) 100,000 shares of Common Stock issuable upon exercise of

options held by Mr.

Thomas Ridge, (iii) 50,000 shares of Common Stock issuable upon exercise

of warrants issued pursuant to the Notes Offering and (iv) 200,000 shares of Common Stock

issuable upon conversion of the convertible notes issued pursuant to the Notes Offering.

Dov Shiff beneficially owns 14,964,618 shares of Common Stock, including (i) 10,674,618

shares of Common Stock, (ii) 1,690,000 shares of Common Stock issuable upon exercise

of warrants issued pursuant to the Notes Offering, and (iii) 2,600,000 shares of Common

Stock issuable upon conversion of Series A Preferred Stock.

Sokolow beneficially owns 262,000 shares of Common Stock, including (i) 62,000

shares of Common Stock, (ii) 50,000 shares of Common Stock obtained pursuant to the November

2015 Stock Offering, and (iii) 150,000 shares of Common Stock issuable upon the exercise

of Director Options.

Campi beneficially owns 1,050,000 shares of Common Stock, including (i) 750,000

shares of Common Stock, (ii) 250,000 shares of Common Stock obtained pursuant to the

May 2015 Stock Offering, and (iii) 50,000 shares of Common Stock obtained pursuant to

the November 2015 Stock Offering.

Wells beneficially owns 1,000,000 shares of Common Stock, including (i) 100,000

shares of Common Stock obtained pursuant to that certain consultant agreement between

Wells and the Company, dated June 1, 2015, (ii) 150,000 shares of Common Stock purchased

Wells pursuant to the Wells Agreement, and (iii) 750,000 shares of Common Stock

issuable upon exercise of warrants issued pursuant to the Wells Agreement.

Patricia Barron beneficially owns 450,000 shares of Common Stock, including (i) 100,000

shares of Common Stock, (ii) 350,000 shares of Common Stock issuable upon the exercise

of options issued under the Incentive Plan.

Hillel Bronstein beneficially owns these shares of Common Stock as Manager of Motek 7

Nagelberg 2003 Revocable Trust DTD 7/2/03 beneficially owns 3,615,865 shares

of Common Stock, including (i) 315,865 shares of Common Stock, (ii) 1,300,000 shares

of Common Stock issuable upon exercise of warrants issued pursuant to the Notes Offering,

and (iii) 2,000,000 shares of Common Stock issuable upon conversion of Series A Preferred

Applicable percentages are based on 53,414,901 shares outstanding, adjusted as required by rules of the SEC.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities.

Shares of Common Stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.

Unless otherwise indicated in the footnotes to this table, the Company believes that each of the shareholders named in the table has sole voting and investment power with respect to the shares of Common Stock indicated as beneficially owned by them.

Shares of Series A Preferred Stock are convertible, at any time at the holder’s election, into an equal number of shares of Common Stock.

Rani Kohen beneficially owns these 9,003,969 shares of Common Stock as Manager of KRNB Holdings LLC, which includes (i) 8,003,969 shares of Common Stock held by KRNB Holdings LLC and (ii) 1,000,000 shares of Common Stock issuable upon exercise of options issued under the Incentive Plan and held by KRNB Holdings LLC.

Phillips Peter beneficially owns 500,000 shares of Common Stock, including (i) 200,000 shares of Common Stock, and (ii) 300,000 shares of Common Stock issuable upon exercise of options held by Mr.

Thomas Ridge beneficially owns 1,025,000 shares of Common Stock, including (i) 675,000 shares of Common Stock, (ii) 100,000 shares of Common Stock issuable upon exercise of options held by Mr.

Thomas Ridge, (iii) 50,000 shares of Common Stock issuable upon exercise of warrants issued pursuant to the Notes Offering and (iv) 200,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock.

Dov Shiff beneficially owns 14,964,618 shares of Common Stock, including (i) 10,674,618 shares of Common Stock, (ii) 1,690,000 shares of Common Stock issuable upon exercise of warrants issued pursuant to the Notes Offering, and (iii) 2,600,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock.

Sokolow beneficially owns 262,000 shares of Common Stock, including (i) 62,000 shares of Common Stock, (ii) 50,000 shares of Common Stock obtained pursuant to the Second 2015 Stock Offering, and (iii) 150,000 shares of Common Stock issuable upon the exercise of Director Options.

Campi beneficially owns 1,170,000 shares of Common Stock, including (i) 870,000 shares of Common Stock issued pursuant to the Campi Agreement, (ii) 250,000 shares of Common Stock obtained pursuant to the First 2015 Stock Offering, and (iii) 50,000 shares of Common Stock obtained pursuant to the Second 2015 Stock Offering.

Wells beneficially owns 1,120,000 shares of Common Stock, including (i) 100,000 shares of Common Stock obtained pursuant to that certain consultant agreement between Mr.

Wells and the Company, dated June 1, 2015, (ii) 270,000 shares of Common Stock purchased by Mr.

Wells pursuant to the Wells Agreement, and (iii) 750,000 shares of Common Stock issuable upon exercise of warrants issued pursuant to the Wells Agreement.

Patricia Barron beneficially owns 700,000 shares of Common Stock, including (i) 100,000 shares of Common Stock, (ii) 600,000 shares of Common Stock issuable upon the exercise of options issued under the Incentive Plan.

Hillel Bronstein beneficially owns these shares of Common Stock as Manager of Motek 7 SQL LLC.

Nagelberg 2003 Revocable Trust DTD 7/2/03 beneficially owns 3,718,365 shares of Common Stock, including (i) 1,518,365 shares of Common Stock, (ii) 200,000 shares of Common Stock issuable upon exercise of 2017 Exchange Warrants, and (iii) 2,000,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock.

Johnny Gray and Mr.

T L Chandler, as Trustees of the J C Gray Trust and T L Chandler

Trust, respectively, have joint voting and dispositive control over these shares of Common

Stock, as such trusts are equal 50% shareholders of Pitch Energy Corporation.

Steven Siegelaub, in his personal capacity and as the Managing Member of 301 Office Ventures,

LLC, Enterprise 2013, LLC, Investment 2013, LLC, and Safety Investors 2014, LLC beneficially

owns 4,577,875 shares of Common Stock, including (i) 83,333 shares of Common Stock held

by him and his wife personally;

(ii) 875,000 shares of Common Stock owned by 301 Office

Ventures, LLC;

(iii) 762,254 shares of Common Stock beneficially owned by Enterprise

2013, LLC, consisting of (a) 577,046 shares of Common Stock and (b) 185,208 shares of

Common Stock issuable upon exercise of warrants owned by Enterprise 2013, LLC;

(iv) 1,189,972

shares of Common Stock beneficially owned by Investment 2013, LLC, consisting of (a)

219,303 shares of Common Stock, (b) 194,134 shares of Common Stock issuable upon exercise

of warrants issued pursuant to the Notes Offering, and (c) 776,535 shares of Common Stock

issuable upon conversion of Series A Preferred Stock;

(v) 1,667,316 shares of Common

Stock beneficially owned by Safety Investors 2014, LLC, consisting of (a) 17,316 shares

of Common Stock, (b) 650,000 shares of Common Stock issuable upon exercise of Warrants

issued pursuant to the Notes Offering, and (c) 1,000,000 shares of Common Stock issuable

upon conversion of Series A Preferred Stock;

and (vi) 100,000 shares of Common Stock

issuable upon the exercise of options issued under the Incentive Plan and held by Mr.

Changes in Control

We are unaware of any contract, or other arrangement or

provision, the operation of which may at any subsequent date result in a change in control of our Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

Except as described herein, none of the following parties

(each a “Related Party”) has, in our fiscal years ended December 31, 2015 and December 31, 2016, had any material

interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially

affect us, any of our directors or officers, any person who beneficially owns, directly or indirectly, shares carrying more than

10% of the voting rights attached to our outstanding shares of Common Stock or any member of the immediate family (including spouse,

parents, children, siblings and in-laws) of any of the above persons.

We are currently party to the Chairman’s

Agreement with Mr.

Rani Kohen, Executive Chairman and Chairman of the Company’s Board, pursuant to which we are required

to pay cash compensation in the amount of $250,000 per year.

During 2015 and through August 31, 2016, we were a party to the Kohen

Consulting Agreement with Mr.

Kohen, pursuant to which we paid cash compensation in the amount of $150,000 per year.

Both agreements

are more fully described in Item 11 of this report, in the subsection entitled “Narrative Disclosure to Summary Compensation

and Option Tables”.

T L Chandler, as Trustees of the J C Gray Trust and T L Chandler Trust, respectively, have joint voting and dispositive control over these shares of Common Stock, as such trusts are equal 50% shareholders of Pitch Energy Corporation.

Steven Siegelaub, in his personal capacity and as the Managing Member of 301 Office Ventures, LLC, Enterprise 2013, LLC, Investment 2013, LLC, and Safety Investors 2014, LLC beneficially owns 4,577,875 shares of Common Stock, including (i) 83,333 shares of Common Stock held by him and his wife personally;

(ii) 875,000 shares of Common Stock owned by 301 Office Ventures, LLC;

(iii) 762,254 shares of Common Stock beneficially owned by Enterprise 2013, LLC, consisting of (a) 577,046 shares of Common Stock and (b) 185,208 shares of Common Stock issuable upon exercise of warrants owned by Enterprise 2013, LLC;

(iv) 1,189,972 shares of Common Stock beneficially owned by Investment 2013, LLC, consisting of (a) 219,303 shares of Common Stock, (b) 194,134 shares of Common Stock issuable upon exercise of warrants issued pursuant to the Notes Offering, and (c) 776,535 shares of Common Stock issuable upon conversion of Series A Preferred Stock;

(v) 1,667,316 shares of Common Stock beneficially owned by Safety Investors 2014, LLC, consisting of (a) 17,316 shares of Common Stock, (b) 650,000 shares of Common Stock issuable upon exercise of Warrants issued pursuant to the Notes Offering, and (c) 1,000,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock;

and (vi) 100,000 shares of Common Stock issuable upon the exercise of options issued under the Incentive Plan and held by Mr.

are unaware of any contract, or other arrangement or provision, the operation of which may at any subsequent date result in a

change in control of our Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

as described herein, none of the following parties (each a “Related Party”) has, in our fiscal years ended December

31, 2017 and December 31, 2016, had any material interest, direct or indirect, in any transaction with us or in any presently

proposed transaction that has or will materially affect us, any of our directors or officers, any person who beneficially owns,

directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of Common Stock

or any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the above persons.

are currently party to the Chairman’s Agreement with Mr.

Rani Kohen, Executive Chairman and Chairman of the Company’s

Board, pursuant to which we are required to pay cash compensation in the amount of $250,000 plus incentives, per year.

2017 and 2016 we were a party to the Kohen Consulting Agreement with Mr.

Kohen, pursuant to which we paid cash compensation in

the amount of $315,989 and $220,257, respectively.

The agreement(s) are more fully described in Item 11 of this report, in the

subsection entitled “Narrative Disclosure to Summary Compensation and Option Tables”.

February 2016, Mr.

Dov Shiff, a member of our Board, loaned $500,000 to the Company pursuant to an unsecured promissory note.

other customary terms, the note is payable on demand and accrues interest at a rate or 12% per annum.

Subject to other customary terms, the note is payable on demand and accrues interest at a rate or 12% per annum.

As of December

31, 2017, the outstanding balance under the note was $200,000.

Director Independence

We are not currently subject to any listing standards

of any national exchange.

However, were we to apply the standards of the New York Stock Exchange, Messrs.

Kohen and Shiff would

not be considered “independent”

are not currently subject to any listing standards of any national exchange.

However, were we to apply the standards of the New

York Stock Exchange, Messrs.

Kohen and Shiff would not be considered “independent”

under such standards.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth the aggregate fees billed

to us for the years ended December 31, 2015 and December 31, 2016 by our independent auditors, L&L CPAS, PA, f/k/a Bongiovanni

& Associates, PA:

following table sets forth the aggregate fees billed to us for the years ended December 31, 2017 and December 31, 2016 by our

independent auditors, L&L CPAS, PA, f/k/a Bongiovanni& Associates, PA:

Audit-Related Fees

Audit fees represent amounts billed for professional services

rendered for the audit of our annual financial statements.

Audit-Related Fees include amounts billed for professional services

rendered in connection with our SEC filings and discussions with the SEC that occurred during fiscal 2014 for us to remain a fully

reporting public company.

Our Board is of the opinion that the Audit-Related Fees charged by L&L CPAS, PA were consistent

with companies of our size maintaining its independence from us.

The audit committee of the Company approves all auditing

services and the terms thereof and non-audit services (other than non-audit services published under Section 10A(g) of the Exchange

Act or the applicable rules of the SEC or the Pubic Company Accounting Oversight Board) to be provided to us by the independent

provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us

if the “de minimis”

provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied.

fees represent amounts billed for professional services rendered for the audit of our annual financial statements.

Audit-Related

Fees include amounts billed for professional services rendered in connection with our SEC filings and discussions with the SEC

that occurred during fiscal 2014 for us to remain a fully reporting public company.

Our Board is of the opinion that the Audit-Related

Fees charged by L&L CPAS, PA were consistent with companies of our size maintaining its independence from us.

audit committee of the Company approves all auditing services and the terms thereof and non-audit services (other than non-audit

services published under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Pubic Company Accounting

Oversight Board) to be provided to us by the independent auditor;

provided, however, the pre-approval requirement is waived with

respect to the provisions of non-audit services for us if the “de minimis”

provisions of Section 10A(i)(1)(B) of the

Exchange Act are satisfied.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

Report of Independent Registered Public Accounting Firm

Audited Consolidated Balance Sheets as of December 31,

2015 and December 31, 2014

Audited Consolidated Statements of Operations for the

Year Ended December 31, 2015 and 2014

Audited Consolidated

Statements of Stockholders’

Equity (Deficit) for the Years Ended December 31, 2015, and 2014

Audited Consolidated

Statements of Cash Flows for the Year Ended December 31, 2015 and 2014

Notes to Audited

Financial Statements

(b) Exhibit Index

of Incorporation of Registrant, as amended.

of Registrant.

of Common Stock Certificate.

Trademark License Agreement, dated as of June 15, 2011, by and between GE Trademark Licensing, Inc.

and SQL Lighting &

Fans, LLC, as amended.

of 2013 Director Stock Option Agreement.

of Security Purchase Agreement, Registration Rights Agreement, Note Subscription Agreement, Common Stock Purchase Warrant

and Secured Convertible Promissory Note for the Notes Offering closed November 26, 2013, May 8, 2014 and June 25, 2014.

of Agreement and Waiver, dated December 10, 2014, between the Registrant and 2012 Investors, Letter Agreement to Convert,

dated January 23, 2014, between the Registrant and holders of Notes dated November 26, 2013 and May 8, 2014.

of November 2015 Election Letter and Forbearance Agreement.

of February 2016 Forbearance Agreement.

of May 2016 Forbearance Agreement.

of Subscription Agreements for U.S.

Persons and Non-US Persons ad Registration Rights Agreement utilized in the May 2015 Stock

of Subscription Agreements and Registration Rights Agreement utilized in the November 2015 Stock Offering

of Securities Subscription Agreement and Common Stock Purchase Warrant used in the April 2016 Stock Sale.

of Securities Subscription Agreement, including the terms to issue Volume Warrants, and form of Common Stock Purchase Warrant

used in the May 2016 Stock Sale.

of Securities Subscription Agreement, including the terms to issue Volume Warrants, and form of Common Stock Purchase Warrant

used in the August 2016 Stock Sale.

of Amendment No.

1 to Secured Convertible Promissory Note

of Lock-Up Agreement

Lease dated October 24, 2014 between the Company and Highwoods DLF 98/29, LLC.

Employment Agreement, dated August 17, 2016 between the Company and Mark J.

Employment Agreement, dated September 1, 2016 between the Company and John P.

Chairman’s

Agreement, dated September 1, 2016 between the Company and Rani Kohen.

Employment Agreement, dated July 1, 2016 between the Company and Patty Barron.

Compensation Policy.

2015 Stock Incentive Plan.

of Subsidiaries.

Certification

of Principal Executive Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002.

Certification

of Principal Accounting Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002.

C ertification

of Principal Executive Officer Pursuant to 18 U.S.C.

of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016

Consolidated Statements of Operations for the Years ended December 31, 2017 and 2016

Consolidated Statements of Stockholders’

Equity (Deficit) for the Years Ended December 31, 2017, and 2016

Consolidated Statements of Cash Flows for the Years ended December 31, 2017 and 2016

to Audited Financial Statements

Exhibit Index

Articles of Incorporation of Registrant, as amended.

Certificate Of Designation of Rights, Preferences and Privileges of Series A Convertible Preferred Stock.

Bylaws of Registrant.

Form of Common Stock Certificate.

GE Trademark License Agreement, dated as of June 15, 2011, by and between GE Trademark Licensing, Inc.

and SQL Lighting & Fans, LLC, as amended.

Office Lease dated October 24, 2014 between the Company and Highwoods DLF 98/29, LLC.

Forms of Security Purchase Agreement, Registration Rights Agreement, Note Subscription Agreement, Common Stock Purchase Warrant and Secured Convertible Promissory Note for the Notes Offering closed November 26, 2013.

Form of Amendment No.

1, dated August 15, 2016, to Secured Convertible Promissory Note.

Form of Securities Subscription Agreements for U.S.

Persons and Non-US Persons used in the First 2015 Stock Offering.

Form of Securities Subscription Agreements for U.S.

Persons and Non-US Persons used in the Second 2015 Stock Offering.

Form of Registration Rights Agreement used in the First and Second 2015 Stock Offerings.

Form of Securities Subscription Agreement and Common Stock Purchase Warrant used in the First 2016 Stock Sale.

Form of Securities Subscription Agreement, including the terms to issue Volume Warrants, and form of Common Stock Purchase Warrant used in the Second 2016 Stock Sale.

Form of Securities Subscription Agreement, including the terms to issue Volume Warrants, Form of Option Agreement, and form of Common Stock Purchase Warrant used in the Third 2016 Stock Sale.

The 2015 Stock Incentive Plan.*

Director Compensation Policy.

Executive Employment Agreement, dated July 1, 2016, between the Company and Patricia Barron.*

Executive Employment Agreement, dated August 17, 2016 between the Company and Mark J.

Executive Employment Agreement, dated September 1, 2016 between the Company and John P.

Chairman’s Agreement, dated September 1, 2016 between the Company and Rani Kohen.*

Form of Stock Option Agreement used in connection with the stock subscriptions dated February 21, 2017, March 24, 2017 and April 11, 2017.

Form of New Warrant utilized in the Warrant Exercise Exchange.

Form of Lock-Up Agreement utilized in the Warrant Exercise Exchange.

Form of Waiver of Registration Rights utilized in the Warrant Exercise Exchange.

List of Subsidiaries.

C ertification of Principal Executive Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Accounting Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

C ertification of Principal Executive Officer Pursuant to 18 U.S.C.

1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification

of Principal Accounting Officer Pursuant to 18 U.S.C.

Certification of Principal Accounting Officer Pursuant to 18 U.S.C.

1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 are formatted

in XBRL (eXtensible Business Reporting Language):

(i) the Audited Balance Sheets, (ii) the Audited Statements of

Operations, (iii) the Audited Statements of Stockholders’

Equity (Deficit), (iv) the Audited Statements of Cash Flows,

and (iv) the Notes to the Audited Financial Statements.

* Indicates management

contract or compensatory plan or arrangement.

(2) Incorporated

by reference from the Company’s registration statement on Form S-1 filed with the

SEC on August 1, 2014 and, declared effective on October 22, 2014.

(3) Incorporated

by reference from the Company’s current report on Form 8-K filed with the SEC on

November 26, 2014.

(4) Incorporated

by reference from the Company’s annual report on Form 10-K filed with the SEC on

March 31, 2015.

(5) Incorporated

by reference from the Company’s registration statement on Form S-1 filed with the

SEC on January 11, 2016, and declared effective on January 20, 2016.

(6) Incorporated

by reference from the Company’s annual report on Form 10-K filed with the SEC on

March 30, 2016.

(7) Incorporated

by reference from the Company’s quarterly report on Form 10-Q filed with the SEC

on May 16, 2016.

(8) Incorporated

by reference from the Company’s quarterly report on Form 10-Q filed with the SEC

on August 15, 2016.

(9) Incorporated

by reference from the Company’s quarterly report on Form 10-Q filed with the SEC

on November 14, 2016.

(10) Incorporated

by reference from the Company’s current report on Form 8-K filed with the SEC on

November 8, 2016.

(11) Incorporated

by reference to the Company’s current report on Form 8-K filed with the SEC on April 7, 2016.

Pursuant to the requirements of the Securities and Exchange

Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SQL TECHNOLOGIES CORP.

Chief Executive Officer

(Principal Executive Officer)

(Principal Accounting Officer)

Chief Executive Officer

March 31, 2017

/s/ Rani Kohen

Executive Chairman, Director

March 31, 2017

The following

materials from the Company’s Annual Report on Form 10-K for the years ended December 31, 2016 are formatted in XBRL

(eXtensible Business Reporting Language):

(i) the Audited Balance Sheets, (ii) the Audited Statements of Operations,

(iii) the Audited Statements of Stockholders’

Equity (Deficit), (iv) the Audited Statements of Cash Flows, and

(iv) the Notes to the Audited Financial Statements.

management contract or compensatory plan or arrangement.

Filed herewith.

Incorporated by reference from the Company’s Registration Statement on Form S-1 filed with the SEC on August 1, 2014 and declared effective on October 22, 2014.

Incorporated by reference from the Company’s Post-Effective Amendment No.

1 to Registration Statement filed with the SEC on May 28, 2015.

Incorporated by reference from the Company’s Registration Statement on Form S-1 filed with the SEC on January 11, 2016 and declared effective on January 20, 2016.

Incorporated by reference from the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2016.

Incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2016.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 16, 2016.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016.

Incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on November 8, 2016.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2016.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2017.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017.

to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its

behalf by the undersigned thereunto duly authorized.

TECHNOLOGIES CORP.

Executive Officer

Executive Officer)

Accounting Officer)

Chief Executive

Executive Chairman,

April 2, 2018

Phillips Peter

/s/ Tom Ridge

March 31, 2017

/s/ Dov Shiff

March 31, 2017

/s/ Leonard Sokolow

March 31, 2017

April 2, 2018

Leonard Sokolow

April 2, 2018

QUICK LIGHTING & FANS CORP AND SUBSIDIARY

FINANCIAL STATEMENTS

SAFETY QUICK LIGHTING &

FANS CORP AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31,

2016 AND 2015

Index to Consolidated Financial

THE YEARS ENDED DECEMBER 31, 2017 AND 2016

to Consolidated Financial Statements

of Independent Registered Public Accounting Firm

15 unchanged sentences

19720 Jetton Road, 3rd Floor

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

of Directors and Shareholders

Lighting & Fans Corp.

Cornelius, NC 28031

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Shareholders

Technologies Corp.

and Subsidiary

We have audited

the accompanying consolidated balance sheets of SQL Technologies Corp.

and Subsidiary (“the Company”) as of December

31, 2016 and 2015 and the related consolidated statements of operations, stockholders’

deficit, and consolidated cash flows

for the years ended December 31, 2016 and 2015.

These consolidated financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

have audited the accompanying consolidated balance sheets of SQL Technologies Corp.

and Subsidiary (“the Company”)

as of December 31, 2017 and 2016 and the related consolidated statements of operations, stockholders’

deficit, and consolidated

cash flows for the years ended December 31, 2017 and 2016.

These consolidated financial statements are the responsibility of the

Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our

conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).

12 unchanged sentences

provides a reasonable basis for our opinion.

In our opinion,

the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position

of the Company as of December 31, 2016 and 2015, and the results of its operations, changes in stockholders’

cash flows for the years ended December 31, 2016 and 2015 in conformity with accounting principles generally accepted in the United

States of America.

/s/ L&L CPAS, PA

Bongiovanni & Associates, PA

Certified Public Accountants

Cornelius, North Carolina

The United States of America

March 31, 2016

SQL Technologies Corp.

our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated

financial position of the Company as of December 31, 2017 and 2016, and the results of its operations, changes in stockholders’

deficit and cash flows for the years ended December 31, 2017 and 2016 in conformity with accounting principles generally accepted

in the United States of America.

Public Accountants

North Carolina

United States of America

Technologies Corp.

and Subsidiary

Consolidated Balance Sheets

Current assets:

Accounts receivable

Prepaid expenses

Balance Sheets

current assets

Total current

and Equipment - net

Other assets:

Debt issue costs

GE trademark license

trademark license –

and Stockholders (Deficit)

payable & accrued expenses

debt net of debt discount $-0- and

at December 31, 2017 and December 31, 2016 respectively

debt - related parties - net of debt discount $-0- and

at December 31, 2017 and December 31, 2016 respectively

payable - current portion

payable - related party

royalty obligation

current liabilities

Accounts payable

& accrued expenses

Convertible debt

- net of debt discount $-0- and $474,283 at

December 31, 2016

and December 31, 2015 respectively

Convertible debt

- related parties - net of debt discount $-0- and

$-0- at December

31, 2016 and December 31, 2015 respectively

Notes payable -

current portion

Notes payable -

related party

Derivative liabilities

current liabilities

Total current

Long term liabilities:

Convertible debt

- related parties - net

Notes payable

term liabilities:

royalty obligation

Total long term

Commitments and contingent

Redeemable preferred

stock - subject to redemption:

long-term liabilities

Commitments and contingent liabilities:

Redeemable preferred stock - subject to redemption:

$0 par value;

20,000,000 shares

20,000,000 shares authorized;

13,456,936 and 13,056,932 shares issued

and outstanding

at December 31, 2016 and December 31, 2015

and outstanding at December 31, 2017 and December 31, 2016

Stockholders' deficit:

1 unchanged sentence

$0 par value, 500,000,000 shares authorized;

47,276,499 and

41,501,251 shares issued and outstanding

at December 31,

2016 and December 31, 2015 respectively

Common stock to

Additional paid-in

and 53,174,901 shares issued and outstanding

at December 31, 2017 and December 31, 2016 respectively

Common stock to be issued

Additional paid-in capital

Subscription receivable

Total Stockholders'

Noncontrolling

liabilities, redeemable preferred stock, and stockholders' deficit

Accumulated deficit

Total Stockholders' deficit

Noncontrolling interest

Total Deficit

Total liabilities, redeemable preferred stock, and stockholders' deficit

accompanying notes are an integral part of these condensed consolidated financial statements.

SQL Technologies Corp.

Technologies Corp.

and Subsidiary

Consolidated Statements of Operations

Years Ended December 31,

Cost of sales

Statements of Operations

Ended December 31,

general and administrative expenses

Loss from operations

Other income (expense)

Interest expense

Derivative expenses

Change in fair

value of embedded derivative liabilities

Loss on debt extinguishment

and amortization

on impairment

operating expenses

from operations

income (expense)

in fair value of embedded derivative liabilities

(14,413,192 )

(43,634,482 )

on debt extinguishment

Total other income

(expense) - net

Net loss including noncontrolling interest

(41,129,336 )

on Debt Extinguishment

other income (expense) –

(19,816,195 )

(92,460,086 )

loss including noncontrolling interest

(26,718,685 )

(98,447,858 )

net loss attributable to noncontrolling interest

Net loss attributable

to Safety Quick Lighting & Fans Corp.

Net loss per share

- basic and diluted

Weighted average number of common shares outstanding

during the year -

loss attributable to Safety Quick Lighting & Fans Corp.

$ (26,718,685 )

$ (98,447,858 )

loss per share - basic and diluted

average number of common shares outstanding during the year-basic and diluted

accompanying notes are an integral part of these condensed consolidated financial statements.

SQL Technologies Corp.

Technologies Corp.

and Subsidiary

Consolidated Statement of Stockholders'

Years Ended December 31, 2016

and December 31, 2015

Common Stock,

Statement of Stockholders' Deficit

Ended December 31, 2017 and December 31, 2016

Common Stock, $0 Par Value

Noncontrolling

1 unchanged sentence

Balance, December 31, 2014

$ (15,813,260 )

$ (9,362,177 )

Common stock issued in exchange for interest due ($0.25/share)

3 unchanged sentences

Common stock issued ($1.00/share), net of issuance cost

December 31, 2015

Common stock issued in exchange for interest

(26,890,210 )

Balance, December 31, 2015

(42,703,470 )

(32,749,407 )

Common stock issued in exchange for interest due

Common stock issued, net of issuance cost

1 unchanged sentence

Common stock issued pursuant to stock award

Pursuant Director Compensation Policy, appointment

to Board and Chair of Audit Committee

Common stock issued in exchange for principal

and interest due

Pursuant Director Compensation Policy, appointment to Board and

Chair of Audit Committee

Common stock issued in exchange for principal and interest due

Conversion of convertible notes to common stock

Reclassification of derivative liability related

to convertible notes

Reclassification of derivative liability related

to interest payable

Reclassification of derivative liability related

Reclassification of derivative liability related to convertible

Reclassification of derivative liability related to interest payable

Reclassification of derivative liability related to options

Dividends Paid

(98,447,858 )

Balance, December 31, 2016

(141,182,294 )

The accompanying notes are an integral

part of these condensed consolidated financial statements.

SQL Technologies Corp.

(72,091,238 )

Common stock issued for the cashless exercise of warrants

Funds received for stock subscription

Common stock issued, net of issuance cost

Common stock issued for the exercise of warrants

Reclassification of derivative liability related to warrants

Warrants expense

Common stock issued for the exercise of options

Reclassification of derivative liability related to options

Options expense

Dividends Paid

Balance, December 31, 2017

accompanying notes are an integral part of these condensed consolidated financial statements.

Technologies Corp.

and Subsidiary

Consolidated Statements of Cash

Years Ended December 31,

Statements of Cash Flows

Ended December 31,

Cash flows from operating activities:

loss attributable to Safety Quick Lighting & Fans Corp.

Net loss attributable

to noncontrolling interest

Adjustments to

reconcile net loss to net cash used in operating activities:

Net loss attributable to SQL Technologies Corp.

Net loss attributable to noncontrolling interest

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

Amortization of

debt issue costs

Amortization of

debt discount

Amortization of

GE trademark license

Change in fair

value of derivative liabilities

Amortization of debt issue costs

Amortization of debt discount

Amortization of patent

Amortization of GE trademark license

Loss on impairment

Change in fair value of derivative liabilities

Derivative expense

Loss on debt extinguishment

Loss (Gain) on

debt forgiveness

Stock options issued

for services - related parties

Change in operating

assets and liabilities:

Warrants expenses

Options expenses

Loss (Gain) on debt forgiveness

Stock options issued for services - related parties

Change in operating assets and liabilities:

Accounts receivable

3 unchanged sentences

Deferred rent

payable & accrued expenses

cash used in operating activities

Accounts payable & accrued expenses

Net cash used in operating activities

Cash flows from investing activities:

Purchase of property

of patent costs

cash used in investing activities

Cash flows from financing

Repayments of convertible

Reduction of Notes

converted to Preferred Stock

Proceeds from note

payable - related party

Stock issued in

exchange for interest

Stock issued in

exchange for principal

Purchase of property & equipment

Payment of patent costs

Net cash used in investing activities

Cash flows from financing activities:

Repayments of convertible notes

Reduction of Notes converted to Preferred Stock

Proceeds from note payable

Proceeds from note payable - related party

Stock issued in exchange for interest

Stock issued in exchange for principal

Dividends paid

Repayments of note

payable - related party

Proceeds from issuance

cash provided by financing activities

Repayments of note payable

Repayments of note payable - related party

Proceeds from issuance of stock

Net cash provided by financing activities

(Decrease) cash and cash equivalents

Cash and cash equivalents

at beginning of period

Cash and cash

equivalents at end of period

Supplementary disclosure of non-cash financing

Reclassification

of derivative liability to additional paid-in-capital

on debt extinguishment

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplementary disclosure of non-cash financing activities:

Reclassification of derivative liability to additional paid-in-capital

Gain on debt extinguishment

Supplementary disclosure of cash flow information

1 unchanged sentence

accompanying notes are an integral part of these condensed consolidated financial statements.

SQL Technologies Corp.

Technologies Corp.

and Subsidiary

Notes to Condensed Financial Statements

Note 1 Organization and Nature of Operations

SQL Technologies Corp.

(f/k/a Safety Quick Lighting &

Fans Corp.), a Florida corporation (the “Company”), was originally organized in May 2004 as a limited liability company

under the name of Safety Quick Light, LLC.

The Company was converted to corporation on November 6, 2012.

Effective August 12,

2016, the Company changed its name from “Safety Quick Lighting & Fans Corp.”

to Condensed Financial Statements

1 Organization and Nature of Operations

Technologies Corp.

(f/k/a Safety Quick Lighting & Fans Corp.), a Florida corporation (the “Company”), was originally

organized in May 2004 as a limited liability company under the name of Safety Quick Light, LLC.

The Company was converted to corporation

on November 6, 2012.

Effective August 12, 2016, the Company changed its name from “Safety Quick Lighting & Fans Corp.”

to “SQL Technologies Corp.”

The Company holds a number of worldwide patents, and has received a variety of final electrical code approvals, including UL Listing

and CSA approval (for the United States and Canadian Markets), and CE (for the European market).

The Company maintains offices

in Georgia, Florida and in Foshan, Peoples Republic of China.

The Company is engaged in the business of developing proprietary

technology that enables a quick and safe installation of electrical fixtures, such as light fixtures and ceiling fans, by the

use of a power plug installed in ceiling and wall electrical junction boxes.

The Company’s main technology consists of a

weight bearing, fixable socket and a revolving plug for conducting electric power and supporting an electrical appliance attached

to a wall or ceiling.

The socket is comprised of a nonconductive body that houses conductive rings connectable to an electric

power supply through terminals in its side exterior.

The plug is also comprised of a nonconductive body that

houses corresponding conductive rings, attaches to the socket via a male post and is capable of feeding electric power to an appliance.

The plug includes a second structural element allowing it to revolve and 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, thereby 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.

The Company markets consumer friendly, energy saving “plugin”

The Company holds a number of worldwide patents and has received a variety of final electrical

code approvals, including UL Listing and CSA approval (for the United States and Canadian Markets), the CE Marking (for the European

market) and, in December 2016, was approved by the National Fire Protection Association for inclusion in the NFPA 70:

Electrical Code (NEC).

The Company maintains offices in Georgia, Florida and in Foshan, Peoples Republic of China.

Company is engaged in the business of developing proprietary technology that enables a quick and safe installation of electrical

fixtures, such as ceiling fans and light fixtures, using a power plug installed in ceiling and wall electrical junction boxes.

The Company’s base technology consists of a weight bearing, fixable socket and a revolving plug for conducting electric

power and supporting an electrical appliance attached to a wall or ceiling.

The socket is comprised of an electric power supply

that is connected to the electrical junction box.

The plug, which is incorporated in an electrical appliance, attaches to the

socket via a male post and is capable of feeding electric power to the appliance.

The plug includes a second structural element

allowing it to revolve and a releasable latching that provides a retention force between the socket and the plug to prevent unintentional

disengagement.

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

The use of the Company’s technology enables the installation and replacement

of ceiling fans and lights and wall sconces in a fraction of the time of similar, conventional appliances.

The Company currently markets consumer friendly,

energy saving “plugin”

ceiling fans and light fixtures under the General Electric Company (“GE”

or “General Electric”) brand

as well as “conventional”

or “General

Electric”) brand as well as “conventional”

ceiling lights and fans carrying the GE brand.

The Company also owns 98.8% of SQL Lighting

& Fans LLC (the “Subsidiary”).

The Subsidiary was formed in Florida on April 27, 2011, and is in the business

of manufacturing the patented device that the Company owns.

The Subsidiary had no activity during the periods presented.

The Company’s fiscal year end is December 31.

Note 2 Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of

the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

The Company also owns

98.8% of SQL Lighting& Fans LLC (the “Subsidiary”).

The Subsidiary was formed in Florida on April 27, 2011 and

is in the business of manufacturing the patented device that the Company owns.

The Subsidiary had no activity during the periods

Company’s fiscal year end is December 31.

2 Summary of Significant Accounting Policies

following is a summary of the Company’s significant accounting policies:

of Presentation

accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally

accepted in the United States of America (U.S.

GAAP) under the accrual basis of accounting.

Use of Estimates

The preparation of financial statements in conformity

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

reported in the 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 nonconforming events.

Accordingly, actual results could differ significantly from estimates.

Risks and Uncertainties

The Company’s operations are subject to risk and

uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.

The Company has experienced, and in the future expects

to continue to experience, variability in its sales and earnings.

The factors expected to contribute to this variability include,

among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition

inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related

volatility of prices pertaining to the cost of sales.

Principles of Consolidation

The consolidated financial statements include the accounts

of SQL Technologies Corp.

(f/k/a Safety Quick Lighting and Fans Corp.) and the Subsidiary, SQL Lighting & Fans LLC.

All intercompany

accounts and transactions have been eliminated in consolidation.

Non-controlling Interest

In May 2012, in connection with the sale of the Company’s

membership units in the Subsidiary, the Company’s ownership percentage in the Subsidiary decreased from 98.8% to 94.35%.

The Company then reacquired these membership units in September 2013, increasing the ownership percentage from 94.35% back to

During 2016 and 2015, there was no activity in the Subsidiary.

Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and represent

cash on hand, demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original

maturity of three months or less.

The Company had $4,125,888 and $450,868 in money market as of December 31, 2016, and December

31, 2015, respectively.

The Company has deposits in financial institutions which exceeds the amount insured by the FDIC.

of uninsured deposits was $3,366,685.

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 bad debts, as well as an assessment of specific identifiable

customer accounts considered at risk or uncollectible.

The Company’s net balance of accounts receivable

for years ended December 31, 2016 and 2015:

of Consolidation

consolidated financial statements include the accounts of SQL Technologies Corp.

(f/k/a Safety Quick Lighting and Fans Corp.)

and the Subsidiary, SQL Lighting & Fans LLC.

All intercompany accounts and transactions have been eliminated in consolidation.

Non-controlling

May 2012, in connection with the sale of the Company’s membership units in the Subsidiary, the Company’s ownership

percentage in the Subsidiary decreased from 98.8% to 94.35%.

The Company then reacquired these membership units in September 2013,

increasing the ownership percentage from 94.35% back to 98.8%.

During year ended 2017 and 2016, there was no activity in the Subsidiary.

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 the 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 nonconforming events.

Accordingly, actual

results could differ significantly from estimates.

Reclassifications

comparability, reclassifications of certain prior-year balances were made in order to confirm with current-year presentations.

and Uncertainties

Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks

including the potential risk of business failure.

Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings.

expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and

ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold

(iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales.

and Cash Equivalents

and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions,

and all highly liquid investments with an original maturity of three months or less.

The Company had $4,877,720 and $4,125,888

in money market as of December 31, 2017, and December 31, 2016, respectively.

The Company has deposits in financial institutions

which exceeds the amount insured by the FDIC.

The amount of uninsured deposits was $4,377,720 at December 31, 2017.

Receivable and Allowance for Doubtful 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

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 bad debts,

as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.

Company’s net balance of accounts receivable for years ended December 31, 2017 and 2016:

Accounts Receivable

Allowance for Doubtful

All amounts are deemed collectible at December 31, 2016

and December 31, 2015 and accordingly, the Company has not incurred any bad debt expense at December 31, 2016 and December 31,

Inventory consists 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 (FIFO) method.

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

changes in future demand.

amounts are deemed collectible at December 31, 2017 and December 31, 2016 and accordingly, the Company has not incurred any bad

debt expense at December 31, 2017 and December 31, 2016.

Inventories are stated at the lower of cost,

determined on the first-in, first-out (FIFO) method.

Cost principally consists of the purchase price (adjusted for lower of cost

or market), customs, duties, and freight.

The Company periodically reviews historical sales activity to determine potentially obsolete

items and evaluates the impact of any anticipated changes in future demand.

At December 31, 2017 and December 31, 2016,

the Company had $2,352,573 and $2,401,048 in inventory, respectively.

The Company will maintain an allowance based on specific inventory

items that have shown no activity over a 24-month period.

The Company tracks inventory as it is disposed, scrapped or sold at below

cost to determine whether additional items on hand should be reduced in value through an allowance method.

As of December 31, 2016,

and December 31, 2015, the Company has determined that no allowance is required.

Valuation of Long-lived Assets and Identifiable Intangible

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.

The inventory at December 31, 2017 consisted of $ 1,891,934

of Finished Goods and $465,539 in Component Parts.

The December 31, 2016 inventory consisted entirely of Finished Goods.

will maintain an allowance based on specific inventory items that have shown no activity over a 24-month period.

The Company tracks

inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in

value through an allowance method.

As of December 31, 2017, and December 31, 2016, the Company has determined that no allowance

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.

The Company determined

no impairment adjustment was necessary for the periods presented.

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 to 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 Patent 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.

GE Trademark Licensing Agreement

The Company entered into a Trademark License Agreement

with General Electric on September, 2011 (the “License Agreement”) allowing the Company to utilize the “GE trademark”

on products which meet the stringent manufacturing and quality requirements of General Electric (the “GE Trademark License”).

As described further in Note 5 to these financial statements, the Company and General Electric amended the License Agreement in

As a result of that amendment, the Company is required to pay a minimum trademark licensing fee (the “Royalty

Obligation”) to General Electric of $12,000,000.

The repayment schedule is based on a percent of sales, with any unpaid

balance due in November 2018.

determined an impairment adjustment of $600,000 was necessary for the year ended 2017.

and Equipment

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.

of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5 to 7

years of the respective assets.

Expenditures for maintenance and repairs are charged to expense as incurred.

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 operations.

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 Patent Office.

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

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.

Trademark Licensing Agreement

The Company entered into a Trademark License

Agreement with General Electric on June 15, 2011 (the “License Agreement”) allowing the Company to utilize the “GE

trademark”

on products which meet the stringent manufacturing and quality requirements of General Electric (the “GE

Trademark License”).

As described further in Note 5 to these financial statements, the Company and General Electric amended

the License Agreement in August 2014.

As a result of that amendment, the Company is required to pay a minimum trademark licensing

fee (the “Royalty Obligation”) to General Electric of $12,000,000.

The repayment schedule is based on a percent of

sales, with any unpaid balance due in November 2018.

Under SFAS 142 “Accounting for Certain Intangible Assets”

the Company has recorded the

value of the Licensing Agreement and will amortize it over the life of the License Agreement, which is 60 months.

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:

Company has recorded the value of the Licensing Agreement and will amortize it over the life of the License Agreement, which is

The Company determined an impairment adjustment of $600,000 was necessary for the year ended 2017.

Value of Financial Instruments

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.

following are the hierarchical levels of inputs to measure fair value:

Level 1 –

Observable inputs that reflect quoted

market prices in active markets for identical assets or liabilities.

Level 2 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; or inputs that are derived principally

from or corroborated by observable market data by correlation or other means.

Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.

Level 2 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;

or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 –

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

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.

Derivative Financial Instruments

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 revalued at each reporting date, with changes in the fair value reported as charges or credits to income.

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 reassessed at the end of each reporting period.

Beneficial Conversion Feature

For conventional convertible debt where the rate of conversion

is below market value, the Company records a “beneficial conversion feature”

(“BCF”) and related debt

When the Company records a BCF, the relative fair value

of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid

in capital) and amortized to interest expense over the life of the debt.

Debt Issue Costs and Debt Discount

The Company may record debt issue costs and/or debt discounts

in connection with raising funds through the issuance of debt.

These costs may be paid in the form of cash, or equity (such as

These costs are amortized to interest expense over the life of the debt.

If a conversion of the underlying debt occurs,

a proportionate share of the unamortized amounts is immediately expensed.

Original Issue Discount

For certain convertible debt issued, the Company may provide

the debt holder with an original issue discount.

The original issue discount would be recorded to debt discount, reducing the

face amount of the note and is amortized to interest expense over the life of the debt.

Extinguishments of Liabilities

The Company accounts for extinguishments of liabilities

in accordance with ASC 86010 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment

of Liabilities”.

When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain

or loss on the sale is recognized.

Stock Based Compensation –

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), 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 as follows:

Expected 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 outstanding.

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 expected 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.

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

Pursuant 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.

If shares of 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

Risk-free rate(s).

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

Treasury 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.

Stock Based Compensation –

Non-Employees

Equity Instruments Issued to Parties Other

Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments

issued to parties other than employees for acquiring goods or services under guidance of Subtopic 505-50 of the FASB Accounting

Standards Codification (“Subtopic 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

Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair

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

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.

Company accounts for its derivative liabilities, at fair value, on a recurring basis under Level 3.

Conversion Features

Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging”

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 earnings.

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.

Financial Instruments

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 revalued at each reporting date, with changes in the fair value reported as charges or credits to income.

The Company changed its method to estimate

the valuation of valuation for fair market values of derivatives in 2017 to a lattice-binomial option-pricing model (“lattice-binomial

model”) from the Black-Scholes option-pricing model (“Black-Scholes model”) which was previously used under SFAS

123 and are reflected on our condensed consolidated statement of operations as other (income) expense at each reporting period.

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

is reassessed at the end of each reporting period.

However, such new and/or complex instruments may have immature or limited markets.

As a result, the pricing models used for valuation of derivatives often incorporate significant estimates and assumptions, which

may impact the level of precision in the financial statements.

Furthermore, depending on the terms of a derivative or embedded

derivative, the valuation of derivatives may be removed from the financial statements upon conversion of the underlying instrument

into some other security.

The change in valuation methodology for accounting estimates had no material impact on the Company’s

previous calculations.

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

The Company has reserved for issuance 26,751,860

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.

Conversion Feature

conventional convertible debt where the rate of conversion is below market value, the Company records a “beneficial conversion

feature”

(“BCF”) and related debt discount.

the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective

debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt.

Issue Costs and Debt Discount

Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt.

costs may be paid in the form of cash, or equity (such as warrants).

These costs are amortized to interest expense over the life

If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

Issue Discount

certain convertible debt issued, the Company may provide the debt holder with an original issue discount.

The original issue discount

would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of

Extinguishments

of Liabilities

Company accounts for extinguishments of liabilities in accordance with ASC 86010 (formerly SFAS 140) “Accounting for Transfers

and Servicing of Financial Assets and Extinguishment of Liabilities”.

When the conditions are met for extinguishment accounting,

the liabilities are derecognized and the gain or loss on the sale is recognized.

Based Compensation –

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.

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,

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 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), 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 as follows:

Expected 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.

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

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.

Expected 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.

instruments is estimated on the date of grant using a lattice-binomial option pricing valuation model.

The ranges of assumptions

for inputs are as follows:

Expected 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 outstanding.

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 expected 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.

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.

Expected volatility

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

Pursuant 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.

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.

If shares of 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

Risk-free rate(s).

An entity that uses a method that employs different risk-free rates shall disclose the range of risk free rates used.

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

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

term of the share options and similar instruments.

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.

expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations.

Based Compensation –

Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance

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

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

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, 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.

fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option pricing valuation

The ranges of assumptions for inputs are as follows:

Expected 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.

Expected volatility

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

Pursuant 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.

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.

If shares of 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.

Expected 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.

Risk-free rate(s).

An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.

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

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

term of the share options and similar instruments.

to ASC paragraph 505-50-257, if fully vested, no 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.

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).

an asset shall not be displayed as contra equity by the grantor of the equity instruments.

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.

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.

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.

Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

Company 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”).

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

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 lattice-binomial option-pricing valuation model.

The ranges of assumptions

for inputs are as follows:

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.

Treasury 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 505-50-257, if fully

vested, no 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.

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

share options and similar instruments.

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.

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).

an asset shall not be displayed as contra-equity by the grantor of the equity instruments.

The transferability (or lack thereof) of the

4 unchanged sentences

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

Revenue Recognition

The Company derives revenues from the sale of GE branded

fans and lighting fixtures to large retailers through retail and online sales.

Revenue is recorded when all of the following have occurred:

(1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the

sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured.

Cost of Sales

Cost of sales represents costs directly related to the

production and third party manufacturing of the Company’s products.

Product sold is typically shipped directly to the customer

from the third-party manufacturer; cost associated with shipping and handling is shown as a component of cost of sales.

Earnings (Loss) Per Share

Basic net earnings (loss) per share is computed by dividing

net income (loss) for the period by the weighted average number of common stock outstanding during each period.

Diluted earnings

(loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common

stock equivalents and potentially dilutive securities outstanding during each period.

The Company uses the “treasury stock”

to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts.

For the years ended

December 31, 2016 and 2015, the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock

equivalents would have been antidilutive for the period.

Therefore, separate computation of diluted earnings (loss) per share

is not presented for the periods presented.

The Company has the following common stock equivalents

at December 31, 2016 and December 31, 2015:

Convertible Debt (Exercise

price - $0.25/share)

Stock Warrants (Exercise price - $0.001

- $3.00/share)

Stock Options (Exercise price $0.35 -

Income Tax Provision

The financial statements reflect the Company’s transactions

without adjustment, if any, required for income tax purposes.

The net loss generated by the Company for the period January 1,

2012 to November 6, 2012 has been excluded from the computation of income taxes due to the company’s tax designation as

an LLC during that period.

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.

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

Deferred 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 derecognition,

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

carrybacks and carryforwards.

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.

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 (a) Affiliates of the Company; (b) 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; (c) Trusts for the benefit of employees, such as pension and profit sharing

trusts that are managed by or under the trusteeship of management; (d) Principal owners of the Company; (e) Management

of the Company; (f) Other 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 (g) 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:

of the relationship(s) involved; (b).

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; (c).

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 (d).

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.

Company derives revenues from the sale of GE branded fans and lighting fixtures to large retailers through retail and online sales.

Sales are recognized at the time title transfers

to the customer, generally upon shipment and when all the following have occurred:

(1) persuasive evidence of an arrangement exists,

(2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable,

and (4) collectability is reasonably assured.

allowances and a provision for estimated returns and other allowances are recorded at the time sales are made, considering historical

and anticipated trends.

January 1, 2017, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments

(“new revenue standard”) to all contracts using the modified retrospective method, while prior period amounts are

not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

The adoption has had an immaterial

impact to our comparative net income and as such comparative information has not been restated and continues to be reported under

the accounting standards in effect for those periods.

We expect the impact of the adoption of the new standard to be immaterial

to our net income on an ongoing basis.

majority of our sales revenue continues to be recognized when products are shipped from our manufacturing facilities and from

our third-party logistics facility.

of sales represents costs directly related to produce, acquire and source inventory for sale, and provisions for inventory shrinkage

and obsolescence.

These costs include costs of purchased products, inbound freight, custom duties.

GENERAL AND ADMINISTRATIVE EXPENSES

Selling expenses

include costs incurred in the selling of merchandise.

General and administrative expenses include costs incurred in the administration

or general operations of the business.

Selling, general and administrative expenses include employee and related costs, marketing,

professional fees, distribution , warehouse costs,

and other related selling costs.

(Loss) Per Share

net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common

stock outstanding during each period.

Diluted earnings (loss) per share is computed by dividing net income (loss) for the period

by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during

Company uses the “treasury stock”

method to determine whether there is a dilutive effect of outstanding convertible

debt, option and warrant contracts.

For the years ended December 31, 2017 and 2016, the Company reflected net loss and a dilutive

net loss, and the effect of considering any common stock equivalents would have been antidilutive for the period.

Therefore, separate

computation of diluted earnings (loss) per share is not presented for the periods presented.

Company has the following common stock equivalents at December 31, 2017 and December 31, 2016:

December 31, 2017

December 31, 2016

Convertible Debt (Exercise price - $0.25/share)

Stock Warrants (Exercise price - $0.375 - $3.00/share)

Stock Options (Exercise price $0.375 - $4.00/share)

Tax Provision

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

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.

The net loss generated by the Company for the period January 1, 2012 to

November 6, 2012 has been excluded from the computation of income taxes.

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.

Deferred 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.

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.

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

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 derecognition, classification, interest and penalties on income taxes, accounting in interim periods

and requires increased disclosures.

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 carrybacks and carryforwards.

The Company periodically reviews the recoverability

of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

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.

taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Company’s tax returns are subject to examination by the federal and state tax authorities.

Tax Positions

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, 2017 and 2016

Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure

of related party transactions.

to Section 850-10-20 the related parties include (a) Affiliates of the Company; (b) 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; (c) Trusts for the benefit of employees,

such as pension and profit sharing trusts that are managed by or under the trusteeship of management; (d) Principal owners

of the Company; (e) Management of the Company; (f) Other 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 (g) 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.

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

the nature of the relationship(s) involved; (b).

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; (c).

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 (d).

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.

Contingencies

The Company follows subtopic 450-20 of the

FASB Accounting Standards Codification to report accounting for contingencies.

Certain conditions may exist as of the date the

consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one

or more future events occur or fail to occur.

The Company assesses such contingent liabilities, and such assessment inherently

involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company

or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings

or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is

probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability

would be accrued in the Company’s financial statements.

If the assessment indicates that a potentially material loss contingency

is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability,

and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not

disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

However, there is no assurance that

such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated

results of operations or consolidated cash flows.

Subsequent Events

The Company follows the guidance in Section

855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events.

The Company will evaluate subsequent

events through the date when the financial statements are issued.

Pursuant to ASU 201009 of the FASB Accounting Standards

Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users,

such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

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

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

In April 2015, the FASB issued Accounting Standards

Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies.

conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company

but which will only be resolved when one or more future events occur or fail to occur.

The Company assesses such contingent liabilities,

and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings

that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived

merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected

to be sought therein.

the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability

can be estimated, then the estimated liability would be accrued in the Company’s financial statements.

If the assessment

indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be

estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material,

would be disclosed.

contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would

be disclosed.

However, there is no assurance that such matters will not materially and adversely affect the Company’s business,

consolidated financial position, and consolidated results of operations or consolidated cash flows.

Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent

The Company will evaluate subsequent events through the date when the financial statements are issued.

to ASU 201009 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued

when they are widely distributed to users, such as through filing them on EDGAR.

Issued Accounting Pronouncements

May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),”

on revenue recognition.

This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers

in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount,

timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The original effective date of this guidance

was for interim and annual reporting periods beginning after December 15, 2016, early adoption is not permitted, and the

guidance must be applied retrospectively or modified retrospectively.

In July 2015, the FASB approved an optional one-year deferral

of the effective date.

January 1, 2017 We adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments

(“new revenue standard”) to all contracts using the modified retrospective method, while prior period amounts are

not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We expect the impact of the

adoption of the new standard to be immaterial to our net income on an ongoing basis.

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.

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.

April 2015, the FASB issued Accounting Standards Update No.

2015-03, Interest—Imputation of Interest (Topic 83530):

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, 2016, 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.

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, 2016, 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.

May 2015, the FASB issued ASU 2015-07, "Fair Value Measurement (Topic 820):

Disclosures for Investments in Certain Entities

That Calculate Net Asset Value per Share (or Its Equivalent),"

which removes the requirement to categorize within the fair

value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient.

the amendments remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair

value using the net asset value per share practical expedient.

This ASU is effective for annual periods, including interim periods

within those annual periods, beginning after December 15, 2015, and early adoption is permitted.

The new guidance should be applied

on a retrospective basis to all periods presented.

We adopted this guidance on January 1, 2016.

The adoption of this guidance

did not have a material impact on our financial position, results of operations or cash flows.

September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement –Period Adjustments.”

Changes to the accounting for measurement-period adjustments relate to business combinations.

Currently, an acquiring entity is

required to retrospectively adjust the balance sheet amounts of the acquired business recognized at the acquisition date with

a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquired business.

measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized

for a business combination (generally up to one year from the date of acquisition).

The changes eliminate the requirement to make

such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period

they are determined.

The new standard is effective for both public and private companies for periods beginning after December 15,

We adopted this guidance in the first quarter 2016.

The adoption of this guidance did not have a material impact on our

financial position, results of operations or cash flows.

July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2015-11, Inventory

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.

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

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.

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.

Note 3 Furniture and Equipment

equipment consisted of the following at December 31, 2016 and December 31, 2015:

Office Equipment

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.

February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810):

Amendments to the Consolidation Analysis,"

makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement

167, included in ASU 2010-10, for certain investment funds.

All reporting entities that hold a variable interest in other

legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements.

This ASU is effective

for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period.

this guidance on January 1, 2016.

The adoption of this guidance did not have a material impact on our financial position,

results of operations or cash flows.

January 2015, the FASB issued ASU 2015-01, "Income Statement –

Extraordinary and Unusual Items (Subtopic 225-20),"

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

This update eliminates

from GAAP the concept of extraordinary items.

We adopted this guidance on January 1, 2016.

The adoption of this guidance

did not have a material impact on our financial position, results of operations or cash flows.

November 2014, the FASB issued ASU 2014-16, "Derivatives and Hedging (Topic 815)."

Entities commonly raise capital by

issuing different classes of shares, including preferred stock, that entitle the holders to certain preferences and rights over

the other shareholders.

The specific terms of those shares may include conversion rights, redemption rights, voting rights, and

liquidation and dividend payment preferences, among other features.

One or more of those features may meet the definition of a

derivative under GAAP.

Shares that include such embedded derivative features are referred to as hybrid financial instruments.

The objective of this update is to eliminate the use of different methods in practice and thereby reduce existing diversity under

GAAP in the accounting for hybrid financial instruments issued in the form of a share.

The amendments are effective for fiscal

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

We adopted this guidance on January 1,

The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements –

Going Concern (Subtopic 205-40),

effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.

Early application

is permitted.

This standard provides guidance about management’s responsibility to evaluate whether there is substantial

doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.

is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted.

We adopted this

guidance on January 1, 2016.

The adoption of this guidance did not have a material impact on our financial position, results

of operations or cash flows.

March 2016, the FASB issued an accounting standard update which simplifies the accounting for share-based payment transactions,

inclusive of income tax accounting and disclosure considerations.

This guidance is effective for fiscal and interim periods beginning

after December 15, 2016 and is required to be applied retrospectively to all impacted share-based payment arrangements.

this guidance on January 1, 2017.

The adoption of this guidance did not have a material impact on our financial position,

results of operations or cash flows.

January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01,

which amends the guidance in U.S.

GAAP on the classification and measurement of financial instruments.

Changes to the current

guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation

and disclosure requirements for financial instruments.

In addition, the ASU clarifies guidance related to the valuation allowance

assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.

standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should

apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period

in which the guidance is effective.

Early adoption is not permitted except for the provision to record fair value changes for

financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income.

We are currently evaluating the impact of adopting this guidance.

February 2016, the FASB issued an accounting standard update which modifies the accounting for leasing arrangements, particularly

those arrangements classified as operating leases.

This update will require entities to recognize the assets and liabilities arising

from operating leases on the balance sheet.

This guidance is effective for fiscal and interim periods beginning after December

15, 2018 and is required to be applied retrospectively to all leasing arrangements.

We are currently assessing the effects this

guidance may have on our financial statements.

January 2017, the FASB issued Accounting Standards Update No.

2017-01, Clarifying the Definition of a Business ("ASU 2017-01").

The standard clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should

be accounted for as acquisitions of assets or businesses.

ASU 2017-01 is effective for fiscal years beginning after December 15,

2017, and interim periods within those fiscal years.

Under ASU 2017-01, to be considered a business, the assets in the transaction

need to include an input and a substantive process that together significantly contribute to the ability to create outputs.

to the adoption of the new guidance, an acquisition or disposition would be considered a business if there were inputs, as well

as processes that when applied to those inputs had the ability to create outputs.

Early adoption is permitted for certain transactions.

Adoption of ASU 2017-01 may have a material impact on our consolidated financial statements if we enter into future business combinations.

January 2017, the FASB issued Accounting Standards Update No.

2017-04, Simplifying the Test for Goodwill Impairment ("ASU

2017-04").

ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test,

which requires a hypothetical purchase price allocation.

ASU 2017-04 is effective for annual or interim goodwill impairment tests

in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis.

Early adoption is permitted for

interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

We do not anticipate the adoption

of ASU 2017-04 will have a material impact on our consolidated financial statements.

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.

3 Furniture and Equipment

Property and equipment consisted of the following:

Machinery and Equipment

Computer Equipment

Furniture and Fixtures

Tooling and Production

Leasehold Improvements

Accumulated Depreciation

Property and Equipment

Depreciation expense amounted to $26,483 and $22,430 for

the twelve months ended December 31, 2016 and 2015, respectively.

Note 4 Intangible Assets

Intangible assets (patents) consisted of the following

at December 31, 2016 and December 31, 2015:

Impairment Charges

Property and Equipment net

Depreciation expense amounted to $50,915 and

$26,483 for the years ended December 31, 2017 and 2016, respectively.

4 Intangible Assets

assets (patents) consisted of the following:

Accumulated Amortization

Patents - net

Amortization expense associated with patents amounted

to $7,958 and $5,347 for the twelve months ended December 31, 2016 and 2015, respectively.

At December 31, 2016, future amortization of intangible

Year Ending December 31

expense on intangible assets was $11,395 and $7,958 for the years ended December 31, 2017 and 2016, respectively.

December 31, 2017, the estimated amortization of intangible assets for the next five years and thereafter was as follows:

Ending December 31

and Thereafter

Actual amortization expense in future periods could differ

from these estimates as a result of future acquisitions, divestitures, impairments and other factors.

Note 5 GE Trademark License Agreement

The Company entered into an amended License Agreement

with General Electric regarding the GE Trademark License.

The License Agreement is amortized through its expiration in November

amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments

and other factors.

5 GE Trademark License Agreement

The Company entered into an amended License

Agreement with General Electric regarding the GE Trademark License.

The License Agreement is amortized through its expiration in

November 2018.

December 31, 2017

December 31, 2016

GE Trademark License

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Accumulated Amortization

Patents –

Amortization expense associated with the GE Trademark

License amounted to $2,448,161 and $2,441,472 for the twelve months ended December 31, 2016 and 2015, respectively

At December 31, 2016, future amortization of intangible

assets is as follows for the remaining:

Ending December 31

Note 6 Notes Payable

GE trademark license –

Amortization expense associated with the GE

Trademark License amounted to $2,435,117 and $2,448,161 for the years ended December 31, 2017 and 2016, respectively.

determined an impairment adjustment of $600,000 was necessary for the year ended 2017.

At December 31, 2017, future amortization of

intangible assets is as follows for the remaining:

Year Ending December 31

Note 6 Deferred Lease Credits

Cash or rent abatements received upon entering

certain office leases are recognized on a straight-line basis as a reduction to rent expense over the lease term.

The unamortized

portion is included in Deferred Lease Credits, which are included in other current liabilities.

As of December 31, 2017, and December

31, 2016 the deferred credits were $42,332 and $13,034 respectively.

Deferred Rent amortization was $ 29,297 and $(11,987) for

the years ended December 31, 2017 and 2016, respectively.

7 Notes Payable

At December 31, 2017 and December 31, 2016,

the Company had a note payable to a bank in the amount of $70,222 and $186,823, respectively.

The note, dated May 2007, is

due in monthly payments of $10,000 and carries interest at 4.75%.

The note is secured by certain assets of the Company

compensating balances, and is due August 2018.

On April 13, 2016, the company entered in to an agreement

with a third party for a $10,000,000 line of credit.

The primary purpose of this line of credit is to fund manufacturing and product

related obligations.

The note carries interest of 8%, due monthly with principal and unpaid interest due December 31, 2017.

note is secured by the assets of the company.

The outstanding balance on this note was $3,112,737 at December 31, 2016.

The Company received a $500,000 loan from a related party

in January 2016.

The note bears interest at prime

plus 1.5%, which was 6% as of December 31, 2017, and matures on August 28, 2018.

The note is secured by the assets of the Company

and personal guarantees by a shareholder and an officer of the Company.

On April 13, 2016, the Company entered into

a Line of Credit Promissory Note with a third party (the “Line of Credit”), as amended and extended, in the principal

sum of up to ten million U.S.

Dollars (US $10,000,000) to support purchase orders, inventory and general working capital needs.

The Company may draw and/or repay this Line of Credit from time to time until the maturity hereof.

The Note provides for monthly

payments of interest at nine percent (9%) per annum on outstanding principal and matures on January 10, 2019, at which time the

full principal amount and accrued but unpaid interest become due.

The Line of Credit note is secured by the assets

of the Company.

As of December 31, 2017, and December 31, 2016, the outstanding balance on this note was $3,456,732 and $3,112,737,

respectively.

The Company received a $500,000 loan from a

related party in January 2016.

The note is on demand and carries interest of 12%.

As of December 31, 2016, the outstanding balance is $200,000.

Principal payments due under the terms of the notes described

above are as follows:

As of December 31, 2017, the outstanding balance

Principal payments due under the terms of the

notes described above are as follows:

Principal Due in Next 12 months

Note 7 Convertible Debt Net

The Company has recorded derivative liabilities associated

with convertible debt instruments, as more fully discussed at Note 8.

December 31, 2014

8 Convertible Debt Net

Company has recorded derivative liabilities associated with convertible debt instruments, as more fully discussed at Note 8.

Related Party

Balance December 31, 2015

Amortization of Debt Discount

Less Repayments/Conversions

Balance December 31, 2016

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Balance December 31, 2017

Less Current portion

Long-Term Convertible Debt

On November 26, 2013, May 8, 2014 and September 25, 2014

the Company completed closings in connection with its offering (the “Notes Offering”) of its 12% Secured Convertible

Promissory Notes (the “12% Notes”) in the aggregate principal amount of $4,240,100 and/or its 15% Secured Convertible

Promissory Notes in the aggregate principal amount of $30,000 (the “15% Notes”, and together with the 12% Notes, each

a “Note”

and collectively, the “Notes”), as applicable, with certain “accredited investors”

(the “Investors”), as defined under Regulation D, Rule 501 of the Securities Act.

The entire aggregate principal amount

of the Notes of $3,574,234 outstanding as of December 31, 2016 and $4,270,100 was outstanding as of December 31, 2015, such amount

being exclusive of securities converted into the Notes separate from the Notes Offering.

Pursuant to the Notes Offering, the Company

received $1,752,803, $1,400,000 and $800,500 in net proceeds on November 26, 2013, May 8, 2014 and September 25, 2014, respectively.

In addition to the terms customarily included in such

instruments, the Notes began accruing interest on the date that each Investor submitted the principal balance of such Investor’s

Note, with the interest thereon becoming due and payable on the one year anniversary, and quarterly thereafter.

Upon a default

of the Notes, the interest rate will increase by 2% for each 30 day period until cured.

The principal balance of each Note and

all unpaid interest became payable twenty-four (24) months after the date of issuance.

The principal and outstanding interest

under the Notes are convertible into shares of the Company’s common stock at $0.25 per share and are secured by a first

priority lien (subject only to an existing note with Signature Bank of Georgia on the Company’s intellectual property and

all substitutes, replacements and proceeds of such intellectual property) pursuant to the terms of a Security Purchase Agreement,

dated as of November 26, 2013, May 8, 2014 and September 25, 2014, as applicable, by and between the Company and each Investor.

Pursuant to the Notes Offering, each Investor also received

five (5) year common stock warrants to purchase the Company’s common stock at $0.375 per share (each a “Warrant”

November 26, 2013, May 8, 2014 and September 25, 2014 the Company completed closings in connection with its offering (the “Notes

Offering”) of its 12% Secured Convertible Promissory Notes (the “12% Notes”) in the aggregate principal amount

of $4,240,100 and/or its 15% Secured Convertible Promissory Notes in the aggregate principal amount of $30,000 (the “15%

Notes”, and together with the 12% Notes, each a “Note”

and collectively, the “Notes”), as applicable,

with certain “accredited investors”

(the “Investors”), as defined under Regulation D, Rule 501 of the

Securities Act.

Pursuant to the Notes Offering, the Company received $1,752,803, $1,400,000 and $800,500 in net proceeds on November

26, 2013, May 8, 2014 and September 25, 2014, respectively.

addition to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor

submitted the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on the one-year

anniversary, and quarterly thereafter.

Upon a default of the Notes, the interest rate will increase by 2% for each 30-day period

The principal balance of each Note and all unpaid interest became payable twenty-four (24) months after the date

The principal and outstanding interest under the Notes are convertible into shares of the Company’s common

stock at $0.25 per share and are secured by a first priority lien (subject only to an existing note with Signature Bank of Georgia

on the Company’s intellectual property and all substitutes, replacements and proceeds of such intellectual property) pursuant

to the terms of a Security Purchase Agreement, dated as of November 26, 2013, May 8, 2014 and September 25, 2014, as applicable,

by and between the Company and each Investor.

Pursuant to the Notes Offering, each Investor

also received five (5) year common stock warrants to purchase the Company’s common stock at $0.375 per share (each a “Warrant”

and collectively, the “Warrants”).

1 unchanged sentence

valuation of the Company.

Investors of the 15% Notes received Warrants with 15% coverage based on the predetermined valuation

of the Company.

Investors of the 15% Notes received Warrants with 15% coverage based on the predetermined valuation of

Investors with a principal investment amount equal to or greater than $250,000 received Warrants with a bonus 40%

3 unchanged sentences

a notice of exercise, payment and surrender of the Warrant.

The Notes and Warrants were treated as derivative liabilities.

In connection with the Notes Offering, the Company entered

into Registration Rights Agreements, each dated as of November 26, 2013, May 8, 2014 and September 25, 2014, and each by and between

the Company and each of the Investors (collectively, the “Registration Rights Agreements”), whereby the Company agreed

to prepare and file a registration statement with the SEC within sixty (60) days after execution of the applicable Registration

Rights Agreement and to have the registration statement declared effective by the SEC within ninety (90) days thereafter.

Because the Company was unable to file a registration

statement pursuant to the terms of each Registration Rights Agreements dated as of November 26, 2013 or May 8, 2014, the Company

was in default under such Registration Rights Agreements (the “Filing Default Damages”), and because the Company was

unable to have a registration statement declared effective pursuant to the terms of the Registration Rights Agreements dated as

of November 26, 2013, the Company was in default under such Registration Rights agreements (the “Effectiveness Default Damages”).

The Filing Default Damages stopped accruing on the date such registration statement was filed, and the Effectiveness Default Damages

stopped accruing on the date it was declared effective.

The Company invited the Investors holding Notes dated

November 26, 2013 to extend the first interest payment that was scheduled to be paid pursuant to the Notes dated November 26,

2013 (the “Interest Due”) to February 24, 2015 and in exchange offered to capitalize the Interest Due at a rate of

12% through payment (the “Additional Interest”), all of which was convertible into the Company’s common stock

at a price of $0.25 per share.

Through December 31, 2016, the Company has issued in total 2,343,191 shares of its common stock

representing $585,798 in Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages.

As of December

31, 2016, all Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages was repaid by the Company.

During 2015, five Investors requested that the Company

withhold payments of interest due under their Notes at no cost to the Company, to allow the Company to address working capital

Such interest due has been or will be paid to the five Investors, and none of such amounts have been or will be paid in

shares of the Company’s capital stock.

In November 2015, the Company invited the holders of Notes

dated November 26, 2013, with respect to outstanding principal and interest due under their respective Notes, to (i) receive payment

in cash, (ii) convert their Notes into shares of the Company’s common stock, or (iii) forbear an election for three (3)

months, or until February 26, 2016, pursuant to a forbearance agreement, during such time interest under their respective Notes

would continue to accrue.

In February 2016, the Company invited the same holders to extend their forbearance period to make an

election to convert or redeem their Notes for an additional three months, or until May 26, 2016, under the same terms as the first

forbearance agreements.

In May 2016, the Company invited the holders of all Notes, where such holders had not already made an

election to redeem or convert their Notes, to forbear or extend their forbearance period to make an election to convert or redeem

their Notes until July 31, 2016, which the Company thereafter extended to August 15, 2016 (the “August 2016 Election”).

This also provided a third option to all noteholders, whereby such holders could convert their respective Note(s) into shares

of Series A Convertible Preferred Stock (“Preferred Stock”).

In May 2016, the Company invited the holders of all Notes,

where such holders had not already made an election to redeem or convert their Notes, to forbear or extend their forbearance period

to make an election to convert or redeem their Notes until July 31, 2016, which the Company thereafter extended to August 15,

2016 (the “August 2016 Election”).

This also provided a third option to all noteholders, whereby such holders could

convert their respective Note(s) into shares of Series A Convertible Preferred Stock (“Preferred Stock”).

Through December 31, 2016, the Company received

elections, in connection with the August 2016 Election, to (i) convert three (3) Notes into 240,000 shares of common stock of the

Company representing an aggregate principal balance of $60,000, and (ii) convert 31 Notes into 13,056,936 shares of Preferred Stock

representing an aggregate principal balance of $3,264,234.

Also through December 31, 2016, the Company received no elections in

connection with the August 2016 Election to redeem Notes and four (4) Investors holding Notes representing an aggregate principal

balance of $200,000 had not responded to the August 2016 Election.

Other than the three (3) aforementioned Investors, all Investors

had elected to redeem or convert their Notes into shares of common stock or Preferred Stock.

(See Note 7(c))

During 2016 six (6) notes with an aggregate

principal balance of $900,000 were repaid in accordance the agreement, in each case prior to the August 2016 Election.

All issuances of capital stock in the August 2016 Election

have been or will be made only for principal balances due under the Notes, and all interest has been or will be paid directly

to the Investors.

Notes and Warrants were treated as derivative liabilities.

connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of November 26, 2013,

May 8, 2014 and September 25, 2014, and each by and between the Company and each of the Investors (collectively, the “Registration

Rights Agreements”), whereby the Company agreed to prepare and file a registration statement with the SEC within sixty (60)

days after execution of the applicable Registration Rights Agreement and to have the registration statement declared effective

by the SEC within ninety (90) days thereafter.

the Company was unable to file a registration statement pursuant to the terms of each Registration Rights Agreements dated as

of November 26, 2013 or May 8, 2014, the Company was in default under such Registration Rights Agreements (the “Filing Default

Damages”), and because the Company was unable to have a registration statement declared effective pursuant to the terms

of the Registration Rights Agreements dated as of November 26, 2013, the Company was in default under such Registration Rights

agreements (the “Effectiveness Default Damages”).

The Filing Default Damages stopped accruing on the date such registration

statement was filed, and the Effectiveness Default Damages stopped accruing on the date it was declared effective.

Company invited the Investors holding Notes dated November 26, 2013 to extend the first interest payment that was scheduled to

be paid pursuant to the Notes dated November 26, 2013 (the “Interest Due”) to February 24, 2015 and in exchange offered

to capitalize the Interest Due at a rate of 12% through payment (the “Additional Interest”), all of which was convertible

into the Company’s common stock at a price of $0.25 per share (the “Agreement and Waiver and Agreement to Convert”).

Through December 31, 2016, the Company has issued in total 2,343,191 shares of its common stock representing $585,798 in Additional

Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages.

As of December 31, 2016, all Additional Interest,

Interest Due, Filing Default Damages and Effectiveness Default Damages was repaid by the Company.

2015, five Investors requested that the Company withhold payments of interest due under their Notes at no cost to the Company,

to allow the Company to address working capital needs.

Such interest due has been or will be paid to the five Investors in cash

or simple non-interest bearing promissory notes, and none of such amounts have been or will be paid in shares of the Company’s

capital stock.

November 2015, the Company invited the holders of Notes dated November 26, 2013, with respect to outstanding principal and interest

due under their respective Notes, to (i) receive payment in cash, (ii) convert their Notes into shares of the Company’s

common stock, or (iii) forbear an election for three (3) months, or until February 26, 2016, pursuant to a forbearance agreement,

during such time interest under their respective Notes would continue to accrue.

In February 2016, the Company invited the same

holders to extend their forbearance period to make an election to convert or redeem their Notes for an additional three months,

or until May 26, 2016, under the same terms as the first forbearance agreements.

May 2016, the Company invited the holders of all Notes, where such holders had not already made an election to redeem or convert

their Notes, to forbear or extend their forbearance period to make an election to convert or redeem their Notes until July 31,

2016, which the Company thereafter extended to August 15, 2016 (the “August 2016 Election”).

This also provided a

third option to all noteholders, whereby such holders could convert their respective Note(s) into shares of Series A Convertible

Preferred Stock (“Preferred Stock”).

(See Note 8(B)).

to the August 2016 Election, several Investors had previously elected to receive payment in cash or convert their Notes into shares

of the Company’s common stock, but most Notes remained outstanding.

December 31, 2017, one Investor redeemed $50,000 in principal balance of one Note and one Investor was issued 200,000 shares of

Preferred Stock in connection with its August 2016 Election.

Pursuant to the August 2016 Elections received and effective as of

August 15, 2016, through September 30, 2017 the Company redeemed or issued shares of the Company’s common stock or Preferred

Stock, as applicable, in exchange for the principal balance of the Notes, as follows:

(i) the payment of, in the aggregate, $50,000

in principal balance of one Note; (ii) the issuance of 240,000 shares of the Company’s common stock, representing $60,000

in outstanding Note principal balance; and (iii) the issuance of 13,456,936 shares of Preferred Stock, representing $3,364,234

in outstanding Note principal balance.

December 31, 2017, all Notes have either been re-paid in cash, separate debt obligation or by conversion, and all such Notes have

been terminated.

All issuances of capital stock in the August 2016 Election were made only for principal balances due under the

Notes, and all interest was paid directly to the Investors.

Terms of Debt

The debt carries interest between 12% and 15%, and was

due in November 2015, May 2016 and September 2016, as extended to July 31, 2016 pursuant to certain forbearance agreements.

All Notes and Warrants issued in connection with the Notes

Offering are convertible at $0.25 and $0.375/share, respectively, subject to the existence of a “ratchet feature”,

which allows for a lower offering price if the Company offers shares to the public at a lower price.

Future Commitments

At December 31, 2016, the Company has outstanding

convertible debt of $150,000 and $50,000 from a related party which will be repaid when the appropriate documentation is received

from the Noteholder, within the next twelve months.

debt carries interest between 12% and 15%, and was due in November 2015, May 2016 and September 2016, as extended to July 31,

2016 pursuant to certain forbearance agreements.

Notes and Warrants issued in connection with the Notes Offering are convertible at $0.25 and $0.375 per share, respectively, subject

to the existence of a “ratchet feature”, which allows for a lower offering price if the Company offers shares to the

public at a lower price.

Offer to Convert Debt to Preferred Shares

By letter to each holder of the Notes, dated July 22,

2016, the Company requested that each holder indicate its election to (i) redeem its Note, (ii) convert its Note into the Company’s

common stock or (iii) elect to convert its Note into shares of Preferred Stock (the “Preferred Option”), in each case

by August 15, 2016.

For those holders electing the Preferred Option, each

holder has received or will receive shares of the Preferred Stock on a 1 to 1 ratio to the number of shares of the Company’s

common stock which are then convertible under such holder’s respective Note.

With respect to interest on junior securities,

dividends, distributions or liquidation preference, shares of Preferred Stock will rank senior to shares of the Company’s

common stock or other junior securities.

Along with other terms customary for a class of convertible preferred stock, the Preferred

Stock will be convertible into shares of the Company’s common stock at the same conversion price as the Notes (i.e., USD

$0.25 per share), and will pay interest quarterly at a rate of six percent (6%).

The Preferred Stock will be convertible upon

the election of the holder thereof.

Shares of the Preferred Stock may be repurchased by the Company upon 30 days’

written notice, in whole or in part, for USD $3.50 per share, provided that during such notice period the holder will continue

to have the option and right to convert its shares of Preferred Stock into shares of the Company’s common stock.

will also have a put option, allowing them to sell their shares of Preferred Stock back to the Company at USD $0.25 per share,

the Note conversion price.

Each holder electing the Preferred Option was required

to enter into an amendment to its Note, providing that the Note will be convertible into the Preferred Stock rather than the Company’s

common stock, and to thereafter elect to convert their Note, as amended, into Preferred Stock.

In addition, each holder will be

required to enter into a lockup agreement, whereby the holder will agree not to offer, sell, contract to sell, pledge, give, donate,

transfer or otherwise dispose of (i) the shares of the Company’s common stock it then holds, (ii) the shares of Preferred

Stock obtained upon conversion of its Note, and (iii) the shares of the Company’s common stock underlying the Preferred

The Note amendments, conversion to Preferred Stock and lockup agreement have been entered into on August 15, 2016.

Note amendments were approved by a majority of the holders of the then outstanding Notes.

See above for more details related to

the results of that offering

Note 8 Derivative Liabilities

The Company identified conversion features

embedded within convertible debt and warrants issued in 2013 and 2014 and warrants attached to stock purchases in 2016.

has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted

for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available

to settle all potential future conversion transactions.

Additionally, the Company has issued options that have vested to purchase

stock through our Incentive Plan.

Shares have not been reserved with our transfer agent, therefore, they are considered “tainted”

and should be accounted for at fair value, as a derivative liability,

As a result of the application of ASC No.

815, the fair

value of the ratchet feature related to convertible debt and warrants is summarized as follow:

The fair value at the commitment and re-measurement dates

for the Company’s derivative liabilities were based upon the following management assumptions as:

letter to each holder of the Notes, dated July 22, 2016, the Company requested that each holder indicate its election to (i) redeem

its Note, (ii) convert its Note into the Company’s common stock or (iii) elect to convert its Note into shares of Preferred

Stock (the “Preferred Option”), in each case by August 15, 2016.

those holders electing the Preferred Option, each holder has received shares of the Preferred Stock on a 1 to 1 ratio to the number

of shares of the Company’s common stock which are then convertible under such holder’s respective Note.

to interest on junior securities, dividends, distributions or liquidation preference, shares of Preferred Stock will rank senior

to shares of the Company’s common stock or other junior securities.

Along with other terms customary for a class of convertible

preferred stock, the Preferred Stock will be convertible into shares of the Company’s common stock at the same conversion

price as the Notes (i.e., USD $0.25 per share), and will pay interest quarterly at a rate of six percent (6%).

The Preferred Stock

will be convertible upon the election of the holder thereof.

Shares of the Preferred Stock may be repurchased by the Company upon

30 days’

prior written notice, in whole or in part, for USD $3.50 per share, provided that during such notice period the

holder will continue to have the option and right to convert its shares of Preferred Stock into shares of the Company’s

common stock.

Holders will also have a put option, allowing them to sell their shares of Preferred Stock back to the Company at

USD $0.25 per share, the Note conversion price.

holder electing the Preferred Option was required to enter into an amendment to its Note, providing that the Note will be convertible

into the Preferred Stock rather than the Company’s common stock, and to thereafter elect to convert their Note, as amended,

into Preferred Stock.

In addition, each holder entered into a lockup agreement, whereby the holder agreed not to offer, sell,

contract to sell, pledge, give, donate, transfer or otherwise dispose of (i) the shares of the Company’s common stock it

then holds, (ii) the shares of Preferred Stock obtained upon conversion of its Note, and (iii) the shares of the Company’s

common stock underlying the Preferred Stock, for a period of twelve (12) months following the date of such agreement.

amendments, conversion to Preferred Stock and lockup agreement have been entered into on August 15, 2016.

The Note amendments

were approved by a majority of the holders of the then outstanding Notes.

See above for more details related to the results of

that offering.

9 Derivative Liabilities

The fair value at the commitment and re-measurement

dates for the Company’s derivative liabilities were based upon the following management assumptions as:

December 31, 2017

7 unchanged sentences

Fair value mark to market adjustment –

value at commitment date for warrants issued

Debt settlement on the derivative

liability associated with interest

Reclassification of derivative

liability to Additional Paid in Capital due to share reservation

(50,437,681 )

on debt settlement

Fair value at commitment date for warrants issued

Debt settlement on the derivative liability associated with interest

Reclassification of derivative liability to Additional Paid in Capital due to share reservation

Gain on debt settlement

Balance at end of period

The Company reclassified $13,229,681 to additional

paid in capital.

The reclassification is mainly due to the share reservation in transfer agent for options, warrants and conversion

of convertible notes.

The Company recorded a change in the value of embedded derivative liabilities income/(expense) $(14,413,192)

and $(43,634,482) for the years ended December 31, 2017 and 2016, respectively.

Commitment Date

Expected dividends

2 unchanged sentences

Risk Free Interest Rate

Note 9 Debt Discount

recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value of the

derivative liability, as it exceeded the gross proceeds of the note.

amortization of derivative discount amounted to $4,402,773 as of December 31, 2016 and $4,153,611 for the year ended December

recorded a change in the value of embedded derivative liabilities income/(expense) of ($43,634,482) and ($19,416,295) for the

twelve months ended December 31, 2016 and 2015, respectively.

recorded derivative expense of ($2,268,021) and $0 for the three months ended and ($9,678,390) and $0 for the twelve months ended

December 31, 2016 and 2015, respectively.

recorded loss on disposition of debt as a result of conversion to Common Stock and Preferred Stock of ($47,879,109).

was a result of the conversion value of the shares received exceeded the face value of the note.

Note 10 Debt Issue Costs

December 31, 2016

December 31, 2015

For the year ended December 31, 2017, the Company

and the third-party investors agreed to convert their warrants to the Company's common shares in cashless basis.

The Company recognizes

the warrant expense of $1,869,358.

The fair value of stock warrant is estimated using the Binomial valuation method and based on

the information as of the conversion date:

exercise price of $3.30, volatility of 150.0%, steps of 20.29 and risk-free rate of

For the year ended December 31, 2017, the Company

recognizes the option expense of $2,003,593.

The fair value of stock option is estimated using the Binomial valuation method and

based on the price of the date granted:

exercise price of $4.00, volatility of 150.0%, steps of 37.78 and risk-free rate of 2.40%.

10 Debt Discount

The Company recorded the debt discount to the

extent of the gross proceeds raised and expensed immediately the remaining fair value of the derivative liability, as it exceeded

the gross proceeds of the note.

Accumulated amortization of debt discount amounted

to -0- as of December 31, 2017 and $4,402,773 for the year ended December 31, 2016.

The Company recorded a change in the value

of embedded derivative liabilities income/(expense) of ($14,413,192) and ($43,634,482) for the years ended December 31, 2017 and

2016, respectively.

The Company recorded derivative expense of

($0) and ($9,678,390) for the years ended December 31, 2017 and 2016, respectively.

The Company recorded loss on disposition of

debt as a result of conversion to Common Stock and Preferred Stock of ($1,260,000) for the year ended 2017.

The loss was a result

of the conversion value of the shares received exceeded the face value of the note.

11 Debt Issue Costs

Debt Issuance Costs

1 unchanged sentence

Debt Issuance Costs

The Company recorded amortization expense of $14,605 and

$117,098 for the twelve months ended December 31, 2016 and 2015, respectively.

Note 11 GE Royalty Obligation

In 2011, the Company executed a Trademark Licensing Agreement

with General Electric, which allows the Company the right to market certain ceiling light and fan fixtures displaying the GE brand.

The License Agreement imposes certain manufacturing and quality control conditions that the Company must maintain in order to

continue to use the GE brand.

The License Agreement is nontransferable and cannot be

Company recorded amortization expense of $-0- and $14,605 for the years ended December 31, 2017 and 2016, respectively.

12 GE Royalty Obligation

2011, the Company executed a Trademark Licensing Agreement with General Electric, which allows the Company the right to market

certain ceiling light and fan fixtures displaying the GE brand.

The License Agreement imposes certain manufacturing and quality

control conditions that the Company must maintain in order to continue to use the GE brand.

License Agreement is nontransferable and cannot be sublicensed.

Various termination clauses are applicable;

however, none were applicable as of December 31, 2016, and December 31,

In August 2014, the Company entered into a second amendment

to the License Agreement pertaining to its royalty obligations.

Under the terms of the amendment, the Company agreed to pay a

total of $12,000,000 by November 2018 for the rights assigned in the original contract.

In case the Company does not pay GE a

total of at least $12,000,000 in cumulative royalties over the term of the License Agreement, the difference between $12,000,000

and the amount of royalties actually paid to GE is owed in December 2018.

Payments are due quarterly based upon the prior quarters’

The Company made payments of $489,108 and $196,800 for the twelve months ended December 31, 2016 and 2015, respectively.

The License Agreement obligation will be paid from sales

of GE branded product subject to the following repayment schedule:

Net Sales in Contract Year

Percentage of

Contract Year Net Sales owed to GE

however, none were

applicable as of December 31, 2017, and December 31, 2016.

August 2014, the Company entered into a second amendment to the License Agreement pertaining to its royalty obligations.

the terms of the amendment, the Company agreed to pay a total of $12,000,000 by November 2018 for the rights assigned in the original

In case the Company does not pay GE a total of at least $12,000,000 in cumulative royalties over the term of the License

Agreement, the difference between $12,000,000 and the amount of royalties actually paid to GE is owed in December 2018.

are due quarterly based upon the prior quarters’

The Company made payments of $541,858 and $489,108 for the years

ended December 31, 2017 and 2016, respectively.

License Agreement obligation will be paid from sales of GE branded product subject to the following repayment schedule:

Sales in Contract Year

of Contract Year Net Sales owed to GE

$0 $50,000,000

1 unchanged sentence

$100,000,000+

The Company has limited operating history and does not

have the ability to estimate the sales of GE branded product, the liability is classified as long-term.

As sales are recognized,

the Company will estimate the portion it expects to pay in the current year and classify as current.

Note 12 Income Taxes

are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due.

taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either

taxable or deductible when the assets or liabilities are recovered or settled.

31, 2016, the Company has a net operating loss carryforward of approximately $15,465,000 available to offset future taxable income

expiring through 2036.

of December 31, 2017, and December 31, 2016 the outstanding balance was $10,760.566 and $11,302,423, respectively.

13 Income Taxes

taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due.

Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which

will be either taxable or deductible when the assets or liabilities are recovered or settled.

December 31, 2017, the Company has a net operating loss carryforward of approximately $22,281,117 available to offset future taxable

income indefinitely.

Utilization of future net operating losses may be limited due to potential ownership changes under Section

382 of the Internal Revenue Code.

the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the

deferred income tax assets will not be realized.

The ultimate realization of deferred income tax assets is dependent upon the

generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers

the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making

this assessment.

Based on consideration of these items, management has determined that enough uncertainty exists relative to the

realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December

assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or

all of the deferred income tax assets will not be realized.

The ultimate realization of deferred income tax assets is dependent

upon the generation of future taxable income during the periods in which those temporary differences become deductible.

considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies

in making this assessment.

Based on consideration of these items, management has determined that enough uncertainty exists relative

to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December

31, 2017, and 2016.

of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2016 and December 31, 2015

effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2017 and December

31, 2016 are approximately as follows:

December 31, 2016

December 31, 2015

Net operating loss carryforward

Gross Deferred Tax Assets

Less Valuation Allowance

Total Deferred Tax Assets –

income tax expense for the years ended December 31, 2015 and 2014 due to the Company’s net losses

The Company’s

tax expense differs from the “expected”

tax expense for the years ended December 31, 2015 and December 31, 2014 (computed

by applying the Federal Corporate tax rate of 35% to loss before taxes and 5.5% for Florida State Corporate Taxes, are approximately

operating loss carryforward

Gross Deferred

Valuation Allowance

Deferred Tax Assets –

was no income tax expense for the years ended December 31, 2017 and 2016 due to the Company’s net losses

Company’s tax expense differs from the “expected”

tax expense for the years ended December 31, 2017 and December

31, 2016 (computed by applying the Federal Corporate tax rate of 35% to loss before taxes and 5.5% for Florida State Corporate

Taxes, are approximately as follows:

"expected"

7 unchanged sentences

in valuation allowance

Note 13 Stockholders Deficit

(A) Common Stock

For the twelve months ended December 31, 2016 and year

ended December, 31 2015, the Company issued the following common stock:

of Value per Share

14 Stockholders Deficit

years ended December 31, 2017 and years ended December 31, 2016, the Company issued the following common stock:

Equity Transactions

stock issued per Waiver and Conversion Agreement

stock issued per Employment Agreement of CEO

stock issued per Stock Rights Offering

stock issued per Stock Rights Offering- to be issued

Stock issued Board of Directors Compensation

stock issued per Waiver and Conversion Agreement

Stock offering

Stock Issued for Services

Stock Issued for Conversion of Debt

The following is a more detailed description of the Company’s

stock issuance from the table above:

Agreement and Waiver and Agreement

The Company issued 1,718,585 shares at $0.25 per share,

representing $429,646 in penalties and interest, in connection with the Agreement and Waiver and the Agreement to Convert.

a complete description of the Agreement and Waiver and the Agreement to Convert, see Note 7 above.

Shares Issued to Chief Executive Officer

In November 2014, the Company entered into an Employment

Agreement with its current Chief Executive Officer, which provided for stock based compensation equal to 750,000 of restricted

shares, of which 250,000 shares vested in May 2015 and 500,000 shares vested in December 2015.

These shares were issued at $0.25

per share and were issued subsequent to December 31, 2015.

Shares Issued in Connection with Stock Offering

the Company offered to existing shareholders a maximum of 6,666,667 shares of common stock at an issuance cost of $0.60 per share

for a total of $4,000,000 (the “May Stock Offering”).

The May Stock Offering concluded on November 15, 2015 the Company

will issue 3,782,666 shares in connection with three closings.

Shares Issued in Connection with Stock Offering

In November 2015, the Company offered to new and existing

shareholders a maximum of 2,000,000 shares of common stock at an issuance cost of $1.00 per share for a total of $2,000,000 (the

“November Stock Offering”).

On December 24, 2015, the Company closed subscriptions for 500,000 shares of common stock

pursuant to the November Stock Offering, and on January 4, 2016, the stock certificates representing those shares were issued.

Shares Issued in Board of Directors Compensation.

Common Stock issued Board

of Directors Compensation

Common stock issued per Agreement and Waiver

and Agreement to Convert

Common Stock Offering

Common Stock Award

Common Stock Issued for Services

Common Stock Issued for Conversion of Debt

2016 Equity Transactions

Equity Transactions

Common Stock Offering

Common Stock Issued per Exercise of Warrants

Common Stock Issued per Exercise of Options

Common Stock Issued

for the cashless exercise of warrants

2017 Equity Transactions

following is a more detailed description of the Company’s stock issuance from the table above:

Shares Issued to Board of Directors

The Company added a new Director in November 2015.

Company issued the Director 50,000 shares of Common Stock at $0.60 per share as compensation in February 2016.

In addition, this

Director agreed to serve as the Company’s Audit Committee Chair, and received 12,000 shares of Common Stock at $1.00 per

share as compensation for these additional responsibilities.

Shares Issued in Connection with the Notes or Agreements

The Company appointed

a new director in November 2015.

Pursuant to the Company’s Director Compensation Policy (the “Director Compensation

Policy ”), the Company issued the director

50,000 shares of the its common stock valued at $0.60 per share in connection with the director’s appointment.

award was granted on November 15, 2015, but the shares were not issued by the Company until February 2016.

In January 2016, this

director agreed to serve as the Company’s Audit Committee Chair, and the Company issued the director 12,000 shares of the

its common stock valued at $1.00 per share as compensation for the additional responsibilities, pursuant to the Director Compensation

Shares Issued in Connection with the Notes or Agreements to Convert

In connection

1 unchanged sentence

additional 2,343,191 shares of its common stock as payment for Additional Interest, Interest Due, Filing Default Damages and Effectiveness

Default Damages, representing payment to Investors of $1,210,798.

Of this amount, $625,000 is prior year stock awards/grants not

issued until 2016.

Default Damages , representing payment to Investors

of $1,210,798.

Of this amount, $625,000 represents prior year stock awards/grants that were not issued until 2016.

Shares Issued in Connection with Offering

On February 19, 2016, the Company completed a second closing

of the November Stock Offering representing aggregate gross proceeds to the Company of $300,000, and thereafter issued 300,000

shares of its common stock.

In April 2016, the Company completed an offering of 2,000,000

shares at an offering price of $2.50 and 1,666,667 in warrants with a conversion price of $3.00 per share.

In May 2016, the Company completed an offering of 675,000

shares at an offering price of $2.60 and 1,350,000 of warrants with a conversion price between $3.00 and $3.50 over the next three

anniversary dates.

In July 2016, the Company completed an offering for 30,000

shares at $2.60 and an additional 150,000 shares at $2.70 in two separate offerings.

February 19, 2016, the Company completed a second closing of its offering of shares of its common stock, which first closed on

December 24, 2015, representing aggregate gross proceeds to the Company of $300,000, and thereafter issued 300,000 shares of its

common stock.

April 2016, the Company completed an offering of 2,000,000 shares of its common stock at an offering price of $2.50 per share,

and 1,666,667 in warrants having a conversion price of $3.00 per share.

May 2016, the Company completed an offering of 675,000 shares of its common stock at an offering price of $2.60 per share, and

1,350,000 of warrants having conversion price between $3.00 and $3.50 over the next three anniversary dates.

July 2016, the Company completed an offering of 30,000 shares of its common stock at an offering price of $2.60 per share, and

an additional 150,000 shares of its common stock at $2.70 per share in two separate offerings.

Shares Issued Pursuant to Stock Awards.

In September 2016, the Company issued 25,000 shares in

stock awards at $0.60 per share.

September 2016, the Company issued 25,000 shares of its common stock in stock awards granted on November 15, 2015, at $0.60 per

Shares Issued for Services

In September 2016, the Company issued 300,000 shares issued

representing $136,250 in services received.

The share conversions were in a range of $0.25 to $1.00 per share.

Shares Issued in Conjunction

with Retirement of Debt

In accordance

with the Notes, 443,156 shares were issued for the retirement of debt during the period.

(B) Preferred Stock

The following is a summary of the Company’s Preferred

Stock Activity

of Value per Share

2015 Preferred

Stock Transactions

issued per Waiver and Conversion Agreement

In accordance

with the Company’s Convertible Notes Payable Preferred Option offering (Note 7 (C) ) 13,056,932 shares of 6% Preferred Stock.

September 2016, the Company issued 300,000 shares of its common stock representing $136,250 in services received in 2015.

share conversions were in a range of valuations between $0.25 and $1.00 per share, based on the dates of the agreements and when

the services were rendered.

Shares Issued in Conjunction with Retirement

accordance with the Notes, the Company issued 443,156 shares of its common stock for the retirement of debt during the year-ended

December 31, 2016.

Shares Issued for Common Stock

the nine-months ended September 30, 2017, the Company received gross proceeds of $209,000 from the issuance of 69,667 shares of

its common stock to three individuals at $3.00 per share.

In connection therewith, the Company issued five-year options to purchase

up to 315,000 shares of its common stock at an exercise price of $3.00 per share.

Shares Issued Pursuant to Warrants Exercised

March 2017, the Company issued 1,666,667 shares of its common stock upon exercise in full of a warrant having an exercise price

of $3.00 per share, and the Company received gross proceeds of $5,000,000.

Shares Issued Pursuant to Options Exercised

April 2017, the Company issued 30,000 shares of its common stock upon exercise in full of an option having an exercise price of

$2.60 per share, and the Company received gross proceeds of $78,000.

Common Stock Issued for the cashless Exercise

November 2017, the Company issued 4,132,068 shares of its common stock upon exercise of warrants, and it was cashless exercise.

Preferred Stock

following is a summary of the Company’s Preferred Stock Activity

Preferred Stock Transactions

Stock Issued per August 2016 Election

2016 Preferred Stock Transactions

Preferred Stock Transactions

Stock Issued per August 2016 Election

2017 Preferred Stock Transactions

accordance with the August 2016 Elections (see Note 8(B)), the Company has issued 13,456,932 shares of 6% Preferred Stock in exchange

for Notes having a principal balance of $3,364,234.

The Preferred Stock will be convertible upon the election of the holder thereof.

Shares of the Preferred Stock may be repurchased

by the Company upon 30 days’

prior written notice, in whole or in part, for USD $3.50 per share, provided that during such

notice period the holder will continue to have the option and right to convert its shares of Preferred Stock into shares of the

Company’s common stock.

Holders will also have a put option, allowing them to sell their shares of Preferred Stock back

to the Company at USD $0.25 per share, the Note conversion price, and therefore the stock is classified as Mezzanine equity rather

than permanent equity The stock was valued based upon the value of Common Shares publicly traded nearest the conversion date.

During the year ended December 31, 2016, the Company distributed $30,966 to the Preferred Stock shareholders.

The following is a summary of the Company’s stock

option activity:

Shares of the Preferred Stock may be repurchased by the Company upon 30 days’

prior written notice, in whole or in part,

for USD $3.50 per share, provided that during such notice period the holder will continue to have the option and right to convert

its shares of Preferred Stock into shares of the Company’s common stock.

Holders also have a put option, allowing them to

sell their shares of Preferred Stock back to the Company at USD $0.25 per share, the Note conversion price, and therefore the

stock is classified as Mezzanine equity rather than permanent equity.

The stock was valued based upon the value of shares of the

Company’s common stock publicly traded nearest the conversion date.

During the year ended December 31, 2017 the Company

paid dividends in the amount of $149,737 to the Preferred Stock shareholders.

preferred stock - subject to redemption:

$0 par value;

20,000,000 shares authorized;

13,456,932 and 13,056,932 shares issued and

outstanding at December 31, 2017 and December 31, 2016, respectively

Stock Options

following is a summary of the Company’s stock option activity:

Contractual Life

4 unchanged sentences

Balance, December 31, 2017

Company has issued options that have vested to purchase stock through our Incentive Plan.

Shares have not been reserved with our transfer agent, therefore, they are considered

“tainted”.

The Company has determined that they should be accounted for at

fair value, as a derivative liability, see Note 8 for further details.

(D) Warrants Issued

The following is a summary of the Company’s stock

option activity:

Average Exercise Price

The Company has issued options, some of which have vested,

to purchase shares of common stock through our Incentive Plan.

The Company has issued options to purchase, in the aggregate, up

to 4,875,000 shares of common stock options, in conjunction with our Incentive Plan, agreements or otherwise.

The Company has reserved

4,140,000 shares with the transfer agent for the future issuance for shares associated with common stock options issued.

735,000 shares have not been reserved and are included in the calculation of derivative liability (See Note 9).

During the year ended December 31, 2017, options to purchase

up to 2,710,000 shares of our common stock were issued in lieu of services to non-employees, in connection with our Incentive

These options are for ten years, have an average vesting period between zero and three years, and have strike prices

ranging between $0.60 and $4.00.

These options were issued in connection with grants that were made on November 15, 2015

and April 19, 2017.

For the year ended December 31, 2017, the Company recognized an option expense of $2,003,591 (See

Warrants Issued

following is a summary of the Company’s stock option activity:

Average Exercise

Average Remaining Contractual Life (in Years)

1 unchanged sentence

Cancelled/Forfeited

Balance, December 31, 2015

December 31, 2016

Cancelled/Forfeited

Balance, December 31, 2016 (1)

Company identified conversion features embedded within warrants attached to stock purchases

The Company has determined that the features associated with the embedded conversion

option, in the form a ratchet provision, should be accounted for at fair value, as a

derivative liability, as the Company cannot determine if a sufficient number of shares

would be available to settle all potential future conversion transactions.

8 for further details.

During 2016, the Company issued warrants to four (4) different

groups totaling 3,826,667.

These warrants had lives ranging from one to five years at strike prices between $3.0 and $3.50 per

(E) 2015 Stock Incentive Plan

On April 27, 2015, the Board 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 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 the Company’s

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

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, 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

December 31, 2017

The Company identified conversion features

embedded within warrants attached to stock purchases in 2016.

The Company has determined that the features associated with the

embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability,

as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

See Footnote 8 for further details.

During 2017, the Company issued warrants to

twenty-four (24) different groups totaling 898,040.

These warrants had lives ranging from three to five years at strike prices

between $3.30 and $3.50 per share.

For the year ended December 31, 2017, the Company recognized warrant expense of $1,869,358 (See

In March 2017, 1,666,667 warrants were exercised

at $3.00 per share.

60,000 warrants were issued at price between $3.00 and $3.50 per share contingent on the date of exercise .

In October 2017, 4,367,100 warrants were cashless

In October 2017, 838,040 warrants were issued

at $3.30 per share contingent on the date of exercise.

2015 Stock Incentive Plan

April 27, 2015, the Board approved the Company’s 2015 Stock Incentive Plan (the “Incentive Plan”).

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

delegates 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 the Company’s common stock, subject to adjustment, and shall be

effective for ten (10) years, unless earlier terminated.

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, 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.

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 Plan.

The Incentive Plan which became effective July 31, 2016.

Note 14 Commitments

15 Commitments

Operating Lease

In January 2014, the Company executed a 39 month lease

for a corporate headquarters.

The Company paid a security deposit of $27,020.

The lease expires April, 2017

In October, 2014, the Company executed a 53 month lease

for a new corporate headquarters with a base rent of $97,266 escalating annually through 2019.

The Company paid a security deposit

In September, 2015 the Company amended the current lease

for a smaller space at the same terms.

In October, 2014, the Company entered into a sublease

agreement to sublease its previous office space through November 2016.

In connection with the sublease, the Company collected

$34,981 as a security deposit.

The minimum rent obligations are approximately as follows:

September 20, 2017, the Company entered into an operating lease for its Georgia location.

The new lease commenced on July 1, 2017

and expires on September 30, 2020.

We recognize rent expense under such arrangements on a straight-line basis.

September 27, 2017 the Company entered into two separate residential leases near the Florida office for two of its employees.

The term for each lease is 12 months and, each lease carries a rent of $2,000 per month.

The collective rent payment are $4,000

per months and will reduce travel costs for the Company.

minimum rent obligations are approximately as follows:

Employment Agreement –

Chief Executive Officer

2014, the Company entered into an employment agreement with its new Chief Executive Officer.

In addition to salary, the agreement

provided for the issuance of 750,000 restricted shares of the Company’s common stock to him, which vested and were issued

Chief Executive

2014, the Company entered into an employment agreement with John Campi, its Chief Executive Officer.

In addition to salary, the

agreement provided for the issuance of 750,000 restricted shares of the Company’s common stock to him, which vested and were

issued as follows:

250,000 shares after the first 6 months of employment and 500,000 additional shares at December 31, 2015.

of the agreement the executive would receive additional compensation in the form of stock options to purchase shares of Company

stock equal to one half of one percent (0.5%) of quarterly net income.

The strike price of the options will be established at

the time of the grant.

The options will vest in twelve months and expire after sixty months.

In addition to the stock options

compensation, the executive will receive cash compensation equal to one half of one percent (0.5%) of annual sales up to $20 million

and one quarter of one percent (0.25%) for annual sales $20 million and 3% of annual net income.

These 750,000 shares were issued

in 2016 and valued at $0.625 per share.

On September 1, 2016, the Company entered into a new employment

agreement with Mr.

The agreement provides for a base salary of $150,000;

120,000 shares of The Company’s common stock

in a “Sign on Bonus”

which will vest December 31, 2017;

0.25% of annual gross sales and 3% of annual adjusted gross

income in cash compensation and 0.50% of quarterly net income in options, the strike price to be determined at the time of grant.

terms of the agreement the executive would receive additional compensation in the form of stock options to purchase shares of Company

stock equal to 0.5% of quarterly net

The strike price of the options will be established at the time of the grant.

The options will vest in twelve months and

expire after sixty months.

In addition to the stock options compensation, the executive will receive cash compensation equal to

0.5% of annual sales up to $20 million and 0.25% for annual sales $20 million and 3% of annual net income.

The 750,000 shares were

issued in 2016 and valued at $0.625 per share.

1, 2016, the Company entered into a new employment agreement with its Chief Executive Officer (the “Campi Agreement”).

The Campi Agreement provides for a base salary of $150,000; 120,000 shares of The Company’s common stock in a “Sign

on Bonus”

which will vest December 31, 2017; 0.25% of annual net sales, paid in cash on an quarterly basis, and 3% of

annual adjusted gross income in cash compensation and 0.50% of quarterly net income in options, the strike price to be determined

at the time of grant.

Such options will expire 5 years after issuance.

For the twelve months ended December 31, 2016 and 2015,

Campi earned approximately $31,600 and $14,400 respectively, under this agreement.

No stock or options have been issued.

to the Campi Agreement, if terminated without cause during the initial term, the Company shall pay to Mr.

Campi (i) an amount calculated

by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the initial term, and

(ii) all unpaid incentive compensation then in effect on a pro rata basis.

In addition, the sign-on shares of Common Stock

shall immediately vest.

For any other termination during the initial term, Mr.

Campi shall receive an amount calculated by multiplying

fifty percent of the monthly salary, in effect at the time of such termination, times the number of months remaining in the initial,

and shall not be entitled to incentive compensation payments then in effect, prorated or otherwise.

years ended December 31, 2017 and December 31, 2016 Mr.

Campi earned approximately $171,966 and $137,853, respectively, under the

Campi Agreement associated with performance pay, as noted above.

Chairman Agreement

has a 3-year consulting agreement with a director which expires in November 2016, and carries an annual payment of $150,000 cash,

stock or 5 year options equal to one half of one percent (0.5%) of the Company’s annual net sales.

For the twelve months

ended December 31, 2016 and 2015, Mr.

Kohen earned approximately $35,400 and $14,400, respectively, under this agreement.

or options have been issued.

1, 2016, the Company modified the above agreement.

The compensation was changed to $250,000 per annum, an annual grant of the

Company’s common stock of 340,000 shares which vest in its entirety January 1, 2019;

Stock options equal to 0.50% of the

Company’s gross revenue with 5-year vesting.

In addition, the Chairman was granted a “Sign on Bonus”

shares of the Company’s common stock which will vest January 1, 2020 and a supplemental bonus of options which is tied to

the stock performance of the Company.

November 25, 2013, we entered into a Consulting Agreement with our founder and the Chairman or our Board, Rani Kohen (the “Kohen

Consulting Agreement”).

The term of the Consulting Agreement was for three (3) years, beginning on December 1, 2013.

to the customary terms and conditions of such agreements, the Consulting Agreement provided that Mr.

Kohen would receive an annual

consulting fee of $150,000, incentive compensation in the form cash, stock and/or options (i) equal to one-half a one percent

(0.50%) of annual net revenue, paid in cash on a quarterly basis.;

and (ii) to be determined by our Board on a project-by-project

September 1, 2016, the Company entered into a Chairman Agreement with Mr.

Kohen (the “Chairman’s Agreement”),

to serve as the Company’s Executive Chairman

and Chairman of the Board, which supersedes and replaced the Consulting Agreement.

Chairman’s Agreement provides that Mr.

Kohen will serve for an initial term of three years, which may be renewed by the

mutual agreement of Mr.

Kohen and the Company.

Subject to other customary terms and conditions of such agreements, the Chairman’s

Agreement provides that Mr.

Kohen will receive (i) a base salary of $250,000 per year, which may be adjusted each year at the

discretion of the Board;

(ii) stock compensation equal to 340,000 shares of Common Stock per year, which shall vest on January

1 of the following year (the “Chairman Compensation Shares”);

(iii) a sign-on bonus of 120,000 shares of Common Stock,

with shall vest in its entirety on January 1, 2020;

(iv) supplemental bonus compensation of stock options to purchase up to 4,000,000

shares of Common Stock at an exercise price ranging between $3.00 and $5.00 per share, determined based on the achievement of

specified market capitalizations of the Company;

and (v) incentive compensation equal to one half of one percent (0.50%) of the

Company’s gross revenue paid in cash, stock or options on an annual basis.

to the Chairman’s Agreement, if terminated without cause during the initial term, the Company shall pay to Mr.

an amount calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining

in the initial term, and (ii) all unpaid incentive compensation then in effect.

In addition, the sign-on shares of Common Stock

shall immediately vest, and the Chairman Compensation Shares shall vest on a pro rata basis based on the number of days served

under the Chairman’s Agreement and the number of days from the beginning of the initial term through August 31, 2019.

any other termination during the initial term, Mr.

Kohen shall receive payment, at the then current rate, through the date termination

is effective.

years ended December 31, 2017 and December 31, 2016 Mr.

Kohen earned approximately $315,989 and $220,257, respectively, under this

and the agreement associated with performance pay as noted above.

Employee Agreement - President

On August 17,

2016, the Company entered into an Employment Agreement with Mark Wells, its new President.

Mr Wells receives a salary of $250,000;

1,025,000 shares in the Company’s common stock which will vest in its entirety January 1, 2019;

0.25% of the Company’s

net revenue and a “Sign on Bonus”

of 120,000 shares of the Company’s common stock which vests January 1, 2017.

For the twelve months ended December 31, 2016, Mr.

Wells earned $3,800 under his employment agreement and $10,000 in commissions

pursuant to the terms of a Consulting Agreement, dated June 1, 2015, between the Company and Mr.

Wells, whereby Mr.

Wells provided

independent sales consultant services.

August 17, 2016, the Company entered into an Executive Employment Agreement with Mr.

Wells (the “Wells Agreement”),

to serve as the Company’s President.

The Wells Agreement provides that Mr.

Wells will serve for an initial term of three

years, which may be renewed by the mutual agreement of Mr.

Wells and the Company.

Subject to other customary terms and conditions

of such agreements, the Wells Agreement provides that Mr.

Wells will receive (i) a base salary of $250,000 per year, which may

be adjusted each year at the discretion of the Board;

(ii) 1,025,000 shares of Common Stock, which shall vest on January 1, 2019

(the “Wells Compensation Shares”);

(iii) a sign-on bonus of 120,000 shares of Common Stock, with shall vest in its

entirety to Mr.

Wells on January 1, 2018;

and (iv) incentive compensation equal to one quarter of one percent (0.25%) of the Company’s

net revenue, paid in cash on an quarterly basis.

to the Wells Agreement, if terminated without cause during the initial term, the Company shall pay to Mr.

Wells (i) an amount

calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the Initial

Term, and (ii) all unpaid incentive compensation then in effect.

In addition, the sign-on bonus shares of Common Stock shall immediately

vest, and the Wells Compensation Shares shall vest on a pro rata basis based on the number of days served under the Wells

Agreement and the number of days in the vesting period.

For any other termination during the initial term, Mr.

Wells shall receive

payment of salary, at the then current rate, and all due but unpaid incentive compensation through the date termination is effective.

years ended December 31, 2017 and December 31, 2016 Mr.

Wells earned approximately $275,559 and $80,763, respectively, under this

and the agreement associated with performance pay as noted above.

Employment Agreement –

Chief Operating Officer

Effective July 1, 2016, the Company entered into an Executive

Employment Agreement with Patricia Barron, its Chief Operations Officer.

Barron receives a base salary of $120,000 per year

and incentive compensation equal to 0.25% of the Company’s net revenue paid in cash.

For the twelve months ended December

31, 2016, Ms.

Barron earned approximately $17,700 under this agreement.

Chief Operating

Barron entered into a three-year Executive Employment Agreement, effective as of September 1, 2016 (the “Barron Agreement”).

Under the terms of the Barron Agreement, Ms.

Barron will receive (i) an annual salary of $120,000, and (ii) incentive compensation

equal to one-quarter of one percent (0.25%) of net revenue, paid

in cash on a quarterly basis.

In addition, The Board granted Ms.

Barron (a) options to purchase up to 200,000 shares of

Common Stock at $0.60 per share, which vested on November 15, 2015;

(b) options to purchase up to 150,000 shares of Common Stock

at $1.20, which vested on November 15, 2016;

and (c) options to purchase up to 150,000 shares of Common Stock at $1.80, which

will vest on November 15, 2017.

the years ended December 31, 2017 and December 31, 2016 Ms.

Barron’s earned approximately $142,927 and $141,018, respectively,

under this and the agreement associated with performance pay as noted above.

Note 15 Subsequent Events

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

1, 2017 through March 31, 2017, in response to the August 2016 Election, (i) holders of two (2) outstanding Notes totaling a principal

balance of $100,000 elected to redeem their Notes, and the Company repaid the principal balance of such Notes in full, and (ii)

a holder of one (1) outstanding Note totaling a principal balance of $50,000 elected to convert the full principal balance of

its outstanding Note into Preferred Stock, and the Company thereafter issued 200,000 shares of Series A Preferred Stock to such

On January 31, 2018, the Company entered into

an agreement to extend the Line of Credit through January 10, 2019.

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.

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 9A. Controls and Procedures