Item 14. Indemnification of Directors
and Officers
Section 102(b)(7) of the Delaware General
Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall
not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which
the director derived an improper personal benefit. Our amended certificate of incorporation provides that, to the maximum extent
permitted by law, no director shall be personally liable to us or our shareholders for monetary damages for breach of fiduciary
duty as director.
Section 145 of the Delaware General Corporation
Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person
in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by
reason of such person being or having been a director, officer, employee or agent to the corporation. The Delaware General Corporation
Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors or otherwise. Our bylaws provide for indemnification by us of
our directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law.
Insofar as indemnification for liabilities
arising under the Securities Act may be provided for directors, officers, employees, agents or persons controlling an issuer pursuant
to the foregoing provisions, the opinion of the SEC is that such indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling
person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against
public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Subject to the operation of Section 4
of Article V of the Company’s By-laws, each Director and Officer shall be indemnified and held harmless by the Company to
the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted
the Company to provide prior to such amendment) against any and all expenses, judgments, penalties, fines and amounts reasonably
paid in settlement that are incurred by such Director or Officer or on such Director’s or Officer’s behalf in connection
with any threatened, pending or completed Proceeding or any claim, issue or matter therein, which such Director or Officer is,
or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status,
if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed
to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful.
No pending material litigation or proceeding
involving our directors, executive officers, employees or other agents as to which indemnification is being sought exists, and
we are not aware of any pending or threatened material litigation that may result in claims for indemnification by any of our
directors or executive officers.
Item 15. Recent Sales of Unregistered
Securities
Except where noted, all of the securities
discussed below were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.
The Company sold 500 000 shares (post
reverse split) of common stock to Convergent Risk Group, LLC (the “CRG Shares”), an entity owned by the Company’s
now Chief Executive Officer and Chairman of the Board, Mr. Robert Liscouski, for an aggregate purchase price of $155,000.00. Financing
for the purchase of the CRG Shares was provided to Convergent Risk Group, LLC by a group of accredited investors (the “Original
Investors”), in exchange for promissory notes from CRG (the “CRG Liabilities”). In order to further induce the
Mr. Liscouski to accept his position as the Company’s Chief Executive Officer, the Company agreed to assume the CRG Liabilities
in exchange for the Company’s issuance of convertible promissory notes to the Original Investors in the principal aggregate
amount of $400,000 (the “January Quantum Notes”). The January Quantum Notes can be converted to shares of the Company’s
common stock at a conversion price of $0.10 per share at any time prior to, or at, the maturity date of August 10, 2019.
December 24, 2017 - 92,500 shares issued
to William Alessi pursuant to Court order settling litigation against the Company. Shares to be free trading and without a restrictive
legend. This block of shares was issued subject to a 5 year non dilution provision enabling Alessi to maintain a 4.95% equity
position in the Company. These shares were issued in reliance on the exemption under Section 3(a)(10) of the Securities Act.
December 24, 2017 - 500,000 shares issued
to Company Treasury pursuant to Court order settling litigation against the Company.
January 22, 2018 - 500,000 Treasury shares
sold to Convergent Risk Group, LLC for $155,000 and proceeds of the sale were remitted to William Alessi pursuant to Court order
settling litigation against the Company.
In January 2018 the Company issued an
aggregate of $400,000 in the principal amount of Convertible Promissory Notes, convertible at $0.10 per share (after a 1:200 reverse
stock split), to a group of accredited investors. These notes are due August 10, 2019 and as of September 30, 2018 the notes had
not been converted and no shares have been issued relating to these Notes. In April 2018 the Company issued an additional Convertible
Promissory Note, also convertible at $0.10 per share. In December 2018 this Note was converted, along with accrued interest, into
1,002,422 shares of common stock.
During the period March 1-September 30,
2018 the Company accepted subscriptions for $75,000 of common stock at $0.40 per share (after a 1:200 reverse stock split), to
a group of accredited investors. The Company issued 187,500 shares of common stock pursuant to these Subscription Agreements in
October 2018.
In March 2018 the Company commenced an
offering of up to $15,000,000 of Convertible Promissory Notes, convertible at $1.00 per share (after a 1:200 reverse stock split),
to a group of accredited investors. One Convertible Promissory Note in the amount of $250,000 was made convertible at $0.25 per
share in exchange for the investor agreeing to serve on the Board. Another Convertible Promissory Note was made convertible at
$0.10 per share in exchange for the investor providing certain investor relations services. These Convertible Promissory Notes
mature twelve (12) months from the date of issuance and as of October 31, 2018, investments had been received for $3,495,500 in
this offering. In October 2018 the Board of Directors formally closed the Convertible Note Offering. As of March 20, 2019, $725,000
of the Notes (plus accrued interest) had been converted and 1,510,377 shares have been issued relating to these Notes.
In September 2018 the Company issued a
total of 4,800,000 shares of common stock to senior management and research and development executives as grants, pursuant to
their respective employment agreements, which were effective March 1, 2018. The shares are restricted, and subject to a lockup
agreement, and a three year recoupment provision whereby the shares are forfeited to the Company if the employee’s employment
is terminated before the end of the third year of employment (February 28, 2021). The number of shares subject to recoupment declines
over time. In November 2018 two senior managers resigned and to date 4,000,000 shares of these grants have been cancelled as of
December 31, 2018.
In October 2018 the Company issued 130,000
shares to a shareholder of the Company pursuant to the non-dilution covenant directed by the 2017 North Carolina court order.
The shares were issued under Section 3(a)(10) of the Securities Act.
In October 2018 the Company issued 150,000
shares of common stock to Cascade IR, LLC, an investor relations firm, as compensation for services pursuant to the terms of a
consulting agreement the Company entered into with Cascade IR, LLC in September 2018.
Also, in October 2018, the Company converted
$725,000 principal amount of convertible promissory notes, plus $16,711 of accrued interest into 1,510,377 shares of common stock.
In December 2018 the Company converted
$100,000 principal amount of convertible promissory notes, plus $2,422 of accrued interest, into 1,002,422 shares of common stock.
In March 2019 the Company issued 25,000
shares of common stock to Lyons Capital, LLC, an investor relations firm, as compensation for services pursuant to the terms of
an agreement the Company entered into with Lyons Capital in December 2018.
In June 2019 the Company issued 350,000
shares to a shareholder of the Company pursuant to the non-dilution covenant directed by the 2017 North Carolina court order.
The shares were issued under Section 3(a)(10) of the Securities Act.
In June 2019 the Company converted $20,000
principal amount of convertible promissory notes, into 200,000 shares of common stock.
In August 2019 the Company converted $2,015,500
principal amount of convertible promissory notes, plus $124,025 of accrued interest, into 2,329,525 shares of common stock.
In January 2020 the Auctus Fund LLC exercised
its option to convert $21,305 of the principal of its Convertible Note and accrued interest and fees of $8,695 (a total of $30,000)
into 20,000 shares of the Company’s common stock. The principal balance remaining on the Note following this conversion
was $478,695.
In February 2020 the Auctus Fund LLC exercised
its option to convert $138,998 of the principal of its Convertible Note and accrued interest and fees of $11,002 (a total of $150,000)
into 100,000 shares of the Company’s common stock. The principal balance remaining on the Note following this conversion
was $339,698.
In March 2020, the Company issued 115,000
shares of common stock under the Company’s incentive compensation plan to four employees as a bonus for their performance
during 2019.
In May 2020, the Company issued 133,334
shares of common stock to Oasis Capital LLC (Oasis) pursuant to an Equity Purchase Agreement as Commitment Shares, and 37,537
shares to Oasis pursuant to a Stock Purchase Agreement as Inducement Shares.