Item
1.01 Entry into a Material Definitive Agreement
May
2018 Private Placement
On May 25, 2018 (the “Effective
Date”), Avant Diagnostics, Inc. (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
basis up to an aggregate of $1,000,000 of common stock in one or more transactions at a 10% discount to the average closing
price of the common stock (as reported for consolidated transactions with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, then in the over-the-counter market, as reported on any tier maintained by the
OTC Markets Group, Inc.) for the thirty (30) consecutive trading days immediately prior to (and including) the Friday preceding
the date of such purchase or purchases.
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.
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.
The
securities sold in the offering were not registered under the Securities Act of 1933, as amended (the “Securities Act”),
or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section
4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws,
which exempt transactions by an issuer not involving any public offering. The Investors are “accredited investor”
as such term is defined in Regulation D promulgated under the Securities Act. This Current Report shall not constitute an
offer to sell or the solicitation of an offer to buy, nor shall such securities be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend
stating the same.
The
foregoing information is a summary of the agreements involved in the transaction described above, is not complete, and is qualified
in its entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibit 3.1 and Exhibit
10.1 and incorporated herein by reference. Readers should review such agreements for a complete understanding of the terms and
conditions associated with this transaction.
2017
Investors Exchange Agreement
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.
The
securities issued and sold is this transaction were not registered under the Securities Act, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration afforded by Section 3(a)(9) or Section 4(a)(2) under
the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt
transactions by an issuer not involving any public offering. Each 2017 Investor is an “accredited investor” as such
term is defined in Regulation D promulgated under the Securities Act. This Current Report shall not constitute an offer
to sell or the solicitation of an offer to buy, nor shall such securities be offered or sold in the United States absent registration
or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating
the same.
The
foregoing information is a summary of the agreement involved in the transaction described above, is not complete, and
is qualified in its entirety by reference to the full text of such agreements, copies of which is attached hereto as
Exhibit 3.2, Exhibit 10.2 and Exhibit 10.3 and incorporated herein by reference. Readers should review such agreements for a
complete understanding of the terms and conditions associated with this transaction.
2016
Investors Exchange Agreement
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. The terms of the Series
B Preferred Stock are set forth under Item 3.02 below.
The
securities issued and sold is this transaction were not registered under the Securities Act, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration afforded by Section 3(a)(9) or Section 4(a)(2) under
the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt
transactions by an issuer not involving any public offering. Each 2016 Investor is an “accredited investor” as such
term is defined in Regulation D promulgated under the Securities Act. This Current Report shall not constitute an offer
to sell or the solicitation of an offer to buy, nor shall such securities be offered or sold in the United States absent registration
or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating
the same.
The
foregoing information is a summary of the agreement involved in the transaction described above, is not complete, and is qualified
in its entirety by reference to the full text of such agreements, copies of which is attached hereto as Exhibit 3.1, Exhibit 3.2,
Exhibit 4.1 and Exhibit 10.2 and incorporated herein by reference. Readers should review such agreements for a complete understanding
of the terms and conditions associated with this transaction.
Coastal
Exchange Agreement
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.
The
securities issued and sold is this transaction were not registered under the Securities Act, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration afforded by Section 3(a)(9) or Section 4(a)(2) under
the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt
transactions by an issuer not involving any public offering. Coastal is an “accredited investor” as such term is defined
in Regulation D promulgated under the Securities Act. This Current Report shall not constitute an offer to sell or the solicitation
of an offer to buy, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption
from the registration requirements and certificates evidencing such shares contain a legend stating the same.
The
foregoing information is a summary of the agreement involved in the transaction described above, is not complete, and is
qualified in its entirety by reference to the full text of such agreements, copies of which is attached hereto as Exhibit
3.1, Exhibit 4.2, Exhibit 10.4 and Exhibit 10.5 and incorporated herein by reference. Readers should review such agreements
for a complete understanding of the terms and conditions associated with this transaction.
Black
Mountain Exchange Agreement
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.
The
securities issued and sold is this transaction were not registered under the Securities Act, or the securities laws of any state,
and were offered and sold in reliance on the exemption from registration afforded by Section 3(a)(9) or Section 4(a)(2) under
the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt
transactions by an issuer not involving any public offering. Black Mountain is an “accredited investor” as such term
is defined in Regulation D promulgated under the Securities Act. This Current Report shall not constitute an offer to sell
or the solicitation of an offer to buy, nor shall such securities be offered or sold in the United States absent registration
or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating
the same.
The
foregoing information is a summary of the agreement involved in the transaction described above, is not complete, and is qualified
in its entirety by reference to the full text of such agreements, copies of which is attached hereto as Exhibit 4.3 and Exhibit
10.6 and incorporated herein by reference. Readers should review such agreements for a complete understanding of the terms and
conditions associated with this transaction.