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0.003
250172
99482
20000
20000
-4166890
P7Y
P5Y
P5Y
P3Y
P5Y
<p><font style="font: 10pt Times New Roman, Times, Serif">Length of the lease</font></p>
0.06
1.45
P7Y
none
201014
447171
10-Q
1627188
1554838
213753
212703
1413435
1342135
461979
607313
87086
88749
335642
3998
267805
267919
177383
293350
2210439
2030050
1647326
1593138
1623624
1569436
3500
3500
73158
70520
489955
366392
12426
7173
427866
347945
28
10
18
28
10
18
2210439
10
18
2030050
10
18
-18094317
-18308887
18547641
18654172
129899
129899
0.001
0.001
0.001
0.001
0.001
0.001
5000000
10000
20000
5000000
10000
20000
28025
10000
18025
28025
10000
18025
0.001
0.001
2000000000
2000000000
129899595
129899595
129899595
105790195
129899595
105790195
-0.00
-0.04
-0.00
-0.04
-234570
-4754677
20000
-214570
-4754677
2590
-4367272
11739
200382
14260
69
-217160
-387405
1309834
500964
60325
737
126531
105293
872806
295452
1092674
113559
126531
126531
4741
19051
49663
11274
28075
-38389
9024
117266
193000
2734
140000
193000
50000
20000
15000
15000
100000
10000
20000
25000
10000
35000
100000
25000
20000
30000
75000
40000
55000
40000
40000
35000
40000
50000
300000
40000
10000
30000
40000
40000
40000
50000
250000
30000
45000
45000
35000
35000
30000
20000
10000
250000
33000
43000
45000
10000
38000
37000
10000
34000
250000
3000
40000
31000
74000
38000
38500
65000
32000
60000
35000
52000
58000
36000
40000
27000
22000
503500
100000
35500
41000
35000
160000
34000
21000
33500
10000
33000
35500
28000
33500
500000
140000
36000
48000
34000
20000
10761
-10000
10000
14650
3889
-166416
-173976
-331644
-8000
6061
33469
115967
85880
-5253
-1714
-93646
-29889
168136
-13725
-3307
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><font style="font: 10pt Times New Roman, Times, Serif">1. 	   BASIS
OF PRESENTATION</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif; color: black"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif; color: black">The
accompanying unaudited condensed consolidated financial statements of </font><font style="font: 10pt Times New Roman, Times, Serif">CloudCommerce,
Inc.’s (“CloudCommerce,” “we,” “us,” or the “Company”), <font style="color: black">have
been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal
recurring adjustments considered necessary for a fair presentation have been included.  Operating results for the three
months ended September 30, 2016are not necessarily indicative of the results that may be expected for the year ending June 30,
2017.  For further information, refer to the financial statements and footnotes thereto included in the Company's Form
10K for the year ended June 30, 2016.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><font style="font: 10pt Times New Roman, Times, Serif">2.     SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This
summary of significant accounting policies of CloudCommerce, Inc. is presented to assist in understanding the Company’s
financial statements. The financial statements and notes are representations of the Company’s management, which is responsible
for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United
States of America and have been consistently applied in the preparation of the financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Condensed Consolidated Financial Statements include the Company and its majority-owned subsidiary (“Indaba Group, Inc.,
a Delaware corporation”). All significant inter-company transactions are eliminated in consolidation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Accounts
Receivable</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">The
Company extends credit to its customers, who are located nationwide. Accounts receivable are customer obligations due under
normal trade terms. The Company performs continuing credit evaluations of its customers’ financial condition.
Management reviews accounts receivable on a regular basis, based on contracted terms and how recently payments have been
received to determine if any such amounts will potentially be uncollected. The Company includes any balances that are
determined to be uncollectible in its allowance for doubtful accounts. After all attempts to collect a receivable have
failed, the receivable is written off. The balance of the allowance account at <font style="color: black">September 30,
2016</font> and June 30, 2016 are $31,859 and $45,584 respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in; text-align: justify"><font style="font: normal 10pt Times New Roman, Times, Serif"><u>Use
of Estimates</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing
these financial statements include revenue recognition, the allowance for doubtful accounts, long-lived assets, intangible assets,
business combinations, the deferred tax valuation allowance, and the fair value of stock options and warrants. Actual results
could differ from those estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Cash
and Cash Equivalents </u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Revenue
Recognition</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company recognizes income when the service is provided or when product is delivered. We present revenue, net of customer
incentives. Most of the income is generated from professional services and site development fees. We provide online marketing
services that we purchase from third parties. The gross revenue presented in our statement of operations is in accordance
with ASC 605-45. We also offer professional services such as development services.  The fees for development services
with multiple deliverables constitute a separate unit of accounting in accordance with ASC 605-25, which are recognized as
the work is performed. Upfront fees for development services or other customer services are deferred until certain
implementation or contractual milestones have been achieved. The terms of services contracts generally are for periods of
less than one year. The deferred revenue as of September 30, 2016 and the fiscal year ended June 30, 2016 was zero and
$331,644, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
always strive to satisfy our customers by providing superior quality and service. Since we typically bill based on a Time and
Materials basis, there are no returns for work delivered. When discrepancies or disagreements arise, we do our best to reconcile
those by assessing the situation on a case-by-case basis and determining if any discounts can be given. Historically, no significant
discounts have been granted.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Research
and Development</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">Research
and development costs are expensed as incurred. Total research and development costs were zero for the three months ended September
30, 2016 and 2015.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Advertising
Costs </u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company expenses the cost of advertising and promotional materials when incurred. Total advertising costs were $48,358 and $12,070
for the three months ended September 30, 2016 and 2015, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Fair
value of financial instruments</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued
liabilities are carried at cost, which approximates their fair value, due to the relatively short maturity of these instruments.
As of September 30, 2016 and June 30, 2016, the Company’s notes payable have stated borrowing rates that are consistent
with those currently available to the Company and, accordingly, the Company believes the carrying value of these debt instruments
approximates their fair value.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">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 at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
These tiers include:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">•</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
1, defined as observable inputs such as quoted prices for identical instruments in active
markets;</font></td></tr></table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">•</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
2, defined as inputs other than quoted prices in active markets that are either directly
or indirectly observable such as quoted prices for similar instruments in active markets
or quoted prices for identical or similar instruments in markets that are not active;
and</font></td></tr></table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">•</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
3, defined as unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions, such as valuations derived from valuation
techniques in which one or more significant inputs or significant value drivers are unobservable.</font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">We
measure certain financial instruments at fair value on a recurring basis. As of September 30, 2016 and the fiscal year ended June
30, 2016, the Company had no assets or liabilities that are required to be valued on a recurring basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Property
and Equipment</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Property
and equipment are stated at cost, and are depreciated or amortized using the straight-line method over the following estimated
useful lives:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 45%; text-align: left; padding-left: 5.4pt">Furniture, fixtures & equipment</td><td style="width: 10%"> </td>
<td style="width: 45%; text-align: right; padding-left: 5.4pt">7 Years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Computer equipment</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Commerce server</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Computer software</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">3 - 5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Leasehold improvements</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">Length of the lease</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Depreciation
expenses were $6,137 and $737 for the three months ended September 30, 2016 and 2015, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Impairment
of Long-Lived Assets</u></font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the
estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the
long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information
at which assets could be bought or sold, including quoted market prices, if available, or the present value of the estimated future
cash flows based on reasonable and supportable assumptions.</font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Indefinite
Lived Intangibles and Goodwill Assets</u> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805,
“Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible
assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the
information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information
regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase
price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is
recognized as goodwill.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events
or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance
with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at June 30, 2016,
and determined there was no impairment of indefinite lived intangibles and goodwill.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Business
Combinations</u> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible
assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values
of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates
and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include,
but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market
participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from
estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets
acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any
subsequent adjustments are recorded to earnings.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: normal 10pt Times New Roman, Times, Serif"><u>Concentrations
of Business and Credit Risk</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company operates in a single industry segment. The Company markets its services to companies and individuals in many industries
and geographic locations. The Company’s operations are subject to rapid technological advancement and intense competition
in the SAAS industry. Accounts receivable represent financial instruments with potential credit risk. The Company typically offers
its customers credit terms. The Company makes periodic evaluations of the credit worthiness of its enterprise customers and other
than obtaining deposits pursuant to its policies, it generally does not require collateral. In the event of nonpayment, the Company
has the ability to terminate services.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Stock-Based
Compensation</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company addressed the accounting for share-based payment transactions in which an enterprise receives employee services in exchange
for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity
instruments or that may be settled by the issuance of such equity instruments. The transactions are accounted for using a fair-value-based
method and recognized as expenses in our statement of income.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Stock-based
compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is
ultimately expected to vest. Stock-based compensation expense recognized in the consolidated statement of operations during
the three months ended September 30, 2016, included compensation expense for the stock-based payment awards granted prior to,
but not yet vested, as of September 30, 2016 based on the grant date fair value estimated. Stock-based compensation expense
recognized in the statement of operations for the three months ended September 30, 2016 is based on awards ultimately
expected to vest, or has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation expense
recognized in the consolidated statements of operations during the three months ended September 30, 2016 and 2015 was
$126,531 and $105,293, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Basic
and Diluted Net Income (Loss) per Share Calculations</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Income
(Loss) per Share dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share
are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted
earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number
of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. The shares for employee options, warrants and convertible notes were used in the calculation of the
income per share.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the three months ended <font style="color: black">September 30, 2016</font>, the Company has excluded 123,000,000 options, 10,000
Series A Preferred shares convertible into 100,000,000 shares of common stock, 18,025 Series B Preferred shares convertible into
450,625,000 shares of common stock,and shares issuable from $88,749 in convertible notes convertible into 22,187,250 shares of
common stock, because their impact on the loss per share is anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the three months ended <font style="color: black">September 30, 2015</font>, the Company has excluded 126,000,000 options, 28,019,163
warrants outstanding, and 374,607,000 shares underlying$1,498,428 in convertible notes, because their impact on the loss per share
is anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">Dilutive
per share amounts are computed using the weighted-average number of common shares outstanding and potentially dilutive securities,
using the treasury stock method if their effect would be dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Recently
Issued Accounting Pronouncements</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0pt; text-indent: 0pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">Management
reviewed accounting pronouncements issued during the three months ended September 30, 2016, and no pronouncements were adopted
during the period.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">3.    
LIQUIDITY AND OPERATIONS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company had net loss of $214,570 for the three months ended September 30, 2016 and net loss of $4,754,677 for the three months
ended September 30, 2015, and net cash used in operating activities of $166,416 and $173,976 for the same periods, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">While
the Company expects that its capital needs in the foreseeable future may be met by cash-on-hand and projected positive cash-flow,
there is no assurance that the Company will be able to generate enough positive cash flow or have sufficient capital to finance
its growth and business operations, or that such capital will be available on terms that are favorable to the Company or at all.
In the current financial environment, it could become difficult for the Company to obtain equipment leases and other business
financing.  There is no assurance that the Company would be able to obtain additional working capital through the private
placement of common stock or from any other source.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif; background-color: white"><u>Going
Concern</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">The
accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the normal course of business.  The accompanying
financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.  The
Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about
the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern
and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion. The Company
has obtained funds from its shareholders since its inception. It is management’s plan to generate additional working capital
from increasing sales from its desktop and mobile service offerings, and then continue to pursue its business plan and purposes.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">4.
    BUSINESS ACQUISITIONS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>Indaba
Group, LLC</u></font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 1, 2015, the Company completed the acquisition of Indaba Group, LLC, a Colorado limited liability company. As of that
date, the Company’s operating subsidiary, Warp 9, Inc., a Delaware corporation, merged with Indaba Group, LLC and the name
of the combined subsidiary was changed to Indaba Group, Inc. (“Indaba”). The total purchase price of two million dollars
($2,000,000.00) was paid in the form of the issuance of ten thousand (10,000) shares of the Company's Series A Convertible Preferred
Stock, at a liquidation preference of two hundred dollars ($200) per share and payment of working capital surplus in the amount
of $55,601. As of the date of closing, Ryan Shields and Blake Gindi, two of the owners of Indaba Group, LLC, were appointed to
the CloudCommerce Board of Directors.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Under
the purchase method of accounting, the transactions were valued for accounting purposes at $2,000,000, which was the fair value
of Indaba at the time of acquisition. The assets and liabilities of Indaba were recorded at their respective fair values as of
the date of acquisition. Since the Company determined there were no other separately identifiable intangible assets, any difference
between the cost of the acquired entity and the fair value of the assets acquired and liabilities assumed is recorded as goodwill.
The acquisition date estimated fair value of the consideration transferred consisted of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 70%; text-align: left; padding-left: 5.4pt">Tangible assets acquired</td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">417,700</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Liabilities assumed</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(193,889</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Net tangible assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">223,811</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Non-compete agreements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">201,014</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Customer list</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">447,171</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Goodwill</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,128,004</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt; padding-bottom: 2.5pt">Total purchase price</td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">2,000,000</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As
of September 30, 2016, the Company has recorded an estimated fair value of the intangible assets of Indaba based on a preliminary
purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which
may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed,
with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets
acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which
the adjustments were determined. </font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"><u>Pro
forma results</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">The
following tables set forth the unaudited pro forma results of the Company as if the acquisition of Indaba had taken place on the
first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved
had the companies been combined as of the first day of the periods presented.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Period ended,</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><u style="text-decoration: none">September 30, 2016</u></font></p></td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Period ended,</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><u style="text-decoration: none">September 30, 2015</u></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left">Total revenues</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">1,092,674</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">774,901</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Net loss</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(214,570</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(4,813,341</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Basic and diluted net earnings per common share</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">(0.00</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">(0.05</td><td style="text-align: left">)</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">5.	
   INTANGIBLE ASSETS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Domain
Name</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
June 26, 2015, the Company purchased the rights to the domain “CLOUDCOMMERCE.COM”, from a private party at a purchase
price of $20,000, plus transaction costs of $202, which will be used as the main landing page for the Company. The total recorded
cost of this domain of $20,202 has been included in other assets on the balance sheet. As of September 30, 2016, we determined
that this domain has an indefinite useful life, and as such, is not included in depreciation and amortization expense. The Company
will assess this intangible asset annually for impairment, in addition to it being classified with indefinite useful life.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Trademark</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
September 22, 2015, the Company purchased the trademark rights of “CLOUDCOMMERCE”, from a private party at a purchase
price of $10,000. The total recorded cost of this trademark of $10,000 has been included in other assets on the balance sheet.
The trademark expires in 2020 and may be renewed for an additional 10 years. Therefore, as of September 30, 2015, we determined
that this intangible asset has a definite useful life of 174 months, and as such, will be included in depreciation and amortization
expense. For the period ended September 30, 2016, the Company included $172 in depreciation and amortization expense related to
this trademark.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Non-Compete
Agreements</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 1, 2015, the Company acquired Indaba from three members of the limited liability company. At that time, we retained two
of the members, who currently serve as the Chief Executive Officer and Chief Technology Officer of Indaba. Both employees have
non-compete agreements in place to protect the Company against the risk of either employee leaving Indaba to compete directly
with us. We have calculated the value of those non-compete agreements at $201,014, with a useful life of 3 years, which coincides
with the term of the non-compete agreement. This amount will be included in depreciation and amortization expense until September
30, 2018. <font style="color: black">For the period ended September 30, 2016, the Company included $16,751 in depreciation and
amortization expense related to these non-compete agreements.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><font style="color: black"> </font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Customer
List</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 1, 2015, the Company acquired Indaba, which brought an increase in revenue and many new customers. We have calculated
the value of the customer list at $447,171, with a useful life of 3 years. This amount will be included in depreciation and amortization
expense until September 30, 2018. <font style="color: black">For the period ended September 30, 2016, the Company included $37,264
in depreciation and amortization expense related to the customer list.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><font style="color: black"> </font></font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company acquired certain intangible assets pursuant to the acquisition of Indaba Group, LLC and other acquisitions. 
The following is the net book value of these assets:</font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="11" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2016</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Accumulated</td><td> </td>
<td colspan="3"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Gross</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Amortization</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Net</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 46%; text-align: left; padding-left: 2.4pt">Customer List</td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">447,171</td><td style="width: 1%; text-align: left"> </td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">(149,057</td><td style="width: 1%; text-align: left">)</td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">298,114</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 2.4pt">Non-Compete Agreements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">201,014</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(67,005</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">134,009</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt; padding-left: 2.4pt">Goodwill</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,128,003</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,128,003</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; padding-left: 2.4pt">Total</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,776,188</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(216,062</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,560,126</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif; color: #252525">Total
amortization expense charged to operations for the period ended September 30, 2016 and 2015 was </font><font style="font: 10pt Times New Roman, Times, Serif">$54,188 and
zero, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
following table of remaining amortization of finite life intangible assets, as of September 30, 2016, includes the intangible
assets acquired during the Indaba acquisition, in addition to the CloudCommerce trademark:</font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 44%; text-align: left; vertical-align: bottom">2017</td><td style="width: 1%; text-align: left"> </td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 43%; text-align: right">162,563</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; vertical-align: bottom">2018</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">216,752</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; vertical-align: bottom">2019</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">54,705</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; vertical-align: bottom">2020</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">690</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">2021 and thereafter</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">6,723</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">441,433</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><font style="font: 10pt Times New Roman, Times, Serif">6.
    LINE OF CREDIT       </font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">The
Company has assumed an outstanding liability related to a bank line of credit agreement from the acquisition of Indaba Group,
LLC. As of September 30, 2016 and June 30, 2016, the balances were $80,806 and $83,540, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">7.    NOTES
PAYABLE</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">During
the quarter ended December 31, 2015, the Company signed addenda to each of its outstanding convertible notes, fixing the conversion
price at $0.004. Before the addenda, the conversion price for each of the notes was tied to the trading price of the Company’s
common stock. Because of that fluctuation, the Company was required to report derivative gains and losses each quarter, which
was included in earnings, and an overall derivative liability balance on the balance sheet. Since the addenda, the Company has
eliminated the derivative liability balance on the balance sheet and discontinued the gain/loss reporting on the income statement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
March 25, 2013, the Company issued a convertible promissory note (the “March 2013 Note”) in the amount of up to $100,000,
at which time an initial advance of $50,000 was received to cover operational expenses. The lender advanced an additional $20,000
on April 16, 2013, $15,000 on May 1, 2013 and $15,000 on May 16, 2013, for a total draw of $100,000. The terms of the March 2013
Note, as amended, allow the lender to convert all or part of the outstanding balance plus accrued interest, at any time after
the effective date, at a conversion price of the lower of (a) $0.015 per share, or (b) 50% of the lowest trade price of common
stock recorded on any trade day after the effective date of the agreement. The March 2013 Note bears interest at a rate of 10%
per year and matures on March 25, 2018. On May 23, 2014, the lender converted $17,000 of the $100,000 outstanding balance and
accrued interest of $1,975 into 4,743,699 shares of common stock. On October 14, 2014, the lender converted $17,000 of the $100,000
outstanding balance and accrued interest of $2,645 into 4,911,370 shares of common stock. The balance of the March 2013 Note,
as of September 30, 2016 is $88,749, which includes $22,749 of accrued interest.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
May 16, 2013, the Company issued a convertible promissory note (the “May 2013 Note”) in the amount of up to
$100,000, at which time an initial advance of $10,000 was received to cover operational expenses. The lender advanced an
additional $20,000 on June 3, 2013, $25,000 on July 2, 2013, $10,000 on September 3, 2013 and $35,000 on February 18, 2014,
for a total draw of $100,000. The terms of the May 2013 Note, as amended, allow the lender to convert all or part of the
outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the lower of (a)
$0.015 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective date of
the agreement. The Company recognized a discount on the May 2013 Note in the amount of $100,000, due to the beneficial
conversion feature. This discount was recognized over twelve months, and has been fully amortized as of June 30, 2016. On
June 28, 2016, the Company exchanged the principle balance on the May 2013 Note ($100,000) for 1,000 shares of Series B
Preferred Stock, and the lender forgave all accrued interest up until that date. As of June 30, 2016, the balance of the May
2013 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
March 4, 2014, the Company issued a convertible promissory note (the “March 2014 Note”) in the amount of up to $250,000,
at which time an initial advance of $25,000 was received to cover operational expenses. The lender advanced an additional $20,000
on March 17, 2014 and $30,000 on April 2, 2014, for a total draw of $75,000. The terms of the March 2014 Note, as amended, allow
the lender to convert all or part of the outstanding balance plus accrued interest, at any time after the effective date, at a
conversion price of the lower of (a) $0.012 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade
day after the effective date of the agreement. <font style="background-color: white">The Company recorded a debt discount of $75,000
related to the beneficial conversion feature of the March 2014 Note, along with derivative liabilities</font>. This discount is
recognized over 18 months, beginning on the date of each tranche payment. On June 28, 2016, the Company exchanged the principle
balance on the March 2014 Note ($75,000) for 750 shares of Series B Preferred Stock, and the lender forgave all accrued interest
up until that date. As of June 30, 2016, the balance of the March 2014 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
April 16, 2014, the Company issued a convertible promissory note (the “April 2014 Note”) in the amount of up to $300,000,
at which time an initial advance of $40,000 was received to cover operational expenses. The lender advanced an additional $55,000
on April 30, 2014, $40,000 on May 16, 2014, $40,000 on June 2, 2014, $35,000 on June 30, 2014, $40,000 on July 18, 2014, and $50,000
on August 15, 2014, for a total draw of $300,000. The terms of the April 2014 Note, as amended, allow the lender to convert all
or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the lower
of (a) $0.012 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective date
of the agreement. <font style="background-color: white">The Company recorded debt discount of $300,000 related to the conversion
feature of the April 2014 Note, along with derivative liabilities</font>. This discount is recognized over 18 months, beginning
on the date of each tranche payment. On June 28, 2016, the Company exchanged the principle balance on the April 2014 Note ($300,000)
for 3,000 shares of Series B Preferred Stock, and the lender forgave all accrued interest up until that date. As of June 30, 2016,
the balance of the April 2014 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
September 5, 2014, the Company issued a convertible promissory note (the “September 2014 Note”) in the amount of up
to $250,000, at which time an initial advance of $40,000 was received to cover operational expenses. The lender advanced an additional
$10,000 on September 17, 2014, $30,000 on October 1, 2014, $40,000 on October 16, 2014, $40,000 on October 31, 2014 $40,000 on
November 18, 2014, and $50,000 on December 16, 2014, for a total draw of $250,000. The terms of the September 2014 Note, as amended,
allow the lender to convert all or part of the outstanding balance plus accrued interest, at any time after the effective date,
at a conversion price of the lower of (a) $0.015 per share, or (b) 50% of the lowest trade price of common stock recorded on any
trade day after the effective date of the agreement. <font style="background-color: white">The Company recorded a debt discount
of $250,000 related to the conversion feature of the September 2014 Note, along with derivative liabilities</font>. This discount
is recognized over 18 months, beginning on the date of each tranche payment. On June 28, 2016, the Company exchanged the principle
balance on the September 2014 Note ($250,000) for 2,500 shares of Series B Preferred Stock, and the lender forgave all accrued
interest up until that date. As of June 30, 2016, the balance of the September 2014 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
January 5, 2015, the Company issued a convertible promissory note (the “January 2015 Note”) in the amount of up to
$250,000, at which time an initial advance of $30,000 was received to cover operational expenses. The lender advanced an additional
$45,000 on January 20, 2015, $45,000 on February 2, 2015, $35,000 on February 16, 2015, $35,000 on March 2, 2015, $30,000 on March
17, 2015,$20,000 on April 2, 2015, and $10,000 on April 17, 2015, for a total draw of $250,000. The terms of the January 2015
Note, as amended, allow the lender to convert all or part of the outstanding balance plus accrued interest, at any time after
the effective date, at a conversion price of the lower of (a) $0.015 per share, or (b) 50% of the lowest trade price of common
stock recorded on any trade day after the effective date of the agreement. <font style="background-color: white">The Company recorded
a debt discount of $250,000 related to the conversion feature of the January 2015 Note, along with derivative liabilities</font>.
This discount is recognized over 18 months, beginning on the date of each tranche payment. On June 28, 2016, the Company exchanged
the principle balance on the January 2015 Note ($250,000) for 2,500 shares of Series B Preferred Stock, and the lender forgave
all accrued interest up until that date. As of June 30, 2016, the balance of the January 2015 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
May 4, 2015, the Company issued a convertible promissory note (the “May 2015 Note”) in the amount of up to
$250,000, at which time an initial advance of $33,000 was received to cover operational expenses. The lender advanced an
additional $43,000 on May 18, 2015, $45,000 on June 2, 2015,$10,000 on June 17, 2015, $38,000 on July 2, 2015, $37,000 on
July 17, 2015, $10,000 on August 5, 2015, and $34,000 on August 19, 2015, for a total draw of $250,000. The terms of the May
2015 Note, as amended, allow the lender to convert all or part of the outstanding balance plus accrued interest, at any time
after the effective date, at a conversion price of $0.004. <font style="background-color: white">The Company recorded a debt
discount of $250,000 related to the conversion feature of the May 2015 Note</font>. This discount is recognized over 18
months, beginning on the date of each tranche payment. On June 28, 2016, the Company exchanged the principle balance on the
May 2015 Note ($250,000) for 2,500 shares of Series B Preferred Stock, and the lender forgave all accrued interest up until
that date. As of June 30, 2016, the balance of the May 2015 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
August 19, 2015, the Company issued a convertible promissory note (the “August 2015 Note”) in the amount of up to
$250,000, at which time an initial advance of $3,000 was received to cover operational expenses. The lender advanced an additional
$40,000 on September 1, 2015, and $31,000 on September 17, 2015, for a total draw of $74,000. The terms of the August 2015 Note,
as amended, allow the lender to convert all or part of the outstanding balance plus accrued interest, at any time after the effective
date, at a conversion price of $0.004. <font style="background-color: white">The Company recorded a debt discount of $74,000 related
to the conversion feature of the August 2015 Note</font>. This discount is recognized over 18 months, beginning on the date of
each tranche payment. On June 28, 2016, the Company exchanged the principle balance on the August 2015 Note ($74,000) for 740
shares of Series B Preferred Stock, and the lender forgave all accrued interest up until that date. As of June 30, 2016, the balance
of the August 2015 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 1, 2015, the Company issued a convertible promissory note (the “October 2015 Note”) in the amount of up to
$1,000,000, at which time an initial advance of $38,000 was received to cover operational expenses. The lender advanced an additional
$38,500 on October 16, 2015, $65,000 on November 17, 2015, $32,000 on December 7, 2015, $60,000 on December 17, 2015, $35,000
on January 4, 2016, $52,000 on January 19, 2016, $58,000 on February 2, 2016, $36,000 on February 18, 2016, $40,000 on March 2,
2016, $27,000 on March 21, 2016, and $22,000 on April 1, 2016, for a total draw of $503,500. The terms of the October 2015 Note,
as amended, allow the lender to convert all or part of the outstanding balance plus accrued interest, at any time after the effective
date, at a conversion price of $0.004. The October 2015 Note bears interest at a rate of 10% per year and matures 12 months from
the effective date of each advance.<font style="background-color: white">The Company recorded a debt discount of $503,500 related
to the conversion feature of the October 2015 Note</font>. This discount is recognized over 12 months, beginning on the date of
each tranche payment. On June 28, 2016, the Company exchanged the principle balance on the October 2015 Note ($503,500) for 5,035
shares of Series B Preferred Stock, and the lender forgave all accrued interest up until that date. As of June 30, 2016, the balance
of the October 2015 Note was zero.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
January 12, 2016, the Company borrowed $100,000 from Bountiful Capital, LLC to cover operating costs. Our Chief Financial Officer
is also the President of Bountiful Capital, LLC. The loan was offered interest free on a short term basis, and was due February
12, 2016. As of the date of this filing, the loan has not been repaid, nor has the lender demanded payment. The Company is currently
discussing options to either extend the maturity date or refinance the balance due.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
April 18, 2016, the Company issued a promissory note (the “April 2016 Note”) in the amount of up to $500,000, at which
time an initial advance of $35,500 was received to cover operational expenses. The lender advanced an additional $41,000 on May
2, 2016, $35,000 on May 17, 2016, $160,000 on May 19, 2016, $34,000 on June 1, 2016, $21,000 on June 21, 2016, $33,500 on June
30, 2016, $10,000 on July 15, 2016, $33,000 on July 29, 2016, $35,500 on August 16, 2016, $28,000 on August 31, 2016, and $33,500
on September 14, 2016, for a total draw of $500,000. The April 2016 Note bears interest at a rate of 5% per year and is payable
upon demand, but in no event later than 60 months from the effective date of each tranche. The balance of the April 2016 Note,
as of September 30, 2016 is $507,313, which includes $7,313 of accrued interest.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">Following
is the five year maturity schedule for our notes payable:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: Black 1pt solid">Year ended June 30,</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Amount Due</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 44%; text-align: left; vertical-align: bottom">2017</td><td style="width: 1%; text-align: left"> </td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 43%; text-align: right"> </td><td style="width: 1%; text-align: left">$600,000</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">8.     CAPITAL
STOCK</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
May 23, 2014, the lender converted $17,000 of the March 2013 Note, plus accrued interest of $1,975 into 4,743,699 shares of
common stock. On October 14, 2014, the lender converted $17,000 of the March 2013 Note, plus accrued interest of $2,645 into
4,911,370 shares of common stock.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
June 22, 2016, all outstanding warrants were exercised, on a cashless basis, resulting in an increase to the outstanding shares
of 24,109,404.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At
September 30, 2016 the Company’s authorized stock consists of 2,000,000,000 shares of common stock, par value $0.001
per share. The Company is also authorized to issue 5,000,000 shares of preferred stock, par value of $0.001 per
share.  The rights, preferences and privileges of the holders of the preferred stock are determined by the Board of
Directors prior to issuance of such shares.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Series
A Preferred</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company has designated 10,000 shares of its preferred stock as Series A Preferred Stock. Each share of Series A Preferred Stock
is convertible into 10,000 shares of the Company’s common stock. The holders of outstanding shares of Series A Preferred
Stock shall be entitled to receive dividends, payable quarterly, out of any assets of the Corporation legally available therefor,
at the rate of $8 per share per annum, payable in preference and priority to any payment of any dividend on the common stock.
As of September 30, 2016, the Company has 10,000 shares of Series A Preferred Stock outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Series
B Preferred</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company has designated 25,000 shares of its preferred stock as Series B Preferred Stock. Each share of Series B Preferred Stock
shall have a stated value of $100. The Series B Preferred Stock is convertible into shares of fully paid and non-assessable shares
of the Company's common stock by dividing the stated value by a conversion price of $0.004 per share. Series B Preferred Stock
shall not be entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for
their action or consideration at any meeting of stockholders of the Company. As of September 30, 2016, the Company has 18,025
shares of Series B Preferred Stock outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">9.     STOCK
OPTIONS AND WARRANTS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Stock
Options</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">On
July 10, 2003, the Company adopted the Warp 9, Inc. Stock Option Plan for directors, executive officers,and employees of and
key consultants to the Company. Pursuant to the now terminated plan, the Company was authorized to issue 5,000,000 shares of
common stock. The plan was administered by the Company’s Board of Directors, and options granted under the plan could
be either incentive options or nonqualified options. Each option was exercisable in full or in installment and at such time
as designated by the Board. Notwithstanding any other provision of the plan or of any option agreement, each option expired
on the date specified in the option agreement, which date was to be no later than the tenth anniversary of the date on which
the option was granted (fifth anniversary in the case of an incentive option granted to a greater-than-10% stockholder). The
purchase price per share of the common stock under each incentive option was to be no less than the fair market value of the
common stock on the date the option was granted (110% of the fair market value in the case of a greater-than-10%
stockholder). The purchase price per share of the common stock under each nonqualified option was to be specified by the
Board at the time the option is granted, and could be less than, equal to or greater than the fair market value of the shares
of common stock on the date such nonqualified option was granted, but was to be no less than the par value of shares of
common stock. The plan provided specific language as to the termination of options granted thereunder.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">The
Company used the historical industry index to calculate volatility, since the Company’s stock history did not represent
the expected future volatility of the Company’s common stock. No stock options were issued during the quarter ended September
30, 2016. The fair value of options granted during the year ended June 30, 2016, was determined using the Black Scholes method
with the following assumptions:	</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"></font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Year Ended</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">6/30/16</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 70%; text-align: left; padding-left: 5.4pt">Risk free interest rate</td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">6.00</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Stock volatility factor</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">145</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Weighted average expected option life</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">7 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Expected dividend yield</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">none</font></td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of the Company’s stock option activity and related information follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">Quarter ended<br /> September 30, 2016</td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">Quarter ended<br /> September 30, 2015</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 40%; padding-left: 5.4pt">Outstanding -beginning of period</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">123,000,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">0.013</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">91,000,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">0.012</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 5.4pt">Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">35,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.015</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Exercised</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Forfeited</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt">Outstanding - end of period</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">123,000,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.013</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">126,000,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.013</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Exercisable at the end of year</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">66,671,233</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.012</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">31,103,082</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.010</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Weighted average fair value of</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt"> options granted during the year</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">525,000</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt; margin-left: 20pt; text-indent: 0pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As
of September 30, 2016, the intrinsic value of the stock options was approximately $1,613,550, and stock option expense for the
three months ended September 30, 2016 was $126,531</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Black Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not
have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options
have characteristics significantly different from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s opinion,the existing models do not
necessarily provide a reliable single measure of the fair value of its employee stock options.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">The
weighted average remaining contractual life of options outstanding, as of September 30, 2016 was as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td colspan="3"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Average</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Number of</td><td> </td>
<td colspan="3" style="text-align: center">remaining</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3" style="text-align: center">Exercise</td><td> </td>
<td colspan="3" style="text-align: center">options</td><td> </td>
<td colspan="3" style="text-align: center">contractual</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">prices</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">outstanding</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">life (years)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 1%; text-align: left">$</td><td style="width: 26%; text-align: right">0.015</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 26%; text-align: right">35,000,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 26%; text-align: right">5.90</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">$</td><td style="text-align: right">0.013</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">60,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5.35</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">$</td><td style="text-align: right">0.013</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">15,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5.47</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">$</td><td style="text-align: right">0.053</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2.87</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt; text-align: left">$</td><td style="padding-bottom: 1pt; text-align: right">0.004</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">500,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt; text-align: right">5.04</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">123,000,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Warrants</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">During
the periods ended September 30, 2016 and 2015, the Company issued no warrants for services. A summary of the Company’s warrant
activity and related information follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="7" style="text-align: center">Quarter Ended</td><td> </td>
<td colspan="7" style="text-align: center">Quarter Ended</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2016</td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2015</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 17%; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding - beginning of period</font></td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">—  </td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">—  </td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 15%; text-align: right">28,019,163</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">0.003</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding - end of period</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">—  </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">—  </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">28,019,163</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.003</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt"><font style="font: 10pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">On
June 22, 2016, all warrant holders exercised their outstanding warrants, on a cashless basis, resulting in 24,109,404 shares of
restricted common stock being issued. As of June 30 2016, there were no issued or outstanding warrants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif; color: black">10. 
 </font><font style="font: 10pt Times New Roman, Times, Serif">RELATED PARTIES</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">On
January 12, 2016, the Company borrowed $100,000 from Bountiful Capital, LLC to cover operating costs. The loan was offered
interest free on a short term basis, and was due February 12, 2016. As of the date of this filing, the loan has not been
repaid, nor has the lender demanded payment. The Company is currently discussing options to either extend the maturity date
or refinance the balance due. The Chief Financial Officer of the Company, Greg Boden, is also the President of Bountiful
Capital, LLC. Therefore, this loan transaction was with a related party.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">On
April 18, 2016, the Company issued a promissory note in the amount of $500,000 to Bountiful Capital, LLC, the details of which
are included in footnote “Notes Payable”. The Company’s Chief Financial Officer, Greg Boden, is also the president
of Bountiful Capital, LLC. The Company received funds during the quarter from this note, in the amount of $140,000.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">11.
  CONCENTRATIONS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the period ended September 30, 2016, the Company had one major customer who represented approximately 67% of total revenue. For
the period ended September 30, 2015, the Company had three major customers who represented 63% of total revenue. At September
30, 2016 and 2015, accounts receivable from three and three customers, respectively, represented approximately 47% and 72% of
total accounts receivable, respectively. The customers comprising the concentrations within the accounts receivable are not the
same customers that comprise the concentrations with the revenues discussed above.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">12. 
 COMMITMENTS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Operating
Leases</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
March 1, 2016, the Company moved into office space located at 1933 Cliff Drive, Suite 1, Santa Barbara, CA 93109, on a month-to-month
arrangement, for approximately $3,000 per month.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
December 10, 2012, the management of Indaba signed a lease which commenced January 16, 2013 for approximately 3,300 square feet
at 2854 Larimer Street, Denver, CO 80205, for approximately $3,500 per month. The original lease term expired February 28, 2016,
but was extended until February 28, 2017, at a rate of $5,800 per month.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
following is a schedule, by years, of future minimum rental payments required under the operating lease.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Years Ending<br /> June 30,</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> Rent Payment </font></td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 44%; text-align: left; vertical-align: bottom">2017</td><td style="width: 1%; text-align: left"> </td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 43%; text-align: right">29,000</td><td style="width: 1%; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">Total
lease expense for the periods ended September 30, 2016 and 2015 was $26,296 and $18,804, respectively. The Company is also
required to pay its pro rata share of taxes, building maintenance costs, and insurance in according to the lease agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">On
May 21, 2014, the Company entered into a settlement agreement with the landlord of our previous location, to make monthly payments
on past due rent totaling $227,052. Under the terms of the agreement, the Company will make monthly payments of $350 on a reduced
balance of $40,250. Upon payment of $40,250, the Company will record a gain on extinguishment of debt of $186,802. As of September
30, 2016, the Company recorded the outstanding balance under this settlement agreement as a long term notes payable, with the
current portion of the debt recorded in accrued expenses. As of September 30, 2016, the Company owed $30,100 on the outstanding
reduced payment terms.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"><u>Legal
Matters</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">The
Company may be involved in legal actions and claims arising in the ordinary course of business, from time to time, none of which
at the time are considered to be material to the Company’s business or financial condition.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">13.
  SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">During
the three months ended September 30, 2016 and 2015, we had no non-cash financing activities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">14.  SUBSEQUENT
EVENTS</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">Management
has evaluated subsequent events according to ASC TOPIC 855 as of the date of the financial statements and has determined that
the following subsequent events are reportable.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif; color: black">On
October 3, 2016, the Company issued an unsecured promissory note (the "October 2016 Note") in the amount of
$500,000, at which time an initial advance of $36,000 was received to cover operational expenses.  The October 2016 Note
bears interest at a rate of 5% per year, is payable upon demand, but in no case later than October 3, 2019.</font><font style="font: 10pt Times New Roman, Times, Serif">
The Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of the
October 2016 Note. The Company received the following additional advances on the October 2016 Note:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">October
17, 2016, received $48,000</font></td></tr></table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">-</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">November
1, 2016, received $34,000</font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On
October 7, 2016, Indaba borrowed $40,000 from Jack Gindi, an employee and previous owner of Indaba, to cover operating expenses.
The short term loan is interest free and payable as soon as the funds become available.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Accounts
Receivable</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">The
Company extends credit to its customers, who are located nationwide. Accounts receivable are customer obligations due under
normal trade terms. The Company performs continuing credit evaluations of its customers’ financial condition.
Management reviews accounts receivable on a regular basis, based on contracted terms and how recently payments have been
received to determine if any such amounts will potentially be uncollected. The Company includes any balances that are
determined to be uncollectible in its allowance for doubtful accounts. After all attempts to collect a receivable have
failed, the receivable is written off. The balance of the allowance account at <font style="color: black">September 30,
2016</font> and June 30, 2016 are $31,859 and $45,584 respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in; text-align: justify"><font style="font: normal 10pt Times New Roman, Times, Serif"><u>Use
of Estimates</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing
these financial statements include revenue recognition, the allowance for doubtful accounts, long-lived assets, intangible assets,
business combinations, the deferred tax valuation allowance, and the fair value of stock options and warrants. Actual results
could differ from those estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Cash
and Cash Equivalents </u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Revenue
Recognition</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company recognizes income when the service is provided or when product is delivered. We present revenue, net of customer
incentives. Most of the income is generated from professional services and site development fees. We provide online marketing
services that we purchase from third parties. The gross revenue presented in our statement of operations is in accordance
with ASC 605-45. We also offer professional services such as development services.  The fees for development services
with multiple deliverables constitute a separate unit of accounting in accordance with ASC 605-25, which are recognized as
the work is performed. Upfront fees for development services or other customer services are deferred until certain
implementation or contractual milestones have been achieved. The terms of services contracts generally are for periods of
less than one year. The deferred revenue as of September 30, 2016 and the fiscal year ended June 30, 2016 was zero and
$331,644, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">We
always strive to satisfy our customers by providing superior quality and service. Since we typically bill based on a Time and
Materials basis, there are no returns for work delivered. When discrepancies or disagreements arise, we do our best to reconcile
those by assessing the situation on a case-by-case basis and determining if any discounts can be given. Historically, no significant
discounts have been granted.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Research
and Development</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">Research
and development costs are expensed as incurred. Total research and development costs were zero for the three months ended September
30, 2016 and 2015.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Advertising
Costs </u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company expenses the cost of advertising and promotional materials when incurred. Total advertising costs were $48,358 and $12,070
for the three months ended September 30, 2016 and 2015, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Fair
value of financial instruments</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued
liabilities are carried at cost, which approximates their fair value, due to the relatively short maturity of these instruments.
As of September 30, 2016 and June 30, 2016, the Company’s notes payable have stated borrowing rates that are consistent
with those currently available to the Company and, accordingly, the Company believes the carrying value of these debt instruments
approximates their fair value.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">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 at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
These tiers include:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">•</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
1, defined as observable inputs such as quoted prices for identical instruments in active
markets;</font></td></tr></table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">•</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
2, defined as inputs other than quoted prices in active markets that are either directly
or indirectly observable such as quoted prices for similar instruments in active markets
or quoted prices for identical or similar instruments in markets that are not active;
and</font></td></tr></table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; background-color: white"><tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"></td><td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif; color: black">•</font></td><td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif">Level
3, defined as unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions, such as valuations derived from valuation
techniques in which one or more significant inputs or significant value drivers are unobservable.</font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">We
measure certain financial instruments at fair value on a recurring basis. As of September 30, 2016 and the fiscal year ended June
30, 2016, the Company had no assets or liabilities that are required to be valued on a recurring basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Property
and Equipment</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Property
and equipment are stated at cost, and are depreciated or amortized using the straight-line method over the following estimated
useful lives:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 45%; text-align: left; padding-left: 5.4pt">Furniture, fixtures & equipment</td><td style="width: 10%"> </td>
<td style="width: 45%; text-align: right; padding-left: 5.4pt">7 Years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Computer equipment</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Commerce server</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Computer software</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">3 - 5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Leasehold improvements</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">Length of the lease</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Depreciation
expenses were $6,137 and $737 for the three months ended September 30, 2016 and 2015, respectively.</font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Impairment
of Long-Lived Assets</u></font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the
estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the
long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information
at which assets could be bought or sold, including quoted market prices, if available, or the present value of the estimated future
cash flows based on reasonable and supportable assumptions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Indefinite
Lived Intangibles and Goodwill Assets</u> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805,
“Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible
assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the
information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information
regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase
price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is
recognized as goodwill.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events
or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance
with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at June 30, 2016,
and determined there was no impairment of indefinite lived intangibles and goodwill.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Business
Combinations</u> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible
assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values
of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates
and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include,
but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market
participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from
estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets
acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any
subsequent adjustments are recorded to earnings.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: normal 10pt Times New Roman, Times, Serif"><u>Concentrations
of Business and Credit Risk</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company operates in a single industry segment. The Company markets its services to companies and individuals in many industries
and geographic locations. The Company’s operations are subject to rapid technological advancement and intense competition
in the SAAS industry. Accounts receivable represent financial instruments with potential credit risk. The Company typically offers
its customers credit terms. The Company makes periodic evaluations of the credit worthiness of its enterprise customers and other
than obtaining deposits pursuant to its policies, it generally does not require collateral. In the event of nonpayment, the Company
has the ability to terminate services.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Stock-Based
Compensation</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company addressed the accounting for share-based payment transactions in which an enterprise receives employee services in exchange
for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity
instruments or that may be settled by the issuance of such equity instruments. The transactions are accounted for using a fair-value-based
method and recognized as expenses in our statement of income.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Stock-based
compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is
ultimately expected to vest. Stock-based compensation expense recognized in the consolidated statement of operations during
the three months ended September 30, 2016, included compensation expense for the stock-based payment awards granted prior to,
but not yet vested, as of September 30, 2016 based on the grant date fair value estimated. Stock-based compensation expense
recognized in the statement of operations for the three months ended September 30, 2016 is based on awards ultimately
expected to vest, or has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation expense
recognized in the consolidated statements of operations during the three months ended September 30, 2016 and 2015 was
$126,531 and $105,293, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"><u>Basic
and Diluted Net Income (Loss) per Share Calculations</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Income
(Loss) per Share dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share
are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted
earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number
of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. The shares for employee options, warrants and convertible notes were used in the calculation of the
income per share.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the three months ended <font style="color: black">September 30, 2016</font>, the Company has excluded 123,000,000 options, 10,000
Series A Preferred shares convertible into 100,000,000 shares of common stock, 18,025 Series B Preferred shares convertible into
450,625,000 shares of common stock,and shares issuable from $88,749 in convertible notes convertible into 22,187,250 shares of
common stock, because their impact on the loss per share is anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For
the three months ended <font style="color: black">September 30, 2015</font>, the Company has excluded 126,000,000 options, 28,019,163
warrants outstanding, and 374,607,000 shares underlying$1,498,428 in convertible notes, because their impact on the loss per share
is anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">Dilutive
per share amounts are computed using the weighted-average number of common shares outstanding and potentially dilutive securities,
using the treasury stock method if their effect would be dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Recently
Issued Accounting Pronouncements</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0pt; text-indent: 0pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">Management
reviewed accounting pronouncements issued during the three months ended September 30, 2016, and no pronouncements were adopted
during the period.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">Property
and equipment are stated at cost, and are depreciated or amortized using the straight-line method over the following estimated
useful lives:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 45%; text-align: left; padding-left: 5.4pt">Furniture, fixtures & equipment</td><td style="width: 10%"> </td>
<td style="width: 45%; text-align: right; padding-left: 5.4pt">7 Years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Computer equipment</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Commerce server</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Computer software</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">3 - 5 Years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Leasehold improvements</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">Length of the lease</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">The acquisition date estimated fair value of the consideration transferred consisted of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 70%; text-align: left; padding-left: 5.4pt">Tangible assets acquired</td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">417,700</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Liabilities assumed</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(193,889</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Net tangible assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">223,811</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Non-compete agreements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">201,014</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-left: 5.4pt">Customer list</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">447,171</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Goodwill</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,128,004</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt; padding-bottom: 2.5pt">Total purchase price</td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">2,000,000</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif">These combined results are not necessarily indicative of the results that may have been achieved
had the companies been combined as of the first day of the periods presented.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0.25in; background-color: white"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Period ended,</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><u style="text-decoration: none">September 30, 2016</u></font></p></td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Period ended,</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><u style="text-decoration: none">September 30, 2015</u></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 56%; text-align: left">Total revenues</td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">1,092,674</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">774,901</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Net loss</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(214,570</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(4,813,341</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Basic and diluted net earnings per common share</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">(0.00</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">(0.05</td><td style="text-align: left">)</td></tr></table>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
Company acquired certain intangible assets pursuant to the acquisition of Indaba Group, LLC and other acquisitions. 
The following is the net book value of these assets:</font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="11" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2016</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Accumulated</td><td> </td>
<td colspan="3"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Gross</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Amortization</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Net</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 46%; text-align: left; padding-left: 2.4pt">Customer List</td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">447,171</td><td style="width: 1%; text-align: left"> </td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">(149,057</td><td style="width: 1%; text-align: left">)</td><td style="width: 5%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">298,114</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 2.4pt">Non-Compete Agreements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">201,014</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(67,005</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">134,009</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt; padding-left: 2.4pt">Goodwill</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,128,003</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,128,003</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; padding-left: 2.4pt">Total</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,776,188</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(216,062</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,560,126</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
following table of remaining amortization of finite life intangible assets, as of September 30, 2016, includes the intangible
assets acquired during the Indaba acquisition, in addition to the CloudCommerce trademark:</font></p>
<p style="color: #252525; font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 44%; text-align: left; vertical-align: bottom">2017</td><td style="width: 1%; text-align: left"> </td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 43%; text-align: right">162,563</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; vertical-align: bottom">2018</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">216,752</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; vertical-align: bottom">2019</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">54,705</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; vertical-align: bottom">2020</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">690</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">2021 and thereafter</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">6,723</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">441,433</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">Following
is the five year maturity schedule for our notes payable:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: Black 1pt solid">Year ended June 30,</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Amount Due</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 44%; text-align: left; vertical-align: bottom">2017</td><td style="width: 1%; text-align: left"> </td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 43%; text-align: right"> </td><td style="width: 1%; text-align: left">$600,000</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif">The fair value of options granted during the year ended June 30, 2016, was determined using the Black Scholes method
with the following assumptions:	</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: 0in"><font style="font: normal 10pt Times New Roman, Times, Serif"></font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3" style="text-align: center">Year Ended</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">6/30/16</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 70%; text-align: left; padding-left: 5.4pt">Risk free interest rate</td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">6.00</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Stock volatility factor</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">145</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Weighted average expected option life</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">7 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt">Expected dividend yield</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">none</font></td><td style="text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of the Company’s stock option activity and related information follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">Quarter ended<br /> September 30, 2016</td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">Quarter ended<br /> September 30, 2015</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 40%; padding-left: 5.4pt">Outstanding -beginning of period</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">123,000,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">0.013</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 10%; text-align: right">91,000,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 10%; text-align: right">0.012</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 5.4pt">Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">35,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">0.015</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Exercised</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Forfeited</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt">Outstanding - end of period</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">123,000,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.013</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">126,000,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.013</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Exercisable at the end of year</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">66,671,233</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.012</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">31,103,082</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.010</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-left: 5.4pt">Weighted average fair value of</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 5.4pt"> options granted during the year</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">525,000</td><td style="text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">During
the periods ended September 30, 2016 and 2015, the Company issued no warrants for services. A summary of the Company’s warrant
activity and related information follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="7" style="text-align: center">Quarter Ended</td><td> </td>
<td colspan="7" style="text-align: center">Quarter Ended</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2016</td><td style="padding-bottom: 1pt"> </td>
<td colspan="7" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2015</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">average</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">exercise</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">Options</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 17%; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding - beginning of period</font></td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">—  </td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">—  </td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 15%; text-align: right">28,019,163</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">0.003</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—  </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">—  </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—  </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; text-align: left; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding - end of period</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">—  </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">—  </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">28,019,163</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.003</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The
following is a schedule, by years, of future minimum rental payments required under the operating lease.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">Years Ending<br /> June 30,</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> Rent Payment </font></td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 44%; text-align: left; vertical-align: bottom">2017</td><td style="width: 1%; text-align: left"> </td><td style="width: 10%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 43%; text-align: right">29,000</td><td style="width: 1%; text-align: left"> </td></tr></table>
447171
201014
1128003
1776188
149057
67005
216062
298114
134009
1128003
1560126
441433
600000
29000
35000000
66671233
31103082
0.015
0.012
0.013
0.013
0.013
0.012
0.010
525000
2000000
10000
200
55601
20000
202
10000
10000
201014
447171
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The trademark expires in 2020 and may be renewed for
an additional 10 years.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">This amount will be included in depreciation and amortization expense until
September 30, 2018.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">This amount will be included in depreciation and amortization expense until
September 30, 2018.</font></p>
P174M
P3Y
P3Y
54188
0
172
16751
37264
0.004
0.004
0.004
0.004
100000
100000
250000
300000
250000
250000
250000
250000
1000000
500000
500000
<p style="margin: 0"><font style="font-size: 10pt">The terms of the March 2013 Note, as amended, allow the lender to convert all
or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the lower
of (a) $0.015 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective date
of the agreement.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The terms of the May 2013 Note, as amended, allow the lender to convert all
or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the lower
of (a) $0.015 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective date
of the agreement.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The terms of the March 2014 Note, as amended, allow the lender to convert all
or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the lower
of (a) $0.012 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective date
of the agreement.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The terms of the April 2014 Note, as amended, allow the lender to convert all
or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the lower
of (a) $0.012 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective date
of the agreement.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The terms of the September 2014 Note, as amended, allow the lender to convert
all or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the
lower of (a) $0.015 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective
date of the agreement.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The terms of the January 2015 Note, as amended, allow the lender to convert
all or part of the outstanding balance plus accrued interest, at any time after the effective date, at a conversion price of the
lower of (a) $0.015 per share, or (b) 50% of the lowest trade price of common stock recorded on any trade day after the effective
date of the agreement.</font></p>
0.10
0.10
0.10
0.05
0.05
2018-03-25
2016-02-12
17000
17000
100000
75000
300000
250000
250000
250000
74000
503500
1975
2645
4743699
4911370
1000
750
3000
2500
2500
2500
740
5035
88749
0
0
0
0
0
0
0
0
507313
22749
7313
100000
75000
300000
250000
250000
250000
74000
503500
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount was recognized over twelve months, and
has been fully amortized as of June 30, 2016.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount is recognized over 18 months, beginning
on the date of each tranche payment.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount is recognized over 18 months, beginning
on the date of each tranche payment.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount is recognized over 18 months, beginning
on the date of each tranche payment.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount is recognized over 18 months, beginning
on the date of each tranche payment.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount is recognized over 18 months, beginning
on the date of each tranche payment.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">This discount is recognized over 18 months, beginning
on the date of each tranche payment.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">This discount is recognized over 12 months, beginning on the date of each tranche
payment.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">It matures 12 months from the effective date of each advance.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">It is payable upon demand, but in no event later than 60 months from the effective
date of each tranche.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif">Payable upon demand, but in no case later than October 3, 2019.</p>
<p style="margin: 0"><font style="font-size: 10pt">The loan was offered interest free on a short term basis.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">Each share of Series A Preferred stock is convertible into 10,000 shares of
the Company’s common stock.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The Series B Preferred Stock is convertible into shares of fully paid and non-assessable
shares of the Company's common stock by dividing the Stated Value by a conversion price of $0.004 per share.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">The holders of outstanding shares of Series A Preferred Stock shall be entitled
to receive dividends, payable quarterly, out of any assets of the Corporation legally available therefor, at the rate of Eight
dollars ($8) per share per annum, payable in preference and priority to any payment of any dividend on the Common Stock.</font></p>
100
<p style="margin: 0"><font style="font-size: 10pt">Series B Preferred Stock shall not be entitled to vote, as a separate class
or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders
of the Company.</font></p>
5000000
<p style="margin: 0"><font style="font-size: 10pt">Pursuant to the now terminated plan, the Company could issue 5,000,000 shares
of common stock. The plan was administered by the Company’s Board of Directors, and options granted under the plan could
be either incentive options or nonqualified options. Each option was exercisable in full or in installment and at such time as
designated by the Board. Notwithstanding any other provision of the plan or of any option agreement, each option expired on the
date specified in the option agreement, which date was to be no later than the tenth anniversary of the date on which the option
was granted (fifth anniversary in the case of an incentive option granted to a greater-than-10% stockholder). The purchase price
per share of the common stock under each incentive option was to be no less than the fair market value of the common stock on
the date the option was granted (110% of the fair market value in the case of a greater-than-10% stockholder). The purchase price
per share of the common stock under each nonqualified option was to be specified by the Board at the time the option is granted,
and could be less than, equal to or greater than the fair market value of the shares of common stock on the date such nonqualified
option was granted, but was to be no less than the par value of shares of common stock.</font></p>
1613550
24109404
162563
216752
54705
690
6723
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif">The
weighted average remaining contractual life of options outstanding, as of September 30, 2016 was as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<tr style="vertical-align: bottom">
<td colspan="3"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Weighted</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3"> </td><td> </td>
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Average</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3"> </td><td> </td>
<td colspan="3" style="text-align: center">Number of</td><td> </td>
<td colspan="3" style="text-align: center">remaining</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3" style="text-align: center">Exercise</td><td> </td>
<td colspan="3" style="text-align: center">options</td><td> </td>
<td colspan="3" style="text-align: center">contractual</td></tr>
<tr style="vertical-align: bottom">
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">prices</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">outstanding</td><td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="text-align: center; border-bottom: Black 1pt solid">life (years)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 1%; text-align: left">$</td><td style="width: 26%; text-align: right">0.015</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 26%; text-align: right">35,000,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 8%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 26%; text-align: right">5.90</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">$</td><td style="text-align: right">0.013</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">60,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5.35</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">$</td><td style="text-align: right">0.013</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">15,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5.47</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">$</td><td style="text-align: right">0.053</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2.87</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt; text-align: left">$</td><td style="padding-bottom: 1pt; text-align: right">0.004</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">500,000</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt; text-align: right">5.04</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">123,000,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>
45584
31859
331644
0
0
0
48358
12070
6137
737
123000000
10000
18025
22187250
126000000
28019163
374607000
100000000
450625000
88749
1498428
0.67
0.63
0.47
0.72
1
3
3
3
<p style="margin: 0"><font style="font-size: 10pt">The Company moved into office space located at 1933 Cliff Drive, Suite 1, Santa
Barbara, CA 93109, on a month-to-month arrangement, for approximately $3,000 per month.</font></p>
<p style="margin: 0"><font style="font-size: 10pt">On December 10, 2012, the management of Indaba signed a lease which commenced
January 16, 2013 for approximately 3,300 square feet at 2854 Larimer Street, Denver, CO 80205, for approximately $3,500 per month.</font></p>
3000
3500
5800
2016-02-28
2017-02-28
26296
18804
227052
40250
350
<p style="margin: 0"><font style="font-size: 10pt">Upon payment of $40,250, the Company will record a gain on extinguishment of
debt of $186,802.</font></p>
30100
<p style="margin: 0"><font style="font-size: 10pt">The short term loan is interest free and payable as soon as the funds become
available.</font></p>
40000
<p style="margin: 0"><font style="font-size: 10pt">The Company is only required to repay the amount funded and the Company is
not required to repay any unfunded portion of the October 2016 Note.</font></p>