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.
On the Effective Date,
the Company entered into a Consulting Agreement (the “Agreement”) with Investor Representative. Under the Agreement,
the Investor Representative shall perform such consulting and advisory services, within Investor Representative’s area of
expertise, as the Company or any of its subsidiaries may reasonably require from time to time. During the six-month term of the
Agreement, Jeff Busch shall perform the services on behalf of Investor Representative (“Designated Person”). The Agreement
has an initial term of six months from the date of execution and shall automatically renew on a monthly basis unless either party
gives notice of non-renewal to the other party at least fifteen days prior to the date of the Agreement, provided this agreement
shall not extend beyond 12 months from the date of the Agreement. Pursuant to the Agreement, the Company shall pay Investor Representative
an annual amount of $160,000, payable either in cash or Series A Preferred Stock (or Common Stock upon filing of the Charter Amendment
and consummation of the Reverse Split) during the term of the Agreement (the “Base Compensation”). The Company shall
promptly reimburse Investor Representative for all travel, meals, entertainment and other ordinary and necessary expenses incurred
by Investor Representative in the performance of its duties to the Company. Investor Representative’s and Designated Person’s
position with the Company may be terminated at any time, with or without cause or good reason, upon at least 30 days prior
written notice. During the term of the Agreement and for a period of twelve months thereafter, Investor Representative and Designated
Person will be subject to non-competition and non-solicitation provisions, subject to standard exceptions. Investors will also
provide Investor Representative an irrevocable proxy to vote their shares on all corporate matters until completion of the Reverse
Split.
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.