Item
1.01 Entry into a Material Definitive Agreement
Series
A Private Placement
On
August 20, 2018 (the “Effective Date”), Avant Diagnostics, Inc. (the “Company”) entered into
securities purchase agreements (collectively, the “Series A Purchase Agreement”) with accredited investors (the
“August 2018 Investors”), including pursuant to which the Company sold an aggregate of three hundred and eighty
thousand (380,000) shares of its series A convertible preferred stock (the “Series A Preferred Stock”) for
aggregate gross proceeds of $380,000. On the Effective Date, Jeffrey Busch, our executive chairman purchased 50,000 shares of
Series A Preferred Stock for aggregate gross proceeds of $50,000. In addition, on August 23, 2018, the Company entered into a
Series A Purchase Agreement with Mick Ruxin, the Company’s chief executive officer (together with the August 2018
Investors, the “Investors”), pursuant to which the Company sold an aggregate of twenty-five thousand (25,000) shares of its Series
A Preferred Stock for aggregate gross proceeds of $25,000. The terms of the Series A Preferred Stock were included in
Items 3.02, 3.03 and Item 5.03 of the Current Report on Form 8-K filed with the Securities and Exchange Commission
(the “SEC”) on May 25, 2018 and are incorporated herein by reference.
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, together with the Series C Investor (as defined below), 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, among other things,
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, 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) 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 Series A Purchase
Agreement), the Company shall prepare and file with the SEC a registration statement covering the resale of all of the Registrable
Securities that are not then registered on an effective registration statement.
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.
Series
C Private Placement
On
the Effective Date, the Company entered into a securities purchase agreement (the “Series C Purchase Agreement”) with
an institutional investor (the “Series C Investor”) pursuant to which the Company sold an aggregate of one hundred
and fifty thousand (150,000) shares of its series C convertible preferred stock for aggregate gross proceeds of $150,000 (the
“Series C Preferred Stock”). The terms of the Series C 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, the Series C Investor, together with the Investors, 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.
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 Stockholder Approval to, among other things, undertake the Reverse Split. Until the consummation
of the Reverse Split, the Series C Investor appointed 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 a Subsequent Financing, the Series C Investor 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.
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 both the Investors and the Series C Investor holding at least 51% of Registrable Securities
(as defined in the Series C Purchase Agreement), the Company shall prepare and file with the SEC a registration statement covering
the resale of all of the Registrable Securities that are not then registered on an effective registration statement.
The Series C Investor
has contractually agreed to restrict its ability to convert and/or exchange the Series C Preferred Stock such that the number of
shares of the Company common stock held by them and their affiliates after such conversion or exchange does not exceed
4.99% of the Company’s then issued and outstanding shares of common stock.
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 3.2 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.
In
connection with sale of the Series A Preferred Stock and the Series C Preferred Stock, we agreed to pay the Placement Agent, (i)
a cash commission of 8% of the gross proceeds raised from the investors of such securities, 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
Series A Preferred Stock and Series C Preferred Stock sold 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 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 in such securities are each 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.