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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Organization and Business Description</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Wrap Technologies, Inc., a Delaware corporation
(the “<i>Company</i>”), is a developer of security products designed for use by law enforcement and security personnel.
The Company’s first product is the BolaWrap 100 remote restraint device.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company resulted from the March 31, 2017
merger of Wrap Technologies, LLC (“<i>Wrap LLC</i>”) with and into its wholly-owned subsidiary MegaWest Energy Montana
Corp. (“<i>MegaWest</i>”) (the “<i>Merger</i>”). Wrap LLC ceased separate existence, and MegaWest continued
as the surviving entity. MegaWest then changed its name to Wrap Technologies, Inc. and an amended and restated certificate of incorporation
changing the Company’s corporate name, authorizing 150,000,000 shares of common stock, par value $0.0001 per share, and authorizing
5,000,000 shares of preferred stock, par value $0.0001 per share, was filed with the Delaware Department of Corporations. All 835.75
membership units of Wrap LLC outstanding immediately prior to the Merger were exchanged, on a pro rata basis, for an aggregate
of 20,000,000 shares of common stock of the Company in the Merger.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prior to the Merger, on March 22, 2017, Wrap
LLC acquired privately held MegaWest from Petro River Oil Corp. (“<i>Petro River</i>”) through the issuance of 16.75
membership units, representing a 2% ownership interest in Wrap LLC. At that time, Petro River was owned 11% by Scot Cohen, Executive
Chairman and a Manager of Petro River, a 26% owner of Wrap LLC, and a director and officer of the Company. MegaWest had no assets
or liabilities at the date of acquisition and was not considered an operating business.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Wrap LLC’s acquisition of MegaWest and
its subsequent merger with and into the MegaWest wholly-owned subsidiary and exchange of member units for common stock was accounted
for as a reverse recapitalization of Wrap LLC. Wrap LLC, now the Company, was deemed the accounting acquirer with MegaWest the
accounting acquiree. The Company’s financial statements are in substance those of Wrap LLC, and are deemed to be a continuation
of Wrap LLC’s business from its inception date of March 2, 2016. The balance sheet of the Company continues at historical
cost, as the accounting acquiree had no assets or liabilities and no goodwill or intangible assets were recorded as part of the
recapitalization of the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To reflect the recapitalization, historical
common shares and additional paid-in capital have been retroactively adjusted using the exchange ratio of approximately 23,930.60
shares for each membership unit of Wrap LLC.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Basis of Presentation and Use of Estimates</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America (“<i>U.S. GAAP</i>”).
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions (e.g., recognition and measurement of contingencies and accrued costs) that
affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial
statements and affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially
differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Public and Private Offerings</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2017, the Company completed a self-underwritten
public offering raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of common stock at $1.50
per share. Three officers of the Company purchased an aggregate of 40,000 shares of the offering for an aggregate of $60,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 30, 2018, the Company obtained gross
cash proceeds of $13.68 million and net cash proceeds of approximately $12.14 million from the sale of 4,561,074 units (“<i>Units</i>”)
for $3.00 per Unit in a private offering. Each Unit consisted of one share of common stock and one detachable two-year warrant
to purchase one share of common stock at an exercise price of $5.00 per share.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Stock Based Compensation</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows the fair value recognition
provisions issued by the Financial Accounting Standards Board (“<i>FASB</i>”) in Accounting Standards Codification
(“<i>ASC</i>”) Topic 718, Stock Compensation (“<i>ASC 718</i>”) and has adopted Accounting Standards Update
(“<i>ASU</i>”) 2018-07 for stock-based transactions with non-employees. Stock based compensation expense recognized
during the year ended December 31, 2018 includes compensation expense for all stock-based payments based on a grant date fair value
using the Black-Scholes valuation model. The grant date is the date at which an employer and employee or non-employee reach a mutual
understanding of the key terms and conditions of a stock-based payment award.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Loss per Share</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic loss per common share is computed by dividing
net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss
per common share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s
losses for the periods presented cause the inclusion of potential common stock instruments outstanding to be antidilutive. Stock
options and warrants exercisable into a total of 7,084,681 shares of common stock were outstanding at December 31, 2018. These
securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion
would be antidilutive due to losses incurred by the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Fair Value of Financial Instruments</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The carrying amounts of cash, accounts payable
and accrued liabilities approximate fair values due to the short nature of these instruments.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Concentrations of Credit Risk</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist primarily of cash. Due to the relative short nature of such instrument, the
carrying amount approximates fair value. The Company places its cash in a demand deposit account at one bank and such balances
may at times be in excess of amounts insured by federal agencies, which is $250,000 as of December 31, 2018. The Company does not
believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.
The Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company has not
experienced any significant losses on its cash.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Accounts Receivable and Allowance for Doubtful
Accounts</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s policy is to evaluate the
collectability of accounts receivable based on an assessment of the collectability of specific customer accounts and then record
an allowance for doubtful accounts to reduce the receivables to an amount that management reasonably estimates will be collected.
The following factors are considered when determining if collection of a receivable is reasonably assured: customer credit-worthiness,
past transaction history with the customer, current economic industry trends and changes in customer payment terms. There was no
allowance for doubtful accounts recorded at December 31, 2018. Accounts that are deemed uncollectible will be written off against
the allowance for doubtful accounts after all reasonable collection efforts have been exhausted. If a major customer’s creditworthiness
deteriorates, or actual defaults exceed our historical experience, such estimates could change and impact our future reported financial
results.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Inventories</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are valued at the lower of cost
or net realizable value. The cost of substantially all of the Company’s inventory is determined by the weighted average cost
method. Inventory is comprised of raw materials, assemblies and finished products intended for sale to customers<i>.</i> The Company
evaluates the need for reserves for excess and obsolete inventories determined primarily based upon estimates of future demand
for the Company’s products. At December 31, 2018 the Company had no reserve for obsolescence.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Property, Equipment and Depreciation</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment is stated at cost. Depreciation
on property and equipment is computed over the estimated useful lives of three years using the straight-line method. The Company
intends, on any retirement or disposition of property and equipment, that the related cost and accumulated depreciation or amortization
will be removed and a gain or loss recorded.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Intangible Assets</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets consisted of capitalized legal
fees and filing costs related to obtaining patents and trademarks. Intangible assets are carried at cost, less accumulated amortization.
Amortization for patents is computed on a straight-line basis over the estimated remaining lives of issued patents which is 20
years from the initial filing. Trademarks are amortized on a straight-line basis over ten years, the estimated useful life
of the assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Impairment of Long-Lived Assets</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets and identifiable intangibles
held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes
in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. The Company
did not recognize any impairment loss during the periods ended December 31, 2017 and 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Classification and Valuation of Warrants</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for warrants as either
equity or liabilities based upon the characteristics and provisions of each particular instrument. Warrants valued and classified
as equity are recorded as additional paid-in capital based on the issue date fair value and no further adjustment to valuation
is made. As of December 31, 2018, the Company had no warrants or other derivative financial instruments that require separate accounting
as liabilities and periodic revaluation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Advertising and Promotion Costs</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses advertising costs in the
period in which they are incurred. The Company incurred advertising costs of $27,218 and $11,812 for the years ended December 31,
2018 and 2017, respectively. The Company incurred product promotion costs for demonstration products delivered to prospective customers
of $192,484 for the year ended December 31, 2018. Advertising and promotion costs are included in selling, general and administrative
expenses in the accompanying statements of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Research and Development Costs</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development costs consist primarily
of contract development costs and experimental work materials and certain startup patent costs. Research and development costs
with no alternative use are expensed as incurred.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Leases</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Leases entered into are classified as either
capital or operating leases. At the time a capital lease is entered into, an asset is recorded, together with its related long-term
obligation to reflect the purchase and financing. At December 31, 2018 and 2017, the Company had no capital lease obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Revenue Recognition</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (“<i>ASU 2014-09</i>”) and ASC Subtopic 340-40, Other Assets and Deferred Costs - Contracts
with Customers (“<i>ASC 340-40</i>”), (collectively, “<i>Topic 606</i>”). On January 1, 2018, the Company
adopted Topic 606 and, as it had no prior revenue or contracts with customers, there was no transition required nor any impact
on prior results. ASU 2014-09 requires entities to recognize revenue through the application of a five-step model, which includes
identification of the contract, identification of the performance obligations, determination of the transaction price, allocation
of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations.
See Note 2 for additional information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Shipping and Handling Costs</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Shipping and handling costs are included in
cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs
were $1,570 for the year ended December 31, 2018. Actual revenues from shipping and handling were $670 for the year ended December
31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Warranty Reserves</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company warrants its products and accessories
to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally
limited. The Company currently provides direct warranty service. International market warranties are generally similar to the U.S.
market.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company establishes a warranty reserve based
on anticipated warranty claims at the time product revenues are recognized. Factors affecting warranty reserve levels include the
number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the
adequacy of the provision for warranty costs each reporting period. The warranty reserve was $428 at December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Segment Information</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has one operating segment with one
business activity, providing restraint solutions. The Company’s chief operating decision maker is its Chief Executive Officer,
who manages operations on a consolidated basis for purposes of allocating resources.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Income Taxes</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Until its reverse recapitalization on March
31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. Instead,
its losses were included in the income tax returns of the member partners. Accordingly, no provision or liability for federal or
state income taxes has been included in these financial statements for the period prior to March 31, 2017 and no income tax expense
was recorded for period ended December 31, 2018 due to losses incurred.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities are determined
based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward
period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change
in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in
income in the year of the change in estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Subsequent Events</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management has evaluated events subsequent to
December 31, 2018 through the date the accompanying financial statements were filed with the Securities and Exchange Commission
and noted that there have been no events or transactions which would affect the Company’s financial statements for the year
ended December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Recent Issued Accounting Guidance</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Recently Adopted Accounting Pronouncement:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2017, the FASB issued ASU 2017-11, Earnings
Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments
in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features)
with down round features. When determining whether certain financial instruments should be classified as liabilities or equity
instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to
an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The
amendments in Part I of this ASU are effective for the Company as of January 1, 2019 with early adoption permitted.  The
amendments in Part II of this ASU replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. The
amendments in Part II of this ASU do not require any transition guidance. The <font style="color: #2E2E2E">adoption of this ASU
did not have any impact on the Company’s historical financial statements and the Company was permitted and adopted retrospectively
to January 1, 2018 the standard for any equity securities with down round features.</font> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As discussed above under “Revenue Recognition”,
the Company adopted Topic 606 on January 1, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition
of right-of-use (“<i>ROU</i>”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional
guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method,
entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption.
We currently plan to adopt this standard using this modified retrospective approach.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Effective the first quarter of 2019:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition
of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional
guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method,
entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption.
We currently plan to adopt this standard using this modified retrospective approach.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Most prominent among the changes in the standard
is the requirement for lessees to recognize ROU assets and lease liabilities for those leases classified as operating leases under
current U.S. GAAP. The standard requires additional disclosures to enable users of financial statements to assess the amount, timing,
and certainty of cash flows arising from leases. We intend to elect certain of the available practical expedients upon adoption.
We have evaluated our existing lease portfolio and believe that our population of leases is low in number. We have implemented
key processes and controls to enable the accurate assessment of leases and preparation of related financial information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect adoption of the standard will result
in the recognition of an ROU asset and lease liability of approximately $12,900 for one operating lease as of January 1, 2019,
with no impact to retained earnings. We had no capital leases at December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Effective the first quarter of 2020:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, to improve the effectiveness of
fair value measurement disclosures by removing or modifying certain disclosure requirements and adding other requirements. This
ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after
December 15, 2019. The Company is currently evaluating the effect, if any, that ASU 2018-13 will have on its financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Other pronouncements:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has reviewed other recently issued,
but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected
to cause a material impact on its financial condition or the results of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company had no historical revenue prior
to the year ended December 31, 2018 and accordingly all revenue has been reported in accordance with Topic 606, which the Company
adopted on January 1, 2018. There were no adjustments to prior period amounts nor changes to stockholders’ equity (accumulated
deficit) required upon adoption.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company enters into contracts that include
various combinations of products, accessories and services, such as training, each of which are generally distinct and are accounted
for as separate performance obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A performance obligation is a promise in a contract
to transfer a distinct good or service to a customer, and is the unit of account in Topic 606. For contracts with a single performance
obligation, the entire transaction price is allocated to the single performance obligation. For contracts with multiple performance
obligations, the Company allocates the contract transaction price to each performance obligation using the Company’s estimate
of the standalone selling price (“<i>SSP</i>”) of each distinct good or service in a contract. The Company determines
standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling
price is not observable through past transactions, the Company estimates the standalone selling price considering available information
such as market conditions and internally approved pricing guidelines related to the performance obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Performance obligations to deliver products
and accessories are generally satisfied at the point in time the Company ships the product, as this is when the customer obtains
control of the asset under our standard terms and conditions. The Company has elected to recognize shipping costs as an expense
in cost of revenues when control has transferred to the customer. The revenues and costs of training are recognized when the training
is completed, generally following delivery of related products.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The timing of revenue recognition may differ
from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are
invoiced and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract
liability (deferred revenue) when revenue will be recognized subsequent to invoicing. At December 31, 2018 the Company had no contract
assets and no deferred revenue related to products or training for product delivered during the year.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes an asset if there are
incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the
underlying performance obligations in the contract and amortized consistent with the recognition timing of the revenue for any
such underlying performance obligations. The Company had no such assets at December 31, 2018. The Company will apply the practical
expedient to expense any sales commissions related to performance obligations with an amortization of one year or less when incurred
within selling, general and administrative expenses.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Estimated costs for the Company’s standard
one-year warranty are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged
to cost of products sold.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventory is recorded at the lower of cost or
net realizable value. The cost of substantially all the Company’s inventory is determined by the weighted average cost
method. Inventories consisted of the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Finished goods</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">82,313</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">5,308</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Work in process</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">12,695</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">5,484</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Raw materials</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">63,259</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">120,400</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">158,267</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">131,192</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment consisted of the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Laboratory equipment</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">13,980</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">12,730</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Tooling</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">22,683</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">18,165</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Computer equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">12,608</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,151</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Furniture and fixtures</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">9,595</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">9,595</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">58,866</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">44,641</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accumulated depreciation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(28,493</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(7,973</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">30,373</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">36,668</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Depreciation expense was $20,520 and $6,661
for the years ended December 31, 2018 and 2017, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets at December 31, 2018 consisted
of patent and trademark costs of $120,070. Upon the Company’s first patent approval in July 2018 the Company commenced capitalizing
patent and trademark costs which consist of legal and filing fees related to the prosecution of patent filings. When a patent or
trademark is issued the cost is amortized using the straight-line method over the estimated remaining lives. An impairment charge
is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets
as determined by projected discounted net future cash flows. Amortization expense was $1,355 for the year ended December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable includes $871 due to related
party Syzygy Licensing, LLC (“<i>Syzygy</i>”). See note 9.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accrued liabilities consist of the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Patent costs</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">11,600</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">900</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accrued compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">55,493</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">50,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warranty costs</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">428</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Other</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">932</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">9,414</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">68,453</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">60,314</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2018, the Company financed $39,435
of insurance obligations pursuant to a short-term note agreement, which note accrued interest at a rate of 7.15% per annum, and
which was payable in ten monthly principal and interest payments of $4,074 due through November 2018. The note was paid in November
2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">From March 2016 through February 2017, the Company
accrued monthly compensation for the services of two officers in the aggregate amount of $7,000 per month payable to Syzygy. In
March 2017 the Company accrued and deferred $6,000 compensation to each of the two officers. The balance payable to Syzygy as of
December 31, 2018 was $84,000 and the accrued deferred compensation aggregated $12,000. These balances accrue without interest.
No payment terms or schedule has been established.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s authorized capital consists
of 150,000,000 shares of common stock, par value $0.0001, and 5,000,000 shares of preferred stock, par value $0.0001. To reflect
the recapitalization (see Note 1) historical shares of common stock and additional paid-in capital have been retroactively adjusted
using the exchange ratio of approximately 23,930.60 shares of common stock for each member unit of Wrap LLC.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Public Offering</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2017, the Company completed a self-underwritten
public offering raising gross proceeds of $3,492,800 from the sale of 2,328,533 shares of common stock at $1.50 per share. Net
cash proceeds to the Company were $3,422,716 after deduction of $70,084 of offering costs. Three officers of the Company purchased
an aggregate of 40,000 shares of the offering for an aggregate of $60,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Private Offering</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 30, 2018 the Company consummated
a private offering, pursuant to which it sold 4,561,074 units (“<i>Units</i>”) to certain accredited investors for
$3.00 per Unit. Each Unit consisted of one share of common stock and one detachable two-year warrant to purchase one share of common
stock at an exercise price of $5.00 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $13,683,222
and net cash proceeds of $12,140,786 after deduction of commissions and offering costs. One officer, Elwood G. Norris, purchased
333,334 of the Units for cash of $1,000,000 on the same terms as those applicable to all other investors.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the offering, the Company
also issued placement agent warrants exercisable for 456,107 shares of common stock for two years at an exercise price of $3.00
per share. The estimated fair value of these warrants was $664,427, as determined using the Black-Scholes methodology (assuming
estimated volatility of 49%, risk-free interest rate of 2.84%, and expected dividend yield of 0.0%). This amount was recorded as
both an increase to additional paid in capital and as a non-cash issuance cost of the offering.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Stock Options</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective with the Merger, on March 31, 2017,
the Company adopted and the shareholders approved the 2017 Stock Incentive Plan (the “<i>Plan</i>”) authorizing 2,000,000
shares of Company common stock for issuance as stock options, shares of common stock, restricted stock awards and restricted stock
units to employees, directors or consultants. The Company generally recognizes stock compensation expense on the grant date and
over the period of vesting or period that services will be provided.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In October 2018 the Company granted a consultant
options outside of the Plan exercisable for 100,000 shares of common stock at an exercise price of $3.00 per share with 50% vesting
ratably over 18 months and the balance vesting based on performance.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes stock option
activity for the year ended December 31, 2018:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted Average</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Options on</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Aggregate</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Common</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Intrinsic</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Term</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Value</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 51%"><font style="font-size: 8pt">Outstanding January 1, 2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 2%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.25in"><font style="font-size: 8pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,067,500</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.68</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4.44</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.25in"><font style="font-size: 8pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.25in"><font style="font-size: 8pt">Forfeited, cancelled, expired</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Outstanding December 31, 2018</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">2,067,500</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">1.68</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">4.44</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">3,063,375</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Vested and exercisable at December 31, 2018</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">225,000</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">4.39</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">371,250</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock-based compensation
in its statements of operations as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Year</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Ended December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b> 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b> 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Selling, general and administrative</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">417,151</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Research and development</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">95,837</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total stock-based expense</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">512,988</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2018, total estimated compensation
cost of stock options granted but not yet vested was $970,576, which is expected to be recognized over the weighted average period
of 1.1 years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company uses the Black-Scholes option pricing
model to determine the fair value of the options granted. The following table summarizes the assumptions used to compute the fair
value of options granted to employees and nonemployees:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Year</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected stock price volatility</font></td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">47% to 49%</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">2.67% to 2.99%</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 88%; padding-left: 27pt"><font style="font-size: 8pt">Forfeiture rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0</font></td>
<td style="width: 1%"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 27pt"><font style="font-size: 8pt">Expected dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 27pt"><font style="font-size: 8pt">Expected life of options - years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.75 - 5.00</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 27pt"><font style="font-size: 8pt">Weighted-average fair value of options granted</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">0.72</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Estimated volatility is a measure of the amount
by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s
estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available.
The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period
equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient
historical data of its stock price, as it only recently commenced trading.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The risk-free interest rate assumption is based
upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options.
The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to
pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock
options as the Company does not have sufficient historical data. The Company has elected to use the contract life of the option
for nonemployee stock options.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information about
stock options outstanding at December 31, 2018:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Weighted</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Average</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Weighted</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Weighted</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Average</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Average</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Range of</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Exercise Prices</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Outstanding</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Life</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Exercisable</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">1,847,500</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">4.39</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">225,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.00 - $3.61</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">220,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4.82</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.23</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Warrants</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has outstanding common stock purchase
warrants as of December 31, 2018 as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"><b>Number of</b></font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"><b>Exercise Price</b></font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="3"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"><b>Description</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Common Shares</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Per Share</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Expiration Date</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr>
<td style="vertical-align: bottom; width: 48%"><font style="font-size: 8pt">Purchase Warrants (1)</font></td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 0%"> </td>
<td style="vertical-align: bottom; width: 11%; text-align: right"><font style="font-size: 8pt">4,561,074</font></td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="vertical-align: bottom; width: 11%; text-align: right"><font style="font-size: 8pt">5.00</font></td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 15%"><font style="font-size: 8pt">October 30, 2020</font></td>
<td> </td>
<td> </td>
<td style="width: 1%"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font-size: 8pt">Agent Warrants</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 8pt">456,107</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">$</font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 8pt">3.00</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">October 30, 2020</font></td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" style="width: 100%; font: 12pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: top; width: 72px; padding-left: 0.5in"><font style="font-size: 8pt">(1)</font></td>
<td style="padding: 0.75pt; text-align: justify"><font style="font-size: 8pt">333,334 warrants are held by a family trust of officer Elwood G. Norris.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The above warrants resulted from the private
offering consummated in October 2018. No warrants were exercised during the period from issuance to December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Facility Leases</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Commencing December 1, 2016, the Company leased
1,890 square feet of improved office, assembly and warehouse space in Las Vegas, Nevada. The term of the lease agreement is 37
months, with a termination date of December 31, 2019. The gross monthly rent is currently $1,588, subject to certain possible adjustments.
In January 2019 the Company entered into an amendment extending the lease to December 31, 2020 with a gross monthly rent of $2,100
per month for the year 2020.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Rent expense for the year ended December 31,
2018 and 2017 was $18,157 and $18,120, respectively. The remaining future annual minimum lease obligations under the foregoing
facility lease, as amended at December 31, 2018, are $19,051 and $25,200 for 2019 and 2020, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2019, the Company entered into a
two-year lease commencing March 1, 2019 for 1906 square feet of office, assembly and warehousing space located in <font style="color: #1B1B1B">Lake
Forest, California</font> at an initial monthly rate of $2,723. Minimum annual lease commitments are $27,230, $33,436 and $5,598
for 2019, 2020 and 2021, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Related Party Technology License Agreement</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is obligated to pay royalties and
pay development and patent costs pursuant to an exclusive Amended and Restated Intellectual Property License Agreement dated as
of September 30, 2016 with Syzygy, a company owned and controlled by stockholders/officers Mr. Elwood Norris and Mr. James Barnes.
The agreement provides for royalty payments of 4% of revenue from products employing the licensed ensnarement device technology
up to an aggregate of $1,000,000 in royalties or until September 30, 2026, whichever occurs earlier. The Company accrued $871 at
December 31, 2018 for royalties incurred in 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Suppliers</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a number of components produced
by outside suppliers, some of which are sourced from a single supplier, which can magnify the risk of shortages and decrease the
Company’s ability to negotiate with suppliers on the basis of price. If supplier shortages occur, or quality problems arise,
then production schedules could be significantly delayed or costs significantly increased, which could in turn have a material
adverse effect on the Company’s financial condition, results of operation and cash flows.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2018, the Company was committed
for approximately $1.5 million for future component deliveries</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">that are generally subject to modification or
rescheduling in the normal course of business.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Indemnifications and Guarantees</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our officers and directors are indemnified as
to personal liability as provided by the Delaware law and the Company’s articles and bylaws. The Company may also undertake
indemnification obligations in the ordinary course of business related to its operations. The Company is unable to estimate with
any reasonable accuracy the liability that may be incurred pursuant to any such indemnification obligations now or in the future.
Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification obligations could
range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary
course of business. The Company has no liabilities recorded for such indemnities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Regulatory Agencies</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may be subject to oversight from
regulatory agencies regarding firearms that arise in the ordinary course of its business.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Until its reverse recapitalization on March
31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. The
Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences
between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance
for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets
will not be realized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company did not provide any current or deferred
U.S. federal income tax provision or benefit for the periods presented because of operating losses since inception. As of December
31, 2018, the Company has net operating loss carryforwards of approximately $3,591,000 to reduce future taxable income through
2038. Certain changes in stock ownership can result in a limitation on the amount of net operating loss and tax credit carryovers
that can be utilized each year. As of December 31, 2018, management has not determined the extent of any such limitations, if any.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company provided a full valuation allowance
on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more
likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period. As
a result of the change in future Federal statutory tax rates due to the passing of the Tax Cuts and Jobs Act of 2017, management
has determined that the deferred tax assets and liabilities should not be valued at a federal statutory rate of 34% but rather
at the rate in which the benefit of the deferred tax asset or liability will be realized by the Company. As such, the Federal
statutory rate used to value the Company's deferred tax assets and liabilities is 21%.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has not taken a tax position that,
if challenged, would have a material effect on the financial statements for the period ended December 31, 2018 applicable under
FASB ASC 740. The Company did not recognize any adjustment to the liability for uncertain tax position and therefore did not record
any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The provision for (benefit from) income taxes
consists of the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Year Ended December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Current tax benefit</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Deferred tax benefit</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">678,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">136,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(678,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(136,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Income tax benefit (provision)</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A reconciliation of the provision for income
taxes at the federal statutory rate of 21% to the Company’s provision for income tax is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Year Ended December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Income taxes benefit computed at federal statutory rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">701,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">133,000</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Research tax credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">15,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Permanent differences and other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(38,000</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(3,000</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(678,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(136,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Income tax benefit (provision)</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets
and liabilities for the periods presented:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Deferred tax assets:</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%; text-indent: 0.25in"><font style="font-size: 8pt">Net operating losses</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">756,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">132,000</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Research tax credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">23,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Deferred compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">20,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">20,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Stock compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">76,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Accruals and other</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">13,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">875,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">171,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Deferred tax liabilities:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Depreciation and other</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">29,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">29,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Net deferred tax assets</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">846,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">168,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Less valuation allowance</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(846,000</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(168,000</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Net deferred taxes after valuation allowance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Commencing in October 2017 the Company
began reimbursing officer Mr. Elwood Norris $1,500 per month on a month to month basis for laboratory costs for an
aggregate of $18,000 and $4,500 during the years ended December 31, 2018 and 2017, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Notes 1, 6, 7, 8 and 9 for additional related
party transactions and information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Wrap Technologies, Inc., a Delaware corporation
(the “<i>Company</i>”), is a developer of security products designed for use by law enforcement and security personnel.
The Company’s first product is the BolaWrap 100 remote restraint device.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company resulted from the March 31, 2017
merger of Wrap Technologies, LLC (“<i>Wrap LLC</i>”) with and into its wholly-owned subsidiary MegaWest Energy Montana
Corp. (“<i>MegaWest</i>”) (the “<i>Merger</i>”). Wrap LLC ceased separate existence, and MegaWest continued
as the surviving entity. MegaWest then changed its name to Wrap Technologies, Inc. and an amended and restated certificate of incorporation
changing the Company’s corporate name, authorizing 150,000,000 shares of common stock, par value $0.0001 per share, and authorizing
5,000,000 shares of preferred stock, par value $0.0001 per share, was filed with the Delaware Department of Corporations. All 835.75
membership units of Wrap LLC outstanding immediately prior to the Merger were exchanged, on a pro rata basis, for an aggregate
of 20,000,000 shares of common stock of the Company in the Merger.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prior to the Merger, on March 22, 2017, Wrap
LLC acquired privately held MegaWest from Petro River Oil Corp. (“<i>Petro River</i>”) through the issuance of 16.75
membership units, representing a 2% ownership interest in Wrap LLC. At that time, Petro River was owned 11% by Scot Cohen, Executive
Chairman and a Manager of Petro River, a 26% owner of Wrap LLC, and a director and officer of the Company. MegaWest had no assets
or liabilities at the date of acquisition and was not considered an operating business.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Wrap LLC’s acquisition of MegaWest and
its subsequent merger with and into the MegaWest wholly-owned subsidiary and exchange of member units for common stock was accounted
for as a reverse recapitalization of Wrap LLC. Wrap LLC, now the Company, was deemed the accounting acquirer with MegaWest the
accounting acquiree. The Company’s financial statements are in substance those of Wrap LLC, and are deemed to be a continuation
of Wrap LLC’s business from its inception date of March 2, 2016. The balance sheet of the Company continues at historical
cost, as the accounting acquiree had no assets or liabilities and no goodwill or intangible assets were recorded as part of the
recapitalization of the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To reflect the recapitalization, historical
common shares and additional paid-in capital have been retroactively adjusted using the exchange ratio of approximately 23,930.60
shares for each membership unit of Wrap LLC.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America (“<i>U.S. GAAP</i>”).
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions (e.g., recognition and measurement of contingencies and accrued costs) that
affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial
statements and affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially
differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2017, the Company completed a self-underwritten
public offering raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of common stock at $1.50
per share. Three officers of the Company purchased an aggregate of 40,000 shares of the offering for an aggregate of $60,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 30, 2018, the Company obtained gross
cash proceeds of $13.68 million and net cash proceeds of approximately $12.14 million from the sale of 4,561,074 units (“<i>Units</i>”)
for $3.00 per Unit in a private offering. Each Unit consisted of one share of common stock and one detachable two-year warrant
to purchase one share of common stock at an exercise price of $5.00 per share.</p>
<p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows the fair value recognition
provisions issued by the Financial Accounting Standards Board (“<i>FASB</i>”) in Accounting Standards Codification
(“<i>ASC</i>”) Topic 718, Stock Compensation (“<i>ASC 718</i>”) and has adopted Accounting Standards Update
(“<i>ASU</i>”) 2018-07 for stock-based transactions with non-employees. Stock based compensation expense recognized
during the year ended December 31, 2018 includes compensation expense for all stock-based payments based on a grant date fair value
using the Black-Scholes valuation model. The grant date is the date at which an employer and employee or non-employee reach a mutual
understanding of the key terms and conditions of a stock-based payment award.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic loss per common share is computed by dividing
net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss
per common share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s
losses for the periods presented cause the inclusion of potential common stock instruments outstanding to be antidilutive. Stock
options and warrants exercisable into a total of 7,084,681 shares of common stock were outstanding at December 31, 2018. These
securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion
would be antidilutive due to losses incurred by the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The carrying amounts of cash, accounts payable
and accrued liabilities approximate fair values due to the short nature of these instruments.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist primarily of cash. Due to the relative short nature of such instrument, the
carrying amount approximates fair value. The Company places its cash in a demand deposit account at one bank and such balances
may at times be in excess of amounts insured by federal agencies, which is $250,000 as of December 31, 2018. The Company does not
believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.
The Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company has not
experienced any significant losses on its cash.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s policy is to evaluate the
collectability of accounts receivable based on an assessment of the collectability of specific customer accounts and then record
an allowance for doubtful accounts to reduce the receivables to an amount that management reasonably estimates will be collected.
The following factors are considered when determining if collection of a receivable is reasonably assured: customer credit-worthiness,
past transaction history with the customer, current economic industry trends and changes in customer payment terms. There was no
allowance for doubtful accounts recorded at December 31, 2018. Accounts that are deemed uncollectible will be written off against
the allowance for doubtful accounts after all reasonable collection efforts have been exhausted. If a major customer’s creditworthiness
deteriorates, or actual defaults exceed our historical experience, such estimates could change and impact our future reported financial
results.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are valued at the lower of cost
or net realizable value. The cost of substantially all of the Company’s inventory is determined by the weighted average cost
method. Inventory is comprised of raw materials, assemblies and finished products intended for sale to customers<i>.</i> The Company
evaluates the need for reserves for excess and obsolete inventories determined primarily based upon estimates of future demand
for the Company’s products. At December 31, 2018 the Company had no reserve for obsolescence.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment is stated at cost. Depreciation
on property and equipment is computed over the estimated useful lives of three years using the straight-line method. The Company
intends, on any retirement or disposition of property and equipment, that the related cost and accumulated depreciation or amortization
will be removed and a gain or loss recorded.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets consisted of capitalized legal
fees and filing costs related to obtaining patents and trademarks. Intangible assets are carried at cost, less accumulated amortization.
Amortization for patents is computed on a straight-line basis over the estimated remaining lives of issued patents which is 20
years from the initial filing. Trademarks are amortized on a straight-line basis over ten years, the estimated useful life
of the assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets and identifiable intangibles
held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes
in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. The Company
did not recognize any impairment loss during the periods ended December 31, 2017 and 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for warrants as either
equity or liabilities based upon the characteristics and provisions of each particular instrument. Warrants valued and classified
as equity are recorded as additional paid-in capital based on the issue date fair value and no further adjustment to valuation
is made. As of December 31, 2018, the Company had no warrants or other derivative financial instruments that require separate accounting
as liabilities and periodic revaluation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expenses advertising costs in the
period in which they are incurred. The Company incurred advertising costs of $27,218 and $11,812 for the years ended December 31,
2018 and 2017, respectively. The Company incurred product promotion costs for demonstration products delivered to prospective customers
of $192,484 for the year ended December 31, 2018. Advertising and promotion costs are included in selling, general and administrative
expenses in the accompanying statements of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development costs consist primarily
of contract development costs and experimental work materials and certain startup patent costs. Research and development costs
with no alternative use are expensed as incurred.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Leases entered into are classified as either
capital or operating leases. At the time a capital lease is entered into, an asset is recorded, together with its related long-term
obligation to reflect the purchase and financing. At December 31, 2018 and 2017, the Company had no capital lease obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (“<i>ASU 2014-09</i>”) and ASC Subtopic 340-40, Other Assets and Deferred Costs - Contracts
with Customers (“<i>ASC 340-40</i>”), (collectively, “<i>Topic 606</i>”). On January 1, 2018, the Company
adopted Topic 606 and, as it had no prior revenue or contracts with customers, there was no transition required nor any impact
on prior results. ASU 2014-09 requires entities to recognize revenue through the application of a five-step model, which includes
identification of the contract, identification of the performance obligations, determination of the transaction price, allocation
of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations.
See Note 2 for additional information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Shipping and handling costs are included in
cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs
were $1,570 for the year ended December 31, 2018. Actual revenues from shipping and handling were $670 for the year ended December
31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company warrants its products and accessories
to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally
limited. The Company currently provides direct warranty service. International market warranties are generally similar to the U.S.
market.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company establishes a warranty reserve based
on anticipated warranty claims at the time product revenues are recognized. Factors affecting warranty reserve levels include the
number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the
adequacy of the provision for warranty costs each reporting period. The warranty reserve was $428 at December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has one operating segment with one
business activity, providing restraint solutions. The Company’s chief operating decision maker is its Chief Executive Officer,
who manages operations on a consolidated basis for purposes of allocating resources.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Until its reverse recapitalization on March
31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. Instead,
its losses were included in the income tax returns of the member partners. Accordingly, no provision or liability for federal or
state income taxes has been included in these financial statements for the period prior to March 31, 2017 and no income tax expense
was recorded for period ended December 31, 2018 due to losses incurred.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities are determined
based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward
period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change
in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in
income in the year of the change in estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management has evaluated events subsequent to
December 31, 2018 through the date the accompanying financial statements were filed with the Securities and Exchange Commission
and noted that there have been no events or transactions which would affect the Company’s financial statements for the year
ended December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Recently Adopted Accounting Pronouncement:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2017, the FASB issued ASU 2017-11, Earnings
Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments
in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features)
with down round features. When determining whether certain financial instruments should be classified as liabilities or equity
instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to
an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The
amendments in Part I of this ASU are effective for the Company as of January 1, 2019 with early adoption permitted.  The
amendments in Part II of this ASU replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. The
amendments in Part II of this ASU do not require any transition guidance. The <font style="color: #2E2E2E">adoption of this ASU
did not have any impact on the Company’s historical financial statements and the Company was permitted and adopted retrospectively
to January 1, 2018 the standard for any equity securities with down round features.</font> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As discussed above under “Revenue Recognition”,
the Company adopted Topic 606 on January 1, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition
of right-of-use (“<i>ROU</i>”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional
guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method,
entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption.
We currently plan to adopt this standard using this modified retrospective approach.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Effective the first quarter of 2019:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition
of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional
guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method,
entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption.
We currently plan to adopt this standard using this modified retrospective approach.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Most prominent among the changes in the standard
is the requirement for lessees to recognize ROU assets and lease liabilities for those leases classified as operating leases under
current U.S. GAAP. The standard requires additional disclosures to enable users of financial statements to assess the amount, timing,
and certainty of cash flows arising from leases. We intend to elect certain of the available practical expedients upon adoption.
We have evaluated our existing lease portfolio and believe that our population of leases is low in number. We have implemented
key processes and controls to enable the accurate assessment of leases and preparation of related financial information.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect adoption of the standard will result
in the recognition of an ROU asset and lease liability of approximately $12,900 for one operating lease as of January 1, 2019,
with no impact to retained earnings. We had no capital leases at December 31, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Effective the first quarter of 2020:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, to improve the effectiveness of
fair value measurement disclosures by removing or modifying certain disclosure requirements and adding other requirements. This
ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after
December 15, 2019. The Company is currently evaluating the effect, if any, that ASU 2018-13 will have on its financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Other pronouncements:</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has reviewed other recently issued,
but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected
to cause a material impact on its financial condition or the results of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Finished goods</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">82,313</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">5,308</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Work in process</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">12,695</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">5,484</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Raw materials</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">63,259</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">120,400</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">158,267</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">131,192</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Laboratory equipment</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">13,980</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">12,730</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Tooling</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">22,683</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">18,165</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Computer equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">12,608</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,151</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Furniture and fixtures</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">9,595</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">9,595</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">58,866</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">44,641</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accumulated depreciation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(28,493</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(7,973</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">30,373</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">36,668</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Patent costs</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">11,600</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">900</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Accrued compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">55,493</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">50,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Warranty costs</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">428</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Other</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">932</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">9,414</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">68,453</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">60,314</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Year Ended December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Current tax benefit</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Deferred tax benefit</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">678,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">136,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(678,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(136,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Income tax benefit (provision)</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Year Ended December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Income taxes benefit computed at federal statutory rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">701,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">133,000</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Research tax credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">15,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Permanent differences and other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(38,000</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(3,000</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(678,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(136,000</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Income tax benefit (provision)</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Deferred tax assets:</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%; text-indent: 0.25in"><font style="font-size: 8pt">Net operating losses</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">756,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">132,000</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Research tax credits</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">23,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Deferred compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">20,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">20,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Stock compensation</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">76,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Accruals and other</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">13,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">875,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">171,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Deferred tax liabilities:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0.25in"><font style="font-size: 8pt">Depreciation and other</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">29,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">29,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Net deferred tax assets</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">846,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">168,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Less valuation allowance</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(846,000</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(168,000</font></td>
<td><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Net deferred taxes after valuation allowance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
82313
5308
12695
5484
63259
120400
58866
44641
13980
12730
22683
18165
12608
4151
9595
9595
28493
7973
2067500
0
1847500
220000
0
0
2067500
225000
225000
0
1.68
0.00
1.50
3.23
0.00
0.00
1.68
1.50
1.50
0.00
P4Y5M8D
P4Y5M8D
P4Y4M20D
P4Y9M25D
P4Y4M20D
3063375
0
0
0
0
371250
0.47
0.49
0.0267
0.0299
0.00
0.00
P2Y9M
P5Y
0.72
3.00
5.00
2020-10-30
2020-10-30
18157
18120
19051
25200
0
0
678000
136000
-678000
-136000
0
0
701000
133000
15000
6000
-38000
-3000
875000
171000
0
13000
76000
0
20000
20000
23000
6000
756000
132000
0
0
846000
168000
846000
168000
29000
3000
29000
3000
120070
0
39435
0
39435
0
1304
0
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted Average</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="text-align: center"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Options on</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Aggregate</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Common</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Intrinsic</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Term</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Value</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 51%"><font style="font-size: 8pt">Outstanding January 1, 2018</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 2%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.25in"><font style="font-size: 8pt">Granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,067,500</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.68</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4.44</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.25in"><font style="font-size: 8pt">Exercised</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.25in"><font style="font-size: 8pt">Forfeited, cancelled, expired</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Outstanding December 31, 2018</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">2,067,500</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">1.68</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">4.44</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">3,063,375</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Vested and exercisable at December 31, 2018</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">225,000</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"> </td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">4.39</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">371,250</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Year</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Expected stock price volatility</font></td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">47% to 49%</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt">2.67% to 2.99%</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 88%; padding-left: 27pt"><font style="font-size: 8pt">Forfeiture rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">0</font></td>
<td style="width: 1%"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 27pt"><font style="font-size: 8pt">Expected dividend yield</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 27pt"><font style="font-size: 8pt">Expected life of options - years</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.75 - 5.00</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 27pt"><font style="font-size: 8pt">Weighted-average fair value of options granted</font></td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.72</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Weighted</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Average</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Weighted</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Weighted</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Average</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Average</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Range of</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Exercise Prices</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Outstanding</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Life</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Exercisable</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 22%; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">1,847,500</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">4.39</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">225,000</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.00 - $3.61</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">220,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4.82</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.23</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"><b>Number of</b></font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="2" style="vertical-align: bottom; text-align: center"><font style="font-size: 8pt"><b>Exercise Price</b></font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td colspan="3"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"><b>Description</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Common Shares</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Per Share</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt"><b>Expiration Date</b></font></td>
<td colspan="2" style="text-align: center"></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr>
<td style="vertical-align: bottom; width: 48%"><font style="font-size: 8pt">Purchase Warrants (1)</font></td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 0%"> </td>
<td style="vertical-align: bottom; width: 11%; text-align: right"><font style="font-size: 8pt">4,561,074</font></td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="vertical-align: bottom; width: 11%; text-align: right"><font style="font-size: 8pt">5.00</font></td>
<td style="vertical-align: bottom; width: 1%"> </td>
<td style="vertical-align: bottom; width: 15%"><font style="font-size: 8pt">October 30, 2020</font></td>
<td> </td>
<td> </td>
<td style="width: 1%"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font-size: 8pt">Agent Warrants</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 8pt">456,107</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">$</font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 8pt">3.00</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"><font style="font-size: 8pt">October 30, 2020</font></td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Year</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Ended December 31,</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b> 2018</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b> 2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 75%"><font style="font-size: 8pt">Selling, general and administrative</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">417,151</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Research and development</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">95,837</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total stock-based expense</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">512,988</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
-.14
-.04
23578291
20194560
456107
4561074
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