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<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited condensed
interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States
for interim financial statements and do not include all the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. The information furnished reflects all adjustments, consisting
only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not
misleading. The consolidated financial statements as of December 31, 2015 have been audited by an independent registered public
accounting firm. The accounting policies and procedures employed in the preparation of these condensed consolidated financial statements
have been derived from the audited financial statements of the Company for the year ended December 31, 2015, which are contained
in Form 10-K as filed with the Securities and Exchange Commission on March 30, 2016. The consolidated balance sheet as of December
31, 2015 was derived from those financial statements.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Basis of Presentation and Principles of Consolidation</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed consolidated financial
statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP")
and the rules and regulations of the U.S Securities and Exchange Commission for Interim Financial Information. All intercompany
transactions and balances have been eliminated. All adjustments (consisting of normal recurring items) necessary to present fairly
the Company's financial position as of June 30, 2016, and the results of operations and cash flows for the six months ended June
30, 2016 have been included. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative
of the results to be expected for the full year.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Description of Business</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Orbital Tracking Corp. (the “Company”)
was formerly Great West Resources, Inc., a Nevada corporation. The Company, through its wholly owned subsidiaries, Global Telesat
Communications Limited (“GTCL”) and Orbital Satcom Corp. (“Orbital Satcom”) is a provider of satellite based
hardware, airtime and related services both in the United States and internationally.  The Company’s principal
focus is on growing the Company’s existing satellite based hardware, airtime and related services business line and developing
the Company’s own tracking devices for use by retail customers worldwide.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><i>Going
Concern Considerations</i></font></p>
<p style="font: 9.5pt/9.9pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 9.5pt/9.9pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The
<font style="letter-spacing: -0.05pt">accompanying</font><font style="letter-spacing: 1.55pt"> </font>condensed<font style="letter-spacing: 1.55pt">
</font>consolidated<font style="letter-spacing: 1.55pt"> </font>financial<font style="letter-spacing: 1.55pt"> </font>statements
are<font style="letter-spacing: 1.55pt"> </font>prepared<font style="letter-spacing: 1.55pt"> </font>assuming<font style="letter-spacing: 1.55pt">
</font>the<font style="letter-spacing: 1.55pt"> </font>Company<font style="letter-spacing: 1.5pt"> </font>will<font style="letter-spacing: 1.55pt">
</font>continue<font style="letter-spacing: 1.55pt"> </font>as<font style="letter-spacing: 1.55pt"> </font>a<font style="letter-spacing: 1.55pt">
</font>going<font style="letter-spacing: 1.5pt"> </font>concern.<font style="letter-spacing: 1.55pt"> </font>At<font style="letter-spacing: 1.55pt">
</font>June<font style="letter-spacing: 1.55pt"> </font>30, 2016,<font style="letter-spacing: 1pt"> </font>the<font style="letter-spacing: 1.05pt">
</font>Company<font style="letter-spacing: 1.05pt"> </font>had<font style="letter-spacing: 1pt"> </font>an<font style="letter-spacing: 1.05pt">
</font>accumulated<font style="letter-spacing: 1.05pt"> </font>deficit<font style="letter-spacing: 1pt"> </font>of<font style="letter-spacing: 1.05pt">
</font>approximately<font style="letter-spacing: 1.05pt"> </font>$3.1<font style="letter-spacing: 1pt"> </font>million.<font style="letter-spacing: 1.05pt">
</font>For the<font style="letter-spacing: 0.55pt"> </font>six<font style="letter-spacing: 0.6pt"> </font>months<font style="letter-spacing: 0.6pt">
</font>ended<font style="letter-spacing: 0.55pt"> </font>June<font style="letter-spacing: 0.6pt"> </font>30,<font style="letter-spacing: 0.6pt">
</font>2016,<font style="letter-spacing: 0.55pt"> </font>the<font style="letter-spacing: 0.6pt"> </font>Company<font style="letter-spacing: 0.6pt">
</font>incurred<font style="letter-spacing: 0.6pt"> </font>a<font style="letter-spacing: 0.55pt"> </font>net<font style="letter-spacing: 0.6pt">
</font>loss<font style="letter-spacing: 0.6pt"> </font>of<font style="letter-spacing: 0.55pt"> </font>approximately<font style="letter-spacing: 0.55pt">
</font>$1,173,757<font style="letter-spacing: 0.6pt"> </font>and<font style="letter-spacing: 0.55pt"> </font>had<font style="letter-spacing: 0.6pt">
</font>cash<font style="letter-spacing: 0.6pt"> </font>flows<font style="letter-spacing: 0.55pt"> </font>used<font style="letter-spacing: 0.6pt">
</font>in<font style="letter-spacing: 0.6pt"> </font>operations<font style="letter-spacing: 0.6pt"> </font>in<font style="letter-spacing: 0.55pt">
</font>the<font style="letter-spacing: 0.6pt"> </font>amount of<font style="letter-spacing: 0.7pt"> </font>$705,892.<font style="letter-spacing: 0.7pt">
</font>These<font style="letter-spacing: 0.7pt"> </font>factors<font style="letter-spacing: 0.75pt"> </font>raise<font style="letter-spacing: 0.7pt">
</font>substantial<font style="letter-spacing: 0.7pt"> </font>doubt<font style="letter-spacing: 0.75pt"> </font>about<font style="letter-spacing: 0.7pt">
</font>the<font style="letter-spacing: 0.7pt"> </font>Company’s<font style="letter-spacing: 0.7pt"> </font>ability<font style="letter-spacing: 0.75pt">
</font>to<font style="letter-spacing: 0.7pt"> </font>continue<font style="letter-spacing: 0.7pt"> </font>as<font style="letter-spacing: 0.75pt">
</font>a<font style="letter-spacing: 0.7pt"> </font>going<font style="letter-spacing: 0.7pt"> </font>concern.<font style="letter-spacing: 0.75pt">
</font>The<font style="letter-spacing: 0.7pt"> </font>ability<font style="letter-spacing: 0.7pt"> </font>of<font style="letter-spacing: 0.7pt">
</font>the<font style="letter-spacing: 0.75pt"> </font>Company<font style="letter-spacing: 0.7pt"> </font>to<font style="letter-spacing: 0.7pt">
</font>continue as<font style="letter-spacing: 0.65pt"> </font>a<font style="letter-spacing: 0.65pt"> </font>going<font style="letter-spacing: 0.7pt">
</font>concern is<font style="letter-spacing: 0.65pt"> </font>dependent<font style="letter-spacing: 0.7pt"> </font>upon<font style="letter-spacing: 0.65pt">
</font>obtaining<font style="letter-spacing: 0.65pt"> </font>additional<font style="letter-spacing: 0.7pt"> </font>capital<font style="letter-spacing: 0.65pt">
</font>and<font style="letter-spacing: 0.7pt"> </font>financing.<font style="letter-spacing: 0.65pt"> </font>Management<font style="letter-spacing: 0.65pt">
</font>intends<font style="letter-spacing: 0.7pt"> </font>to<font style="letter-spacing: 0.65pt"> </font>attempt<font style="letter-spacing: 0.65pt">
</font>to<font style="letter-spacing: 0.7pt"> </font>raise<font style="letter-spacing: 0.65pt"> </font>additional<font style="letter-spacing: 0.7pt">
</font>funds<font style="letter-spacing: 0.65pt"> </font>by<font style="letter-spacing: 0.65pt"> </font>way<font style="letter-spacing: 0.7pt">
</font>of<font style="letter-spacing: 0.65pt"> </font>a public<font style="letter-spacing: 1.45pt"> </font>or<font style="letter-spacing: 1.5pt">
</font>private<font style="letter-spacing: 1.5pt"> </font>offering.<font style="letter-spacing: 1.5pt"> </font>While<font style="letter-spacing: 1.45pt">
</font>the<font style="letter-spacing: 1.5pt"> </font>Company<font style="letter-spacing: 1.5pt"> </font>believes<font style="letter-spacing: 1.5pt">
</font>in<font style="letter-spacing: 1.45pt"> </font>the<font style="letter-spacing: 1.5pt"> </font>viability<font style="letter-spacing: 1.5pt">
</font>of<font style="letter-spacing: 1.5pt"> </font>its<font style="letter-spacing: 1.45pt"> </font>strategy<font style="letter-spacing: 1.5pt">
</font>to<font style="letter-spacing: 1.5pt"> </font>raise<font style="letter-spacing: 1.5pt"> </font>additional<font style="letter-spacing: 1.5pt">
</font>funds,<font style="letter-spacing: 1.45pt"> </font>there<font style="letter-spacing: 1.5pt"> </font>can<font style="letter-spacing: 1.5pt">
</font>be<font style="letter-spacing: 1.5pt"> </font>no<font style="letter-spacing: 1.45pt"> </font>assurances<font style="letter-spacing: 1.5pt">
</font>to<font style="letter-spacing: 1.5pt"> </font>that effect.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 9.5pt/normal Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The
condensed<font style="letter-spacing: 1.05pt"> </font>consolidated<font style="letter-spacing: 1.05pt"> </font>financial<font style="letter-spacing: 1.05pt">
</font>statements<font style="letter-spacing: 1.05pt"> </font>do<font style="letter-spacing: 1.05pt"> </font>not<font style="letter-spacing: 1.05pt">
</font>include<font style="letter-spacing: 1.05pt"> </font>any<font style="letter-spacing: 1pt"> </font>adjustments<font style="letter-spacing: 1.05pt">
</font>relating<font style="letter-spacing: 1.05pt"> </font>to<font style="letter-spacing: 1.05pt"> </font>classification<font style="letter-spacing: 1.05pt">
</font>of<font style="letter-spacing: 1.05pt"> </font>liabilities<font style="letter-spacing: 1.05pt"> </font>that<font style="letter-spacing: 1.05pt">
</font>might<font style="letter-spacing: 1pt"> </font>be<font style="letter-spacing: 1.05pt"> </font>necessary<font style="letter-spacing: 1.05pt">
</font>should the<font style="letter-spacing: 0.45pt"> </font>Company<font style="letter-spacing: 0.45pt"> </font>be<font style="letter-spacing: 0.5pt">
</font>unable<font style="letter-spacing: 0.45pt"> </font>to<font style="letter-spacing: 0.5pt"> </font>continue<font style="letter-spacing: 0.45pt">
</font>as<font style="letter-spacing: 0.45pt"> </font>a<font style="letter-spacing: 0.5pt"> </font>going<font style="letter-spacing: 0.45pt">
</font>concern.</font></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Use of Estimates</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In preparing the consolidated financial
statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may
differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions
used to calculate stock-based compensation, derivative liabilities, preferred deemed dividend and common stock issued for services.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Cash and Cash Equivalents</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid
investments with a maturity of six months or less when acquired to be cash equivalents. The Company places its cash with a high
credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $250,000.  To reduce its risk associated with the failure of such financial institution,
the Company evaluates at least annually the rating of the financial institution in which it holds deposits.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">   </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Accounts receivable and allowance for doubtful accounts</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a policy of reserving
for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.  The
Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past
due accounts and other factors that may indicate that the realization of an account may be in doubt.  Account balances
deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential
for recovery is considered remote. As of June 30, 2016 and December 31, 2015, there is an allowance for doubtful accounts
of $0 and $0.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Foreign Currency Translation</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s reporting currency
is US Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, (Great
British Pound) GTCL as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date,
shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange
rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’
equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation
on transactions denominated in a currency other than the functional currency are included in the statements of operations.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The<font style="letter-spacing: 0.15pt">
</font>relevant<font style="letter-spacing: 0.2pt"> </font>translation<font style="letter-spacing: 0.2pt"> </font>rates<font style="letter-spacing: 0.2pt">
</font>are<font style="letter-spacing: 0.2pt"> </font>as<font style="letter-spacing: 0.2pt"> </font>follows:<font style="letter-spacing: 0.2pt">
</font>for<font style="letter-spacing: 0.2pt"> </font>the<font style="letter-spacing: 0.2pt"> </font>three<font style="letter-spacing: 0.15pt">
</font>and<font style="letter-spacing: 0.2pt"> </font>six<font style="letter-spacing: 0.2pt"> </font>months<font style="letter-spacing: 0.2pt">
</font>ended<font style="letter-spacing: 0.2pt"> </font>June<font style="letter-spacing: 0.2pt"> </font>30,<font style="letter-spacing: 0.2pt">
</font>2016<font style="letter-spacing: 0.2pt"> </font>closing<font style="letter-spacing: 0.2pt"> </font>rate<font style="letter-spacing: 0.15pt">
</font>at<font style="letter-spacing: 0.2pt"> </font>1.3311<font style="letter-spacing: 0.2pt"> </font>US$:<font style="letter-spacing: 0.2pt">
</font>GBP,<font style="letter-spacing: 0.2pt"> </font>average<font style="letter-spacing: 0.2pt"> </font>rate<font style="letter-spacing: 0.2pt">
</font>at 1.43544 and<font style="letter-spacing: 0.85pt"> </font>1.43414<font style="letter-spacing: 0.85pt"> </font>US$:<font style="letter-spacing: 0.85pt">
</font>GBP,<font style="letter-spacing: 0.85pt"> </font>for<font style="letter-spacing: 0.85pt"> </font>the<font style="letter-spacing: 0.8pt">
</font>three<font style="letter-spacing: 0.85pt"> </font>and<font style="letter-spacing: 0.85pt"> </font>six<font style="letter-spacing: 0.85pt">
</font>months<font style="letter-spacing: 0.85pt"> </font>ended<font style="letter-spacing: 0.85pt"> </font>June 30,<font style="letter-spacing: 0.8pt">
</font>2015<font style="letter-spacing: 0.85pt"> </font>closing<font style="letter-spacing: 0.85pt"> </font>rate<font style="letter-spacing: 0.85pt">
</font>at<font style="letter-spacing: 0.85pt"> </font>1.5725<font style="letter-spacing: 0.85pt"> </font>US$:<font style="letter-spacing: 0.85pt">
</font>GBP,<font style="letter-spacing: 0.8pt"> </font>average<font style="letter-spacing: 0.85pt"> </font>rate<font style="letter-spacing: 0.85pt">
</font>at 1.5325<font style="letter-spacing: 0.1pt"> </font>and<font style="letter-spacing: 0.1pt"> </font>1.5236<font style="letter-spacing: 0.1pt">
</font>and for the year ended 2015 closing rate at 1.5322 US$: GBP.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Revenue Recognition and Unearned Revenue</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue from satellite
services when earned, as services are rendered or delivered to customers.  Equipment sales revenue is recognized when the
equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically, the Company
has not incurred significant expenses for warranties.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s customers generally
purchase a combination of our products and services as part of a multiple element arrangement. The Company’s assessment of
which revenue recognition guidance is appropriate to account for each element in an arrangement can involve significant judgment.
This assessment has a significant impact on the amount and timing of revenue recognition.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue is recognized when all of the
following criteria have been met:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>Persuasive evidence of an arrangement exists. Contracts and customer purchase orders are generally used to determine the existence
of an arrangement.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>Delivery has occurred. Shipping documents and customer acceptance, when applicable, are used to verify delivery.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>The fee is fixed or determinable. We assess whether the fee is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or adjustment.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>Collectability is reasonably assured. We assess collectability based primarily on the creditworthiness of the customer as determined
by credit checks and analysis, as well as the customer’s payment history.</td></tr></table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with ASC 605-25, <i>Revenue
Recognition </i>—<i> Multiple-Element Arrangements, </i>based on the terms and conditions of the product arrangements, the
Company believes that its products and services can be accounted for separately as its products and services have value to the
Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue is allocated
to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services
are provided over the term of the customer contract.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Goodwill and other intangible assets</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with ASC 350-30-65, “Intangibles
- Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances
indicate that the carrying value may not be recoverable.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Factors the Company considers to be important
which could trigger an impairment review include the following:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 7%; text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1.</font></td>
<td style="width: 85%; text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Significant underperformance relative to expected historical or projected future operating results;</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"> </td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2.</font></td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"> </td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">3.</font></td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Significant negative industry or economic trends.</font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">When the Company determines that the
carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment
and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment
charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by
management to be commensurate with the risk inherent in the current business model. Significant management judgment is required
in determining whether an indicator of impairment exists and in projecting cash flows.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Property and Equipment</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are carried at
historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and
is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized.
Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed
from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related
accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance
are expensed as incurred.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The estimated useful lives of property and equipment are generally
as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr>
<td style="width: 84%; line-height: 107%"> </td>
<td style="width: 16%; border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Years</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Office furniture and fixtures</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4</font></td></tr>
<tr style="background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Computer equipment  </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Appliques</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">10 </font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Website development</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2</font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Impairment of long-lived assets</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable,
or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated
fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods ended
June 30, 2016 and December 31, 2015, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> <i> </i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Fair value of financial instruments</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements
and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition
for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework
for measuring fair value and expands disclosure about such fair value measurements.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 820 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs. These inputs are prioritized below:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 1: Observable inputs such as quoted
market prices in active markets for identical assets or liabilities</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 2: Observable market-based inputs
or unobservable inputs that are corroborated by market data</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3: Unobservable inputs for which
there is little or no market data, which require the use of the reporting entity’s own assumptions.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table presents a reconciliation
of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3) from January
1, 2016 to June 30, 2016:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 47%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 15%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Conversion Feature Derivative Liability</b></font></td>
<td style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 16%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Warrant Liability</b></p></td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 14%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Total</b></p></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$    614,036</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> $           4,355</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$    618,391</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Change in fair value included in earnings</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">    (422,974)</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">            (1,871)</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">    (424,846)</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Net effect on additional paid in capital</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><u>    (191,062)</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-left: 0.25in; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><u>             -</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  <u>   (191,062)</u></font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance June 30, 2016</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif; text-underline-style: double"><u>$               -</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> <font style="text-underline-style: double"><u>$          2,484</u></font></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif; text-underline-style: double"><u>$        2,484</u></font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company did not identify any other
assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the
accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued expenses approximate
their estimated fair market value based on the short-term maturity of the instruments.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Stock Based Compensation</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock-based compensation is accounted
for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial
statements of the cost of employee and director services received in exchange for an award of equity instruments over the period
the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The
ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting
date.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Income Taxes</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has adopted Accounting Standards
Codification subtopic 740-10, <i>Income Taxes</i> (“ASC740-10”) which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Under
this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis
of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation
allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">U.S. GAAP requires that, in applying
the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more
likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based
on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain
tax positions recognized during the six months ended June 30, 2016 and the year ended December 31, 2015, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Earnings per Common Share</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Net income (loss) per common share is
calculated in accordance with ASC Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The
computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding
as they would be anti-dilutive.  For the six months ended June 30, 2016, where the Company had net income, therefore weighted
average number of shares dilutive are noted.  For the six months ended June 30, 2015, periods where the Company has a
net loss, all dilutive securities are excluded.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The following are dilutive common stock equivalents during
the period ended:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 74%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Convertible preferred stock</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; border-top: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">209,416,215</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 11%; border-top: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">220,887,750</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Stock options</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,150,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Stock warrants</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Total</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">212,271,215</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">223,042,750</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Related Party Transactions</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A party is considered to be related to
the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls
or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties
might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or
operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests is also a related party.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Recent Accounting Pronouncements</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Management does not believe that any
recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial
statements.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 19, 2015, the Company entered
into a Share Exchange Agreement with <font style="background-color: white">Global Telesat Communications Limited, </font>a
Private Limited Company formed under the laws of England and Wales (“GTCL”) and all of the holders of the outstanding
equity of GTCL (the “GTCL Shareholders”). Upon closing of the transactions contemplated under the Exchange Agreement
the GTCL Shareholders (7 members) transferred all of the issued and outstanding equity of GTCL to the OTC in exchange for (i) an
aggregate of 2,540,000 shares of the common stock of the OTC and 8,746,000 shares of the newly issued Series E Convertible Preferred
Stock of the OTC with each share of Series E Convertible Preferred Stock convertible into ten shares of common stock, (ii) a cash
payment of $375,000 and (iii) a one-year promissory note in the amount of $122,536.  Such exchange caused GTCL to become
a wholly owned subsidiary of the Company.  </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For accounting purposes, this transaction
is being accounted for as a reverse acquisition and has been treated as a recapitalization of Orbital Tracking Corp. with Global
Telesat Communications Limited considered the accounting acquirer, and the financial statements of the accounting acquirer became
the financial statements of the registrant. The completion of the Share Exchange resulted in a change of control. The Share Exchange
was accounted for as a reverse acquisition and re-capitalization. The GTCL Shareholders obtained approximately 39% of voting control
on the date of Share Exchange. GTCL was the acquirer for financial reporting purposes and the Orbital Tracking Corp. was the acquired
company. The consolidated financial statements after the acquisition include the balance sheets of both companies at historical
cost, the historical results of GTCL and the results of the Company from the acquisition date. All share and per share information
in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization.
As part of agreement, OTC shareholders retained 5,383,172 shares of the Common Stock, 20,000 shares of series A Convertible Preferred
Stock, 6,666 shares of series B Convertible Preferred Stock, 1,197,442 shares of series C Convertible Preferred Stock and 5,000,000
shares of series D Convertible Preferred Stock.  </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 88%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Property and equipment</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4,973</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Accounts receivable</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">34,585</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Cash in bank</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">30,934</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid expenses</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,219,677</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Inventory</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">40,161</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Intangible asset</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">250,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Current liabilities</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(469,643</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Due to related party</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(2,174</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  )</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Derivative liability</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(4,936</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  )</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Liabilities of discontinued operations</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(112,397</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  )</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total purchase price/assets acquired</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1,991,180</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Preferred Stock</i></b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 50,000,000
shares of Preferred Stock authorized.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 20,000
shares of Series A Convertible Preferred Stock authorized and 0 shares issued and outstanding, due to the conversion
of 20,000 shares of Series A into 20,000 shares of common stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 30,000
shares of Series B Convertible Preferred Stock authorized and 6,667 shares issued and outstanding.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 4,000,000
shares of Series C Convertible Preferred Stock authorized and 3,190,365 shares issued and outstanding, due to the conversion
of 147,077 shares of Series C into 1,470,770 shares of common stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 5,000,000
shares of Series D Convertible Preferred Stock authorized and 4,063,843 shares issued and outstanding, due to the conversion
of 609,167 shares of Series D into 12,183,340 shares of common stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 8,746,000
shares of Series E Convertible Preferred Stock authorized and 8,504,569 shares issued and outstanding, due to the conversion
of 117,020 shares of Series E into 1,170,200 shares of common stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 1,100,000
shares of Series F shares authorized and 1,099,998 shares issued and outstanding.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 10,090,000
shares of Series G shares authorized and 10,083,351 shares issued and outstanding, upon the exchange of convertible notes in
the amount of $504,168 into 10,083,351 shares of common stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Common Stock</i></b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016, there were 750,000,000
shares of Common Stock authorized and 34,213,004 shares issued and outstanding.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 4, 2016, the Company issued
an aggregate of 75,000 shares of common stock upon the conversion of 7,500 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 29, 2016, the Company issued
an aggregate of 850,000 shares of common stock upon the conversion of 42,500 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 1, 2016, the Company issued
an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 2, 2016, the Company issued
an aggregate of 900,000 shares of common stock upon the conversion of 45,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 5, 2016, the Company issued
an aggregate of 1,600 shares of common stock upon the conversion of 160 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 11, 2016, the Company issued
an aggregate of 136,612 shares of common stock calculated by the average closing price of the Company’s common stock on its
principal exchange for the 10 (ten) trading days immediately prior to the execution of the Agreement, or $100,000, to an investor
relations consultant as compensation for services, which is amortized over the period of service.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 16, 2016, the Company issued
an aggregate of 100,000 shares of common stock upon the conversion of 10,000 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 1, 2016, the Company issued
an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 8, 2016, the Company issued
an aggregate of 73,320 shares of common stock upon the conversion of 3,666 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 11, 2016, the Company issued
an aggregate of 1,600 shares of common stock upon the conversion of 160 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 1, 2016, the Company issued
an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 5, 2016, the Company issued
an aggregate of 208,530 shares of common stock upon the conversion of 20,853 shares of Series C Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 12, 2016, the Company issued
an aggregate of 125,000 shares of common stock upon the conversion of 6,250 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 18, 2016, the Company issued
an aggregate of 650,000 shares of common stock upon the conversion of 32,500 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 21, 2016, the Company issued
an aggregate of 400,000 shares of common stock upon the conversion of 20,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 22, 2016, the Company issued
an aggregate of 900,000 shares of common stock upon the conversion of 45,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 27, 2016, the Company issued
an aggregate of 200,000 shares of common stock upon the conversion of 10,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 2, 2016, the Company issued an
aggregate of 92,840 shares of common stock upon the conversion of 9,284 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 4, 2016, the Company issued an
aggregate of 5,560 shares of common stock upon the conversion of 556 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 17, 2016, the Company issued
an aggregate of 1,376,470 shares of common stock upon the conversion of 64,147 shares of Series C Preferred Stock and 36,750
shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 17, 2016, the Company issued
an aggregate of 2,420,770 shares of common stock upon the conversion of 62,077 shares of Series C Preferred Stock and 90,000
shares of Series D Preferred Stock. Also, on May 17, 2016 the Company issued an aggregate of 10,083,351 shares of Series G
Preferred Stock upon the exchange of convertible notes of $504,168. Upon the conversion, additional paid in capital
increased $649,662 from the decrease in convertible notes payable of $504,168, decrease in derivative liabilities of $146,502
and increase in Preferred Stock Series G of $1,008.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 20, 2016, the Company issued an
aggregate of 760,000 shares of common stock upon the conversion of 38,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 23, 2016, the Company issued an
aggregate of 250,000 shares of common stock upon the conversion of 12,500 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 25, 2016, the Company issued an
aggregate of 950,000 shares of common stock upon the conversion of 47,500 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 1, 2016, the Company issued an
aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 6, 2016, the Company issued an
aggregate of 1,531,020 shares of common stock upon the conversion of 76,551 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 8, 2016, the Company issued an
aggregate of 1,000,000 shares of common stock upon the conversion of 50,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 13, 2016, the Company issued
an aggregate of 500,000 shares of common stock upon the conversion of 25,000 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 30, 2016, the Company issued
an aggregate of 500,000 shares of common stock upon the conversion of 50,000 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Stock Options</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>2014 Equity Incentive Plan</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 21, 2014, the Board approved
the adoption of a 2014 Equity Incentive Plan (the “2014 Plan”).  The purpose of the 2014 Plan is to promote
the success of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract,
motivate, retain and reward selected employees and other eligible persons.  The 2014 Plan provides for the grant of incentive
stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other types
of stock-based awards to the Company’s employees, officers, directors and consultants.  Pursuant to the terms of
the 2014 Plan, either the Board or a board committee is authorized to administer the plan, including by determining which eligible
participants will receive awards, the number of shares of common stock subject to the awards and the terms and conditions of such
awards.  Unless earlier terminated by the Board, the Plan shall terminate at the close of business on January 21, 2024.  Up
to 226,667 shares of common stock are issuable pursuant to awards under the 2014 Plan, as adjusted in a single adjustment for an
issuance no later than sixty (60) days following the date of shareholder approval of the Plan in connection with (i) a private
placement of the Company’s securities in which the Corporation receives gross proceeds of at least $1,000,000 and (ii) an
acquisition of at least 50 mining leases and/or claims in the Holbrook Basin.  </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 19, 2015, the Company issued
to Mr. Rector, the former Chief Executive Officer, Chief Financial Officer and director of the Company, a seven-year option to
purchase 2,150,000 shares of common stock as compensation for services provided to the Company.  The options have an
exercise price of $0.05 per share, were fully vested on the date of grant and shall expire in February 2022. The 2,150,000 options
were valued on the grant date at approximately $0.05 per option or a total of $107,500 using a Black-Scholes option pricing model
with the following assumptions: stock price of $0.05 per share (based on the sale of common stock in a private placement), volatility
of 380%, expected term of 7 years, and a risk free interest rate of 1.58%. In connection with the stock option grant, the Company
recorded stock based compensation for the for the year ended December 31, 2015 of $107,500.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 28, 2015, the Company issued
Ms. Carlise, Chief Financial Officer, a ten-year option to purchase 500,000 shares of common stock as compensation for services
provided to the Company.  The options have an exercise price of $0.05 per share, were fully vested on the date of grant
and shall expire in December 2025. The 500,000 options were valued on the grant date at approximately $1.30 per option or a total
of $650,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $1.30 per share (based on
the closing price of the Company’s common stock of the date of issuance), volatility of 992%, expected term of 10 years,
and a risk free interest rate of 1.05%. In connection with the stock option grant, the Company recorded stock based compensation
for the six months ended June 30, 2016 and for the year ended December 31, 2015 of $0 and $650,000, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Also on December 28, 2015, the Company
issued Mr. Delgado, its Director, a ten-year option to purchase 200,000 shares of common stock as compensation for services provided
to the Company.  The options have an exercise price of $0.05 per share, were fully vested on the date of grant and shall
expire in December 2025. The 200,000 options were valued on the grant date at approximately $1.30 per option or a total of $260,000
using a Black-Scholes option pricing model with the following assumptions: stock price of $1.30 per share (based on the closing
price of the Company’s common stock of the date of issuance), volatility of 992%, expected term of 10 years, and a risk free
interest rate of 1.05%. In connection with the stock option grant, the Company recorded stock based compensation for the six months
ended June 30, 2016 and for the year ended December 31, 2015 of $0 and $260,000, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock options outstanding at June 30,
2016 as disclosed in the table below have approximately $57,000 of intrinsic value at the end of the period.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the Company’s
outstanding stock options and changes during the six months ended June 30, 2016 is as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Number of Options</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Remaining Contractual Life (Years)</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 66%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.05</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">7.08</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Granted</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Exercised</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Forfeited</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Cancelled</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance outstanding and exercisable at June 30, 2016</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.05</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">6.59</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Weighted average fair value of options granted during the period</font></td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.05</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Stock Warrants</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the Company’s
outstanding stock warrants and changes during the six months ended June 30, 2016 is as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Number of Warrants</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Remaining Contractual Life (Years)</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 66%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1.36</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Granted</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Exercised</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Forfeited</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Cancelled</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance outstanding at June 30, 2016</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1.11</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes the Company’s
stock warrants outstanding at June 30, 2016:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="11" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Warrants Outstanding</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Warrants Exercisable</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number Outstanding at</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30, 2016</b></p></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Remaining Contractual Life</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number Exercisable at</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30, 2016</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 41%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.86 Years</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.86 Years</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses amounted to $318,274
at June 30, 2016. Prepaid expenses include prepayments in cash for professional fees, prepayments in equity instruments which are
being amortized over the terms of their respective agreements. Amortization of the prepaid expense will be included in professional
fees. The current portion consists primarily of costs paid for future services which will occur within a year. Prepaid expense
current portion and long-term portion were $238,137 and $80,137, as of June 30, 2016. As of December 31, 2015, prepaid expense
current portion and long-term portion were $191,677 and $189,968, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 19, 2015, the Company purchased
an intangible asset valued at $250,000 for 1,000,000 shares of common stock. Amortization of customer contracts will be included
in general and administrative expenses. The Company began amortizing the customer contracts in January 2015.  Amortization
expense for the three and six months ended June 30, 2016 was $6,250 and $12,500, respectively.  Future amortization of
intangible assets is as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="background-color: white">
<td style="vertical-align: bottom; width: 88%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">12,500</font></td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2017</font></td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">25,000</font></td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2018</font></td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">25,000</font></td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2019 </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">25,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2020 and thereafter</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">125,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">212,500</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">Property and equipment consisted of the following:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">December 31,</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Office furniture and fixtures</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">113,681</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">95,434</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Computer equipment</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">24,302</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">24,766</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Appliques</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,160,096</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,160,096</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Website development</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">105,271</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">92,399</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Less accumulated depreciation</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(287,658</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(154,002 </font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,115,692</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,218,693</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Depreciation expense was $133,656 for
the six months ended June 30, 2016.  For the six months ended June 30, 2015 depreciation expense was $29,515.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">At June 30, 2016 and December 31, 2015, inventories consisted
of the following:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">December 31,</font></td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Finished goods</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">289,522</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">251,518</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Less reserve for obsolete inventory</font></td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">289,522</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">251,518</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For the six months ended June 30, 2016
and the year ended December 31, 2015, the Company did not make any change to reserve for obsolete inventory.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has received financing from
the Company’s Chief Executive Officer. No formal repayment terms or arrangements existed prior to February 19, 2015, when
as part of the Share Exchange Agreement, the Company entered into a note with David Phipps where the stockholder loans bear no
interest and are due February 19, 2017. The accounts payable due to related party includes advances for inventory due to David
Phipps and compensation. Total payments due to David Phipps as of June 30, 2016 and December 31, 2015 are $85,622 and $74,051,
respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Also, as part of the Share Exchange Agreement
entered into on February 19, 2015, Mr. Phipps received a payment of $25,000 as compensation for transition services that he provided.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company employs two individuals who
are related to Mr. Phipps, of which earned gross wages totaling $25,210 for the six months ended June 30, 2016.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Employment Agreements</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 19, 2015, Orbital Satcom
entered into an employment agreement with Mr. Phipps, whereby Mr. Phipps agreed to serve as the President of Orbital Satcom for
a period of two years, subject to renewal, in consideration for an annual salary of $180,000. Additionally, under the terms of
the employment agreement, Mr. Phipps shall be eligible for an annual bonus if the Company meets certain criteria, as established
by the Board of Directors. Mr. Phipps remains the sole director of GTCL following the closing of the Share Exchange. Mr. Phipps
and the Company entered into an Indemnification Agreement at the closing.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company entered into an employment
agreement with Ms. Carlise on June 9, 2015.  The agreement has a term of one year, and shall automatically be extended
for additional terms of one year each. The agreement provides for an annual base salary of $72,000. In addition to the base salary
Ms. Carlise shall be eligible to receive an annual cash bonus if the Company meets or exceeds criteria adopted by the Compensation
Committee of the Board of Directors and shall be eligible for grants of awards under stock option or other equity incentive plans
of the Company.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 28, 2015, the Company amended
her employment agreement. Effective December 1, 2015, the term of Ms. Carlise’s employment was extended to December 1, 2016
from June 9, 2016, her annual salary was increased to $140,000 from $72,000 and she agreed to devote her full business time to
the Company.  The term of the Original Agreement, as amended by the Amendment, shall automatically extend for additional
terms of one year each, unless either party gives prior written notice of non-renewal to the other party no later than 60 days
prior to the expiration of the initial term or the then current renewal term, as applicable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 26, 2016, the Board of Directors
of Orbital Tracking Corp., a Nevada corporation (“Orbital” or the “Company”), entered into a new executive
employment agreement, (Employment Agreement) with its Chief Executive Officer and President, David Phipps and terminated the original
employment agreement dated February 19, 2015, at a base salary of $144,000 and £ 48,000 per annum, to be effective as of
January 20, 2016, for a term of two years from effective date. In addition to the base salary Executive shall be entitled<font style="letter-spacing: 0.2pt">
</font>to<font style="letter-spacing: -0.35pt"> </font>receive an<font style="letter-spacing: -0.1pt"> </font>annual<font style="letter-spacing: 0.05pt">
</font>cash<font style="letter-spacing: -0.15pt"> </font>bonus<font style="letter-spacing: 0.05pt"> </font>in<font style="letter-spacing: -0.3pt">
</font>an<font style="letter-spacing: -0.1pt"> </font>amount<font style="letter-spacing: 0.15pt"> </font>equal<font style="letter-spacing: -0.45pt">
</font>to<font style="letter-spacing: -0.35pt"> </font>up<font style="letter-spacing: -0.2pt"> </font>to<font style="letter-spacing: -0.3pt">
</font>fifty<font style="letter-spacing: -0.4pt"> </font>(50%)<font style="letter-spacing: -0.65pt"> </font>percent of<font style="letter-spacing: -0.45pt">
</font>his<font style="letter-spacing: -0.1pt"> </font>then-current<font style="letter-spacing: 0.9pt"> </font>Base<font style="letter-spacing: 0.35pt">
</font>Salary,<font style="letter-spacing: 0.1pt"> </font>if<font style="letter-spacing: -0.4pt"> </font>the<font style="letter-spacing: 0.1pt">
</font>Company<font style="letter-spacing: 0.15pt"> </font>meets<font style="letter-spacing: 0.35pt"> </font>or<font style="letter-spacing: -0.05pt">
</font>exceeds<font style="letter-spacing: 0.1pt"> </font>criteria adopted by<font style="letter-spacing: 0.05pt"> </font>the<font style="letter-spacing: 0.1pt">
</font>Compensation<font style="letter-spacing: 0.9pt"> </font>Committee of the Board of the Company.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><i>Litigation</i></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">From time to time, the Company may become
involved in litigation relating to claims arising out of our operations in the normal course of business. The Company is not currently
involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating
any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably
be likely to have a material adverse effect on the Company’s business, financial condition and operating results.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2008, a FASB approved guidance
related to the determination of whether a freestanding equity-linked instrument should be classified as equity or debt under the
provisions of FASB ASC Topic No. 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Stock. The adoption
of this requirement will affect accounting for convertible instruments and warrants with provisions that protect holders from declines
in the stock price (“down-round” provisions). Warrants with such provisions are no longer recorded in equity and are
reclassified as a liability.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Instruments with down-round protection
are not considered indexed to a company’s own stock under ASC Topic 815, because neither the occurrence of a sale of common
stock by the company at market nor the issuance of another equity-linked instrument with a lower strike price is an input to the
fair value of a fixed-for-fixed option on equity shares.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the issuance of its 6%
convertible debentures and related warrants, the Company has determined that the terms of the convertible warrants include down-round
provisions under which the exercise price could be affected by future equity offerings. Accordingly, the warrants are accounted
for as liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. On May 17, 2016,
the Company entered into exchange agreements with holders of the Company's outstanding $504,168 convertible notes originally issued
on December 28, 2015 pursuant to which the Notes were cancelled and the exchanging holders were issued an aggregate of 10,083,351
shares of newly designated Series G Convertible Preferred. Upon the conversion, additional paid in capital increased $649,662 from
the decrease in convertible notes payable of $504,168, decrease in derivative liabilities of $146,502 and increase in Preferred
Stock Series G of $1,008.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The convertible notes were accounted
for as liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. The Company recorded
amortization for the discount to the convertible notes of $602,515 at June 30, 2016. As of June 30, 2016 and December 31, 2015,
the Company has unamortized discount balance of $0 and $602,515, respectively. The Company has recognized derivative liabilities
of $0 and $614,036 at June 30, 2016 and December 31, 2015, respectively. The gain (loss) resulting from the decrease (increase)
in fair value of this convertible instrument was $422,974 and ($64,035) for the six months ended June 30, 2016 and the year ended
December 31, 2015, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has recognized derivative
liabilities for related warrants of $2,484 and $4,355 at June 30, 2016 and December 31, 2015, respectively. The gain resulting
from the decrease in fair value of this convertible instrument was $1,872 and $580 for the six months ended June 30, 2016 and the
year ended December 31, 2015, respectively. Weighted average term is 1.11 years.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company used the following assumptions
for determining the fair value of the convertible instruments granted under the Black-Scholes option pricing model:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30, 2016</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 88%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Expected volatility</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">238</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Expected term - years</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.86</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Risk-free interest rate</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.58</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Expected dividend yield</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Customers:</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">No customer accounted for 10% or more
of the Company’s revenues during the six months ended June 30, 2016 and 2015.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Suppliers:</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth information
as to each supplier that accounted for 10% or more of the Company’s purchases for the six months ended June 30, 2016 and
2015.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30, 2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">June 30,</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">2015</p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 69%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Globalstar Europe</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">146,547</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 4%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">10.9</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 3%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Network Innovations </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">424,605</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  31.5</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> %</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> $</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">207,479</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">15.9</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> %</font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 5, 2016, the Company issued an
aggregate of 1,058,400 shares of common stock upon the conversion of 48,000 shares of Series D Preferred Stock and 9,840 shares
of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 12, 2016, the Company issued
an aggregate of 750,000 shares of common stock upon the conversion of 37,500 shares of Series D Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 1, 2016, the Company issued
an aggregate of 123,010 shares of common stock upon the conversion of 12,301 shares of Series E Preferred Stock.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
36144414
2483857
1972677
1188867
1188593
1839960
1432409
864787
983040
643897
540268
324080
205553
1546726
1180642
536478
804706
146156
174430
103970
63334
688484
258002
63591
387916
0
151563
0
0
344836
139154
123454
170981
367250
457493
245463
182475
-902829
-640374
-212398
-599173
-210962
-14227
-2475
-574584
-32822
-12068
-83
-7817
602986
2321
2321
527108
-424846
-162
71
39659
-1113791
-654601
-214873
-1173757
-1116166
-648961
-208809
-1169342
-2375
5640
6064
4413
24190850
8742059
11068172
27667167
24190850
8742059
11068172
27667167
-0.06
-0.07
-0.02
-0.04
-0.06
-0.07
-0.02
-0.04
602515
12500
12500
6250
6250
133656
29515
0
150000
0
111111
471
2321
164608
21304
-16662
-26875
31342
203139
1047
-4492
-1237
0
5705
-26917
-38004
-73018
-63198
-44801
-30654
-401782
0
375000
30654
57716
0
30934
-89263
1037426
-11571
60074
100834
0
0
1097500
963329
135142
406199
65982
-828187
340307
0
0
0
0
100000
143500
0
50000
0
122536
650670
175000
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed consolidated financial
statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP")
and the rules and regulations of the U.S Securities and Exchange Commission for Interim Financial Information. All intercompany
transactions and balances have been eliminated. All adjustments (consisting of normal recurring items) necessary to present fairly
the Company's financial position as of June 30, 2016, and the results of operations and cash flows for the six months ended June
30, 2016 have been included. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative
of the results to be expected for the full year.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Orbital Tracking Corp. (the “Company”)
was formerly Great West Resources, Inc., a Nevada corporation. The Company, through its wholly owned subsidiaries, Global Telesat
Communications Limited (“GTCL”) and Orbital Satcom Corp. (“Orbital Satcom”) is a provider of satellite
based hardware, airtime and related services both in the United States and internationally.  The Company’s principal
focus is on growing the Company’s existing satellite based hardware, airtime and related services business line and developing
the Company’s own tracking devices for use by retail customers worldwide.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In preparing the consolidated financial
statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may
differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions
used to calculate stock-based compensation, derivative liabilities, preferred deemed dividend and common stock issued for services.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid
investments with a maturity of six months or less when acquired to be cash equivalents. The Company places its cash with a high
credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $250,000.  To reduce its risk associated with the failure of such financial institution,
the Company evaluates at least annually the rating of the financial institution in which it holds deposits.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has a policy of reserving
for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable.  The
Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past
due accounts and other factors that may indicate that the realization of an account may be in doubt.  Account balances
deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential
for recovery is considered remote. As of June 30, 2016 and December 31, 2015, there is an allowance for doubtful accounts
of $0 and $0.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s reporting currency
is US Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, (Great
British Pound) GTCL as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date,
shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange
rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’
equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation
on transactions denominated in a currency other than the functional currency are included in the statements of operations.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The<font style="letter-spacing: 0.15pt">
</font>relevant<font style="letter-spacing: 0.2pt"> </font>translation<font style="letter-spacing: 0.2pt"> </font>rates<font style="letter-spacing: 0.2pt">
</font>are<font style="letter-spacing: 0.2pt"> </font>as<font style="letter-spacing: 0.2pt"> </font>follows:<font style="letter-spacing: 0.2pt">
</font>for<font style="letter-spacing: 0.2pt"> </font>the<font style="letter-spacing: 0.2pt"> </font>three<font style="letter-spacing: 0.15pt">
</font>and<font style="letter-spacing: 0.2pt"> </font>six<font style="letter-spacing: 0.2pt"> </font>months<font style="letter-spacing: 0.2pt">
</font>ended<font style="letter-spacing: 0.2pt"> </font>June<font style="letter-spacing: 0.2pt"> </font>30,<font style="letter-spacing: 0.2pt">
</font>2016<font style="letter-spacing: 0.2pt"> </font>closing<font style="letter-spacing: 0.2pt"> </font>rate<font style="letter-spacing: 0.15pt">
</font>at<font style="letter-spacing: 0.2pt"> </font>1.3311<font style="letter-spacing: 0.2pt"> </font>US$:<font style="letter-spacing: 0.2pt">
</font>GBP,<font style="letter-spacing: 0.2pt"> </font>average<font style="letter-spacing: 0.2pt"> </font>rate<font style="letter-spacing: 0.2pt">
</font>at 1.43544 and<font style="letter-spacing: 0.85pt"> </font>1.43414<font style="letter-spacing: 0.85pt"> </font>US$:<font style="letter-spacing: 0.85pt">
</font>GBP,<font style="letter-spacing: 0.85pt"> </font>for<font style="letter-spacing: 0.85pt"> </font>the<font style="letter-spacing: 0.8pt">
</font>three<font style="letter-spacing: 0.85pt"> </font>and<font style="letter-spacing: 0.85pt"> </font>six<font style="letter-spacing: 0.85pt">
</font>months<font style="letter-spacing: 0.85pt"> </font>ended<font style="letter-spacing: 0.85pt"> </font>June 30,<font style="letter-spacing: 0.8pt">
</font>2015<font style="letter-spacing: 0.85pt"> </font>closing<font style="letter-spacing: 0.85pt"> </font>rate<font style="letter-spacing: 0.85pt">
</font>at<font style="letter-spacing: 0.85pt"> </font>1.5725<font style="letter-spacing: 0.85pt"> </font>US$:<font style="letter-spacing: 0.85pt">
</font>GBP,<font style="letter-spacing: 0.8pt"> </font>average<font style="letter-spacing: 0.85pt"> </font>rate<font style="letter-spacing: 0.85pt">
</font>at 1.5325<font style="letter-spacing: 0.1pt"> </font>and<font style="letter-spacing: 0.1pt"> </font>1.5236<font style="letter-spacing: 0.1pt">
</font>and for the year ended 2015 closing rate at 1.5322 US$: GBP.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue from satellite
services when earned, as services are rendered or delivered to customers.  Equipment sales revenue is recognized when the
equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically, the Company
has not incurred significant expenses for warranties.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s customers generally
purchase a combination of our products and services as part of a multiple element arrangement. The Company’s assessment of
which revenue recognition guidance is appropriate to account for each element in an arrangement can involve significant judgment.
This assessment has a significant impact on the amount and timing of revenue recognition.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue is recognized when all of the
following criteria have been met:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>Persuasive evidence of an arrangement exists. Contracts and customer purchase orders are generally used to determine the existence
of an arrangement.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>Delivery has occurred. Shipping documents and customer acceptance, when applicable, are used to verify delivery.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>The fee is fixed or determinable. We assess whether the fee is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or adjustment.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 8pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 24pt">●</td><td>Collectability is reasonably assured. We assess collectability based primarily on the creditworthiness of the customer as determined
by credit checks and analysis, as well as the customer’s payment history.</td></tr></table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with ASC 605-25, <i>Revenue
Recognition </i>—<i> Multiple-Element Arrangements, </i>based on the terms and conditions of the product arrangements, the
Company believes that its products and services can be accounted for separately as its products and services have value to the
Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue is allocated
to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services
are provided over the term of the customer contract.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In accordance with ASC 350-30-65, “Intangibles
- Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances
indicate that the carrying value may not be recoverable.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Factors the Company considers to be important
which could trigger an impairment review include the following:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 7%; text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1.</font></td>
<td style="width: 85%; text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Significant underperformance relative to expected historical or projected future operating results;</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"> </td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2.</font></td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"> </td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">3.</font></td>
<td style="text-align: justify; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Significant negative industry or economic trends.</font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">When the Company determines that the
carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment
and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment
charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by
management to be commensurate with the risk inherent in the current business model. Significant management judgment is required
in determining whether an indicator of impairment exists and in projecting cash flows.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are carried at
historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and
is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized.
Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed
from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related
accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance
are expensed as incurred.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The estimated useful lives of property and equipment are generally
as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr>
<td style="width: 84%; line-height: 107%"> </td>
<td style="width: 16%; border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Years</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Office furniture and fixtures</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4</font></td></tr>
<tr style="background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Computer equipment  </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Appliques</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">10 </font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Website development</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2</font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable,
or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated
fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods ended
June 30, 2016 and December 31, 2015, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements
and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition
for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework
for measuring fair value and expands disclosure about such fair value measurements.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 820 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs. These inputs are prioritized below:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 1: Observable inputs such as quoted
market prices in active markets for identical assets or liabilities</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 2: Observable market-based inputs
or unobservable inputs that are corroborated by market data</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3: Unobservable inputs for which
there is little or no market data, which require the use of the reporting entity’s own assumptions.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table presents a reconciliation
of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3) from January
1, 2016 to June 30, 2016:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 47%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 15%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Conversion Feature Derivative Liability</b></font></td>
<td style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 16%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Warrant Liability</b></p></td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 14%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Total</b></p></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$    614,036</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> $           4,355</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$    618,391</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Change in fair value included in earnings</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">    (422,974)</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">            (1,871)</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">    (424,846)</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Net effect on additional paid in capital</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><u>    (191,062)</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-left: 0.25in; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><u>             -</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  <u>   (191,062)</u></font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance June 30, 2016</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif; text-underline-style: double"><u>$               -</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> <font style="text-underline-style: double"><u>$          2,484</u></font></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif; text-underline-style: double"><u>$        2,484</u></font></td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company did not identify any other
assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the
accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued expenses approximate
their estimated fair market value based on the short-term maturity of the instruments.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock-based compensation is accounted
for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial
statements of the cost of employee and director services received in exchange for an award of equity instruments over the period
the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The
ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting
date.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has adopted Accounting Standards
Codification subtopic 740-10, <i>Income Taxes</i> (“ASC740-10”) which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Under
this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis
of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation
allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">U.S. GAAP requires that, in applying
the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more
likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based
on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain
tax positions recognized during the six months ended June 30, 2016 and the year ended December 31, 2015, respectively.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Net income (loss) per common share is
calculated in accordance with ASC Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The
computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding
as they would be anti-dilutive.  For the six months ended June 30, 2016, where the Company had net income, therefore weighted
average number of shares dilutive are noted.  For the six months ended June 30, 2015, periods where the Company has a
net loss, all dilutive securities are excluded.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The following are dilutive common stock equivalents during
the period ended:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 74%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Convertible preferred stock</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; border-top: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">209,416,215</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 11%; border-top: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">220,887,750</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Stock options</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,150,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Stock warrants</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Total</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">212,271,215</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">223,042,750</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A party is considered to be related to
the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls
or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties
might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or
operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests is also a related party.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Management does not believe that any
recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial
statements.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr>
<td style="width: 84%; line-height: 107%"> </td>
<td style="width: 16%; border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Years</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Office furniture and fixtures</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4</font></td></tr>
<tr style="background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Computer equipment  </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Appliques</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">10 </font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Website development</font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 47%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 15%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Conversion Feature Derivative Liability</b></font></td>
<td style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 16%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Warrant Liability</b></p></td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="width: 14%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Total</b></p></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$    614,036</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> $           4,355</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$    618,391</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Change in fair value included in earnings</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">    (422,974)</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">            (1,871)</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">    (424,846)</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Net effect on additional paid in capital</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><u>    (191,062)</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-left: 0.25in; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><u>             -</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  <u>   (191,062)</u></font></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance June 30, 2016</font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif; text-underline-style: double"><u>$               -</u></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> <font style="text-underline-style: double"><u>$          2,484</u></font></font></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 107%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif; text-underline-style: double"><u>$        2,484</u></font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 74%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Convertible preferred stock</font></td>
<td style="width: 1%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; border-top: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">209,416,215</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 11%; border-top: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">220,887,750</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Stock options</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,150,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Stock warrants</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Total</font></td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">212,271,215</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">223,042,750</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 88%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Property and equipment</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4,973</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Accounts receivable</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">34,585</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Cash in bank</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">30,934</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid expenses</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,219,677</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Inventory</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">40,161</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Intangible asset</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">250,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Current liabilities</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(469,643</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Due to related party</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(2,174</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  )</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Derivative liability</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(4,936</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  )</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Liabilities of discontinued operations</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(112,397</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  )</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total purchase price/assets acquired</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1,991,180</font></td>
<td style="vertical-align: bottom; line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="11" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Warrants Outstanding</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Warrants Exercisable</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number Outstanding at</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30, 2016</b></p></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Remaining Contractual Life</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number Exercisable at</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30, 2016</b></p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 41%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.86 Years</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.86 Years</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Number of Warrants</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Remaining Contractual Life (Years)</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 66%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1.36</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Granted</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Exercised</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Forfeited</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Cancelled</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance outstanding at June 30, 2016</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">5,000</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">4.50</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">1.11</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Number of Options</b></font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Exercise Price</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted Average Remaining Contractual Life (Years)</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 66%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance at January 1, 2016</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.05</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">7.08</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Granted</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Exercised</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Forfeited</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  Cancelled</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">—</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Balance outstanding and exercisable at June 30, 2016</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,850,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.05</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">6.59</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Weighted average fair value of options granted during the period</font></td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.05</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="background-color: white">
<td style="vertical-align: bottom; width: 88%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td>
<td style="vertical-align: bottom; width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">12,500</font></td>
<td style="vertical-align: top; width: 1%; line-height: 107%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2017</font></td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">25,000</font></td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2018</font></td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: top; line-height: 107%"> </td>
<td style="vertical-align: bottom; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">25,000</font></td>
<td style="vertical-align: top; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2019 </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">25,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2020 and thereafter</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">125,000</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">212,500</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">December 31,</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 77%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Office furniture and fixtures</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">113,681</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">95,434</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Computer equipment</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">24,302</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">24,766</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Appliques</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,160,096</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,160,096</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Website development</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">105,271</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">92,399</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Less accumulated depreciation</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(287,658</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">(154,002 </font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,115,692</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2,218,693</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30,</font></td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">December 31,</font></td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2016</font></td>
<td style="line-height: 107%"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">2015</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Finished goods</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">289,522</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">251,518</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Less reserve for obsolete inventory</font></td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">289,522</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">251,518</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30, 2016</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 88%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Expected volatility</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">238</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Expected term - years</font></td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.86</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Risk-free interest rate</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0.58</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> Expected dividend yield</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">0</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 11pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid; text-align: center; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">June 30, 2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="border-bottom: Black 1pt solid">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">June 30,</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">2015</p></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td colspan="2" style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 69%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Globalstar Europe</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">146,547</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 4%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">10.9</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">%</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 3%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">Network Innovations </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">424,605</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">  31.5</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> %</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> $</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">207,479</font></td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif">15.9</font></td>
<td style="line-height: 107%"><font style="font: 8pt Times New Roman, Times, Serif"> %</font></td></tr>
</table>
P4Y
P4Y
P2Y
P10Y
618391
2484
614036
4355
2484
0
-191062
-191062
0
250000
4973
34585
30934
2219677
40161
250000
469643
2174
4936
112397
1991180
2850000
2850000
0
0
0
0
2850000
0
.05
.05
0
0
0
0
.05
.05
P6Y7M2D
P6Y7M2D
5000
5000
0
0
0
0
4.50
0
0
0
0
0
P1Y4M10D
5000
5000
4.50
4.50
P10M13D
P10M13D
4.50
4.50
5000
5000
4.50
4.50
12500
25000
25000
25000
125000
212500
25210
2.38
P10M10D
.0058
0.00
0.109
0
.315
.159
146547
0
424605
207479
1.5236
1.3311
1.5725
-705892
-300977
<p style="font: 9.5pt/9.9pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 9.5pt/9.9pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 9.5pt/9.9pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The
<font style="letter-spacing: -0.05pt">accompanying</font><font style="letter-spacing: 1.55pt"> </font>condensed<font style="letter-spacing: 1.55pt">
</font>consolidated<font style="letter-spacing: 1.55pt"> </font>financial<font style="letter-spacing: 1.55pt"> </font>statements
are<font style="letter-spacing: 1.55pt"> </font>prepared<font style="letter-spacing: 1.55pt"> </font>assuming<font style="letter-spacing: 1.55pt">
</font>the<font style="letter-spacing: 1.55pt"> </font>Company<font style="letter-spacing: 1.5pt"> </font>will<font style="letter-spacing: 1.55pt">
</font>continue<font style="letter-spacing: 1.55pt"> </font>as<font style="letter-spacing: 1.55pt"> </font>a<font style="letter-spacing: 1.55pt">
</font>going<font style="letter-spacing: 1.5pt"> </font>concern.<font style="letter-spacing: 1.55pt"> </font>At<font style="letter-spacing: 1.55pt">
</font>June<font style="letter-spacing: 1.55pt"> </font>30, 2016,<font style="letter-spacing: 1pt"> </font>the<font style="letter-spacing: 1.05pt">
</font>Company<font style="letter-spacing: 1.05pt"> </font>had<font style="letter-spacing: 1pt"> </font>an<font style="letter-spacing: 1.05pt">
</font>accumulated<font style="letter-spacing: 1.05pt"> </font>deficit<font style="letter-spacing: 1pt"> </font>of<font style="letter-spacing: 1.05pt">
</font>approximately<font style="letter-spacing: 1.05pt"> </font>$3.1<font style="letter-spacing: 1pt"> </font>million.<font style="letter-spacing: 1.05pt">
</font>For the<font style="letter-spacing: 0.55pt"> </font>six<font style="letter-spacing: 0.6pt"> </font>months<font style="letter-spacing: 0.6pt">
</font>ended<font style="letter-spacing: 0.55pt"> </font>June<font style="letter-spacing: 0.6pt"> </font>30,<font style="letter-spacing: 0.6pt">
</font>2016,<font style="letter-spacing: 0.55pt"> </font>the<font style="letter-spacing: 0.6pt"> </font>Company<font style="letter-spacing: 0.6pt">
</font>incurred<font style="letter-spacing: 0.6pt"> </font>a<font style="letter-spacing: 0.55pt"> </font>net<font style="letter-spacing: 0.6pt">
</font>loss<font style="letter-spacing: 0.6pt"> </font>of<font style="letter-spacing: 0.55pt"> </font>approximately<font style="letter-spacing: 0.55pt">
</font>$1,173,757<font style="letter-spacing: 0.6pt"> </font>and<font style="letter-spacing: 0.55pt"> </font>had<font style="letter-spacing: 0.6pt">
</font>cash<font style="letter-spacing: 0.6pt"> </font>flows<font style="letter-spacing: 0.55pt"> </font>used<font style="letter-spacing: 0.6pt">
</font>in<font style="letter-spacing: 0.6pt"> </font>operations<font style="letter-spacing: 0.6pt"> </font>in<font style="letter-spacing: 0.55pt">
</font>the<font style="letter-spacing: 0.6pt"> </font>amount of<font style="letter-spacing: 0.7pt"> </font>$705,892.<font style="letter-spacing: 0.7pt">
</font>These<font style="letter-spacing: 0.7pt"> </font>factors<font style="letter-spacing: 0.75pt"> </font>raise<font style="letter-spacing: 0.7pt">
</font>substantial<font style="letter-spacing: 0.7pt"> </font>doubt<font style="letter-spacing: 0.75pt"> </font>about<font style="letter-spacing: 0.7pt">
</font>the<font style="letter-spacing: 0.7pt"> </font>Company’s<font style="letter-spacing: 0.7pt"> </font>ability<font style="letter-spacing: 0.75pt">
</font>to<font style="letter-spacing: 0.7pt"> </font>continue<font style="letter-spacing: 0.7pt"> </font>as<font style="letter-spacing: 0.75pt">
</font>a<font style="letter-spacing: 0.7pt"> </font>going<font style="letter-spacing: 0.7pt"> </font>concern.<font style="letter-spacing: 0.75pt">
</font>The<font style="letter-spacing: 0.7pt"> </font>ability<font style="letter-spacing: 0.7pt"> </font>of<font style="letter-spacing: 0.7pt">
</font>the<font style="letter-spacing: 0.75pt"> </font>Company<font style="letter-spacing: 0.7pt"> </font>to<font style="letter-spacing: 0.7pt">
</font>continue as<font style="letter-spacing: 0.65pt"> </font>a<font style="letter-spacing: 0.65pt"> </font>going<font style="letter-spacing: 0.7pt">
</font>concern is<font style="letter-spacing: 0.65pt"> </font>dependent<font style="letter-spacing: 0.7pt"> </font>upon<font style="letter-spacing: 0.65pt">
</font>obtaining<font style="letter-spacing: 0.65pt"> </font>additional<font style="letter-spacing: 0.7pt"> </font>capital<font style="letter-spacing: 0.65pt">
</font>and<font style="letter-spacing: 0.7pt"> </font>financing.<font style="letter-spacing: 0.65pt"> </font>Management<font style="letter-spacing: 0.65pt">
</font>intends<font style="letter-spacing: 0.7pt"> </font>to<font style="letter-spacing: 0.65pt"> </font>attempt<font style="letter-spacing: 0.65pt">
</font>to<font style="letter-spacing: 0.7pt"> </font>raise<font style="letter-spacing: 0.65pt"> </font>additional<font style="letter-spacing: 0.7pt">
</font>funds<font style="letter-spacing: 0.65pt"> </font>by<font style="letter-spacing: 0.65pt"> </font>way<font style="letter-spacing: 0.7pt">
</font>of<font style="letter-spacing: 0.65pt"> </font>a public<font style="letter-spacing: 1.45pt"> </font>or<font style="letter-spacing: 1.5pt">
</font>private<font style="letter-spacing: 1.5pt"> </font>offering.<font style="letter-spacing: 1.5pt"> </font>While<font style="letter-spacing: 1.45pt">
</font>the<font style="letter-spacing: 1.5pt"> </font>Company<font style="letter-spacing: 1.5pt"> </font>believes<font style="letter-spacing: 1.5pt">
</font>in<font style="letter-spacing: 1.45pt"> </font>the<font style="letter-spacing: 1.5pt"> </font>viability<font style="letter-spacing: 1.5pt">
</font>of<font style="letter-spacing: 1.5pt"> </font>its<font style="letter-spacing: 1.45pt"> </font>strategy<font style="letter-spacing: 1.5pt">
</font>to<font style="letter-spacing: 1.5pt"> </font>raise<font style="letter-spacing: 1.5pt"> </font>additional<font style="letter-spacing: 1.5pt">
</font>funds,<font style="letter-spacing: 1.45pt"> </font>there<font style="letter-spacing: 1.5pt"> </font>can<font style="letter-spacing: 1.5pt">
</font>be<font style="letter-spacing: 1.5pt"> </font>no<font style="letter-spacing: 1.45pt"> </font>assurances<font style="letter-spacing: 1.5pt">
</font>to<font style="letter-spacing: 1.5pt"> </font>that effect.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 9.5pt/normal Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt">The
condensed<font style="letter-spacing: 1.05pt"> </font>consolidated<font style="letter-spacing: 1.05pt"> </font>financial<font style="letter-spacing: 1.05pt">
</font>statements<font style="letter-spacing: 1.05pt"> </font>do<font style="letter-spacing: 1.05pt"> </font>not<font style="letter-spacing: 1.05pt">
</font>include<font style="letter-spacing: 1.05pt"> </font>any<font style="letter-spacing: 1pt"> </font>adjustments<font style="letter-spacing: 1.05pt">
</font>relating<font style="letter-spacing: 1.05pt"> </font>to<font style="letter-spacing: 1.05pt"> </font>classification<font style="letter-spacing: 1.05pt">
</font>of<font style="letter-spacing: 1.05pt"> </font>liabilities<font style="letter-spacing: 1.05pt"> </font>that<font style="letter-spacing: 1.05pt">
</font>might<font style="letter-spacing: 1pt"> </font>be<font style="letter-spacing: 1.05pt"> </font>necessary<font style="letter-spacing: 1.05pt">
</font>should the<font style="letter-spacing: 0.45pt"> </font>Company<font style="letter-spacing: 0.45pt"> </font>be<font style="letter-spacing: 0.5pt">
</font>unable<font style="letter-spacing: 0.45pt"> </font>to<font style="letter-spacing: 0.5pt"> </font>continue<font style="letter-spacing: 0.45pt">
</font>as<font style="letter-spacing: 0.45pt"> </font>a<font style="letter-spacing: 0.5pt"> </font>going<font style="letter-spacing: 0.45pt">
</font>concern.</font></p>