0001624512 2018-01-01 2018-03-31 0001624512 2017-12-31 0001624512 2016-12-31 0001624512 us-gaap:CommonClassAMember 2017-12-31 0001624512 BOXL:PrepaymentstoVendorsMember 2017-12-31 0001624512 BOXL:EmployeeReceivablesMember 2017-12-31 0001624512 BOXL:PrepaidLocalTaxesMember 2017-12-31 0001624512 BOXL:PrepaidAndRefundableIncomeTaxesMember 2017-12-31 0001624512 us-gaap:LeaseholdImprovementsMember 2017-12-31 0001624512 us-gaap:OfficeEquipmentMember 2017-12-31 0001624512 BOXL:OtherEquipmentMember 2017-12-31 0001624512 us-gaap:PatentsMember 2017-12-31 0001624512 us-gaap:CustomerRelationshipsMember 2017-12-31 0001624512 us-gaap:TrademarksMember 2017-12-31 0001624512 BOXL:MimioMember 2017-12-31 0001624512 BOXL:BoxlightMember 2017-12-31 0001624512 BOXL:AHANoteMember 2016-06-03 0001624512 BOXL:AHANoteMember 2017-12-01 2017-12-31 0001624512 BOXL:AHANoteMember 2017-12-31 0001624512 BOXL:LineOfCreditAgreementMember BOXL:LogicalChoiceCorporationMember 2014-05-20 2014-05-21 0001624512 BOXL:LineOfCreditAgreementMember BOXL:LogicalChoiceCorporationMember 2017-12-31 0001624512 BOXL:LineOfCreditAgreementMember BOXL:LogicalChoiceCorporationMember 2014-05-21 0001624512 BOXL:MarkElliottMember 2015-01-16 0001624512 BOXL:MarkElliottMember 2015-01-15 2015-01-16 0001624512 BOXL:MarkElliottMember 2017-12-31 0001624512 us-gaap:CommonClassAMember 2015-01-01 2015-01-31 0001624512 BOXL:ClassBNonVotingCommonStockMember 2015-01-01 2015-01-31 0001624512 2015-07-01 2015-07-31 0001624512 2016-02-01 2016-02-29 0001624512 BOXL:AHANoteMember 2016-06-02 2016-06-03 0001624512 BOXL:LineOfCreditAgreementMember BOXL:SallyportCommercialFinanceLLCMember 2017-08-14 2017-08-15 0001624512 BOXL:LineOfCreditAgreementMember BOXL:SallyportCommercialFinanceLLCMember 2017-08-15 0001624512 BOXL:LineOfCreditAgreementMember BOXL:SallyportCommercialFinanceLLCMember us-gaap:MaximumMember us-gaap:PrimeRateMember 2017-08-14 2017-08-15 0001624512 BOXL:AHANoteMember BOXL:SettlementAgreementMember 2017-11-29 0001624512 BOXL:AHANoteMember BOXL:SettlementAgreementMember 2017-11-27 2017-11-29 0001624512 BOXL:NotePayableAHAMember 2017-12-31 0001624512 BOXL:AccountsReceivableFinancingSallyportCommercialMember 2017-12-31 0001624512 BOXL:NotePayableLogicalChoiceCorporationDelawareMember 2017-12-31 0001624512 BOXL:ConvertibleNotePayableMarkElliottMember 2017-12-31 0001624512 BOXL:PrepaidLicensesAndOtherMember 2017-12-31 0001624512 us-gaap:IPOMember 2017-01-01 2017-12-31 0001624512 BOXL:DirectorsOfficersKeyEmployeesConsultantsMember 2014-09-19 0001624512 2017-05-30 2017-06-01 0001624512 2017-11-01 2017-11-30 0001624512 2017-04-01 2017-04-30 0001624512 BOXL:ManagementAgreementMember 2017-12-31 0001624512 2018-05-14 0001624512 2018-03-31 0001624512 2017-03-31 0001624512 us-gaap:CommonClassAMember 2018-03-31 0001624512 2017-01-01 2017-03-31 0001624512 BOXL:PrepaymentstoVendorsMember 2018-03-31 0001624512 BOXL:EmployeeReceivablesMember 2018-03-31 0001624512 BOXL:PrepaidLocalTaxesMember 2018-03-31 0001624512 BOXL:PrepaidAndRefundableIncomeTaxesMember 2018-03-31 0001624512 BOXL:PrepaidInsuranceMember 2018-03-31 0001624512 BOXL:PrepaidLicensesAndOtherMember 2018-03-31 0001624512 BOXL:PrepaidInsuranceMember 2017-12-31 0001624512 us-gaap:LeaseholdImprovementsMember us-gaap:MinimumMember 2018-01-01 2018-03-31 0001624512 us-gaap:LeaseholdImprovementsMember us-gaap:MaximumMember 2018-01-01 2018-03-31 0001624512 us-gaap:OfficeEquipmentMember us-gaap:MinimumMember 2018-01-01 2018-03-31 0001624512 us-gaap:OfficeEquipmentMember us-gaap:MaximumMember 2018-01-01 2018-03-31 0001624512 us-gaap:LeaseholdImprovementsMember 2018-03-31 0001624512 us-gaap:OfficeEquipmentMember 2018-03-31 0001624512 BOXL:OtherEquipmentMember 2018-03-31 0001624512 us-gaap:PatentsMember 2018-01-01 2018-03-31 0001624512 us-gaap:CustomerRelationshipsMember 2018-01-01 2018-03-31 0001624512 us-gaap:TrademarksMember 2018-01-01 2018-03-31 0001624512 us-gaap:PatentsMember 2018-03-31 0001624512 us-gaap:CustomerRelationshipsMember 2018-03-31 0001624512 us-gaap:TrademarksMember 2018-03-31 0001624512 BOXL:MimioMember 2018-03-31 0001624512 BOXL:BoxlightMember 2018-03-31 0001624512 BOXL:AHANoteMember 2018-03-31 0001624512 BOXL:SallyportCommercialFinanceLLCMember 2018-03-31 0001624512 BOXL:SallyportCommercialFinanceLLCMember 2018-01-01 2018-03-31 0001624512 BOXL:LineOfCreditAgreementMember BOXL:LogicalChoiceCorporationMember 2018-03-31 0001624512 BOXL:MarkElliottMember 2018-03-31 0001624512 BOXL:NotePayableAHAMember 2018-03-31 0001624512 BOXL:AccountsReceivableFinancingSallyportCommercialMember 2018-03-31 0001624512 BOXL:NotePayableLogicalChoiceCorporationDelawareMember 2018-03-31 0001624512 BOXL:ConvertibleNotePayableMarkElliottMember 2018-03-31 0001624512 2017-01-01 2017-12-31 0001624512 us-gaap:SeriesAPreferredStockMember 2018-01-01 2018-03-31 0001624512 us-gaap:SeriesAPreferredStockMember 2018-03-31 0001624512 us-gaap:SeriesBPreferredStockMember 2018-01-01 2018-03-31 0001624512 us-gaap:SeriesBPreferredStockMember 2018-03-31 0001624512 us-gaap:SeriesCPreferredStockMember 2018-01-01 2018-03-31 0001624512 us-gaap:SeriesCPreferredStockMember 2018-03-31 0001624512 us-gaap:CommonClassBMember 2018-03-31 0001624512 us-gaap:CommonClassBMember 2017-12-31 0001624512 BOXL:KLaserMember 2018-01-07 2018-01-08 0001624512 BOXL:KLaserMember 2018-01-08 0001624512 BOXL:BoradOfDirectorsMember us-gaap:MinimumMember 2018-03-31 0001624512 BOXL:BoradOfDirectorsMember us-gaap:MaximumMember 2018-03-31 0001624512 us-gaap:StockOptionMember 2018-01-01 2018-03-31 0001624512 2017-12-29 2018-01-02 0001624512 us-gaap:PresidentMember 2017-12-29 2018-01-02 0001624512 us-gaap:ChiefExecutiveOfficerMember 2017-12-29 2018-01-02 0001624512 BOXL:FormerChiefFinancialOfficerMember 2017-12-29 2018-01-02 0001624512 us-gaap:ChiefOperatingOfficerMember 2017-12-29 2018-01-02 0001624512 BOXL:EmployeeMember 2018-02-13 2018-02-14 0001624512 us-gaap:ChiefFinancialOfficerMember 2018-03-17 2018-03-19 0001624512 BOXL:BoardOfDirectorsMember 2018-03-28 2018-03-29 0001624512 us-gaap:StockOptionMember us-gaap:MinimumMember 2018-01-01 2018-03-31 0001624512 us-gaap:StockOptionMember us-gaap:MaximumMember 2018-01-01 2018-03-31 0001624512 BOXL:ManagementAgreementMember 2018-03-31 0001624512 2018-01-29 0001624512 us-gaap:SalesRevenueNetMember BOXL:CustomerOneMember 2018-01-01 2018-03-31 0001624512 us-gaap:AccountsReceivableMember BOXL:CustomerOneMember 2018-03-31 0001624512 us-gaap:SalesRevenueNetMember BOXL:CustomerTwoMember 2018-01-01 2018-03-31 0001624512 us-gaap:AccountsReceivableMember BOXL:CustomerTwoMember 2018-03-31 0001624512 us-gaap:SalesRevenueNetMember BOXL:CustomerThreeMember 2018-01-01 2018-03-31 0001624512 us-gaap:AccountsReceivableMember BOXL:CustomerThreeMember 2018-03-31 0001624512 BOXL:VendorOneMember BOXL:PurchasesMember 2018-01-01 2018-03-31 0001624512 BOXL:VendorOneMember BOXL:AccontsPayableMember 2018-03-31 0001624512 BOXL:VendorTwoMember BOXL:PurchasesMember 2018-01-01 2018-03-31 0001624512 BOXL:VendorTwoMember BOXL:AccontsPayableMember 2018-03-31 0001624512 BOXL:EverestDisplayIncMember 2018-03-31 0001624512 BOXL:EverestDisplayIncMember 2018-01-01 2018-03-31 0001624512 BOXL:EverestDisplayIncMember 2017-01-01 2017-03-31 0001624512 us-gaap:IPOMember BOXL:DecemberThirtyOneTwoThousandEighteenMember 2018-01-01 2018-03-31 0001624512 us-gaap:ChiefFinancialOfficerMember 2018-03-17 2018-03-20 0001624512 2018-01-27 2018-01-30 0001624512 BOXL:OtherEquipmentMember 2018-01-01 2018-03-31 0001624512 BOXL:TwoThousandFourteenMemberStockOptionPlanMember 2018-03-31 0001624512 BOXL:RemainingNineMonthsOfTwoThousandEighteenMember 2018-01-01 2018-03-31 0001624512 BOXL:EverestDisplayIncMember 2017-12-31 0001624512 2018-01-28 2018-01-31 0001624512 us-gaap:SubsequentEventMember BOXL:ClassACommonStockMember 2018-05-08 2018-05-09 0001624512 us-gaap:SubsequentEventMember BOXL:CohuborateLtdMember 2018-05-09 0001624512 us-gaap:FairValueInputsLevel3Member 2018-03-31 0001624512 us-gaap:FairValueInputsLevel2Member 2018-03-31 0001624512 us-gaap:FairValueInputsLevel1Member 2018-03-31 0001624512 us-gaap:WarrantMember BOXL:DynamicCapitalLLCMember 2018-03-31 0001624512 us-gaap:WarrantMember BOXL:CanaanParishLLCMember 2018-03-31 0001624512 us-gaap:WarrantMember 2018-01-01 2018-03-31 0001624512 us-gaap:WarrantMember 2017-01-01 2017-03-31 0001624512 us-gaap:RestatementAdjustmentMember 2018-03-31 0001624512 us-gaap:RestatementAdjustmentMember 2018-01-01 2018-03-31 0001624512 us-gaap:ScenarioPreviouslyReportedMember 2018-03-31 0001624512 us-gaap:ScenarioPreviouslyReportedMember 2018-01-01 2018-03-31 0001624512 BOXL:DynamicCapitalLLCAndCanaanParishLLCMember 2018-01-01 2018-03-31 0001624512 BOXL:DynamicCapitalLLCAndCanaanParishLLCMember 2018-03-31 0001624512 us-gaap:StockOptionMember 2017-01-01 2017-03-31 0001624512 us-gaap:MinimumMember 2018-03-31 0001624512 us-gaap:MaximumMember 2018-03-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure iso4217:GBP Boxlight Corp 0001624512 10-Q/A 2018-03-31 true --12-31 Smaller Reporting Company 2010325 456502 448345 401574 388006 295448 6203 1015 33435 51905 1227995 881024 1262 122832 222877 4181991 44931 4137060 4181991 44931 4137060 21125956 22041151 -2614795 24655946 2614795 9050376 9065405 0.0001 0.0001 0.0001 0.0001 0.0001 50000000 50000000 250000 250000 1000000 0.0001 0.0001 200000000 200000000 5996685 4194429 250000 4515713 2994683 1480972 1199746 3194013 2451206 24226 3169787 24226 92505 190445 3286518 2641651 -1805546 -1441905 146928 169091 144364 -13461 49646 900508 -119445 -905038 -1561350 -905038 -1561350 -1010933 1915971 4863 -23713 -900175 -1585063 -1010933 1911108 520914 47165 496688 24226 24226 496688 47165 9648198 Q1 <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 1 &#8211; ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>THE COMPANY</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Boxlight Corporation (the &#8220;Company&#8221; or &#8220;Boxlight Parent&#8221;) was incorporated in the State of Nevada on September 18, 2014 with its headquarters in Atlanta, Georgia for the purpose of becoming a technology company that sells interactive educational products. In 2016, the Company acquired Boxlight, Inc., Boxlight Latinoamerica, S.A. DE C.V. (&#8220;BLA&#8221;) and Boxlight Latinoamerica Servicios, S.A. DE C.V. (&#8220;BLS&#8221;) (together, &#8220;Boxlight Group&#8221;), Mimio LLC (&#8220;Mimio&#8221;) and Genesis Collaboration, LLC (&#8220;Genesis&#8221;). The Company currently designs, produces and distributes interactive technology solutions to the education market.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying consolidated financial statements include the accounts of Boxlight Corporation, Boxlight Group, Mimio and Genesis. Transactions and balances among Boxlight Corporation, Boxlight Group, Mimio and Genesis have been eliminated.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (&#8220;GAAP&#8221;) for interim unaudited consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2017 and notes thereto contained in the Company&#8217;s Annual Report on Form 10-K.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>ESTIMATES AND ASSUMPTIONS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Significant estimates include estimates of allowances for bad debts, inventory obsolescence, initial valuations and recoverability of intangible assets including goodwill, stock compensation, and estimates for contingent liabilities related to debt obligations and litigation matters.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>FOREIGN CURRENCIES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s functional currency is the U.S. dollar. BLA and BLS&#8217;s functional currency is the Mexican Peso. The Company translates their financial statements from their functional currencies into the U.S. dollar.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An entity&#8217;s functional currency is the currency of the primary economic environment in which it operates and is generally the currency in which the business generates and expends cash. BLA and BLS, whose functional currency is the Mexican Peso, translate their assets and liabilities into U.S. dollars at the exchange rates in effect as of the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rates for the period. Translation adjustments are included in accumulated other comprehensive loss, a separate component of equity (deficit). Foreign exchange gains and losses included in net income result from foreign exchange fluctuations on transactions denominated in a currency other than an entity&#8217;s functional currency.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>CASH AND CASH EQUIVALENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $250,000 for banks located in the U.S. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any rick of loss on its cash bank accounts.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Accounts receivable are stated at historical carrying amounts, net of write-offs and allowance for doubtful accounts. Allowance for doubtful accounts represents management&#8217;s estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical payment trends, the age of receivables and knowledge of the individual customers. When the analysis indicates, management increases or decreases the allowance accordingly. However, if the financial condition of our customers were to deteriorate, additional allowances might be required.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>INVENTORIES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost or net realizable value and included spare parts and finished goods. Inventories are primarily determined using the specific identification method and the first-in, first-out (&#8220;FIFO&#8221;) cost method. Cost includes direct cost from the contract manufacturer (&#8220;CM&#8221;) or original equipment from manufacturer (&#8220;OEM&#8221;), plus material overhead related to the purchase, inbound freight and import duty costs.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company continuously reviews its inventory levels to identify slow-moving merchandise and markdowns necessary to clear slow-moving merchandise, which reduces the cost of inventories to its estimated net realizable value. Consideration is given to a number of quantitative and qualitative factors, including current pricing levels and the anticipated need for subsequent markdowns, aging of inventories, historical sales trends, and the impact of market trends and economic conditions. Estimates of markdown requirements may differ from actual results due to changes in quantity, quality and mix of products in inventory, as well as changes in consumer preferences, market and economic conditions.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>PROPERTY AND EQUIPMENT</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment is stated at cost and depreciated using the straight-line method over the estimated life of the asset. Repairs and maintenance are charged to expense as incurred.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>LONG&#8211;LIVED ASSETS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount or fair value less cost to sell.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="text-transform: uppercase"><b>Intangible assets</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No material impairments of intangible assets have been identified during any of the periods presented. Intangible assets and goodwill are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Goodwill is not amortized and is not deductible for tax purposes.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>DERIVATIVES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company classifies Common Stock purchase warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined that certain warrants to purchase common stock do not satisfy the criteria for classification as equity instruments due to the existence of certain net cash and non-fixed settlement provisions that are not within the sole control of the Company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>FAIR VALUE OF FINANCIAL INSTRUMENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s financial instruments primarily include cash, accounts receivable, prepayments, derivative liabilities and accounts payable. Due to the short-term nature of cash, receivables, prepayments and accounts payable the carrying amounts of these assets and liabilities approximate their fair value.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Derivatives are recorded at fair value at each period end. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As required by Accounting Standard Codification (&#8220;ASC&#8221;) Topic No. 820 - 10 <i>Fair Value Measurement</i>, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company&#8217;s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth, by level within the fair value hierarchy, the Company&#8217;s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt">Markets for </font><br /> <font style="font-size: 10pt">Identical </font><br /> <font style="font-size: 10pt">Assets</font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt">Other </font><br /> <font style="font-size: 10pt">Observable </font><br /> <font style="font-size: 10pt">Inputs</font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt">Significant </font><br /> <font style="font-size: 10pt">Unobservable </font><br /> <font style="font-size: 10pt">Inputs</font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt">Carrying </font><br /> <font style="font-size: 10pt">Value as of </font><br /> <font style="font-size: 10pt">March 31,</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Description</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(Level 1)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(Level 2)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">(Level 3)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 48%"><font style="font-size: 10pt">Derivative liabilities - warrant instruments</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 10%; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>DEFERRED REVENUE</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred revenue represents amounts collected for any extended warranty that is separately priced. The Company recognizes revenue from extended warranty contracts using the straight-line method over the estimated life of the product which is three years.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>REVENUE RECOGNITION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue is comprised of product sales and service revenue, net of sales returns, co-operative advertising credits, early payment discounts, and special incentive payments (&#8220;SPIFF&#8221;) paid to the value-added resellers (&#8220;VARs&#8221;). The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from product sales is derived from the sale of projectors, interactive panels and related accessories. Evidence of an arrangement consists of an order from its distributors, resellers or end users. The Company considers delivery to have occurred once title and risk of loss has been transferred.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Service revenue is comprised of product installation services and training services. These service revenues are normally entered into at the time products are sold. Service prices are established depending on product equipment sold and include a cost value for the estimated services to be performed based on historical experience. The Company outsources installation and training services to third parties and recognizes revenue upon completion of the services.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates the criteria outlined in FASB ASC Subtopic 605-45, Principal Agent Considerations, in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as revenue. Generally, when the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded at the gross amount. If the Company is not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, the Company generally records the net amounts as revenue earned.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s standard terms and conditions of sale do not allow for product returns and it generally does not allow product returns other than under warranty. However, the Company, on a case by case basis, will grant exceptions, mostly &#8220;buyer&#8217;s remorse&#8221; where the VAR&#8217;s end user customer either did not understand what they were ordering, or determined that the product did not meet their needs. An allowance for sales returns is estimated based on an analysis of historical trends.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">While the Company uses resellers and distributors to sell its products, the Company&#8217;s sale agreements do not contain any special pricing incentives, right of return or other post shipment obligations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has warranty policy to provide 12 to 36 months warranty coverage on projectors, displays, accessories, batteries and computers except when sold through a &#8220;Premier Education Partner&#8221; or sold to schools where the Company provides a 60 month warranty. The Company establishes a liability for estimated product warranty costs at the time product revenue is recognized, if the liability is expected to be material. The warranty obligation is affected by product failure rates and the related use of materials, labor costs and freight incurred in correcting any product failure. Should actual product failure rates, use of materials, or other costs differ from the Company&#8217;s estimates, additional warranty liabilities could be required, which would reduce its gross profit.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company offers sales incentives where the Company offers discounted products delivered by the Company to its resellers and distributors that are redeemable only if the resellers and distributors complete specified cumulative levels of revenue agreed to and written into their reseller and distributor agreements through an executed addendum. The resellers and distributors have to submit a request for the discounted products and cannot redeem additional discounts within 180 days from the date of the discount given on like products. The value of the award products as compared to the value of the transactions necessary to earn the award is generally insignificant in relation to the value of the transactions necessary to earn the award. The Company estimates and records the cost of the products related to the incentive as marketing expense based on analyses of historical data.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>RESEARCH AND DEVELOPMENT EXPENSES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development costs are expensed as incurred and consists primarily of personnel related costs, prototype and sample costs, design costs, and global product certifications mostly for wireless certifications.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>INCOME TAXES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>SHARE-BASED COMPENSATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates the fair value of each share-based compensation award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest. Excess tax benefits, if any, are recognized as an addition to paid-in capital.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>SUBSEQUENT EVENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has evaluated all transactions through the financial statement issuance date for subsequent event disclosure consideration.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NEW ACCOUNTING PRONOUNCEMENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the Financial Accounting Standards Board (&#8220;FASB&#8221;) issued Accounting Standards Update (&#8220;ASU&#8221;) 2014-09, &#8220;Revenue from Contracts with Customers (Topic 606).&#8221; The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is recorded. This accounting standard update, as amended, will be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2017. Since the company is an Emerging Growth Company, adoption is not required until 2019. The Company is currently assessing the provisions of the guidance and has not determined the impact of the adoption of this guidance on its consolidated financial statements.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, a pronouncement was issued by FASB that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 3 &#8211; ACCOUNTS RECEIVABLE - TRADE</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 72%"><font style="font-size: 10pt">Accounts receivable - trade</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">3,855,064</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">3,846,724</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Allowance for doubtful accounts</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(250,306</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(200,874</font></td> <td><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Allowance for sales returns and volume rebates</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(521,090</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(555,918</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Accounts receivable - trade, net of allowances</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,083,668</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,089,932</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 4 &#8211; INVENTORIES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 72%"><font style="font-size: 10pt">Finished goods</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">3,691,197</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">4,611,973</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Spare parts</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">165,821</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">187,158</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Reserves for inventory obsolescence</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(118,295</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(172,562</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Inventories, net</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,738,723</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,626,569</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2018 and 2017, the Company wrote off obsolete inventories of $0 and $24,531, respectively.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 5 &#8211; PREPAID EXPENSES AND OTHER CURRENT ASSETS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 72%"><font style="font-size: 10pt">Prepayments to vendors</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">881,024</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">295,448</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Employee receivables</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">6,203</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Prepaid local taxes</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1,015</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Prepaid and refundable income taxes</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1,262</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">33,435</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Prepaid insurance</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">122,832</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Prepaid licenses and other</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">222,877</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">51,905</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Prepaid expenses and other current assets</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,227,995</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">388,006</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 6 &#8211; PROPERTY AND EQUIPMENT</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Useful lives</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 57%"><font style="font-size: 10pt">Leasehold improvements</font></td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: center"><font style="font-size: 10pt">9-10 years</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">3,355</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">3,355</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Office equipment</font></td> <td>&#160;</td> <td style="text-align: center"><font style="font-size: 10pt">3-5 years</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">21,341</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">21,341</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Other equipment</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">5 years</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">42,485</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">42,485</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Property and equipment, at cost</font></td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">67,181</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">67,181</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accumulated depreciation</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(42,086</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(37,429</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Property and equipment, net of accumulated depreciation</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt; text-align: center">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">25,095</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">29,752</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2018 and 2017, the Company recorded depreciation expense of $4,657 and $15,189 respectively.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 7 &#8211; INTANGIBLE ASSETS AND GOODWILL</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets and goodwill consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Useful lives</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 57%"><font style="font-size: 10pt">Patents</font></td> <td style="width: 1%">&#160;</td> <td style="width: 12%; text-align: center"><font style="font-size: 10pt">10 years</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">67,395</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 12%; text-align: right"><font style="font-size: 10pt">67,395</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Customer relationships</font></td> <td>&#160;</td> <td style="text-align: center"><font style="font-size: 10pt">10 years</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">3,567,396</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">3,567,396</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Trademarks</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">10 years</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3,554,932</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3,554,932</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Intangible assets, at cost</font></td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">7,189,723</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">7,189,723</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accumulated amortization</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,246,355</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,063,165</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Intangible assets, net of accumulated amortization</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt; text-align: center">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">5,943,368</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6,126,558</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Goodwill from acquisition of Mimio</font></td> <td>&#160;</td> <td style="text-align: center"><font style="font-size: 10pt">N/A</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">44,931</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">44,931</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Goodwill from acquisition of Boxlight</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 10pt">N/A</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,137,060</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,137,060</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,181,991</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,181,991</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2018 and 2017, the Company recorded amortization expense of $183,190 and $177,036, respectively.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 8 &#8211; DEBT</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a summary of our debt at March 31, 2018 and December 31, 2017</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt"><b>Short-term debt &#8211; third parties</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 62%"><font style="font-size: 10pt">Note payable &#8211; AHA</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">125,000</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">250,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Accounts receivable financing &#8211; Sallyport Commercial</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">694,960</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">502,449</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Total short-term debt &#8211;third parties</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">819,960</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">752,449</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Short-term debt &#8211; related parties</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Note payable &#8211; Logical Choice Corporation - Delaware</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">54,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">54,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="border-top: black 1.5pt solid">&#160;</td> <td style="border-top: black 1.5pt solid; text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt"><b>Convertible debt &#8211; related party</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Convertible note payable &#8211; Mark Elliott</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">50,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Total debt</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">923,960</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">856,449</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Short-Term Debt - Third Parties:</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>AHA Note</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 3, 2016, prior to the Company&#8217;s acquisition of Boxlight Group, Boxlight Group issued a promissory note to AHA Inc. Co Ltd. (&#8220;AHA&#8221;), a Korean corporation, in the amount of $1,895,413 to settle unpaid accounts payable of $1,866,418 for purchases of inventory. Interest shall be payable in the amount of 6.5% per annum. The principal was due and payable in eight equal monthly principal payments in the amount of $236,926 beginning on June 30, 2016. Interest was to be paid in consecutive monthly installments for eight months.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 29, 2017, the outstanding principal and interest were reduced to $500,000 related to a settlement agreement reached with AHA, resulting in a gain on settlement of $304,913. Pursuant to the settlement agreement, the Company was required to pay $250,000 on or before December 2017 and the remaining principal is due in six equal monthly payment of $41,667 commencing January 2018. The outstanding balance on the note payable to AHA was $125,000 and $250,000 at March 31, 2018 and December 31, 2017, respectively. The Company has made monthly payments in 2018 pursuant to the repayment schedule.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Accounts Receivable Financing &#8211; Sallyport Commercial Finance</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 15, 2017, Boxlight Inc., and Genesis entered into a 12-month term account sale and purchase agreement with Sallyport Commercial Finance, LLC (&#8220;Sallyport&#8221;). Pursuant to the agreement, Sallyport agreed to purchase 85% of the eligible accounts receivable of the Company with a right of recourse back to the Company if the receivables are not collectible. This agreement requires a minimum monthly sales volume of $1,250,000 with a maximum facility limit of $6,000,000. Advances against this agreement accrue interest at 4% in excess of the highest prime rate publicly announced from time to time with a floor of 4.25%. In addition, the Company is required to pay a $950 audit fee per day. The Company granted Sallyport a security interest in all of Boxlight Inc. and Genesis&#8217; assets.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2018, outstanding principal and accrued interest were $694,960 and $0, respectively. For the three months ended March 31, 2018, the Company incurred interest expense of $144,364.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Short-Term Debt - Related Parties:</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Line of Credit - Logical Choice Corporation-Delaware</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 21, 2014, the Company entered into a line of credit agreement with Logical Choice Corporation-Delaware (&#8220;LCC-Delaware&#8221;), former sole member of Genesis. The line of credit allowed the Company to borrow up to $500,000 for working capital and business expansion. The funds when borrowed accrued interest at 10% per annum. Interest accrued on any advanced funds was due monthly and the outstanding principal and any accrued interest were due in full on May 21, 2015. In May 2016, the maturity date was extended to May 21, 2018. The assets of Genesis have been pledged as a security interest against any advances on the line of credit. As of March 31, 2018, outstanding principal and accrued interest under this agreement was $54,000 and $16,789, respectively. As of December 31, 2017, outstanding principal and accrued interest under this agreement was $54,000 and $15,916, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Convertible Notes Payable - Third Parties:</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Convertible Note Payable &#8211; Mark Elliott</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 16, 2015, the Company issued a note to Mark Elliott, the Company&#8217;s Chief Executive Officer, in the amount of $50,000. The note as amended is due on December 31, 2018and bears interest at an annual rate of 10%, compounded monthly. The noted is currently in default and bears a 15% default rate. The note is convertible into the Company&#8217;s common stock at the lesser of (i) $6.28 per share, (ii) a discount of 20% to the stock price if the Company&#8217;s common stock is publicly traded, or (iii) if applicable, such other amount negotiated by the Company. The note holder may convert all, but not less than all, of the outstanding principal and interest due under this note. As of March 31, 2018, outstanding principal and accrued interest under this note were $50,000 and $16,041, respectively. As of December 31, 2017, outstanding principal and accrued interest under this note were $50,000 and $14,808, respectively.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 9 &#8211; DEFERRED REVENUE</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has future performance obligations for separately priced extended warranties sold related to its Lamps for Life program and advances from customers. Deferred revenue consisted of the following as of March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>March 31, 2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>December 31, 2017</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 62%"><font style="font-size: 10pt">Balance, beginning of the period</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">1,302,717</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">767,726</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Additions</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">71,903</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1,070,528</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Amortization or earned</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(715,462</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(535,537</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Balance, ending of the period</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">659,158</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1,302,717</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Deferred revenue &#8211; short-term</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">483,243</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,127,423</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Deferred revenue &#8211; long-term</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">175,915</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">175,294</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 11 &#8211; EQUITY</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Preferred Shares</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s articles of incorporation provide that the Company is authorized to issue 50,000,000 preferred shares consisting of: 1) 250,000 shares of voting Series A preferred stock, with a par value of $0.0001 per share; 2) 1,200,000 shares of voting Series B preferred stock, with a par value of $0.0001 per share; 3) 270,000 shares of voting Series C preferred stock, with a par value of $0.0001 per share; and 4) 48,280,000 shares to be designated by the Company&#8217;s Board of Directors.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issued 1,000,000 shares of Series B preferred stock for the acquisition of Genesis and 270,000 shares of Series C preferred stock for the acquisition of Boxlight Group. Upon the completion of the IPO in November 2017, all shares of Series B and C preferred stock related to the acquisitions of Genesis and Boxlight Group were converted to Class A common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Upon completion of the Company&#8217;s IPO, an aggregate of 250,000 shares of the Company&#8217;s non-voting convertible Series A preferred stock were issued to Vert Capital for the acquisition of Genesis. All of the Series A preferred stock shall be automatically converted into Class A common stock no later than November 30, 2018.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 36pt">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Common Stock</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In January 2015, the Company amended its articles of incorporation to state that the Company&#8217;s common stock consists of: 1) 150,000,000 shares of Class A voting common stock and 2) 50,000,000 shares of Class B non-voting common stock. Class A and Class B common stock have the same rights except that Class A common stock is entitled to one vote per share while Class B common stock has no voting rights. Upon any public or private sale or disposition by any holder of Class B common stock, such shares of Class B common stock shall automatically convert into shares of Class A common stock. As of March 31, 2018, and December 31, 2017, the Company had 9,648,197 and 9,558,997 shares of Class A common stock issued and outstanding, respectively. No Class B shares were outstanding at March 31, 2018 and December 31, 2017.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Issuance of common stock </i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 8, 2018, the Company issued 60,000 shares of common stock to K Laser at $7.00 per share for cash of $420,000.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>&#160;</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Exercise of stock options</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 20, 2018, the former Chief Financial Officer exercised 29,200 stock options and paid a total of $3 for the exercise price.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 12 &#8211; SHARE-BASED COMPENSATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 19, 2014, the Board approved the Company&#8217;s 2014 Stock Option Plan. The total number of underlying shares of the Company&#8217;s Class A common stock available for grant to directors, officers, key employees, and consultants of the Company or a subsidiary of the Company under the plan is 2,390,438 shares. Grants made under this plan must be approved by the Company&#8217;s Board of Directors. As of March 31, 2018, the Company had 684,060 shares reserved for issuance under the plan. In 2018, the Board of Directors approved an increase in the number of shares available for grant by 300,000 shares to 2,690,438 shares. The increase is not finalized and subject to shareholder approval.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock Options</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under our stock option program, an employee receives an award that provides the opportunity in the future to purchase the Company&#8217;s shares at the market price of our stock on the date the award is granted (strike price). The options become exercisable over a range of immediate to 4-year vesting period and expire 5 years from the grant date, unless stated differently in the option agreements, if they are not exercised. Stock options have no financial statement effect on the date they are granted but rather are reflected over time through recording compensation expense and increasing shareholder&#8217;s equity. We record compensation expense based on the estimated fair value of the awards that vest and that amount is amortized as compensation expense on a straight- line basis over the vesting period. Accordingly, total expense related to the award is reduced by the fair value of options that are forfeited by employees that leave the Company prior to vesting.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of the option activities during the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27.5pt">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of Units</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted </font><br /> <font style="font-size: 10pt">Average </font><br /> <font style="font-size: 10pt">Exercise Price</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Average </font><br /> <font style="font-size: 10pt">Remaining Contractual </font><br /> <font style="font-size: 10pt">Term (in years)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 37%"><font style="font-size: 10pt">Outstanding, December 31, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 16%; text-align: right"><font style="font-size: 10pt">812,574</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 18%; text-align: right"><font style="font-size: 10pt">3.01</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 20%; text-align: right"><font style="font-size: 10pt">5.64</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">Granted</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">927,500</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">5.10</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt">Exercised</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(29,200</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">0.0001</font></td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Cancelled</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(4,495</font></td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">$</font></td> <td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 10pt">7.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Outstanding, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,706,379</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td> <td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">4.19</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.10</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Exercisable, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">573,955</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">$</font></td> <td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">2.26</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt; text-align: right"><font style="font-size: 10pt">5.73</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates the fair value of each stock option award on the date of grant using a Black- Scholes option pricing model. Outstanding stock option awards may be dilutive to earnings per share when they are in the money (i.e. the market price of the Company&#8217;s stock is greater than the strike price of the option). When an option is dilutive, it increases the number of shares used in the diluted earnings per share calculation which will decrease earnings per share. However, the effect stock options have on the number of shares added to the diluted earnings in not one-for-one. The average amount of unrecognized compensation expense (the portion of the fair value of these option awards not yet amortized) and the market price of the Company&#8217;s stock during the reporting period affect how many of these potential shares are included in the calculation. The calculation assumes that proceeds received from the exercise and the unrecognized compensation expense are used to buy back shares, which reduces the dilutive impact. As of March 31, 2018, the options had an intrinsic value of approximately $1.7 million.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 2, 2018, the Company granted 100,000 stock options each, 300,000 options in total, to its President, Chief Executive Officer and former Chief Financial Officer with an exercise price of $5.01 per share vesting monthly over one year. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $689,000 on the grant date that was calculated using the Black-Scholes option-pricing model.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 2, 2018, the Company granted 200,000 stock options to its Chief Operating Officer with an exercise price of $5.01 per share vesting monthly over one year. The expiration date of these options is five years from the grant date. These options had a fair value of approximately $459,000 on the grant date that was calculated using the Black-Scholes option-pricing model.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 14, 2018, the Company granted an aggregate of 367,500 stock options in total to its employees with an exercise price of $5.40 per share vesting quarterly over four years. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $998,000 on the grant date that was calculated using the Black-Scholes option-pricing model.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 19, 2018, the Company granted 35,000 stock options to its Chief Financial Officer with an exercise price of $4.00 per share vesting monthly over one year. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $65,000 on the grant date that was calculated using the Black-Scholes option-pricing model.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 29, 2018, the Company granted 25,000 stock options to one of its Board of Directors with an exercise price of $4.06 per share vesting quarterly over one year. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $47,000 on the grant date that was calculated using the Black-Scholes option-pricing model.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Variables used in the Black-Scholes option-pricing model for options granted during the three months ended March 31, 2018 include: (1) discount rate of 2.01% &#8211; 2.45% (2) expected life of 3 &#8211; 3.75 years, (3) expected volatility of 66% &#8211; 68%, and (4) zero expected dividends.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Warrants</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of the warrants activities during the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27.5pt">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Number of Units</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted </font><br /> <font style="font-size: 10pt">Average </font><br /> <font style="font-size: 10pt">Exercise Price</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Weighted Average </font><br /> <font style="font-size: 10pt">Remaining Contractual </font><br /> <font style="font-size: 10pt">Term (in years)</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 37%"><font style="font-size: 10pt">Outstanding, December 31, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 17%; text-align: right"><font style="font-size: 10pt">1,070,717</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 15%; text-align: right"><font style="font-size: 10pt">7.57</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 22%; text-align: right"><font style="font-size: 10pt">2.12</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Granted</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">12,000</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">7.00</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.98</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Outstanding, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,082,717</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">7.56</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.88</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Exercisable, March 31, 2018</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1,032,717</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">7.56</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.75</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27.5pt">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2018, the Company committed to grant additional 9,000 and 3,000 warrants to Dynamic Capital LLC (&#8220;Dynamic&#8221;) and Canaan Parish LLC (&#8220;Canaan&#8221;), entities associated with Adam Levin and to Michael Pope, respectively, in associated with a qualified equity event as defined in the warrants agreements. These warrants had a fair value of $24,226 on measurement date using the binomial option-pricing model and were immediately exercisable upon the issuance.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Variables used in the Black-Scholes option-pricing model for options granted during the three months ended March 31, 2018 include: (1) discount rate of 1.96% (2) expected life of 1.98 years, (3) expected volatility of 69%, and (4) zero expected dividends.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The warrants granted to Dynamic and Canaan contain net cash settlement provision and do not have fixed settlement provisions because their exercise prices may be lowered if the Company issues securities at lower prices in the future. The Company concluded that the instruments are not indexed to the Company&#8217;s stock and are to be treated as derivative liabilities. See Note 17.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27.5pt">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock compensation expense</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2018 and 2017, the Company recorded the following stock compensation expense:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">2017</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 72%; text-align: justify"><font style="font-size: 10pt">Stock options</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">496,688</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 11%; text-align: right"><font style="font-size: 10pt">47,165</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; text-align: justify"><font style="font-size: 10pt">Warrants</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">24,226</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt; text-align: justify"><font style="font-size: 10pt">Total stock compensation expense</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">520,914</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">47,165</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2018, there was approximately $2.8 million of unrecognized compensation expense related to unvested options, which will be amortized over the remaining vesting period. Of that total, approximately $1.5 million is estimated to be recorded as compensation expense in the remaining nine-months of 2018.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 13 &#8211; OTHER RELATED PARTY TRANSACTIONS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Management Agreement</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective November 30, 2017, the Company entered into a management agreement with Dynamic Capital, LLC, a Delaware limited liability company owned by the AEL Irrevocable Trust and managed by Adam Levin (&#8220;Dynamic Capital&#8221;). Pursuant to the agreement, Dynamic Capital shall perform consulting services for the Company relating to, among other things, sourcing and analyzing strategic acquisitions and introductions to various financing sources. Dynamic Capital shall receive a management fee payable in cash equal to 1.125% of total consolidated net revenues for the fiscal years ended December 31, 2017 and 2018, payable in monthly installments. The annual fee is subject to a cap of $750,000 in each of 2017 and 2018. At its option, Dynamic Capital may defer payment until the end of each year and receive payment in the form of shares of Class A common stock of the Company. Dynamic Capital agreed it shall not, nor shall it permit any of its affiliates, members, officers or associates, including the AEL Irrevocable Trust, to purchase, sell or otherwise trade in any shares of Boxlight common stock during the term of the agreement. As of March 31, 2018 and December 31, 2017, the Company had a payable of $94,998 and $35,632, respectively, pursuant to the agreement.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 31, 2018, the Company entered into a management agreement with an entity owned and controlled by our President and Director, Michael Pope. Effective as of the first day of the same month that Mr. Pope&#8217;s employment with the Company shall terminate, and for a term of 13 months, Mr. Pope shall provide consulting services to the Company including sourcing and analyzing strategic acquisitions, assisting with financing activities, and other services. As consideration for the services provided, the Company shall pay a management fee equal to 0.375% of the consolidated net revenues of the Company, payable in monthly installments, not to exceed $250,000 in any calendar year. At his option, Mr. Pope may defer payment until the end of each year and receive payment in the form of shares of Class A common stock of the Company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Sales and Purchases - EDI</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Everest Display Inc. (&#8220;EDI&#8221;), an affiliate of the Company&#8217;s major shareholder K-Laser, is a major supplier of products to the Company. For the three months ended March 31, 2018 and 2017, the Company had purchases of $1,926,324 and $1,307,918, respectively, from EDI. For the three months ended March 31, 2018 and 2017, the Company had sales of $5,100 and $0, respectively, to EDI. As of March 31, 2018, and December 31, 2017, the Company had accounts payable of approximately of $4,611,000 and $4,325,000, respectively, to EDI.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 14 &#8211; COMMITMENTS AND CONTINGENCIES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Litigation</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2015, a supplier filed a lawsuit against the Company for outstanding payables owed by the Company of approximately $72,000. In February 2016, the supplier and the Company agreed to settle the indebted balance for $43,000 provided that the Company pays on or before March 16, 2016. The Company failed to make the payment and the judgement amount was therefore increased to approximately $70,000 plus interest and court costs of approximately $2,300. The Company is currently negotiating new terms with the supplier. On January 29, 2018, the Company entered into a Compromise Settlement and Release Agreement with the supplier, where the Company agreed to settle the indebted balance for $39,000. On January 30, 2018 the Company paid the settlement in full and received a release from the Court. The Company recorded a gain from the settlement of approximately $26,000.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 2017, a Garnishment Action was filed by Asahi Net, Inc. (&#8220;Asahi&#8221;) against Vert. Asahi was seeking to garnish funds in the amount of $2,180,881. The Company was listed as a garnishee in the Action because Vert had loaned money to the Company. The Company had already paid Vert in full satisfaction of the loan. On March 1, 2018, the Company was served a claim under the Georgia Uniform Voidable Transactions Act by Asahi, which was seeking to void transactions between the Company and Vert. The Company disputed these allegations. On April 26, 2018, Asahi filed a Notice of Dismissal for both the Garnishment Action as well as the claim under the Georgia Uniform Voidable Transactions Act.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 1, 2017, the Company was served with a lawsuit from Skyview seeking judgment on the $1,460,508 outstanding balance due under the currently defaulted Skyview Note, plus accrued interest thereon, and also seeking to foreclose on the assets of Mimio that is now owned and operated by our Boxlight, Inc. The Company paid off the $1,460,508 outstanding balance in November 2017. Skyview filed a request for additional attorney fees in the amount of $67,826. On March 14, 2018, the Company satisfied the claim and the acknowledgement of satisfaction of judgement was received on March 21, 2018 from the Court.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Operating Lease Commitments</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company leases two offices under non-cancelable lease agreements. The leases provide that the Company pays only a monthly rental and is not responsible for taxes, insurance or maintenance expenses related to the property. Future minimum lease payments of the Company&#8217;s operating leases with a term over one year subsequent to March 31, 2018 are as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid"><font style="font-size: 10pt">Year ending December 31,</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Amount</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%"><font style="font-size: 10pt">2018</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 15%; text-align: right"><font style="font-size: 10pt">197,700</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">2019</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: black 1.5pt solid">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">40,400</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: right">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt"><font style="font-size: 10pt">Net Minimum Lease Payments</font></td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">238,100</font></td> <td style="padding-bottom: 2.5pt">&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also has another office lease on a month-to-month basis. For the three months ended March 31, 2018 and 2017, aggregate rent expense was approximately $67,000 and $98,000, respectively.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 15 &#8211; CUSTOMER AND SUPPLIER CONCENTRATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Significant customers and suppliers are those that account for greater than 10% of the Company&#8217;s revenues and purchases.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s revenues were concentrated among few customers for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Customer</font></td> <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Total revenues</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">from the customer</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">to total revenues</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">for the three</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">months ended</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">March 31, 2018</p></td> <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td> <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Accounts</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">receivable</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(deferred revenue)</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">from the customer</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">as of March 31, 2018</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(rounded to 000&#8217;s)</p></td> <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 30%; text-align: center"><font style="font-size: 10pt">1</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 33%; text-align: right"><font style="font-size: 10pt">13</font></td> <td style="width: 1%"><font style="font-size: 10pt">%</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 31%; text-align: right"><font style="font-size: 10pt">45,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: center"><font style="font-size: 10pt">2</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">12</font></td> <td><font style="font-size: 10pt">%</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(111,000</font></td> <td><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: center"><font style="font-size: 10pt">3</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">11</font></td> <td><font style="font-size: 10pt">%</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">654,000</font></td> <td>&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The loss of the significant customer or the failure to attract new customers could have a material adverse effect on our business, results of operations and financial condition.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s purchases were concentrated among few vendors for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Vendor</font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Total purchases</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">from the vendor</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">to total purchases for</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">the three months</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">ended March 31, 2018</p></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Accounts payable</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(prepayment) to the</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">vendor as of</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">March 31, 2018</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(rounded to 000&#8217;s)</p></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 30%; text-align: center"><font style="font-size: 10pt">1*</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 33%; text-align: right"><font style="font-size: 10pt">44</font></td> <td style="width: 1%"><font style="font-size: 10pt">%</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 31%; text-align: right"><font style="font-size: 10pt">4,611,000</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;2</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">29</font></td> <td><font style="font-size: 10pt">%</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(7,000</font></td> <td><font style="font-size: 10pt">)</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">* EDI, a related party. See note 13.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 16 &#8211; SUBSEQUENT EVENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 9, 2018, the Company acquired 100% of Cohuborate, Ltd., a developer of touch display technology based in the United Kingdom, for 257,200 shares of the Company&#8217;s Class A common stock and $100 British pound sterling. The closing of the acquisition is subject to delivery of Boxlight and Cohuborate&#8217;s shares and exchange of documents and shall take place no later than May 15, 2018. The Company will account for the acquisition using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>THE COMPANY</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Boxlight Corporation (the &#8220;Company&#8221; or &#8220;Boxlight Parent&#8221;) was incorporated in the State of Nevada on September 18, 2014 with its headquarters in Atlanta, Georgia for the purpose of becoming a technology company that sells interactive educational products. In 2016, the Company acquired Boxlight, Inc., Boxlight Latinoamerica, S.A. DE C.V. (&#8220;BLA&#8221;) and Boxlight Latinoamerica Servicios, S.A. DE C.V. (&#8220;BLS&#8221;) (together, &#8220;Boxlight Group&#8221;), Mimio LLC (&#8220;Mimio&#8221;) and Genesis Collaboration, LLC (&#8220;Genesis&#8221;). The Company currently designs, produces and distributes interactive technology solutions to the education market.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying consolidated financial statements include the accounts of Boxlight Corporation, Boxlight Group, Mimio and Genesis. Transactions and balances among Boxlight Corporation, Boxlight Group, Mimio and Genesis have been eliminated.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (&#8220;GAAP&#8221;) for interim unaudited consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2017 and notes thereto contained in the Company&#8217;s Annual Report on Form 10-K.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>ESTIMATES AND ASSUMPTIONS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Significant estimates include estimates of allowances for bad debts, inventory obsolescence, initial valuations and recoverability of intangible assets including goodwill, stock compensation, and estimates for contingent liabilities related to debt obligations and litigation matters.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>FOREIGN CURRENCIES</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s functional currency is the U.S. dollar. BLA and BLS&#8217;s functional currency is the Mexican Peso. The Company translates their financial statements from their functional currencies into the U.S. dollar.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">An entity&#8217;s functional currency is the currency of the primary economic environment in which it operates and is generally the currency in which the business generates and expends cash. BLA and BLS, whose functional currency is the Mexican Peso, translate their assets and liabilities into U.S. dollars at the exchange rates in effect as of the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rates for the period. Translation adjustments are included in accumulated other comprehensive loss, a separate component of equity (deficit). Foreign exchange gains and losses included in net income result from foreign exchange fluctuations on transactions denominated in a currency other than an entity&#8217;s functional currency.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Accounts receivable are stated at historical carrying amounts, net of write-offs and allowance for doubtful accounts. Allowance for doubtful accounts represents management&#8217;s estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical payment trends, the age of receivables and knowledge of the individual customers. When the analysis indicates, management increases or decreases the allowance accordingly. However, if the financial condition of our customers were to deteriorate, additional allowances might be required.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>INVENTORIES</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories are stated at the lower of cost or net realizable value and included spare parts and finished goods. Inventories are primarily determined using the specific identification method and the first-in, first-out (&#8220;FIFO&#8221;) cost method. Cost includes direct cost from the contract manufacturer (&#8220;CM&#8221;) or original equipment from manufacturer (&#8220;OEM&#8221;), plus material overhead related to the purchase, inbound freight and import duty costs.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company continuously reviews its inventory levels to identify slow-moving merchandise and markdowns necessary to clear slow-moving merchandise, which reduces the cost of inventories to its estimated net realizable value. Consideration is given to a number of quantitative and qualitative factors, including current pricing levels and the anticipated need for subsequent markdowns, aging of inventories, historical sales trends, and the impact of market trends and economic conditions. Estimates of markdown requirements may differ from actual results due to changes in quantity, quality and mix of products in inventory, as well as changes in consumer preferences, market and economic conditions.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>PROPERTY AND EQUIPMENT</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment is stated at cost and depreciated using the straight-line method over the estimated life of the asset. Repairs and maintenance are charged to expense as incurred.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="text-transform: uppercase"><b>INTANGIBLE ASSETS</b></font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No material impairments of intangible assets have been identified during any of the periods presented. Intangible assets and goodwill are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Goodwill is not amortized and is not deductible for tax purposes.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>DEFERRED REVENUE</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred revenue represents amounts collected for any extended warranty that is separately priced. The Company recognizes revenue from extended warranty contracts using the straight-line method over the estimated life of the product which is three years.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>REVENUE RECOGNITION</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue is comprised of product sales and service revenue, net of sales returns, co-operative advertising credits, early payment discounts, and special incentive payments (&#8220;SPIFF&#8221;) paid to the value-added resellers (&#8220;VARs&#8221;). The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from product sales is derived from the sale of projectors, interactive panels and related accessories. Evidence of an arrangement consists of an order from its distributors, resellers or end users. The Company considers delivery to have occurred once title and risk of loss has been transferred.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Service revenue is comprised of product installation services and training services. These service revenues are normally entered into at the time products are sold. Service prices are established depending on product equipment sold and include a cost value for the estimated services to be performed based on historical experience. The Company outsources installation and training services to third parties and recognizes revenue upon completion of the services.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates the criteria outlined in FASB ASC Subtopic 605-45, Principal Agent Considerations, in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as revenue. Generally, when the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded at the gross amount. If the Company is not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, the Company generally records the net amounts as revenue earned.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s standard terms and conditions of sale do not allow for product returns and it generally does not allow product returns other than under warranty. However, the Company, on a case by case basis, will grant exceptions, mostly &#8220;buyer&#8217;s remorse&#8221; where the VAR&#8217;s end user customer either did not understand what they were ordering, or determined that the product did not meet their needs. An allowance for sales returns is estimated based on an analysis of historical trends.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">While the Company uses resellers and distributors to sell its products, the Company&#8217;s sale agreements do not contain any special pricing incentives, right of return or other post shipment obligations.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has warranty policy to provide 12 to 36 months warranty coverage on projectors, displays, accessories, batteries and computers except when sold through a &#8220;Premier Education Partner&#8221; or sold to schools where the Company provides a 60 month warranty. The Company establishes a liability for estimated product warranty costs at the time product revenue is recognized, if the liability is expected to be material. The warranty obligation is affected by product failure rates and the related use of materials, labor costs and freight incurred in correcting any product failure. Should actual product failure rates, use of materials, or other costs differ from the Company&#8217;s estimates, additional warranty liabilities could be required, which would reduce its gross profit.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company offers sales incentives where the Company offers discounted products delivered by the Company to its resellers and distributors that are redeemable only if the resellers and distributors complete specified cumulative levels of revenue agreed to and written into their reseller and distributor agreements through an executed addendum. The resellers and distributors have to submit a request for the discounted products and cannot redeem additional discounts within 180 days from the date of the discount given on like products. The value of the award products as compared to the value of the transactions necessary to earn the award is generally insignificant in relation to the value of the transactions necessary to earn the award. The Company estimates and records the cost of the products related to the incentive as marketing expense based on analyses of historical data.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>RESEARCH AND DEVELOPMENT EXPENSES</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Research and development costs are expensed as incurred and consists primarily of personnel related costs, prototype and sample costs, design costs, and global product certifications mostly for wireless certifications.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>INCOME TAXES</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>SHARE-BASED COMPENSATION</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates the fair value of each share-based compensation award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest. Excess tax benefits, if any, are recognized as an addition to paid-in capital.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>SUBSEQUENT EVENTS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has evaluated all transactions through the financial statement issuance date for subsequent event disclosure consideration.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NEW ACCOUNTING PRONOUNCEMENTS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the Financial Accounting Standards Board (&#8220;FASB&#8221;) issued Accounting Standards Update (&#8220;ASU&#8221;) 2014-09, &#8220;Revenue from Contracts with Customers (Topic 606).&#8221; The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is recorded. This accounting standard update, as amended, will be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2017. Since the company is an Emerging Growth Company, adoption is not required until 2019. The Company is currently assessing the provisions of the guidance and has not determined the impact of the adoption of this guidance on its consolidated financial statements.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, a pronouncement was issued by FASB that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">There were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 70%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts receivable - trade</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,855,064</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,846,724</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Allowance for doubtful accounts</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(250,306</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(200,874</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Allowance for sales returns and volume rebates</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(521,090</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(555,918</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts receivable - trade, net of allowances</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,083,668</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,089,932</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Inventories consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 70%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Finished goods</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,691,197</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,611,973</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Spare parts</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">165,821</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">187,158</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Reserves for inventory obsolescence</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(118,295</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(172,562</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Inventories, net</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,738,723</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,626,569</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Prepaid expenses and other current assets consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 70%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Prepayments to vendors</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">881,024</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">295,448</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Employee receivables</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,203</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid local taxes</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,015</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid and refundable income taxes</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,262</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">33,435</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid insurance</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">122,832</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid licenses and other</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">222,877</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">51,905</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Prepaid expenses and other current assets</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,227,995</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">388,006</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Useful lives</b></font></td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 56%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Leasehold improvements</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 12%; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9-10 years</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,355</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,355</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Office equipment</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3-5 years</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">21,341</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">21,341</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Other equipment</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5 years</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">42,485</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">42,485</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and equipment, at cost</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">67,181</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">67,181</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accumulated depreciation</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(42,086</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(37,429</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and equipment, net of accumulated depreciation</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">25,095</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">29,752</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets and goodwill consisted of the following at March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Useful lives</b></font></td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 56%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Patents</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 12%; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10 years</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">67,395</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">67,395</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Customer relationships</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10 years</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,567,396</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,567,396</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Trademarks</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10 years</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,554,932</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3,554,932</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Intangible assets, at cost</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7,189,723</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7,189,723</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accumulated amortization</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(1,246,355</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(1,063,165</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Intangible assets, net of accumulated amortization</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5,943,368</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,126,558</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Goodwill from acquisition of Mimio</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">N/A</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">44,931</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">44,931</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Goodwill from acquisition of Boxlight</font></td> <td style="line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">N/A</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,137,060</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,137,060</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="padding-bottom: 2.5pt">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,181,991</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,181,991</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred revenue consisted of the following as of March 31, 2018 and December 31, 2017:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>March 31, 2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>December 31, 2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 62%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Balance, beginning of the period</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 16%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,302,717</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">767,726</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Additions</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">71,903</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,070,528</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Amortization or earned</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(715,462</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(535,537</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Balance, ending of the period</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">659,158</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,302,717</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Deferred revenue &#8211; short-term</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">483,243</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,127,423</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Deferred revenue &#8211; long-term</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">175,915</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">175,294</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of the option activities during the three months ended March 31, 2018:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27.5pt">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Number of Units</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Average&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Exercise Price</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted Average&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Remaining Contractual&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Term (in years)</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 37%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding, December 31, 2017</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 16%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">812,574</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 17%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3.01</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 19%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.64</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">927,500</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.10</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(29,200</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">0.0001</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Cancelled</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(4,495</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.00</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding, March 31, 2018</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,706,379</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4.19</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.10</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Exercisable, March 31, 2018</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">573,955</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.26</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5.73</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum lease payments of the Company&#8217;s operating leases with a term over one year subsequent to March 31, 2018 are as follows:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Year ending December 31,</font></td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Amount</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 14%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">197,700</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2019</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">40,400</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Net Minimum Lease Payments</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">238,100</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> BOXL -0.09 -0.34 9617234 4621687 25738 304913 752449 250000 502449 819960 125000 694960 54000 54000 54000 54000 <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a summary of our debt at March 31, 2018 and December 31, 2017</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>March 31, 2018</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>December 31, 2017</b></font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Short-term debt &#8211; third parties</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 62%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Note payable &#8211; AHA</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 16%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">125,000</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 15%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">250,000</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts receivable financing &#8211; Sallyport Commercial</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">694,960</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">502,449</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total short-term debt &#8211;third parties</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">819,960</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">752,449</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Short-term debt &#8211; related parties</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Note payable &#8211; Logical Choice Corporation - Delaware</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">54,000</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">54,000</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-top: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-top: black 1.5pt solid; text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Convertible debt &#8211; related party</b></font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Convertible note payable &#8211; Mark Elliott</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">50,000</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">50,000</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total debt</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">923,960</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">856,449</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 2 &#8211; GOING CONCERN</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary debt or equity financing to continue operations, and the attainment of profitable operations. As of March 31, 2018, the Company had an accumulated deficit of $12,933,426 and a working capital deficit of $909,450. During the three months ended March 31, 2018, the Company incurred a net loss of $905,038 and net cash used in operations was $2,050,132. These factors raise substantial doubt regarding the Company&#8217;s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company is seeking to obtain funds for operations from its public or private sales of equity or debt securities or from bank or other loans.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2018 and 2017, the Company recorded the following stock compensation expense:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 70%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Stock options</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 12%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">496,688</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">47,165</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Warrants</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">24,226</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total stock compensation expense</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">520,914</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">47,165</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> 250000 250000 <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s revenues were concentrated among few customers for the three months ended March 31, 2018:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Customer</font></td> <td style="text-align: center; line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Total revenues</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">from the customer</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">to total revenues</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">for the three</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">months ended</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">March 31, 2018</p></td> <td style="text-align: center; line-height: 107%">&#160;</td> <td style="text-align: center; line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Accounts</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">receivable</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">(deferred revenue)</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">from the customer</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">as of March 31, 2018</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">(rounded to 000&#8217;s)</p></td> <td style="text-align: center; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 30%; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 33%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">13</font></td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 30%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">45,000</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(111,000</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">654,000</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s purchases were concentrated among few vendors for the three months ended March 31, 2018:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Vendor</font></td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Total purchases</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">from the vendor</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">to total purchases for</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">the three months</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">ended March 31, 2018</p></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">Accounts payable</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">(prepayment) to the</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">vendor as of</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">March 31, 2018</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">(rounded to 000&#8217;s)</p></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 30%; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1*</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 33%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">44</font></td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 30%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,611,000</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;2</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">29</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(7,000</font></td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">* EDI, a related party. See note 13.</p> 2018 3089932 3083668 4626569 3738723 10114832 8498731 29752 25095 6126558 5943368 292 316 20453425 18649501 2994918 2415090 4391713 4739569 50000 50000 1127423 483243 11227755 9408181 175294 175915 11403049 9584096 25 25 956 965 325 325 -12028388 -12933426 -1768476 14701902 1768476 -47848 -42985 20453425 18649501 9558997 9648197 9558997 9648197 -2050132 -113374 -40220 -263 -643559 -65557 347858 1119606 -553436 265145 838031 771039 -942113 -584062 8240 87053 187847 192225 -54267 -11476 -34828 56233 49432 78708 487515 84709 3 420000 4646582 720291 4714094 144364 112915 -1561980 -54928 637 -26263 1000000 195000 <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>CASH AND CASH EQUIVALENTS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $250,000 for banks located in the U.S. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any rick of loss on its cash bank accounts.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 10 &#8211; INCOME TAXES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates in the United States and Mexico. Income taxes have been provided based upon the tax laws and rates of the countries in which operations are conducted and income is earned. The Company idled its office in Mexico in 2016. For the three months ended March 31, 2018 and the year ended December 31, 2017, the Company has incurred net losses and, therefore, has no tax liability. The cumulative net operating loss carry-forward on tax basis was approximately $9.0 and $7.6 million at March 31, 2018 and December 31, 2017, respectively. The value of these carryforwards depends on the Company&#8217;s ability to generate taxable income. A change in ownership, as defined by federal income tax regulations, could significantly limit the Company&#8217;s ability to utilize our net operating loss carryforwards. Additionally, because federal tax laws limit the time during which the net operating loss carryforwards may be applied against future taxes, if the Company fails to generate taxable income prior to the expiration dates the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. The Company has cumulative losses and there is no assurance of future taxable income, therefore, valuation allowances have been recorded to fully offset the deferred tax asset at March 31, 2018 and December 31, 2017.</p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of the warrants activities during the three months ended March 31, 2018:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 27.5pt">&#160;</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%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Number of Units</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Average&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Exercise Price</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Weighted Average&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Remaining Contractual&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Term (in years)</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 37%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding, December 31, 2017</font></td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 17%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,070,717</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 2%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 14%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.57</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 21%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2.12</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12,000</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.00</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.98</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding, March 31, 2018</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,082,717</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.56</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.88</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Exercisable, March 31, 2018</font></td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1,032,717</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7.56</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">1.75</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> P3Y 909450 3846724 3855064 200874 250306 555918 521090 0 24531 4611973 3691197 187158 165821 172562 118295 4657 15189 P9Y P10Y P3Y P5Y P5Y 67181 3355 21341 42485 67181 3355 21341 42485 32429 42086 183190 177036 P10Y P10Y P10Y 7189723 67395 3567396 3554932 7189723 67395 3567396 3554932 -1063165 -1246355 0.065 0.10 236926 41667 250000 54000 50000 500000 125000 694960 54000 50000 250000 0.85 1250000 500000 6000000 0.10 0.04 0.0425 950 67826 15916 14808 0 16789 16041 2018-05-21 2018-12-31 50000 0.15 6.28 0.20 50000 50000 856449 923960 1302717 767726 659158 71903 1070528 -715462 -535537 7600000 9000000 150,000,000 shares of Class A voting common stock 50,000,000 shares of Class B non-voting common stock 250,000 shares of voting 1,200,000 shares of voting 270,000 shares of voting 48280000 250,000 shares of non-voting 60000 7.00 1000000 270000 257200 35632 94998 2390438 300000 2690438 9000 3000 P4Y P1Y P1Y P4Y P1Y P1Y P2Y1M13D P5Y P5Y P5Y P5Y P5Y P5Y 927500 100000 300000 300000 300000 200000 367500 35000 25000 2800000 1500000 5.01 5.01 5.40 4.00 4.06 689000 459000 998000 65000 47000 29200 29200 5.10 0.0001 0.0201 0.0245 0.0196 P3Y P3Y9M0D P1Y11M23D 0.66 0.68 0.69 812574 1706379 4495 573955 3.01 4.19 7.00 2.26 P5Y7M21D P5Y1M6D P5Y8M23D 1070717 1082717 12000 1032717 7.57 7.56 7.56 P1Y10M17D P1Y9M 0.01125 0.01125 0.00375 750000 750000 72000 1460508 2180881 43000 70000 2300 1460508 67000 98000 238100 Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. 0.13 0.12 0.11 0.44 0.29 45000 -111000 654000 3 39000 26000 250000 1895413 1866418 420000 684060 1700000 1926324 1307918 5100 0 4611000 -7000 4611000 4325000 197700 40400 1.00 1857252 846319 846319 846319 846319 1035159 1035159 1035159 <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>FAIR VALUE OF FINANCIAL INSTRUMENTS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s financial instruments primarily include cash, accounts receivable, prepayments, derivative liabilities and accounts payable. Due to the short-term nature of cash, receivables, prepayments and accounts payable the carrying amounts of these assets and liabilities approximate their fair value.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Derivatives are recorded at fair value at each period end. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As required by Accounting Standard Codification (&#8220;ASC&#8221;) Topic No. 820 - 10&#160;<i>Fair Value Measurement</i>, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company&#8217;s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth, by level within the fair value hierarchy, the Company&#8217;s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Markets for&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Identical&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Assets</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Other&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Observable&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Inputs</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Significant&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Unobservable&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Inputs</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Carrying&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Value as of&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">March 31,</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Description</font></td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(Level 1)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(Level 2)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(Level 3)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 51%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Derivative liabilities - warrant instruments</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>DERIVATIVES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company classifies Common Stock purchase warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined that certain warrants to purchase common stock do not satisfy the criteria for classification as equity instruments due to the existence of certain net cash and non-fixed settlement provisions that are not within the sole control of the Company.</p> 24226 0.00 0.00 7.00 P1Y11M23D 1857252 846319 24226 -1035159 <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of the restatement changes made to the consolidated financial statements previously issued as of and for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Originally</b></font><br /> <font style="font-size: 10pt"><b>Reported</b></font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Restatement</b></font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>As Restated</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt"><b>Consolidated balance sheet:</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 49%; padding-left: 10pt"><font style="font-size: 10pt">Derivative liabilities</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 14%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 14%; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 14%; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Additional paid-in capital</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">24,655,946</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(2,614,795</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">22,041,151</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Accumulated deficit</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">14,701,902</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,768,476</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">12,933,426</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Consolidated Statement of Operations and</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Comprehensive Loss:</b></p></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">General and administrative</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">3,169,787</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">24,226</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">3,194,013</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Change in fair value of derivative liabilities</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Net loss</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,915,971</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,010,933</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">905,038</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Total comprehensive loss</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,911,108</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,010,933</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">900,175</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Consolidated Statements of Cash Flows:</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Net loss</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,915,971</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,010,933</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">905,038</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Stock compensation</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">496,688</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">24,226</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">520,914</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Change in fair value of derivative liabilities</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In determining the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model at March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; text-align: justify">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%; text-align: justify"><font style="font-size: 10pt">Common stock issuable upon exercise of warrants</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,032,717</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Market value of common stock on measurement date</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">4.06</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Exercise price</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">7.70 to $7.0</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Risk free interest rate(1)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.27</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Expected life in years</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.76 years</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Expected volatility (2)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">72.36</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Expected dividend yields (3)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0</font></td> <td><font style="font-size: 10pt">%</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(1) The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(2) The historical trading volatility was determined by calculating the volatility of the Company&#8217;s peers common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(3) The Company does not expect to pay a dividend in the foreseeable future.</p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the change in the Company&#8217;s derivative liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; text-align: justify">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Amount</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%; text-align: justify"><font style="font-size: 10pt">Balance, December 31, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,857,252</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Initial valuation of derivative liabilities upon issuance of warrants</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">24,226</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Change in fair value of derivative liabilities</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(1,035,159</font></td> <td><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Balance, March 31, 2018</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">846,319</font></td> <td>&#160;</td></tr> </table> <p style="margin: 0pt"></p> 846319 846319 <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth, by level within the fair value hierarchy, the Company&#8217;s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018:</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</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="text-align: center; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Markets for&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Identical&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Assets</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Other&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Observable&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Inputs</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Significant&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Unobservable&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Inputs</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Carrying&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">Value as of&#160;</font><br /> <font style="font: 10pt Times New Roman, Times, Serif">March 31,</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Description</font></td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(Level 1)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(Level 2)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(Level 3)</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 51%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Derivative liabilities - warrant instruments</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%">&#160;</td> <td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="width: 9%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="width: 1%; line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; line-height: 107%">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="text-align: right; line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="line-height: 107%">&#160;</td> <td style="line-height: 107%">&#160;</td> <td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">846,319</font></td> <td style="line-height: 107%">&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 17 &#8211; RESTATEMENT</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subsequent to the issuance of the Company&#8217;s consolidated financial statements for the three months ended March 31, 2018 on May 15, 2018, the Company realized that (1) warrants which contain certain net cash settlement and down-round provisions were incorrectly accounted for as equity instruments instead of derivative liabilities; and (2) understatement of stock compensation from not recognizing additional warrants issued to Dynamic and Cannan. The Company recorded derivative liabilities of $846,319 and decreased additional paid in capital and accumulated deficit by $2,614,795 and $1,768,476, respectively at March 31, 2018. The Company also adjusted stock compensation expense and gain on derivative liability for the three months ended March 31, 2018 by $24,226 and $1,035,159, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of the restatement changes made to the consolidated financial statements previously issued as of and for the three months ended March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Originally</b></font><br /> <font style="font-size: 10pt"><b>Reported</b></font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>Restatement</b></font></td> <td>&#160;</td> <td>&#160;</td> <td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>As Restated</b></font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2018</b></font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td><font style="font-size: 10pt"><b>Consolidated balance sheet:</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 49%; padding-left: 10pt"><font style="font-size: 10pt">Derivative liabilities</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 14%; text-align: right"><font style="font-size: 10pt">-</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 14%; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 14%; text-align: right"><font style="font-size: 10pt">846,319</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Additional paid-in capital</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">24,655,946</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(2,614,795</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">22,041,151</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Accumulated deficit</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">14,701,902</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,768,476</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">12,933,426</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Consolidated Statement of Operations and</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Comprehensive Loss:</b></p></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">General and administrative</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">3,169,787</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">24,226</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">3,194,013</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Change in fair value of derivative liabilities</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Net loss</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,915,971</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,010,933</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">905,038</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Total comprehensive loss</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,911,108</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,010,933</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">900,175</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td><font style="font-size: 10pt"><b>Consolidated Statements of Cash Flows:</b></font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Net loss</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,915,971</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">(1,010,933</font></td> <td><font style="font-size: 10pt">)</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">905,038</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Stock compensation</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">496,688</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">24,226</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">520,914</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt"><font style="font-size: 10pt">Change in fair value of derivative liabilities</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">-</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">1,035,159</font></td> <td>&#160;</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Derivative liabilities</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 5.55pt; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC Topic No. 815 - Derivatives and Hedging provides guidance on determining what types of instruments or embedded features in an instrument issued by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in the pronouncement on accounting for derivatives. These requirements can affect the accounting for warrants issued by the Company. At March 31, 2018, the Company had warrants resulting from equity offerings in November 30, 2017 and additional warrants issued upon qualified equity event as defined in the warrants agreements that contain net cash settlement provision and do not have fixed settlement provisions because their conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future, the Company concluded that the instruments are not indexed to the Company&#8217;s stock and are to be treated as derivative liabilities. In determining the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model at March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; text-align: justify">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">March 31, 2018</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%; text-align: justify"><font style="font-size: 10pt">Common stock issuable upon exercise of warrants</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%">&#160;</td> <td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,032,717</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Market value of common stock on measurement date</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">4.06</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Exercise price</font></td> <td>&#160;</td> <td><font style="font-size: 10pt">$</font></td> <td style="text-align: right"><font style="font-size: 10pt">7.70 to $7.0</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Risk free interest rate(1)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">2.27</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Expected life in years</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">1.76 years</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Expected volatility (2)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">72.36</font></td> <td><font style="font-size: 10pt">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Expected dividend yields (3)</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">0</font></td> <td><font style="font-size: 10pt">%</font></td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(1) The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(2) The historical trading volatility was determined by calculating the volatility of the Company&#8217;s peers common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(3) The Company does not expect to pay a dividend in the foreseeable future.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table shows the change in the Company&#8217;s derivative liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; text-align: justify">&#160;</td> <td style="padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Amount</font></td> <td style="padding-bottom: 1.5pt">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%; text-align: justify"><font style="font-size: 10pt">Balance, December 31, 2017</font></td> <td style="width: 1%">&#160;</td> <td style="width: 1%"><font style="font-size: 10pt">$</font></td> <td style="width: 15%; text-align: right"><font style="font-size: 10pt">1,857,252</font></td> <td style="width: 1%">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify"><font style="font-size: 10pt">Initial valuation of derivative liabilities upon issuance of warrants</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">24,226</font></td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Change in fair value of derivative liabilities</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">(1,035,159</font></td> <td><font style="font-size: 10pt">)</font></td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify">&#160;</td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify"><font style="font-size: 10pt">Balance, March 31, 2018</font></td> <td>&#160;</td> <td>&#160;</td> <td style="text-align: right"><font style="font-size: 10pt">846,319</font></td> <td>&#160;</td></tr> </table> <p style="margin: 0pt"></p> <p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>LONG&#8211;LIVED ASSETS</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount or fair value less cost to sell.</p> 0.0227 P1Y9M3D 1032717 4.06 7.70 7.0 0.7236 0.00 This Amendment No. 1 on Form 10-Q/A for the quarter ended March 31, 2018 amends the Form 10-Q that was originally filed on May 15, 2018. Subsequent to the filing of the Company's Form 10-Q filed on May 15, 2018, the Company identified (1) misstatements of stock compensation expense and (2) improper classification of certain warrants with net cash and non-fixed settlement provisions through internal discussions and reviews. The Company is filing this amendment to (i) correct the misstatement to stock compensation and to reflect the reclassification of certain warrants from equity to liabilities, and (ii) make corresponding amendments to Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A"). This Amendment No. 1 does not reflect subsequent events occurring after the original filing date of the Original 10-Q or modify or update in any way disclosures made in the Original 10-Q except as noted above. This Amendment No. 1 should be read in conjunction with the Original 10-Q and with other Company filings with the Securities and Exchange Commission subsequent to the filing of the Original 10-Q. 100 EDI, a related party. See note 13. The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date. The historical trading volatility was determined by calculating the volatility of the Company's peers common stock. The Company does not expect to pay a dividend in the foreseeable future.