Item
1.01 Entry into a Material Definitive Agreement.
On
June 12, 2017, PositiveID Corporation (the “Company”) entered into a Stock Purchase Agreement (“SPA”)
with E-N-G Mobile Systems, Inc., a California corporation and the Company’s wholly-owned subsidiary (“ENG”),
and Holdings ENG, LLC, a Florida limited liability company and an affiliate of East West Resources Corporation (the “Purchaser”),
pursuant to which (i) the Company sold 49%, or two hundred ninety nine (299) shares of Series A Convertible Preferred Stock (the
“Purchased Shares”), of ENG, (ii) the Company granted Purchaser an option to purchase up to an additional 10%, or
sixty (60) shares of Series A Convertible Preferred Stock, of ENG (the “Option Shares”) and (iii) ENG, pursuant to
a stock option agreement (the “Stock Option Agreement”), granted Purchaser an option to purchase 1%, or three (3)
shares of Series A Convertible Preferred Stock, of ENG (collectively, the “Transaction”). The Company received one
million four hundred ninety-five thousand dollars ($1,495,000.00) or $5,000.00 per share of Series A Convertible Preferred Stock,
in exchange for the Purchased Shares. The exercise price payable to the Company for each Option Share is five thousand dollars
($5,000.00) (subject to adjustment) for a total of up to three hundred thousand dollars ($300,000.00).
Immediately
prior to the closing of the Transaction, ENG effected a recapitalization so that there are two classes of its stock as follows:
(i) 2,000 authorized shares of common stock, $0.001 par value, with 241 shares, issued and outstanding and held by the Company;
and (ii) 1,000 authorized shares of Series A Convertible Preferred Stock, $0.001 par value (the “Series A Convertible Stock”),
with 359 shares of Series A Convertible Stock issued and outstanding and held by the Company prior to the closing of the Transaction.
A
summary of the Series A Convertible Stock of ENG is set forth below:
Voting
and Protective Provisions.
The Series A Convertible Stock shall vote together with the common stock of ENG, except as required
by law. The Series A Convertible Stock contain protect provisions such that the vote of a majority of the outstanding shares of
Series A Stock is required to engage in certain acts, including (i) file a petition in bankruptcy; (ii) create, authorize, authorize
the creation of, issue or sell any equity security, any security convertible into or exercisable for any equity security or option;
(iii) permit any consolidation, reorganization or merger of ENG with or into any other person; (iv) acquire all or substantially
all of the properties, assets or capital stock of any other corporation or entity; (v) sell, lease or otherwise dispose of assets
or properties of ENG in an aggregate amount in excess of $100,000 in any calendar year, other than in the ordinary course of business;
(vi) grant any lien on or security interest in any of ENG’s assets other than in the ordinary course of business; (vii)
incur any indebtedness for borrowed funds, excluding any draws on any line of credit in the ordinary course of business; (viii)
create or authorize the creation of any debt security; (ix) approve or execute any contract, agreement or lease giving rise to
a financial commitment or obligation of ENG other than in the ordinary course of business; (x) purchase or redeem or pay any dividend
on any capital stock, make any distribution or authorize a stock split or split-up; (xi) increase or decrease the size of the
Board of Directors of ENG; (xii) create, or authorize the creation of, a subsidiary; (xiii) make any loan or advance to any person,
except advances in the ordinary course of business; (xiv) guarantee any indebtedness except for trade accounts of ENG arising
in the ordinary course of business; (xv) make any investment inconsistent with any investment policy approved by the Board of
Directors of ENG; (xvi) enter into or be a party to any transaction with (A) any director, officer or employee of ENG or any “associate”
(as defined in Rule 12b-2 promulgated under the Exchange Act) of any such person or (B) any “affiliate” (as defined
in Rule 12b-2 promulgated under the Exchange Act); (xvii) change the principal business of ENG, enter new lines of business, or
exit the current line of business; (xviii) sell, assign, license, pledge or encumber material technology or intellectual property,
other than licenses granted in the ordinary course of business; (xix) amend the Articles of Incorporation or the Bylaws of ENG
(xx) purchase, option or otherwise acquire any real property or any interest therein; (xxi) dissolve, wind-up or cease operations
of ENG; or (xxii) enter into any corporate strategic relationship, joint venture or partnership.
Dividends.
Dividends may not be declared on any class of stock unless paid pro rata on all classes of stock.
Liquidation
.
Upon on any liquidation, dissolution or winding up of ENG, after payment or provision for payment of debts and other liabilities
of ENG, before any distribution or payment is made to the holders common stock or any junior securities, the holders of Series
A Convertible Stock shall first be entitled to be paid out of the assets of the Company available for distribution to its stockholders
an amount equal to $5,000 per share (subject to adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization with respect to the Series A Convertible Stock), plus any dividends declared but unpaid on such shares.
The occurrence of a merger or consolidation or sale of substantially all of the assets of ENG shall be deemed to be a liquidation
of ENG.
In
connection with the Transaction, the Company entered into a Stockholders Agreement, dated June 12, 2017, with Purchaser and ENG
(the “Stockholders Agreement”), which sets forth certain rights and obligations of the Company, Purchaser and ENG,
respectively, relating to the Company and Purchaser’s ownership of ENG’s capital stock.
In
addition, in connection with the Transaction, the Company entered into an Executive Services Agreement, dated June 12, 2017, with
Purchaser and Mr. Lyle Probst, the Company’s President (the “Executive Services Agreement”), pursuant to which
the Company has agreed to provide ENG the services of Mr. Probst to continue to act as President of ENG (the “Services”).
As compensation for the Services, ENG will pay the Company nine thousand five hundred twenty-five dollars ($9,525) per month.
The
foregoing description of the terms of the SPA, the Stockholders Agreement, the Executive Services Agreement, and the Stock Option
Agreement does not purport to be complete and is qualified in its entirety by the complete text of the documents attached as,
respectively, Exhibit 10.1, Exhibit 10.2, Exhibit 10.3, and Exhibit 10.4 to this Current Report on Form 8-K.