Stockholders' Equity (Deficit) | NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT) On February 20, 2019, the board of directors of the Company approved resolutions, and on February 21, 2019, certain stockholders representing a majority of our outstanding voting capital on such date approved by written consent the taking of all steps necessary to increase its authorized common stock from 1,520,000,000 authorized shares consist of 1,500,000,000 shares of common stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock, par value $0.0001 per share. Series A Preferred Stock On August 20, 2015, the Company filed the Certificate of Designation with the Nevada Secretary of State, designating 1,000,000 shares of the authorized 20,000,000 Preferred Stock as Series A Preferred Stock. Each holder of Series A Preferred Stock is entitled to 500 votes for each share of Series A Preferred Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. The holders of Series A Preferred Stock shall have no special voting rights and their consent is not required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action. As of December 31, 2018 and 2017, there were 1,000,000 shares of the Company’s Series A Preferred Stock outstanding. Of these shares, 500,000 are held by our former Chief Executive Officer and 500,000 shares are held by a former member of our Board of Directors. Series B Preferred Stock On March 7, 2017, the Company filed a certificate of designation, preferences and rights of Series B preferred stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada to designate 7,892,000 shares of its previously authorized preferred stock as Series B preferred stock, par value $0.0001 per share and a stated value of $0.0001 per share. The Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law. The holders of shares of Series B preferred stock are entitled to dividends or distributions share for share with the holders of the Common Stock, if, as and when declared from time to time by the Board of Directors. The holders of shares of Series B preferred stock have the following voting rights: ● Each share of Series B preferred stock entitles the holder to 100 votes on all matters submitted to a vote of the Company’s stockholders. ● Except as otherwise provided in the Certificate of Designation, the holders of Series B preferred stock, the holders of Company common stock and the holders of shares of any other Company capital stock having general voting rights and shall vote together as one class on all matters submitted to a vote of the Company’s stockholders; and ● Commencing at any time after the date of issuance of any shares of the Series B Preferred Stock (the “Issuance Date”) and upon the earliest of the occurrence of (i) a holder of the Series B Preferred Stock owning, directly or indirectly as a beneficiary or otherwise, shares of Common Stock which are less than 5.0% of the total outstanding shares of Common Stock, (ii) the date a holder of the Series B Preferred Stock is no longer an employee of the Company or any of its subsidiaries or (iii) five years after the Issuance Date, the Company shall have the right to redeem all of the then outstanding Series B Preferred Stock held by such holder at a price equal to the Stated Value (the “Redemption Price”). The Series B Preferred Stock which is redeemed as provided for in the Certificate of Designations shall be returned to the Company (and, if not so returned, shall automatically be deemed canceled). The Redemption Price shall be mailed to such holder at the holder’s address of record, and the Series B Preferred Stock owned by such holder shall be canceled (see Note 13). In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, the holders of the Series B Preferred Stock shall be entitled to receive, share for share with the holders of shares of Common Stock and Series A Preferred Stock, all the assets of the Corporation of whatever kind available for distribution to stockholders, after the rights of the holders of the Series A Preferred Stock have been satisfied. In March 2017, the Company issued 2,892,000 shares of Series B Preferred to Jonathan F. Head, Ph. D, the Company’s Chief Executive Officer and a member of the Board of Directors of the Company as provided for in the Contribution Agreement. The Series B Preferred issued to Dr. Head and were determined to have nominal value of $289, or $0.0001 per shares, and was recorded as compensation expense. In addition, in March 2017 the Company issued 5,000,000 shares of Series B Preferred to Banco Actinver for the benefit of the Vitel Stockholders as partial consideration in the exchange for 100% of the issued and outstanding capital stock of Vitel (see Note 3). The 5,000,000 shares of Series B Preferred gave the holders voting rights and were determined to have nominal value of $500, or $0.0001 per shares. As of December 31, 2018 and 2017, there were 7,892,000 shares of Series B Preferred issued and outstanding. On February 20, 2019, pursuant to the Certificate of Designation, the Company exercised its right to redeem 5,000,000 shares of the Series B Preferred outstanding held by to Banco Actinver, S.A., in its capacity as Trustee of the Trust Agreement for the benefit of Mr. Cosme and Mr. Alaman equal to the stated value. The total redemption price equaled $500 or $0.0001 per share of Series B Preferred (see Note 13). Common Stock Common stock issuable for cash During the year ended December 31, 2017, the Company had: ● 16,491,265 shares of its common stock issuable to investors for cash proceeds of $164,713 and a subscription receivable of $200 or $0.01 per share, pursuant to a unit subscription agreement. ● 30,000 shares of its common stock issuable to an investor in connection with a unit subscription agreement in 2016. During the year ended December 31, 2018, the Company had: ● 600,000 shares of its common stock issuable to an investor for cash proceeds of $6,000, or $0.01 per share, pursuant to a unit subscription agreement. Shares issued for cash During the year ended December 31, 2017, the Company issued: ● 8,253,136 shares of its common stock and 4,126,579 five-year warrants to purchase common shares for an exercise price of $0.30 per common share to investors for cash proceeds of $618,983 or $0.075 per share, pursuant to unit subscription agreements. ● 1,000,000 shares of its common stock and 500,000 five-year warrants to purchase common shares for an exercise price of $0.30 per common share to investors for cash proceeds of $50,000 or $0.05 per share, pursuant to a unit subscription agreement. ● 2,000,000 shares of its common stock to Lincoln Park for net cash proceeds of $407,787, pursuant to a Purchase Agreement. During the year ended December 31, 2018, the Company did not issue any shares for cash. Shares issued for services During the year ended December 31, 2017, the Company issued: ● 150,000 shares of its common stock to an employee as a bonus for services to the Company. The shares were valued at the most recent cash price paid of $0.075 per share at the time. In connection with these shares, the Company recorded stock-based compensation of $11,250. ● 20,000 shares of its common stock to a consultant for business development services performed, pursuant to an agreement. The shares were valued at the most recent cash price paid of $0.075 per share at the time. In connection with these shares, the Company recorded stock-based compensation of $1,500. ● 300,000 shares of its common stock to a consultant for business development services performed, pursuant to an agreement. The shares were valued at the quoted trading price on the date of grant of $0.077 per share at the time. In connection with these shares, the Company recorded stock-based consulting fees of $23,100. During the year ended December 31, 2018, the Company issued: ● 2,500,000 shares of its common stock with a grant date value of $52,500 or $0.021 per share as reported on the OTC Pink on the grant date, in exchange for legal services, pursuant to an agreement. Shares issued for acquisition On March 10, 2017, pursuant to the terms of the Contribution Agreement, the Company issued 61,158,013 shares of its unregistered common stock to Banco Actinver, S.A., in its capacity as Trustee (the “Trustee”) of the Irrevocable Management Trust Agreement Trust No. 2868 (the “Trust Agreement”) for the benefit of the Vitel Stockholders in exchange for 100% of the issued and outstanding capital stock of Vitel (see Note 3). The 61,158,013 shares of common stock were valued at $4,586,851, based on the acquisition-date fair value of our common stock of $0.075 per share based on recent sales of the Company’s common stock pursuant to unit subscription agreements. Shares issued for debt conversion During the year ended December 31, 2017, the Company converted an aggregate of $410,514 and $15,358 of outstanding principal and interest of convertible debt, respectively, into 10,608,890 shares of its common stock (see Note 6). During the year ended December 31, 2018, the Company converted an aggregate of $387,292 and $40,320 outstanding principal and interest of convertible debt, respectively and $55,890 of default interest related to the convertible debt, into 58,631,521 shares of its common stock (see Note 6). Shares issued for cashless exercise of warrants During the year ended December 31, 2017, the Company issued 9,547,087 shares of its common stock upon the cashless exercise of 9,074,077 of its warrants (see Note 6). During the year ended December 31, 2018, the Company issued 32,715,368 shares of its common stock upon the cashless exercise of 35,573,203 of its warrants (see Note 6). Warrants The November 2016 Warrants include a down-round provision under which the exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Subsequent to the date of these November 2016 Warrants, the Company sold stock at a share price of $0.075 per share, $0.05 per share and $0.01 per share. Accordingly, pursuant to these ratchet provisions, the exercise price of the November 2016 Warrants was lowered to $0.006. Additionally, the total number of November 2016 Warrants were increased on a full ratchet basis from 2,333,334 warrants to 13,611,114 warrants. In September 2017, the Company issued 9,547,087 shares of its common stock upon the cashless exercise of 9,074,076 of these warrants. The remaining 4,537,038 warrants were then ratcheted to 22,685,192 warrants, based on the new ratcheted down $0.006 per share exercise price. As of December 31, 2018, there were 22,685,192 warrants outstanding under the November 2016 Warrants. During the year ended December 31, 2016, in connection the sale of common stock, the Company issued an aggregate of 971,538 five-year warrants to purchase common shares for an exercise price of $0.30 per common share to investors pursuant to unit subscription agreements. On June 2, 2017, in connection with the Second Securities Purchase Agreement, the Company issued the June 2017 Warrants to purchase an aggregate of 1,555,633 shares of the Company’s common stock, par value $0.0001 per share at an exercise price of $0.175 (subject to adjustments under certain conditions as defined in the June 2017 Warrants). The June 2017 Warrants include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Subsequent to the date of the June 2017 Notes, the Company sold stock at a share price of $0.05 per share and $0.01 per share. Accordingly, pursuant to these ratchet provisions, the exercise price of the June 2017 Warrants were lowered to $0.006 per share and the total number of June 2017 Warrants were increased on a full ratchet basis from 1,555,632 warrants to 45,372,600 warrants, an increase of 43,816,968 warrants. During the year ended December 31, 2018, the Company initially issued 6,893,145 shares of its common stock upon the cashless exercise of 9,074,520 of these warrants. The Company issued an additional 1,605,492 shares of common stock pursuant to the ratchet adjustment of the converted 9,074,520 warrants bringing the total shares issued to 8,498,637. In addition, pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, June 2017 Warrants to purchase 6,049,680 (post anti-dilution) of the Company’s Common Stock (see Note 6- Puritan Settlement Agreement On July 26, 2017, in connection with the Third Securities Purchase Agreement, the Company issued the July 2017 Warrants to purchase an aggregate of 4,769,763 shares of the Company’s common stock, par value $0.0001 per share at an exercise price of $0.10 (subject to adjustments under certain conditions as defined in the July 2017 Warrants). The July 2017 Notes and related Warrants include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Subsequent to the date of these July 2017 Notes, the Company sold stock at a share price of $0.05 per share and $0.01 per share. Accordingly, pursuant to these ratchet provisions, the exercise price of the July 2017 Warrants were lowered to $0.006 per share and the total number of July 2017 Warrants were increased on a full ratchet basis from 4,769,763 warrants to 79,496,050 warrants, an increase of 74,726,287 warrants. During the year ended December 31, 2018, the Company issued 24,216,732 shares of its common stock upon the cashless exercise of 26,498,683 of these warrants. As of December 31, 2018, there were 52,997,367 warrants outstanding under the July 2017 Warrants. During the year ended December 31, 2017, in connection the sale of common stock, the Company issued an aggregate of 4,126,579 five-year warrants to purchase common shares for an exercise price of $0.30 per common share to investors pursuant to unit subscription agreements (see” Shares issued for cash On January 29, 2018, in connection with the Fourth Securities Purchase Agreement, the Company issued the January 2018 Warrants to purchase an aggregate of 8,333,334 shares of the Company’s common stock, par value $0.0001 per share at an exercise price of $0.04 (subject to adjustments under certain conditions as defined in the January 2018 Warrants). The January 2018 Notes and related Warrants include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Subsequent to the date of the Fourth Securities Purchase Agreement, the Company defaulted on the Notes. Accordingly, pursuant to the default provisions, the exercise price of the January 2018 Warrants became 60% of the Default Conversion Price and the total number of January 2018 Warrants were increased on a full ratchet basis from 8,333,334 warrants to 42,499,184, an aggregate increase of 34,165,850 warrants. Pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, warrants to purchase 7,558,580 (post anti-dilution) of the Company’s common stock (see Note 6 - Puritan Settlement Agreement On March 13, 2018, in connection with the Fifth Securities Purchase Agreement, the Company issued the March 2018 Warrants to purchase an aggregate of 12,500,000 shares of the Company’s common stock, par value $0.0001 per share at an exercise price of $0.04 (subject to adjustments under certain conditions as defined in the March 2018 Warrants). The March Notes and related Warrants include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. Subsequent to the date of the Fifth Securities Purchase Agreement, the Company defaulted on the Notes. Accordingly, pursuant to the default provisions, the exercise price of the March 2018 Warrants became 60% of the Default Conversion Price and the total number of March 2018 Warrants were increased on a full ratchet basis from 12,500,000 warrants to 63,748,775, an aggregate increase of 51,248,775 warrants. Pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, March 2018 Warrants to purchase 11,337,869 (post anti-dilution) of the Company’s common stock (see Note 7- Puritan Settlement Agreement On September 24, 2018, in connection with the Seventh Securities Purchase Agreement, the Company issued the September 2018 Warrants to purchase an aggregate of 51,041,667 shares of the Company’s common stock, par value $0.0001 per share at an exercise price of $0.04 (subject to adjustments under certain conditions as defined in the September 2018 Warrants). The September 2018 Notes and related Warrants include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. As of December 31, 2018, there were 51,041,667 warrants outstanding under the September 2018 Warrants. On November 13, 2018, in connection with the Eighth Securities Purchase Agreement, the Company issued the November 2018 Warrants to purchase an aggregate of 4,791,667 shares of the Company’s common stock, par value $0.0001 per share at an exercise price of $0.04 (subject to adjustments under certain conditions as defined in the November 2018 Warrants). The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrant. As of December 31, 2018, there were 4,791,667 warrants outstanding under the November 2018 Warrants. During the year ended December 31, 2018, the Company issued 32,715,369 shares of its common stock upon the cashless exercise of 35,573,203 of these warrants (see Note 9). Warrant activities for the years ended December 31, 2018 and 2017 are summarized as follows: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance Outstanding December 31, 2016 3,304,872 $ 0.270 4.82 $ — Issued on a full ratcheted basis 147,969,189 $ 0.006 — $ — Issued in connection with financings 10,951,974 $ 0.170 — $ — Exercised (9,074,077 ) $ 0.03 — $ — Balance Outstanding December 31, 2017 153,151,959 $ 0.020 4.41 $ 5,754,600 Issued in connection with financings 76,666,668 $ 0.04 4.07 $ — Adjustment in connection with default provision 85,414,624 $ 0.005 2.09 Reduction in warrants related to settlement of debt (24,946,129 ) $ 0.013 — $ — Exercised (35,573,203 ) $ 0.006 — $ — Balance Outstanding December 31, 2018 254,713,920 $ 0.021 3.47 $ — Exercisable, December 31, 2018 254,713,920 $ 0.021 3.47 $ — Stock options Effective February 18, 2011, our board of directors adopted and approved the 2011 stock option plan. The purpose of the 2011 stock option plan is to enhance the long-term stockholder value of our company by offering opportunities to directors, key employees, officers, independent contractors and consultants of our company to acquire and maintain stock ownership in our company in order to give these persons the opportunity to participate in our company’s growth and success, and to encourage them to remain in the service of our company. A total of 43,094 options to acquire shares of our common stock were authorized under the 2011 stock option plan and during the 12 month period after the first anniversary of the adoption of the 2011 stock option plan, by our board of directors and during each 12 month period thereafter, our board of directors is authorized to increase the amount of options authorized under this plan by up to 10,744 shares. As of December 31, 2017 and 2018, no options were granted under the 2011 stock option plan. On March 10, 2017, the non-management members of the Board of Directors determined that it was in the best interests of the Company to reward the Company’s chief executive officer and chief financial officer of the Company by amending their employment agreements and awarding them stock options, outside of the plan, in order to provide incentives to retain and motivate them in their roles with the Company. The stock option award included options for each of them to purchase 2,000,000 shares of common stock at an exercise price of $0.25 per share. One-third of the stock options vest on March 10, 2017, March 10, 2018, and March 10, 2019, respectively, and are exercisable at any time after vesting until 10 years after the grant date. The stock options vest so long as the optionee remains an employee of the Company or a subsidiary of the Company on the vesting dates (except as otherwise provided for in the employment agreement between the Company and the optionee). The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0%; expected volatility of 203.4%; risk-free interest rate of 1.93%; and, an estimated holding period of 6 years. In connection with these options, the Company valued these options at a grant fair value of $293,598 and will record stock-based compensation expense over the vesting term. On April 17, 2017, the Company granted an aggregate of 700,000 stock options, outside of the plan, to purchase shares of the Company’s common stock to two non-employee members of the Board, Daniel S. Hoverman and Charles L. Rice; each were granted 350,000 stock options, exercisable at $0.26 per share. These options vested April 17, 2018 and expire on April 17, 2027. The stock options vest so long as the optionee remains an employee of the Company on the vesting date (except as otherwise provided for in the employment agreement between the Company and the optionee). The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0%; expected volatility of 288%; risk-free interest rate of 1.79%; and, an estimated term based on the simplified method of 6 years. In connection with these options, the Company valued these options at a grant date fair value of $52,430 which was recorded as stock-based compensation expense during the year ended December 31, 2018. At December 31, 2017, there were 4,700,000 options outstanding and 1,333,334 options vested and exercisable. As of December 31, 2017, there was $79,516 of unvested stock-based compensation expense to be recognized through December 2026. The aggregate intrinsic value at December 31, 2017 was $0, calculated based on the difference between the quoted share price on December 31, 2017 and the exercise price of the underlying options. On May 8, 2018, the Company granted an aggregate of 17,500,000 stock options, outside of the plan, to purchase 17,500,000 shares of the Company’s common stock at $0.0135 per share as follows: (i) 15,000,000 options were granted to officers and directors of the Company; (ii) 500,000 options were granted to an employee and; (iii) 2,000,000 options were granted to the Company’s scientific advisory board. These options vest May 8, 2019 and expire on May 8, 2028. The fair value of these option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0%; expected volatility of 243%; risk-free interest rate of 2.81%; and, an estimated term based on the simplified method of 5.5 years. In connection with these options, the Company valued these options at a fair value of approximately $233,000 and will record stock-based compensation expense over the vesting term. At December 31, 2018, there were 22,200,000 options outstanding and 3,366,668 options vested and exercisable. As of December 31, 2018, there was $87,778 of unvested stock-based compensation expense to be recognized through May 2019. The aggregate intrinsic value at December 31, 2018 was approximately $0, calculated based on the difference between the quoted share price on December 31, 2018 and the exercise price of the underlying options. During the years ended December 31, 2018 and 2017, the Company recorded stock-based compensation expense of $276,918 and $214,082, respectively, related to these options. Stock option activities for the year ended December 31, 2018 and 2017 are summarized as follows: Number of Option Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance Outstanding December 31, 2016 — $ — — $ — Granted 4,700,000 $ 0.25 10.00 $ — Balance Outstanding December 31, 2017 4,700,000 $ 0.25 9.19 $ — Granted 17,500,000 $ 0.0135 10.00 $ — Balance Outstanding December 31, 2018 22,200,000 $ 0.06 9.12 $ — Exercisable, December 31, 2018 3,366,668 $ 0.25 8.21 $ — |