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Item 1.01
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Entry into a Material Definitive Agreement.
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Convertible Notes Offering
On May 7, 2021 (“Effective Date”),
Mosaic ImmunoEngineering Inc., a Delaware corporation (the “Company”), entered into a convertible note purchase agreement
(“Agreement”) with five (5) accredited investors, including two (2) members of the Board of Directors of the Company
that participated on the same terms as other accredited investors (collectively, the “Investors”). Pursuant to the
Agreement, the Company received $575,000 in proceeds and issued unsecured convertible promissory notes (each a “Convertible Note”
and collectively, the “Convertible Notes”) in the aggregate principal amount of $575,000, of which, Dr. Garnick and
Ms. Felcyn, members of the Board of the Directors, invested $100,000 and $25,000, respectively. The Convertible Notes were issued as part
of a convertible note offering authorized by the Company’s board of directors (the “Convertible Notes Offering”)
for raising up to $5 million from the issuance of Convertible Notes through July 31, 2021. The Company will use the proceeds from the
sale of the Convertible Notes for general corporate purposes.
The Convertible Notes have no stated maturity
date; bear interest at a simple rate equal to eight percent (8.0%) per annum until converted; and automatically convert into the same
equity securities issued for cash in the Qualified Financing, or at the option of the Investors, into the same equity securities issued
for cash in a Smaller Financing (each as described below). Interest on the Convertible Notes will be accreted and added to the unpaid
principal balance prior to conversion.
The Convertible Notes will convert into the same
equity securities offered in the Qualified Financing or Smaller Financing (“Conversion Shares”), as described below,
at a conversion price equal to the lower of (i) the product equal to 80% times the lowest per unit purchase price of the equity securities
issued for cash in the Qualified Financing or Smaller Financing (representing a 20% discount), or (ii) $2.377, representing $21 million
divided by the number of fully diluted shares of Common Stock outstanding, including common stock reversed for issuance under the Company’s
Series B Convertible Voting Preferred Stock and the Company’s 2020 Equity Incentive Plan as of the Effective Date (“Conversion
Price”). The Conversion Price may be reduced or increased proportionately as a result of stock splits, stock dividends, recapitalizations,
reorganizations, and similar transactions. Upon any conversion of the Convertible Notes in connection with a Qualified Financing or a
Smaller Financing, as applicable, the Convertible Notes shall convert immediately prior to the closing thereof, such that the investors
paying cash in such Qualified Financing or Smaller Financing, as applicable, are not diluted by the conversion of the Convertible Notes.
Pursuant to the Agreement, a “Qualified
Financing” represents a single transaction or series or transactions whereby the Company receives aggregate gross proceeds of
at least $5 million from the sale of equity securities following the Effective Date (excluding proceeds from the issuance of any future
Convertible Notes). A “Smaller Financing” represents any sale of equity securities whereby the aggregate gross proceeds
are less than $5 million (excluding proceeds from the issuance of any future Convertible Notes).
In addition, in the event of a corporate transaction covering the sale
of all or substantially all of the Company’s assets, or merger or consolidation with or into another entity, or change in ownership
of at least 50% in voting securities of the Company, the holder of the Convertible Note may elect that either: (a) the Company pay the
holder of such Convertible Note an amount equal to the sum of (i) all accrued and unpaid interest due on such Convertible Note and (ii)
one and one-half (1.5) times the outstanding principal balance of such Convertible Note; or (b) such Convertible Note will convert into
that number of conversion shares equal to the quotient obtained by dividing (i) the outstanding principal balance and unpaid accrued interest
of such Convertible Note on the date of conversion by (ii) $2.377, representing $21 million divided by the number of fully diluted shares
of Common Stock outstanding, including common stock reversed for issuance under the Company’s Series B Convertible Voting Preferred
Stock and the Company’s 2020 Equity Incentive Plan as of the Effective Date.
The issuance and sale of the Convertible Notes
and Conversion Shares (collectively, the “Securities”) has not been, and will not upon issuance be, registered under
the Securities Act, and the Securities may not be offered or sold in the United States absent registration under or exemption from the
Securities Act and any applicable state securities laws. The Securities were issued and sold in reliance upon an exemption from registration
afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act, based on the following
facts: each of the Investors has represented that it is an accredited investor as defined in Rule 501(a) promulgated under the Securities
Act, that it is acquiring the Securities for investment only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof in violation of applicable securities laws and that it has sufficient investment experience to evaluate the
risks of the investment; the Company used no advertising or general solicitation in connection with the issuance and sale of the Securities
to the Investors; the Securities will be issued as restricted securities.
The Company did not engage any underwriter or placement agent in connection
with the Convertible Notes Offering.
The preceding description of the Agreement and Convertible Note is
qualified in its entirety by reference to the forms of Convertible Note and Agreement, filed herewith as Exhibit 4.1 and Exhibit
10.1 to this Current Report on Form 8-K, respectively, which are incorporated herein by reference.