| Subsequent Events | NOTE 9 – SUBSEQUENT EVENTS On May 25, 2018
(the “Effective Date”), the Company entered into securities purchase agreements (collectively, the “Purchase
Agreement”) with accredited investors (the “Investors”) pursuant to which the Company sold an aggregate of six
hundred and fifty thousand (650,000) shares of its series A convertible preferred stock for aggregate gross proceeds of $650,000
(the “Series A Preferred Stock”). In addition, existing debtholders of the Company exchanged an aggregate of $516,155
(currently due and payable under existing indebtedness) for an aggregate of 516,155 shares of Series A Preferred Stock pursuant
to exchange agreements described below. The terms of the Series A Preferred Stock are set forth under Item 3.02 below. For a period of
one year from the date of final closing of the offering, Investors holding at least a majority of the Series A Preferred Stock
outstanding from time to time shall have the right to cause the Company to sell for cash to such Investors on a pro rata At any time on or
after the Effective Date and until the Company’s 2019 annual meeting of stockholders, the Investors, jointly and severally,
shall have the exclusive right, voting separately as a class, to elect up to six (6) directors (each director, an “Investor
Director”). A Preferred Director so elected shall serve for a term of one year and until his successor is elected and qualified.
An Investor Director may, during his or her term of office, be removed at any time, with or without cause, by and only by the affirmative
vote, at a special meeting of holders of Series A Preferred Stock called for such purpose. Any vacancy created by such removal
may also be filled at such meeting or by such consent for the remainder of such initial one-year term. At any time on or after
the Effective Date and until the Company’s 2019 annual meeting of stockholders, Infusion 51a, LP (“Infusion”)
shall have the right to elect up to three (3) directors (each director, an “Infusion Director”). An Infusion Director
so initially elected shall serve for a term of one year and until his successor is elected and qualified. Any vacancy in the position
of an Infusion Director may be filled only by the affirmative vote of Infusion. An Infusion Director may, during his or her term
of office, be removed at any time, with or without cause. Any vacancy created by such removal may also be filled by Infusion for
the remainder of such initial one-year term. As soon as practicable
after the final closing of the offering, the Company shall use commercially reasonable efforts to take all necessary actions and
to obtain such approvals of the Company’s stockholders as may be required to increase the Company’s authorized shares
of Common Stock such that the Company can issue all of the shares of Common Stock issuable upon completion of the restructuring
and undertake a reverse stock split at such ratio where the number of shares of Common Stock outstanding after consummation of
such reverse stock split shall be approximately 15,000,000 shares (the “Reverse Split”) before the exchange of the
Series A Preferred Stock into shares of common stock (the “Stockholder Approval”). Until the consummation of the Reverse
Split (as defined herein), the Investors appointed AVDX Investors Group, LLC (the “Investor Representative”) as its
attorney-in-fact for the purpose of carrying out the Stockholder Approval. On the Effective
Date, the Company entered into a Consulting Agreement (the “Agreement”) with Investor Representative. Under the Agreement,
the Investor Representative shall perform such consulting and advisory services, within Investor Representative’s area of
expertise, as the Company or any of its subsidiaries may reasonably require from time to time. During the six-month term of the
Agreement, Jeff Busch shall perform the services on behalf of Investor Representative (“Designated Person”). The Agreement
has an initial term of six months from the date of execution and shall automatically renew on a monthly basis unless either party
gives notice of non-renewal to the other party at least fifteen days prior to the date of the Agreement, provided this agreement
shall not extend beyond 12 months from the date of the Agreement. Pursuant to the Agreement, the Company shall pay Investor Representative
an annual amount of $160,000, payable either in cash or Series A Preferred Stock (or Common Stock upon filing of the Charter Amendment
and consummation of the Reverse Split) during the term of the Agreement (the “Base Compensation”). The Company shall
promptly reimburse Investor Representative for all travel, meals, entertainment and other ordinary and necessary expenses incurred
by Investor Representative in the performance of its duties to the Company. Investor Representative’s and Designated Person’s
position with the Company may be terminated at any time, with or without cause or good reason, upon at least 30 days prior written
notice. During the term of the Agreement and for a period of twelve months thereafter, Investor Representative and Designated Person
will be subject to non-competition and non-solicitation provisions, subject to standard exceptions. Investors will also provide
Investor Representative an irrevocable proxy to vote their shares on all corporate matters until completion of the Reverse Split. From the Effective
Date until the consummation of the Reverse Split, upon any issuance by the Company of common stock or Common Stock Equivalents
(as defined in the Series A Certificate of Designations (as defined below)) for cash consideration, indebtedness or a combination
of units thereof (a “Subsequent Financing”), each Qualifying Purchaser (as defined below) shall have the right to participate
in up to an amount of the Subsequent Financing equal to 50% of the Subsequent Financing on the same terms, conditions and price
provided for in the Subsequent Financing. For purposes herein, “Qualifying Purchaser” means an Investor with a subscription
amount of at least $150,000. Beginning on the
six month anniversary of the final closing of the offering, on or prior to the sixtieth (60th) calendar day after the date of receipt
of written demand from Investors holding at least 51% of Registrable Securities (as defined in the Purchase Agreement), the Company
shall prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement covering the
resale of all of the Registrable Securities that are not then registered on an effective registration statement. In connection with
the offering, we agreed to pay our placement agent, a registered broker-dealer, or the Placement Agent, (i) a cash commission of
8% of the gross proceeds raised from investors in the offering, and to issue to the Placement Agent warrants to purchase a number
of shares of common stock equal to 4% of the gross proceeds divided by the respective offering price, with a term of seven years
from the date of issuance. On the Effective
Date, the Company entered into an exchange agreement (collectively, the “2017 Investors Exchange Agreement”) with the
investors who purchased convertible promissory notes between June 2017 and October 2017 (the “2017 Notes”) for an aggregate
principal amount of $545,000 (the “2017 Investors”). Pursuant to the terms of the 2017 Investors Exchange Agreement,
the Company agreed to exchange (i) the principal amount due under the 2017 Notes (ii) warrants to purchase 18,166,667 shares of
common stock and (iii) purchase rights to purchase shares of common stock for an aggregate of 72,666,667 shares of common stock,
in exchange for an aggregate approximately 22,290,800 shares of series B convertible preferred stock having an aggregate value
of $545,000 (the “Series B Preferred Stock”). The 2017 Investors have agreed to waive the defaults and breaches that
have resulted on or prior to the Effective Date as well as any penalties, interest or other amounts that may have accrued under
the 2017 Notes after March 31, 2018. The terms of the Series B Preferred Stock are set forth under Item 3.02 below. In addition,
each 2017 Investor entered into a termination agreement with the Company (collectively, the “2017 Investors Termination Agreement”)
pursuant to which as of the Effective Date, (i) the securities purchase agreements and pledge agreements entered into with the
2017 Investors (the “2017 Investors Prior Agreements”) were terminated in their entirety and shall have no further
force or effect, (ii) the security interests granted by the pledge agreements were terminated and shall have no further force or
effect and (iii) neither party shall have any further rights or obligations under the Prior Agreements. The 2017 Investors also
authorized the Company or his/her/its representatives to take all actions as they determine in their sole discretion to discharge
and release any and all security interests, pledges, liens, and other encumbrances held by such 2017 Investor on the Company’s
assets. In connection with
the 2017 Investors Exchange Agreement, the 2017 Investors have agreed to a lock-up agreement with respect to any shares of common
stock it may receive beginning on May 25, 2018 and ending on the nine (9) month anniversary of the date the Company’s laboratory
is open for business (the “Lockup Period”). For the first one hundred and eighty (180) days after termination of the
Lockup Period, the 2017 Investors shall be subject to a daily liquidation limit for any sales of common stock equal to two and
a half percent (2.5%) of the average trading volume of the Company’s common stock for the prior five (5) trading days, but
excluding the date of sale (the “Leakout Limitation”). For any sale proposed by the 2017 Investors in excess of the
Leakout Limitation, the Company will have (a) a right of first refusal for a period of 15 business days after receipt of written
notice of such sale from the 2017 Investor, to purchase such shares of common stock subject to the Leakout Limitation at a price
equal to the average closing price per share of the Company’s common stock for the prior five (5) trading days prior to such
notice, and (b) if not purchased by the Company, the Company will have approval rights of the counter party proposed by a 2017
Investor for the sale of any such securities, such approval in the Company’s sole and absolute discretion. On the Effective
Date, the Company entered into an exchange agreement (collectively, the “2016 Investors Exchange Agreement”) with the
investors who purchased convertible promissory notes between November 2016 and January 2017 (the “2016 Notes”) for
an aggregate principal amount of $786,500 (the “2016 Investors”). Pursuant to the terms of the 2016 Investors Exchange
Agreement, the Company agreed to exchange (i) the principal amount due under the 2016 Notes in exchange for an aggregate of (i)
323,323 shares of Series A Preferred Stock having an aggregate value of $323,323 and (ii) approximately 3,324,065 shares of series
B convertible preferred stock having an aggregate value of approximately $498,610 (the “Series B Preferred Stock”)
and (iii) exchange for the issuance of new promissory note due twenty-four (24) months from the Effective Date in the aggregate
principal amount of $47,259 (the “New 2016 Investor Note”). The New 2016 Investor Note shall bear interest at 12% per
annum and has mandatory payments of $2,000 every 30 days until paid in full starting June 25, 2018. In connection with the 2016
Investors Exchange Agreement, the 2016 Investors have agreed to waive the defaults and breaches that have resulted on or prior
to the Effective Date as well as any penalties, interest or other amounts that may have accrued under the 2016 Notes after March
31, 2018. On the Effective
Date, the Company entered into an exchange Agreement (the “Coastal Exchange Agreement”) with Coastal Investment Partners,
LLC (“Coastal”). Pursuant to the terms of the Coastal Exchange Agreement, the Company agreed to exchange the principal
amount due under the convertible promissory note dated July 6, 2016 plus accrued but unpaid interest and default and other amounts
due and payable under such notes, which was $305,664 as of the Effective Date (the “Coastal Notes”) in exchange for
(i) 192,832 shares of Series A Preferred Stock having an aggregate value of $192,832 and (ii) the issuance of new convertible promissory
notes due eighteen (18) months from the Effective Date in the aggregate principal amount of $192,832 (the “New Coastal Note”).
The New Coastal Note shall bear interest at 8% per annum and is convertible into shares of the Company’s common stock at
$0.015 per share, subject to adjustment. Coastal has contractually agreed to restrict their ability to convert the New Coastal
Note such that the number of shares of the Company common stock held by them and their affiliates after such conversion does not
exceed 9.99% of the Company’s then issued and outstanding shares of common stock. In connection with the Coastal Exchange
Agreement, Coastal agreed to waive the defaults and breaches that have resulted on or prior to the Effective Date as well as any
penalties, interest or other amounts that may have accrued under the Coastal Notes after March 31, 2018. In addition, Coastal entered
into a termination agreement with the Company pursuant to which as of the Effective Date, (i) the securities purchase agreements
and pledge agreements entered into with Coastal (the “Coastal Prior Agreements”) were terminated in their entirety
and shall have no further force or effect, (ii) the security interests granted by the pledge agreement were terminated and shall
have no further force or effect and (iii) neither party shall have any further rights or obligations under the Coastal Prior Agreements.
Coastal also authorized the Company or its representatives to take all actions as they determine in their sole discretion to discharge
and release any and all security interests, pledges, liens, and other encumbrances held by it on the Company’s assets. On the Effective
Date, the Company entered into an exchange agreement (the “Black Mountain Exchange Agreement”) with Black Mountain
Equity Partners LLC (“Black Mountain”). Pursuant to the terms of the Black Mountain Exchange Agreement, the Company
agreed to exchange the principal amount due under the convertible promissory note dated November 11, 2016 (the “Black Mountain
Note”) in exchange for the issuance of new promissory note due twelve (12) months from the Effective Date in the aggregate
principal amount of $20,000 (which includes a prepayment amount of $5,000 made on the Effective Date) (the “New Black Mountain
Note”). The New Black Mountain Note shall bear interest at 12% per annum and has mandatory payments of $5,000 every 90 days
until paid in full. In connection with the Black Mountain Exchange Agreement, Black Mountain agreed to waive the defaults and breaches
that have resulted on or prior to the Effective Date as well as any penalties, interest or other amounts that may have accrued
under the Black Mountain Note after March 31, 2018. On May 25, 2018,
the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock with the
Secretary of State of the State of Nevada (the “Series A Certificate of Designation”). On May 25, 2018,
the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock with the
Secretary of State of the State of Nevada (the “Series B Certificate of Designation”). On May 25, 2018,
the Company entered into an employment agreement (the “Ruxin Agreement”) with Dr. Ruxin under which he will serve as
Chief Executive Officer of the Company. The term of the Ruxin Agreement was effective as of May 25, 2018, continues until May 25,
2023 and automatically renews for successive one-year periods at the end of each term until either party delivers written notice
of their intent not to renew at least 60 days prior to the expiration of the then effective term. Under the terms of the Ruxin
Agreement, Dr. Ruxin will receive an annual salary of $250,000. He is eligible to receive a cash bonus of up to 100% of his base
salary. The bonus shall be earned upon the Company’s achievement of performance targets for a fiscal year to be mutually
agreed upon by Dr. Ruxin and the board or a committee thereof. Additionally, following the adoption by the Company of an equity
compensation plan and subject to approval of the board or a committee thereof, Dr. Ruxin shall receive (i) a one-time restricted
stock unit award having a fair value of approximately $100,000 and which shall vest over a five year period following the date
of grant and (ii) an option to purchase ten percent (10%) of the outstanding shares of the Company (calculated on the date of grant),
which shall vest over a five-year period following the date of grant and expire on the tenth anniversary of the date of grant.
Dr. Ruxin is entitled to participate in any and all benefit plans, from time to time, in effect for senior management, along with
vacation, sick and holiday pay in accordance with the Company’s policies established and in effect from time to time. Dr. Ruxin is an
“at-will” employee and his employment may be terminated by the Company at any time, with or without cause. In the event
Dr. Ruxin’s termination of employment is the result of termination by the Company without Cause (as defined in the Ruxin
Agreement) with Good Reason (as defined in the Ruxin Agreement) or as a result of a non-renewal of the term of employment under
the Ruxin Agreement, Dr. Ruxin shall be entitled to receive the sum of (I) the Severance Multiple (as defined below), multiplied
by multiplied by provided, however The Ruxin Agreement
also contains covenants (a) restricting the executive from engaging in any activity competitive with our business during the term
of the employment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the executive
from disclosing confidential information regarding us, and (c) soliciting our employees, customers and prospective customers during
the term of the employment agreement and for a period of one year thereafter. On May 25, 2018,
the Company entered into an employment agreement (the “Busch Agreement”) with Mr. Busch under which he will serve as
Executive Chairman of the Company. The term of the Busch Agreement was effective as of May 25, 2018, continues until May 25, 2023
and automatically renews for successive one-year periods at the end of each term until either party delivers written notice of
their intent not to renew at least 60 days prior to the expiration of the then effective term. Under the terms of the Busch Agreement,
Mr. Busch will receive an annual salary of $30,000, which amount shall be automatically increased to $120,000 on the first anniversary
of the date of the Busch Agreement. He is eligible to receive a discretionary cash bonus at the option of the board based on their
evaluation of his performance of duties and responsibility. Additionally, following the adoption by the Company of an equity compensation
plan and subject to approval of the board or a committee thereof, Mr. Busch shall receive (i) a one-time restricted stock unit
award having a fair value of approximately $100,000 and which shall vest over a five year period following the date of grant and
(ii) an option to purchase ten percent (10%) of the outstanding shares of the Company (calculated on the date of grant), which
shall vest over a five-year period following the date of grant and expire on the tenth anniversary of the date of grant. Mr. Busch
is entitled to participate in any and all benefit plans, from time to time, in effect for senior management, along with vacation,
sick and holiday pay in accordance with the Company’s policies established and in effect from time to time. Mr. Busch is an
“at-will” employee and his employment may be terminated by the Company at any time, with or without cause. In the event
Mr. Busch’s termination of employment is the result of termination by the Company without Cause (as defined in the Busch
Agreement) with Good Reason (as defined in the Busch Agreement) or as a result of a non-renewal of the term of employment under
the Busch Agreement, Mr. Busch shall be entitled to receive the sum of (I) the Severance Multiple (as defined below), multiplied
by multiplied by provided, however The Busch Agreement
also contains covenants (a) restricting the executive from engaging in any activity competitive with our business during the term
of the employment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the executive
from disclosing confidential information regarding us, and (c) soliciting our employees, customers and prospective customers during
the term of the employment agreement and for a period of one year thereafter. |
