UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed
by the Registrant |
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by a party other than the Registrant |
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Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under § 240.14a-12 |
Aditxt, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment
of Filing Fee (Check all boxes that apply): |
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No
fee required |
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Fee
paid previously with preliminary materials. |
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Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a- 6(i)(1) and 0-11 |
737 N. Fifth Street, Suite 200
Richmond, VA 23219
, 2023
NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on , 2023
Dear Stockholder:
We are pleased to invite you
to attend the annual meeting of stockholders (the “Annual Meeting”) of Aditxt, Inc. (the “Company”), which will
be held on , 2023 at [*].
Due to the continuing
public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and stockholders,
the Annual Meeting will be held in a virtual-only meeting format at [*]
In addition to voting by submitting
your proxy prior to the Annual Meeting, you also will be able to vote your shares electronically during the Annual Meeting. Further details
regarding the virtual meeting are included in the accompanying proxy statement. At the Annual Meeting, the holders of our outstanding
common stock will act on the following matters:
| 1. | To
elect five (5) members to our board of directors; |
| 2. | To ratify the appointment of dbbmckennon as our independent
registered public accounting firm for the fiscal year ending December 31, 2023; |
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3. |
To approve, for the purpose of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying warrants originally issued by the Company in August 2022; |
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4. |
To approve, for the purpose of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying secured promissory notes originally issued by the Company in July 2023; |
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5. |
To seek authorization to issue securities in one or more non-public offerings in accordance with Nasdaq Marketplace Rule 5635(d); |
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6. |
To approve any change of control under NASDAQ Marketplace Rule 5635 that may result from the potential issuance of securities in the non-public offerings; |
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7. |
To grant discretionary authority to our board of directors to (i) amend our certificate of incorporation to combine outstanding shares of our common stock into a lesser number of outstanding shares, or a “reverse stock split,” at a specific ratio within a range of one-for-[*] (1:[*]) to a maximum of a one-for-[*] (1:[*]) split, with the exact ratio to be determined by our board of directors in its sole discretion; and (ii) effect the reverse stock split, if at all, within one year of the date the proposal is approved by stockholders; |
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8. |
To approve an amendment to our 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) to increase the number of shares of common stock issuable thereunder to [*] shares from 60,000 shares; |
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9. |
To authorize the adjournment of the Annual Meeting if necessary or appropriate, including to solicit additional proxies in the event that there are not sufficient votes at the time of the Annual Meeting or adjournment or postponement thereof to approve any of the foregoing proposals; and |
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10. |
To transact such other matters as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
Our board of directors has
fixed , 2023 as the record date (the “Record Date”) for the determination
of stockholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment or postponement of the meeting.
IF YOU PLAN TO ATTEND:
To be admitted to the Annual
Meeting at you must have your control number available and follow the instructions found on your proxy card or voting instruction form.
You may vote during the Annual Meeting by following the instructions available on the meeting website during the meeting. Please allow
sufficient time before the Annual Meeting to complete the online check-in process. Your vote is very important.
If you have any questions
or need assistance voting your shares, please call Kingsdale Advisors at:
Strategic Stockholder Advisor and Proxy Solicitation
Agent
745 Fifth Avenue, 5th Floor, New York,
NY 10151
North American Toll Free Phone:
+1 (888) 564-7333
Email: contactus@kingsdaleadvisors.com
Call Collect Outside North America: +1 (416) 867-2272
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BY ORDER OF THE BOARD OF DIRECTORS |
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,
2023 |
/s/
Amro Albanna |
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Amro
Albanna
Chief Executive
Officer and Chairman of the Board of Directors |
Whether or not you expect
to attend the Annual Meeting virtually, we urge you to vote your shares via proxy at your earliest convenience. This will ensure the presence
of a quorum at the Annual Meeting. Promptly voting your shares will save the Company the expenses and extra work of additional solicitation.
Submitting your proxy now will not prevent you from voting your shares electronically at the Annual Meeting if you desire to do so, as
your proxy is revocable at your option. Your vote is important, so please act today!
737 N. Fifth Street, Suite 200
Richmond, VA 23219
PROXY STATEMENT FOR THE
2023 ANNUAL MEETING OF STOCKHOLDERS
To be held on , 2023
The board of directors of Aditxt,
Inc. (“Aditxt” or the “Company”) is soliciting your proxy to vote at the Annual Meeting of Stockholders (the “Annual
Meeting”) to be held on , 2023, at [*], in a virtual-only format online by accessing [*]
and at any adjournment thereof.
This proxy statement contains
information relating to the Annual Meeting. This year’s Annual Meeting of stockholders will be held as a virtual meeting. Stockholders
attending the virtual meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting.
You will be able to attend
and participate in the Annual Meeting online via a live webcast by visiting [*]. In addition
to voting by submitting your proxy prior to the Annual Meeting, you also will be able to vote your shares electronically during the Annual
Meeting.
Important Notice Regarding the Availability
of Proxy Materials
for the Annual Meeting of Stockholders to be Held on , 2023:
The Notice of Meeting, Proxy Statement, and 2022 Annual Report
on Form 10-K are available at:
[*]
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ADITXT, INC.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT
AND VOTING
What is a proxy?
A proxy is the legal designation
of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written
document, that document is also called a proxy or a proxy card. By completing, signing and returning the accompanying proxy card, you
are designating Amro Albanna, Chief Executive Officer, and Thomas J. Farley, Chief Financial Officer, as your proxies for the Annual Meeting
and you are authorizing Mr. Albanna and Mr. Farley to vote your shares at the Annual Meeting as you have instructed on the proxy
card. This way, your shares will be voted whether or not you attend the Annual Meeting. Even if you plan to attend the Annual Meeting,
we urge you to vote in one of the ways described below so that your vote will be counted even if you are unable or decide not to attend
the Annual Meeting.
What is a proxy statement?
A proxy statement is a document
that we are required by regulations of the U.S. Securities and Exchange Commission, or “SEC,” to give you when we ask
you to sign a proxy card designating Amro Albanna and Mr. Farley as proxies to vote on your behalf.
Why did you send me this proxy statement?
We sent you this proxy statement
and proxy card because our board of directors is soliciting your proxy to vote at the Annual Meeting and any adjournment and postponement
thereof. This proxy statement summarizes information related to your vote at the Annual Meeting. All stockholders who find it convenient
to do so are cordially invited to attend the Annual Meeting virtually. However, you do not need to attend the meeting to vote your shares.
Instead, you may simply complete, sign and return the proxy card or vote over the Internet, by phone, or by fax.
What Does it Mean if I Receive More than
one set of proxy materials?
If you receive more than one
set of proxy materials, your shares may be registered in more than one name or in different accounts. Please complete, sign, and return
each proxy card to ensure that all of your shares are voted.
How do I attend the Annual Meeting?
The Annual Meeting will
be held on , 2023, at [*] in a virtual format online by accessing [*]. Information on how to
vote in person at the Annual Meeting is discussed below.
Who is Entitled to Vote?
The board of directors has
fixed the close of business on , 2023 as the record date (the “Record Date”) for the determination of stockholders entitled
to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. On the Record Date, there were [*]
shares of common stock outstanding. Each share of common stock represents one vote that may be voted on each proposal that may come before
the Annual Meeting.
What is the Difference Between Holding Shares
as a Record Holder and as a Beneficial Owner (Holding Shares in Street Name)?
If your shares are registered
in your name with our transfer agent, VStock Transfer, LLC, you are the “record holder” of those shares. If you are a record
holder, these proxy materials have been provided directly to you by the Company.
If your shares are held in
a stock brokerage account, a bank or other holder of record, you are considered the “beneficial owner” of those shares held
in “street name.” If your shares are held in street name, the Notice has been forwarded to you by that organization. The organization
holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial owner,
you have the right to instruct this organization on how to vote your shares. See “How Will my Shares be Voted if I Give No
Specific Instruction?” below for information on how shares held in street name will be voted without instructions provided.
Who May Attend the Annual Meeting?
Only record holders and beneficial
owners of our common stock, or their duly authorized proxies, may attend the Annual Meeting. If your shares of common stock are held in
street name, you will need to provide a copy of a brokerage statement or other documentation reflecting your stock ownership as of the
Record Date.
What am I Voting on?
There are nine (9) matters
scheduled for a vote:
| 1. | To elect five (5) members to our board of directors; |
| 2. | To ratify the appointment of dbbmckennon as our independent
registered public accounting firm for the fiscal year ending December 31, 2023; |
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3. |
To approve, for the purposes of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying warrants originally issued by the Company in August 2022; |
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4. |
To approve, for the purpose of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying secured promissory notes originally issued by the Company in July 2023; |
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5. |
To seek authorization to issue securities in one or more non-public offerings in accordance with Nasdaq Marketplace Rule 5635(d); |
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6. |
To approve any change in control under Nasdaq Marketplace Rule 5635(d) that may result from the potential issuance of securities in the non-public offerings; |
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7. |
To grant discretionary authority to our board of directors to (i) amend our certificate of incorporation to combine outstanding shares of our common stock into a lesser number of outstanding shares, or a “reverse stock split,” at a specific ratio within a range of one-for-[*] (1:[*]) to a maximum of a one-for-[*] (1:[*]) split, with the exact ratio to be determined by our board of directors in its sole discretion; and (ii) effect the reverse stock split, if at all, within one year of the date the proposal is approved by stockholders. |
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8. |
To approve an amendment to our 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) to increase the number of shares of common stock issuable thereunder to [*] shares from 60,000 shares; |
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9. |
To authorize the adjournment of the Annual Meeting if necessary or appropriate, including to solicit additional proxies in the event that there are not sufficient votes at the time of the Annual Meeting or adjournment or postponement thereof to approve any of the foregoing proposals; |
What if another matter is properly brought
before the Annual Meeting?
The board of directors knows
of no other matters that will be presented for consideration at the Annual Meeting. The proxies also have discretionary authority to vote
to adjourn the Annual Meeting, including for the purpose of soliciting votes in accordance with our Board’s recommendations. If
any other matters are properly brought before the Annual Meeting, it is the intention of the person named in the accompanying proxy to
vote on those matters in accordance with his best judgment.
How Do I Vote?
![](https://www.sec.gov/Archives/edgar/data/1726711/000121390023055879/image_003.jpg) |
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![](https://www.sec.gov/Archives/edgar/data/1726711/000121390023055879/image_004.jpg) |
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![](https://www.sec.gov/Archives/edgar/data/1726711/000121390023055879/image_006.jpg) |
MAIL |
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INTERNET |
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PHONE |
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ONLINE AT THE MEETING |
Mailing your signed proxy
card or voter instruction
card to: Vote Processing
c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717 |
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Using the Internet at: www.proxyvote.com |
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1-800-690-6903 |
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You can vote at the meeting
at: |
Stockholders of Record
If you are a registered stockholder,
you may vote by mail, fax, Internet, phone or online at the Annual Meeting by following the instructions in the Notice. You also may submit
your proxy by mail by following the instructions included with your proxy card. The deadline for submitting your proxy by Internet is
11:59 p.m. Eastern Time on , 2023. Our Board’s designated proxies, Mr. Albanna and Mr. Farley, will vote your shares according
to your instructions. If you attend the live webcast of the Annual Meeting you also will be able to vote your shares electronically at
the meeting up until the time the polls are closed.
Beneficial Owners of Shares Held in Street
Name
If you are a street name holder,
your broker or nominee firm is the legal, registered owner of the shares, and it may provide you with the Notice. Follow the instructions
on the Notice to access our proxy materials and vote or to request a paper or email copy of our proxy materials. The materials include
a voting instruction card so that you can instruct your broker or nominee how to vote your shares. Please check the Notice or voting instruction
card or contact your broker or other nominee to determine whether you will be able to deliver your voting instructions by Internet in
advance of the meeting and whether, if you attend the live webcast of the Annual Meeting, you will be able to vote your shares electronically
at the meeting up until the time the polls are closed.
All shares entitled to vote
and represented by a properly completed and executed proxy received before the Annual Meeting and not revoked will be voted at the Annual
Meeting as instructed in a proxy delivered before the Annual Meeting. We provide Internet proxy voting to allow you to vote your shares
online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware
that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone
companies.
How Many Votes do I Have?
Holders of record of shares
of our common stock will be entitled to one vote for each share of common stock held by them on the Record Date and have the right to
vote on all matters brought before the Annual Meeting. The holder of record of the one outstanding share of our Series C preferred stock
will be entitled to [*] votes for each share of our Series C preferred stock held on the Record Date, and has the right to vote only
on the Reverse Stock Split proposal (“Proposal 7”), provided that such votes must be counted in the same proportion as the
shares of common stock voted on Proposal 7. As an example, if 50.5% of the shares of common stock are voted FOR Proposal 7, 50.5% of
the votes cast by the holder of the Series C preferred stock will be cast as votes FOR Proposal 7. Holders of common stock and Series
C preferred stock will vote on Proposal 7 as a single class.
Is My Vote Confidential?
Yes, your vote is confidential.
Only the inspector of elections, individuals who help with processing and counting your votes and persons who need access for legal reasons
will have access to your vote. This information will not be disclosed, except as required by law.
What Constitutes a Quorum?
To carry on business at
the Annual Meeting, we must have a quorum. A quorum is present when one-third of the shares entitled to vote, as of the Record Date,
are represented in person or by proxy. Thus, [*] shares must be represented in person or by proxy to have a quorum at the Annual Meeting.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank
or other nominee) or if you vote in person at the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum
requirement. Shares owned by the Company are not considered outstanding or considered to be present at the Annual Meeting. If there is
not a quorum at the Annual Meeting, either the chairperson of the Annual Meeting or our stockholders entitled to vote at the Annual Meeting
may adjourn the Annual Meeting.
How Will my Shares be Voted if I Give
No Specific Instruction?
We must vote your shares as
you have instructed. If there is a matter on which a stockholder of record has given no specific instruction but has authorized us generally
to vote the shares, they will be voted as follows:
| 1. | “For” the election of five (5) members to
our board of directors; |
| 2. | “For” the ratification of the appointment of
dbbmckennon as our independent registered public accounting firm for the fiscal year ending December 31, 2023; |
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3. |
“For” the approval, for purposes of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying warrants originally issued by the Company in August 2022; |
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4. |
“For” for the purpose of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying secured promissory notes originally issued by the Company in July 2023; |
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5. |
“For” authorization to issue securities in one or more non-public offerings in accordance with Nasdaq Marketplace Rule 5635(d); |
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6. |
“For” approval of any change in control under Nasdaq Marketplace Rule 5635(d) that may result from the potential issuance of securities in the non-public offerings; |
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7. |
“For” the grant of discretionary authority to our board of directors to (i) amend our certificate of incorporation to combine outstanding shares of our common stock into a lesser number of outstanding shares, or a “reverse stock split,” at a specific ratio within a range of one-for-[*] (1:[*]) to a maximum of a one-for-[*] (1:[*]) split, with the exact ratio to be determined by our board of directors in its sole discretion; and (ii) effect the reverse stock split, if at all, within one year of the date the proposal is approved by stockholders; and |
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8. |
“For” the approval of an amendment to our 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) to increase the number of shares of common stock issuable thereunder to [*] shares from 60,000 shares. |
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9. |
“For” the authorization to adjourn the Annual Meeting if necessary or appropriate, including to solicit additional proxies in the event that there are not sufficient votes at the time of the Annual Meeting or adjournment or postponement thereof to approve any of the foregoing proposals. |
This authorization would exist,
for example, if a stockholder of record merely signs, dates and returns the proxy card but does not indicate how its shares are to be
voted on one or more proposals. If other matters properly come before the Annual Meeting and you do not provide specific voting instructions,
your shares will be voted at the discretion of Amro Albanna and Thomas J. Farley, the board of directors’ designated proxies.
If your shares are held in
street name, see “What is a Broker Non-Vote?” below regarding the ability of banks, brokers and other such holders of record
to vote the uninstructed shares of their customers or other beneficial owners in their discretion.
How are Votes Counted?
Votes will be counted by the
inspector of election appointed for the Annual Meeting, who will separately count, for the election of directors, “For,” “Withhold”
and broker non-votes; and, with respect to the other proposals, votes “For” and “Against,” abstentions and broker
non-votes. Broker non-votes will not be included in the tabulation of the voting results of any of the proposals and, therefore, will
have no effect on such proposals.
What is a Broker Non-Vote?
A “broker non-vote”
occurs when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a proposal because
(1) the broker has not received voting instructions from the stockholder who beneficially owns the shares and (2) the broker
lacks the authority to vote the shares at their discretion.
Our common stock is listed
on the Nasdaq Capital Market. However, under current New York Stock Exchange (“NYSE”) rules and interpretations
that govern broker non-votes: (i) Proposal No. 1 for the election of directors is considered a non-discretionary matter, and
a broker will lack the authority to vote uninstructed shares at their discretion on such proposal; (ii) Proposal No. 2 for
the ratification of the appointment of dbbmckennon as our independent registered public accounting firm is considered a discretionary
matter, and a broker will be permitted to exercise its discretion to vote uninstructed shares on the proposal; (iii) Proposal No.
3 for the approval, for purposes of Nasdaq Marketplace Rule 5635(d), of the issuance of shares of common stock that may be issued upon
exercise of the warrants originally issued by the Company in August 2022 is considered a non-discretionary matter, and a broker will
not be permitted to exercise its discretion to vote uninstructed shares on the proposal; (iv) Proposal No. 4 for the approval,
for purposes of Nasdaq Marketplace Rule 5635(d), of the issuance of shares of common stock that may be issued upon conversion of promissory
notes originally issued by the Company in July 2023 is considered a non-discretionary matter, and a broker will not be permitted to exercise
its discretion to vote uninstructed shares on the proposal; (v) Proposal No. 5 for the authorization to issue securities in one or more
non-public offerings in accordance with Nasdaq Marketplace Rule 5635(d) is considered a non-discretionary matter, and a broker will not
be permitted to exercise its discretion to vote uninstructed shares on the proposal; (vi) Proposal No. 6 for the approval of any change
of control under Nasdaq Marketplace Rule 5635(d) that may result from the potential issuance of securities in the non-public offerings
is considered a non-discretionary matter, and a broker will not be permitted to exercise its discretion to vote uninstructed shares on
the proposal; (vii) Proposal No. 7 for the approval of the reverse stock split is considered a discretionary matter, and a broker
will be permitted to exercise its discretion to vote uninstructed shares on the proposal; (viii) Proposal No. 8 for the approval of an
amendment our 2021 Plan to increase the number of shares of common stock issuable thereunder, is considered a non-discretionary matter,
and a broker will lack the authority to vote uninstructed shares at their discretion on such proposal; and (ix) Proposal No. 9 for the
authorization to adjourn the Annual Meeting if necessary or appropriate, including to solicit additional
proxies in the event that there are not sufficient votes at the time of the Annual Meeting or adjournment or postponement thereof to
approve any of the foregoing proposals is considered a non-discretionary matter, and a broker will not be permitted to exercise
its discretion to vote uninstructed shares on the proposal. Because NYSE rules apply to all brokers that are members of the NYSE, this
prohibition applies to the Annual Meeting even though our common stock is listed on the Nasdaq Capital Market.
What is an Abstention?
An abstention is a stockholder’s
affirmative choice to decline to vote on a proposal. Under Delaware law, abstentions are counted as shares present and entitled to vote
at the Annual Meeting. Generally, unless provided otherwise by applicable law, our amended and restated bylaws (the “Bylaws”)
provide that an action of our stockholders (other than the election of directors) is approved if a majority of the number of shares of
stock entitled to vote thereon and present (either in person or by proxy) vote in favor of such action. Therefore, abstentions will have
no effect with respect to Proposals 1, 2, 3, 4, 5, 6, 8 and 9. Abstentions will have the effect of a vote “against” Proposal
7.
How many votes are required to approve each
proposal?
The table below summarizes
the proposals that will be voted on, the vote required to approve each item and how votes are counted:
Proposal |
|
Votes
Required |
|
Voting
Options |
|
Impact
of
“Withhold” or
“Abstain” Votes |
|
Broker
Discretionary
Voting Allowed |
Proposal No.
1:
Election
of Directors |
|
The plurality of the votes cast. This means that the
nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. |
|
“FOR” “WITHHOLD” |
|
None(1) |
|
No(3) |
|
|
|
|
|
|
|
|
|
Proposal No.
2:
Ratification
of Appointment of Independent Registered Public Accounting Firm |
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The affirmative vote of the holders of a majority in
voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled
to vote thereon. |
|
“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
Yes(4) |
|
|
|
|
|
|
|
|
|
Proposal No.
3:
Approval
of, for purposes of Nasdaq Rule 5635(d), the issuance of shares of common stock that may be issued upon exercise of the warrants
originally issued by the Company in August 2022 |
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The affirmative vote of the holders of a majority in
voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled
to vote thereon. |
|
“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
No(3) |
|
|
|
|
|
|
|
|
|
Proposal No.
4:
Approval
of, for purposes of Nasdaq Rule 5635(d), the issuance of shares of common stock that may be issued upon conversion of promissory
notes originally issued by the Company in July 2023 |
|
The affirmative vote of the holders of a majority in
voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled
to vote thereon. |
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“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
No(3) |
|
|
|
|
|
|
|
|
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Proposal No. 5: Authorization to issue securities in one or more non-public offerings in accordance with Nasdaq Marketplace Rule 5635(d) |
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The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled to vote thereon. |
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“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
No(3) |
Proposal |
|
Votes
Required |
|
Voting
Options |
|
Impact
of
“Withhold” or
“Abstain” Votes |
|
Broker
Discretionary
Voting Allowed |
Proposal No. 6: Approval of any change in control under Nasdaq Marketplace Rule 5635(d) that may result from the potential issuance of securities in the non-public offerings; |
|
The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled to vote thereon. |
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“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
No(3) |
|
|
|
|
|
|
|
|
|
Proposal No. 7: Authorization of the reverse stock split |
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The affirmative vote of the holders of a majority of the outstanding shares of our common stock. |
|
“FOR” “AGAINST” “ABSTAIN” |
|
(5) |
|
No(3) |
|
|
|
|
|
|
|
|
|
Proposal No. 8: Approval of an increase in number of shares of
common stock issuable under the 2021 Plan |
|
The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled to vote thereon. |
|
“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
No(3) |
|
|
|
|
|
|
|
|
|
Proposal No. 9: To authorize the adjournment of the Annual Meeting if necessary or appropriate |
|
The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Annual Meeting by the holders entitled to vote thereon. |
|
“FOR” “AGAINST” “ABSTAIN” |
|
None(2) |
|
No(3) |
| (1) | Votes that are “withheld” will have the same effect
as an abstention and will not count as a vote “FOR” or “AGAINST” a director, because directors are elected by
plurality voting. |
| (2) | A vote marked as an “Abstention” is not considered
a vote cast and will, therefore, not affect the outcome of this proposal. |
| (3) | As this proposal is not considered a discretionary matter, brokers
lack authority to exercise their discretion to vote uninstructed shares on this proposal. |
| (4) | As this proposal is considered a discretionary matter, brokers
are permitted to exercise their discretion to vote uninstructed shares on this proposal. |
| (5) | Abstentions will have the effect of a vote against this proposal. |
What Are the Voting Procedures?
In voting by proxy with regard
to the election of directors, you may vote in favor of all nominees, withhold your votes as to all nominees, or withhold your votes as
to specific nominees. With regard to other proposals, you may vote in favor of or against the proposal, or you may abstain from voting
on the proposal. You should specify your respective choices on the accompanying proxy card or your vote instruction form.
Is My Proxy Revocable?
You may revoke your proxy and
reclaim your right to vote at any time before your proxy is voted by giving written notice to the Corporate Secretary of the Company by
delivering a properly completed, later-dated proxy card or vote instruction form or by voting in person at the Annual Meeting. All written
notices of revocation and other communications with respect to revocations of proxies should be addressed to: Aditxt, Inc., 737 N. Fifth
Street, Suite 200, Richmond, VA 23219. Attention: Corporate Secretary. Your most current proxy card or Internet proxy is the one
that will be counted.
Who is Paying for the Expenses Involved in
Preparing and Mailing this Proxy Statement?
All of the expenses involved
in preparing, assembling and mailing these proxy materials and all costs of soliciting proxies will be paid by us. In addition to the
solicitation by mail, proxies may be solicited by our officers and other employees by telephone or in person. Such persons will receive
no compensation for their services other than their regular salaries. Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial owners of the shares held of record by such persons, and
we may reimburse such persons for reasonable out of pocket expenses incurred by them in forwarding solicitation materials. We have retained
Kingsdale Advisors as our strategic stockholder advisor and proxy solicitation agent in connection with the solicitation of proxies for
the Annual Meeting. If you have any questions or require any assistance with completing your proxy, please contact Kingsdale Advisors
by telephone [(toll-free within North America) at +1 (866) 581-1489 or (call collect outside North America) at +1 (416) 867-2272
or by email at contactus@kingsdaleadvisors.com.
Do I Have Dissenters’ Rights of
Appraisal?
Stockholders do not have appraisal
rights under Delaware law or under the Company’s governing documents with respect to the matters to be voted upon at the Annual
Meeting.
How can I Find out the Results of the
Voting at the Annual Meeting?
Preliminary voting results
will be announced at the Annual Meeting. In addition, final voting results will be disclosed in a Current Report on Form 8-K that
we expect to file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us
in time to file a Form 8-K with the SEC within four business days after the Annual Meeting, we intend to file a Form 8-K
to publish preliminary results and, within four business days after the final results are known to us, file an amended Form 8-K
to publish the final results.
PROPOSAL No.
1:
ELECTION OF DIRECTORS
Board Size and Structure
Our amended and restated Certificate
of incorporation, as amended (the “Certificate of Incorporation”), and our Bylaws provide that our business is to be managed
under the direction of our board of directors. Our board of directors is required to consist of not less than one (1) director but
not more than nine (9) directors. The number of directors is currently fixed at five (5) by resolution of the board of directors.
Our board of directors currently
consists of five (5) directors. Our Certificate of Incorporation provides that the number of directors on our board of directors
shall be fixed exclusively by resolution adopted by our board of directors or by our stockholders. At each annual meeting, directors shall
be elected by the stockholders for a term of one (1) year. Each director shall serve until his or her successor is duly elected and
qualified or until the director’s earlier death, resignation or removal.
When considering whether directors
have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight
responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each person’s background
and experience as reflected in the information discussed in each of the directors’ individual biographies set forth below. We believe
that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.
Pursuant to Delaware law and
our Certificate of Incorporation, directors may be removed, with or without cause, by the affirmative vote of the holders of a majority
of the shares then entitled to vote at an election of directors.
Nominees for Election
Amro Albanna, Shahrokh Shabahang,
D.D.S., MS, Ph.D., Brian Brady, Namvar Kiaie, and Jeffrey Runge, M.D. have been nominated by the board of directors to stand for election
at the Annual Meeting. If elected by the stockholders at the Annual Meeting, Messrs. Albanna, Brady, Kiaie, Dr. Shabahang, and Dr. Runge
will serve for a term expiring at the annual meeting to be held in 2024 (the “2024 Annual Meeting”) and the election and qualification
of their successors or until their earlier death, resignation or removal.
Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any nominee will be unable to serve. If, however, prior to
the Annual Meeting, the board of directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise
would have been voted for this nominee will be voted for a substitute nominee as selected by the board of directors. Alternatively, the
proxies, at the board of directors’ discretion, may be voted for that fewer number of nominees as results from the inability of
any nominee to serve. The board of directors has no reason to believe that any nominee will be unable to serve.
Information About Board Nominees
The following pages contain
certain biographical information for the nominees for director, including all positions currently held, their principal occupation and
business experience for the past five years, and the names of other publicly-held companies of which such nominee currently serves
as a director or has served as a director during the past five years.
Amro Albanna. Mr. Albanna
has been our Chief Executive Officer and a Director since we were formed in 2017. He also served as our President from our inception through
September 2021. In 2010, Mr. Albanna co-founded Innovation Economy Corporation (“IEC”), formed to license and commercialize
innovations and create a group of life and health subsidiaries. From 2010 until 2017, Mr. Albanna was Chief Executive Officer and
a Director of IEC and Olfactor Laboratories, Inc., a majority-owned subsidiary of IEC. From 2010 to August 2016, he was the
Chief Executive Officer and a Director of Nano Engineered Applications, Inc., another majority-owned subsidiary of IEC. In 2003,
Mr. Albanna founded Qmotions, Inc. (subsequently renamed Deal A Day Group Corp.). He served as its Chief Executive Officer and a
Director until 2011. Qmotions, Inc. used 3-D spatial tracking and pattern recognition technologies to develop motion-capturing video game controllers.
In 2002, Mr. Albanna was a co-founder of Digital Angel Corporation — a company formed via the merger of three private
companies (one being TTC below) into a fourth publicly traded company (American Stock Exchange) and was placed in charge of commercializing
its GPS/wireless technologies. Around that time, Mr. Albanna co-founded an incubator for startups at the University of California,
Riverside Research Park which was acquired in 2007. In 1997, he founded Timely Technology Corporation (“TTC”), which designed
and developed e-commerce software for education, retail and finance. TTC was acquired in 2000 by a Nasdaq-listed company. Mr. Albanna
graduated from California State University San Bernardino in 1991 with a B.S. in Business Administration with concentration in Computer
Information Systems. He completed graduate coursework in Computer Science and Engineering at California State University, Long Beach from
1992 to 1993. In 2019, Mr. Albanna completed coursework in Immunology and Genetics at Harvard Medical School HMX online learning
platform. We believe that Mr. Albanna’s expertise leading technology companies across various sectors, leading private and
public financing, and in positioning companies for mergers and acquisitions, qualifies him to serve as a director of our Company.
Shahrokh Shabahang, D.D.S.,
MS, Ph.D. Dr. Shabahang has been our Chief Innovation Officer and Director since our inception. In 2009, Dr. Shabahang
co-founded Sekris Biomedical Inc. to incubate immunotherapy technologies. He served as its Chairman of the board and Chief Executive
Officer since its inception. In 2004, Dr. Shabahang joined Genelux Corporation (“Genelux”) to lead its clinical development
program and to serve as board secretary. Genelux developed an oncolytic virus technology for treatment of cancer, co-invented by Dr. Shabahang.
During his tenure from 2004-2007, Genelux raised $20M+ and obtained regulatory approval to initiate First-In-Human clinical studies
in Europe with patients who had not responded to chemotherapy. In 2001, Dr. Shabahang became the Director of the Microbiology and
Molecular Biology Lab at Loma Linda University (“LLU”). He led the research and development of an antimicrobial therapeutic
agent for treatment of dental infections, which was licensed and marketed by one of the largest dental distribution companies. Dr. Shabahang
attended the University of California, Santa Barbara from 1982 to 1984 and later received his D.D.S. from the University of the Pacific
in 1987. He earned his Ph.D. in Microbiology and Molecular Genetics at LLU in 2001. During the same year, he established his laboratory
at LLU to study infectious diseases and host immune responses. We believe that Dr. Shabahang’s experience leading biotech
startups, leading clinical development programs, and his expertise in immunology and immune tolerance qualifies him to serve as a director
of our Company.
Brian Brady. Mr. Brady
has served as a Director since December 1, 2018. Mr. Brady has also been the Director of Investments at a large hospital system
since March 2016, where he is responsible for the management of investment activity related to the organization and personal investments
of the family that owns that company. From December 2011 to March 2016, Mr. Brady was the Vice President/Portfolio Manager
at a wealth advisory firm, where he served in an investment advisory role, including asset and portfolio management. Mr. Brady graduated
in 2001 with a Bachelor’s degree in Finance from the University of Illinois at Chicago and in 2014 with a Master of Business Administration
degree from the University of Chicago. We believe that Mr. Brady’s extensive experience with financial markets and management
of investment activities qualifies him to serve as a director of our Company.
Namvar Kiaie. Mr. Kiaie
has served as a director since July 2020. Mr. Kiaie has been associated with Abbott Diabetes Care since December 2005 (Director
of Engineering 2005-2007; R&D Director 2007-2010; and Senior Director of R&D 2010-present), where he is responsible
for the development of diabetes management related products and accessories, including blood glucose monitoring devices and data management
software. Mr. Kiaie graduated in 1985 with a Bachelor of Science degree in Electrical Engineering and in 1986 with a Master of Science
degree in Electrical Engineering, both from the University of California Santa Barbara. We believe that Mr. Kiaie’s extensive
experience leading research and development efforts in the biotech industry qualifies him to serve as a director of our Company.
Jeffrey Runge, M.D. Dr. Runge
has served as a director since July 2020. From 2008 to the present, Dr. Runge has been the President and founder of Biologue,
Inc., which provides consulting in biodefense, medical preparedness and injury control. From 2001 through August of 2008, Dr. Runge
served in the Bush administration, first as the head of the National Highway Traffic Safety Administration, and, beginning in September 2005,
as the Department of Homeland Security’s (DHS) first Chief Medical Officer. Dr. Runge founded the DHS Office of Health Affairs
and was confirmed by the United States Senate as DHS’ first Assistant Secretary for Health Affairs in December of 2007. Dr. Runge
also served as Acting DHS Undersecretary for Science and Technology from February through August 2006. In his role at DHS, Dr. Runge
oversaw the operations of the department’s biodefense activities, medical preparedness and workforce health protection, as well
as fulfilling DHS’ responsibilities in medical countermeasure development. Prior to his government service, Dr. Runge was Assistant
Chairman and Director of Clinical Research in the Department of Emergency Medicine at Carolinas Medical Center in Charlotte, NC, from
1984 through 2001. Additionally, Dr. Runge is a Senior Advisor at The Chertoff Group, a firm providing advisory services in business
risk management, security and homeland defense. Since 2010, Dr. Runge has served on the boards of two public companies, including
their Audit and Compensation committees, both of which underwent strategic acquisitions. He has also served as President and CEO of a
SEC-regulated startup company in the health sector. Dr. Runge earned his medical degree from the Medical University of South Carolina
and his undergraduate degree from the University of the South. We believe that Dr. Runge’s experience in medicine, medical
research, public service, business and his prior service on public corporate boards qualifies him to serve as a director of our Company.
Board Leadership Structure and Risk Oversight
The Board oversees our business
and considers the risks associated with our business strategy and decisions. The Board currently implements its risk oversight function
as a whole. Each of the Board committees, when established, will also provide risk oversight in respect of its areas of concentration
and reports material risks to the Board for further consideration.
Term of Office
Officers hold office until
his or her successor is elected and qualified. Directors are appointed to serve for one year until the meeting of the Board following
the annual meeting of stockholders and until their successors have been elected and qualified.
Director Independence
We use the definition of “independence”
of The Nasdaq Stock Exchange LLC (“Nasdaq”) listing rules to make this determination. Nasdaq listing rules provide that an
“independent director” is one who the board “affirmatively determines” has no “material relationship”
with the company “either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company.
Nasdaq listing rules provide that a director cannot be considered independent if:
| ● | the director is, or has been within the last three (3) years,
an employee of the Company or an immediate family member of director is, or has been within the last three (3) years, an executive
officer of the Company; |
| ● | the director has received, or has an immediate family member
who is an executive officer of the Company and has received, during any twelve-month period within the last three (3) years, more
than $120,000 compensation directly from the Company (not including compensation received for director service, pension plan payments
or deferred compensation for prior service not contingent on continued service); |
| ● | the director or an immediate family member is a current partner
of the Company’s internal or external auditor; the director is a current employee of the auditor; an immediate family member is
a current employee of the auditor and personally works on the Company’s audit; or the director or an immediate family member was
within the last three (3) years a partner or employee of the auditor and personally worked on the Company’s audit within that
time; |
| ● | the director or an immediate family member is, or has been
within the last three (3) years, employed as an executive officer of another company where any of the Company’s present executive
officers at the same time serves or served on that company’s compensation committee; or |
| ● | the director is a current employee, or an immediate family
member is a current executive officer, of an organization that has made to or received from the Company payments for property or services
in an amount which, in any of the last three fiscal (3) years, exceeds greater of 2% of such other company’s consolidated
gross revenues or $1 million. Charitable contributions not considered “payments” for purposes of this prohibition but
contributions meeting these thresholds must be disclosed on the Company’s website or in its annual proxy statement or its Annual
Report on Form 10-K. |
Under such definitions, we consider Mr. Kiaie,
Mr. Brady, and Dr. Runge to be “independent.” Nasdaq listing rules permits a phase-in period of up to one year for
an issuer registering securities in an initial public offering to comply with its requirement that a majority of the board of directors
be made up of independent directors. However, our common stock is not currently quoted or listed on any national exchange or interdealer
quotation system with a requirement that a majority of our Board be independent and, therefore, the Company is not subject to any director
independence requirements. We are subject to Nasdaq’s director independence requirements and are required to structure our board
of directors accordingly.
Committees of the Board
Our board of directors has
established three standing committees: Audit, Compensation, and Nominating and Corporate Governance. Each of these standing committees
operate pursuant to its respective charter. The committee charters are reviewed annually by the Nominating and Corporate Governance Committee.
If appropriate, and in consultation with the chairs of the other committees, the Nominating and Corporate Governance Committee may propose
revisions to the charters. The responsibilities of each committee are described in more detail below.
Nasdaq listing rules permits
a phase-in period for an issuer registering securities in an initial public offering to meet the Audit Committee, Compensation Committee
and Nominating and Corporate Governance Committee independence requirements. Under the initial public offering phase-in period, only one
member of each committee is required to satisfy the heightened independence requirements at the time our registration statement becomes
effective, a majority of the members of each committee must satisfy the heightened independence requirements within 90 days following
the effectiveness of our registration statement, and all members of each committee must satisfy the heightened independence requirements
within one year from the effectiveness of our registration statement.
The composition and functions
of each committee are described below.
Name | |
Independent | |
Audit | |
Compensation | |
Nominating and Corporate Governance |
Amro Albanna | |
| |
| |
| |
|
Shahrokh Shabahang, D.D.S., MS, Ph.D. | |
| |
| |
| |
|
Brian Brady | |
X | |
X* | |
X | |
X |
Namvar Kiaie | |
X | |
X | |
X* | |
X |
Jeffrey Runge, M.D. | |
X | |
X | |
X | |
X* |
| * | Chairman of the committee |
Audit Committee
The Audit Committee, among
other things, is responsible for:
| ● | appointing; approving the compensation of; overseeing the
work of; and assessing the independence, qualifications, and performance of the independent auditor; |
| ● | reviewing the internal audit function, including its independence,
plans, and budget; |
| ● | approving, in advance, audit and any permissible non-audit
services performed by our independent auditor; |
| ● | reviewing our internal controls with the independent auditor,
the internal auditor, and management; |
| ● | reviewing the adequacy of our accounting and financial controls
as reported by the independent auditor, the internal auditor, and management; |
| ● | overseeing our financial compliance system; and |
| ● | overseeing our major risk exposures regarding the Company’s
accounting and financial reporting policies, the activities of our internal audit function, and information technology. |
The Board has affirmatively
determined that each member of the Audit Committee meets the additional independence criteria applicable to audit committee members under
SEC rules and Nasdaq listing rules. The Board has adopted a written charter setting forth the authority and responsibilities of the Audit
Committee. The Board has affirmatively determined that each member of the Audit Committee is financially literate, and that Mr. Brady
meets the qualifications of an Audit Committee financial expert.
The Audit Committee consists
of Mr. Brady, Mr. Kiaie, and Dr. Runge. Mr. Brady chairs the Audit Committee.
Compensation Committee
The Compensation Committee
is responsible for:
| ● | reviewing and making recommendations to the Board with respect
to the compensation of our officers and directors, including the CEO; |
| ● | overseeing and administering the Company’s executive
compensation plans, including equity-based awards; |
| ● | negotiating and overseeing employment agreements with officers
and directors; and |
| ● | overseeing how the Company’s compensation policies
and practices may affect the Company’s risk management practices and/or risk-taking incentives. |
The Board has adopted a written
charter setting forth the authority and responsibilities of the Compensation Committee.
The Compensation Committee
consists of Mr. Brady, Mr. Kiaie, and Dr. Runge. Mr. Kiaie serves as chairman of the Compensation Committee. The Board
has affirmatively determined that each member of the Compensation Committee meets the independence criteria applicable to compensation
committee members under SEC rules and Nasdaq listing rules.
Nominating and Corporate Governance Committee
The Nominating and Corporate
Governance Committee, among other things, is responsible for:
| ● | reviewing and assessing the development of the executive
officers and considering and making recommendations to the Board regarding promotion and succession issues; |
| ● | evaluating and reporting to the Board on the performance
and effectiveness of the directors, committees and the Board as a whole; |
| ● | working with the Board to determine the appropriate and desirable
mix of characteristics, skills, expertise and experience, including diversity considerations, for the full Board and each committee; |
| ● | annually presenting to the Board a list of individuals recommended
to be nominated for election to the Board; |
| ● | reviewing, evaluating, and recommending changes to the Company’s
Corporate Governance Principles and Committee Charters; |
| ● | recommending to the Board individuals to be elected to fill
vacancies and newly created directorships; |
| ● | overseeing the Company’s compliance program, including
the Code of Conduct; and |
| ● | overseeing and evaluating how the Company’s corporate
governance and legal and regulatory compliance policies and practices, including leadership, structure, and succession planning, may
affect the Company’s major risk exposures. |
The Board of Directors has
adopted a written charter setting forth the authority and responsibilities of the Nominating and Corporate Governance Committee.
The Nominating and Corporate
Governance Committee consists of Dr. Runge, Mr. Brady, and Mr. Kiaie. Dr. Runge serves as chairman of the Nominating
and Corporate Governance Committee. The Company’s Board of Directors has determined that each member of the Nominating and Corporate
Governance Committee is independent within the meaning of the independent director guidelines of Nasdaq listing rules.
Compensation Committee Interlocks and Insider
Participation
None of the Company’s
executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee
serving an equivalent function, of any entity that has one or more executive officers who serve as members of the Company’s board
of directors or its compensation committee. None of the members of the Company’s compensation committee is, or has ever been, an
officer or employee of the Company.
Code of Business Conduct and Ethics
The Company’s board of
directors adopted a code of business conduct and ethics applicable to its employees, directors and officers, in accordance with applicable
U.S. federal securities laws and the corporate governance rules of the Nasdaq Capital Market. The code of business conduct and ethics
is publicly available on the Company’s website. Any substantive amendments or waivers of the code of business conduct and ethics
or code of ethics for senior financial officers may be made only by the Company’s board of directors and will be promptly disclosed
as required by applicable U.S. federal securities laws and the corporate governance rules of the Nasdaq Capital Market.
Corporate Governance Guidelines
The Company’s board of
directors has adopted corporate governance guidelines in accordance with the corporate governance rules of the Nasdaq Capital Market.
Involvement in Certain Legal Proceedings
To our knowledge, none of our
current directors or executive officers has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to
a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| ● | had any bankruptcy petition filed by or against the business
or property of the person, or of any partnership, corporation or business association of which he or she was a general partner or executive
officer, either at the time of the bankruptcy filing or within two years prior to that time; |
| ● | been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking,
savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| ● | been found by a court of competent jurisdiction in a civil
action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and
the judgment has not been reversed, suspended, or vacated; |
| ● | been the subject of, or a party to, any federal or state
judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement
of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law
or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary
or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order,
or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;
or |
| ● | been the subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the
Securities Exchange Act of 1934, as amended (the Exchange Act)), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over
its members or persons associated with a member. |
Except as set forth above and
in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers
has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required
to be disclosed pursuant to the rules and regulations of the SEC.
Other than as set forth below,
we are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, we believe will
have a material adverse effect on our business, financial condition or operating results.
The Company, Amro Albanna,
our Chief Executive Officer, and Dr. Shahrokh Shabahang, our Chief Innovation Officer, have been named as cross-defendants in a counterclaim
filed by Christopher Sechrist in an action entitled Shahrokh Shabahang v. Christopher Sechrist, San Bernardino County Superior Court Case
No. CIVDS1831323. In a cross-complaint, Mr. Sechrist contends that he was a partner in a dental practice with Dr. Shabahang,
and that disputes arose as between those partners. Neither the Company nor Mr. Albanna were partners in, or otherwise have an interest
in, the dental practice. Notwithstanding, and seemingly based solely on the fact that Dr. Shabahang became the Chief Innovation Officer
for the Company, Mr. Sechrist has brought claims against the Company and Mr. Albanna. Both the Company and Mr. Albanna
believe that the Counterclaims filed by Mr. Sechrist have no factual or legal merit, and they intend to vigorously defend themselves
in the action and to seek a dismissal of the case as against them as soon as possible. On May 26, 2020, Mr. Sechrist filed a
request for dismissal as to the Company and Mr. Albanna with the Superior Court of California, County of San Bernardino, San Bernardino
District. The clerk of the court entered the dismissal with prejudice on May 26, 2020.
Our Chief Executive Officer,
Amro Albanna, is a party to litigation matters unrelated to the Company or any of its properties. Such litigations relate to Innovation
Economy Corporation (IEC), a company in which Mr. Albanna served as the CEO and a Director from 2010 until 2017, and its wholly-owned
subsidiaries (Innovation Economy Corporation d/b/a ieCrowd). The first litigation (ieCrowd v. Kim, et. al, Superior Court, Riverside
County) was originally commenced by IEC and its subsidiary after Mr. Albanna was no longer affiliated with IEC, against certain third-party
defendants based upon claims related to their misconduct and mismanagement. Such defendants subsequently brought a countersuit against
IEC and its subsidiary, in which they named Mr. Albanna and others as defendants, alleging that they were misled to invest in IEC
and its subsidiary based upon misrepresentations by, among others, Mr. Albanna. The cases have now been consolidated. Mr. Albanna
believes that the counteraction commenced by the third parties against him is without merit and intends to defend himself. The
second matter (Calabria v. ieCrowd) was commenced by Calabria Ventures (the “Calabria Action”) more than 2 years
after Mr. Albanna was no longer affiliated with IEC, related to uncollected rent. Mr. Albanna believes that the action
commenced against him is without merit and intends to defend himself. IEC (either directly or through its Director and officer
insurance policy) has covered all related legal costs to date. On August 5, 2020, the plaintiff in the Calabria Action filed a request
for dismissal as to Mr. Albanna with the Superior Court of California, County of Riverside. The clerk of the court entered the dismissal
without prejudice on August 5, 2020.
Director Compensation
The Company accrued or paid
compensation to its directors for serving in such capacity, as shown in the table below.
Director | |
Year | | |
Option Awards | | |
Restricted Stock Unit Awards | | |
Fees Earned or Paid in Cash | | |
Total | |
Amro Albanna | |
| 2022 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Shahrokh Shabahang, D.D.S., MS, Ph.D. | |
| 2022 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Brian Brady | |
| 2022 | | |
$ | - | | |
$ | - | | |
$ | 15,000 | | |
$ | 15,000 | |
Namvar Kiaie | |
| 2022 | | |
$ | - | | |
$ | - | | |
$ | 15,000 | | |
$ | 15,000 | |
Jeffrey Runge, M.D. | |
| 2022 | | |
$ | - | | |
$ | - | | |
$ | 15,000 | | |
$ | 15,000 | |
Option awards represent granted
options at the fair market value as of the date of grant. Restricted stock unit awards represent granted restricted stock unit awards
at the fair market value as of the grant date.
On September 18, 2021,
the Board of Directors adopted a director compensation program for the Company’s independent directors consisting of both cash and
equity compensation, beginning in October 2021. The program consists of the following compensation for directors:
Cash Compensation (payable quarterly)
| ● | Board service — $11,000 per year |
| ● | Chairperson of the Audit Committee — additional
$4,000 per year |
| ● | Chairperson of the Compensation Committee — additional
$4,000 per year |
| ● | Chairperson of the Nominating and Corporate Governance Committee — additional
$4,000 per year |
Required Vote for Approval
A plurality of the votes cast
at the Annual Meeting is required to elect a nominee as a director.
Board Recommendation
The board of directors unanimously
recommends a vote “FOR” the election of Amro Albanna, Shahrokh Shabahang, D.D.S., MS, Ph.D., Brian Brady, Namvar
Kiaie, and Jeffrey Runge, M.D. as directors of the Company.
EXECUTIVE OFFICERS
The table below identifies
and sets forth certain biographical and other information regarding our executive officers as of date of this proxy statement. Other than
as disclosed below, there are no family relationships among any of our executive officers or directors.
Name |
|
Age |
|
|
Positions |
Amro Albanna |
|
|
53 |
|
|
Chief Executive Officer, Director |
Corinne Pankovcin |
|
|
56 |
|
|
Chief Commercialization Officer |
Shahrokh Shabahang, D.D.S., MS, Ph.D. |
|
|
60 |
|
|
Chief Innovation Officer, Director |
Rowena Albanna |
|
|
57 |
|
|
Chief Operating Officer |
Thomas J. Farley |
|
|
50 |
|
|
Chief Financial Officer |
Matthew Shatzkes |
|
|
36 |
|
|
Chief Legal Officer and General Counsel |
See “Proposal No. 1 — Election
of Directors” for biographical and other information regarding Mr. Albanna and Dr. Shabahang.
Corinne Pankovcin — Chief
Commercialization Officer
Ms. Pankovcin has been our
Chief Commercialization Officer since April 12, 2023. Ms. Pankovcin served as our President from September 2021 through April 2023. Ms.
Pankovcin served as our Chief Financial Officer from July 2020 through August 2021. From December 2015 to July 2019, Ms. Pankovcin
was the Chief Financial Officer and Managing Director and Treasurer of Business Development Corporation of America (“BDCA”),
a business development company. Prior thereto, from January 2011 to August 2015, Ms. Pankovcin was the Chief Financial Officer
and Treasurer of Blackrock Capital Investment Corporation (NASDAQ: BKCC), and a Managing Director of Finance at BlackRock Investment
Management LLC. Prior to joining BlackRock, Ms. Pankovcin was a senior member of Finance & Accounting of Alternative Investments
and served as Chief Financial Officer for the Global Emerging Markets products group at AIG Capital Partners. Ms. Pankovcin began her
career with PricewaterhouseCoopers LLP, where she ultimately held the role of Senior Manager of Business Assurance for Consumer Products,
Manufacturing, and Middle Market industries from 1991 to 2001. Ms. Pankovcin earned her B.S. in Accounting from Dowling College and her
Master’s Degree in Business Administration from Hofstra University. She is a Certified Public Accountant.
Rowena Albanna — Chief Operating
Officer
Ms. Albanna has been
our Chief Operating Officer since July 2020. From 2017 to immediately prior to her appointment as Chief Operating Officer, Ms.
Albanna was an independent operations consultant for the Company. Prior thereto, from 2013 to 2017, Ms. Albanna was the Chief
Operating Officer of Innovation Economy Corporation (“IEC”), formed to license and commercialize innovations and create
a group of life and health subsidiaries. From 2010 to 2013, Ms. Albanna was Senior Vice President of IEC. From 2004 to
2009, Ms. Albanna was the founder and principal of Weezies, an online-based business focused on building and operating e-commerce
stores and affiliate marketing sites. From 2003 to 2004, Ms. Albanna was the head of Product Development and Engineering of Qmotions
Inc. Qmotions, Inc. used 3-D spatial tracking and pattern recognition technologies to develop motion-capturing video game
controllers. In 2002, Ms. Albanna was VP of Product Development at Digital Angel Systems where she led the development of devices
which combined GPS, wireless, and biosensing. Prior to that, Ms. Albanna held multiple product development roles with increasing
responsibilities for various technology companies in the areas of financial, medical, telecommunications, integrated circuit layout
design, and defense. Ms. Albanna is a co-inventor of two patents related to systems for localizing, monitoring, and sensing objects.
Ms. Albanna received a Bachelor of Science degree in Computer Science with a minor in Mathematics from California State University,
San Bernardino in 1988. Ms. Albanna is the wife of Amro Albanna, our Chief Executive Officer.
Thomas J. Farley, CPA — Chief
Financial Officer
Mr. Farley has been
the Chief Financial Officer since September 2021. Prior to this, Mr. Farley was the Principal Accounting Officer and Controller
from October of 2020 to September 2021. From December 2015 to June 2020, Mr. Farley was the Controller of Business
Development Corporation of America (“BDCA”), a publicly listed business development company. Prior thereto, from January 2011
to August 2015, Mr. Farley was the Senior Controller of Blackrock Capital Investment Corporation (NASDAQ: BKCC). Prior
to joining BlackRock Capital Investment Corporation, Mr. Farley was a Senior Controller for PineBridge Investments Emerging Markets
practice. Mr. Farley was also an Accounting Manager for Bessemer Venture Partners prior to his tenure at PineBridge. Mr. Farley began
his career with PricewaterhouseCoopers LLP, from 1996 to 2001. Mr. Farley earned his B.S. in Accounting from Long Island University
and is a Certified Public Accountant.
Matthew Shatzkes, Esq. – Chief Legal
Officer and General Counsel
Mr. Shatzkes has been the
Chief Legal Officer and General Counsel of Aditxt since January 2022. Prior to this role, Mr. Shatzkes was a partner at an international
AM Law 50 law firm where he advised a wide variety of healthcare related entities, including biotech companies, on corporate, regulatory,
and strategic business matters. In his current role, Mr. Shatzkes oversees all aspects of the legal functions at Aditxt, including, providing
advice and counsel on governance, regulatory matters, strategic alliances, mergers and acquisitions, and commercial transactions.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table represents
information regarding the total compensation for the named executive officers of the Company as of December 31, 2022 and 2021:
Name and Principal
Position | |
Year | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
Restricted Stock Units ($) | | |
All Other Compensation ($) | | |
Total ($) | |
Amro Albanna | |
2022 | |
| 500,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 500,000 | |
President, and Director, Former President(1) | |
2021 | |
| 280,000 | | |
| 470,000 | | |
| 938,250 | | |
| - | | |
| - | | |
| - | | |
| 1,688,250 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shahrokh Shabahang, D.D.S., MS, Ph.D. | |
2022 | |
| 325,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 325,000 | |
Chief Innovation Officer | |
2021 | |
| 210,000 | | |
| 245,000 | | |
| - | | |
| - | | |
| 210,100 | | |
| - | | |
| 665,100 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Corinne Pankovcin | |
2022 | |
| 385,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 385,000 | |
Chief Commercialization Officer, Former President(2), Former Chief Financial Officer(3) | |
2021 | |
| 250,000 | | |
| 333,250 | | |
| 505,450 | | |
| - | | |
| - | | |
| - | | |
| 1,088,700 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Thomas J. Farley | |
2022 | |
| 360,833 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 360,833 | |
Chief Financial Officer(4) | |
2021 | |
| 225,000 | | |
| 297,000 | | |
| - | | |
| - | | |
| 304,850 | | |
| | | |
| 826,850 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Matthew Shatzkes | |
2022 | |
| 368,958 | | |
| 246,697 | | |
| | | |
| | | |
| 218,064 | | |
| | | |
| 833,719 | |
Chief Legal Officer & General Counsel(5) | |
2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Option awards represent granted
options at the fair market value as of the date of grant. Restricted stock units represent granted restricted stock units at the fair
market value as of the date of grant.
(1) |
Mr. Albanna served as the Company’s President through September 25, 2021 |
(2) |
In January 2023, the Company formed a wholly-owned subsidiary, Pearsanta,
Inc. in order to accelerate the growth of the Company’s AditxtScoreTM program through future strategic revenue and growth
oriented transactions. In connection with the formation of Pearsanta, Inc. and Ms. Pankovcin’s anticipated role in driving such
strategic revenue and growth oriented transactions, Ms. Pankovcin’ s title was changed from President to Chief Commercialization
Officer, effective April 12, 2023. |
|
|
(3) |
Ms. Pankovcin served as the Company’s Chief Financial Officer from July 2020 through September 25, 2021. She was appointed as our President on September 25, 2021. Ms. Pankovcin’s title was changed from President to Chief Commercialization Officer effective April 12, 2023. |
|
|
(4) |
Mr. Farley was appointed as the Company’s Chief Financial Officer on September 25, 2021. |
(5) |
Mr. Shatzkes joined Aditxt in January of 2022. |
Employment Agreements
Amro Albanna, Chief Executive Officer
On November 14, 2021,
the Company entered into an Amended and Restated Employment Agreement with Mr. Amro Albanna, the Chief Executive Officer of the Company
(the “Amro Employment Agreement”). Pursuant to the Amro Employment Agreement, Mr. Albanna will receive (i) a base
salary at the annual rate of $280,000 for the remainder of calendar year 2021, and effective January 1, 2022, $500,000 (prorated
for any partial year) payable in bimonthly installments (ii) the opportunity to earn an annual bonus of 2% of the Company’s
earnings before interest, taxes, depreciation, and amortization (EBITDA) with respect to an applicable year for which the bonus is payable,
provided that such bonus will not exceed two (2) times Mr. Albanna’s base salary, and (iii) eligible to earn an annual
discretionary bonus as determined by the Board or its Compensation Committee in their sole discretion. In addition, for calendar year
2021, Mr. Albanna will be eligible to earn an additional discretionary bonus as determined by the Company.
The term of Mr. Albanna’s
engagement under the Amro Employment Agreement commences as of the Effective Date (as defined in the Amro Employment Agreement) and continues
until November 14, 2023, unless earlier terminated in accordance with the terms of the Amro Employment Agreement. The term of Mr. Albanna’s
Employment Agreement is automatically renewed for successive one (1) year periods until terminated by Mr. Albanna or the Company.
Under the Amro Employment
Agreement, termination of Mr. Albanna by the Company for “Cause,” “Death,” or “Disability,” (as
such terms are defined in the Amro Employment Agreement), or resignation by Mr. Albanna without “Good Reason” (as defined
in the Amro Employment Agreement), will not require the Company to pay severance to Mr. Albanna. Upon any such termination, Mr. Albanna
will be entitled to receive any Accrued Compensation (as defined in the Amro Employment Agreement), which in the case of termination by
the Company for Cause or resignation by Mr. Albanna for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Mr. Albanna by the Company without “Cause” or resignation by Mr. Albanna for “Good Reason,”
then under the Amro Employment Agreement will require the Company to pay severance to Mr. Albanna. Upon any such termination, Mr. Albanna
will be entitled to receive any Accrued Compensation and, subject to Mr. Albanna’s execution of an irrevocable release, receive
(i) on the sixtieth day (60th) day following termination, a lump sum amount equal to twelve (12) months
base salary then in effect as of the date of termination, less applicable taxes and withholdings; (ii) provide reimbursement to Mr. Albanna’s
medical insurance premiums for a period of twelve (12) months following the date of termination; and (iii) cause any equity
awards granted prior to the Effective Date (as defined in the Amro Employment Agreement), that are then outstanding and unvested to immediately
vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding the foregoing,
under the Amro Employment Agreement, termination of Mr. Albanna by the Company without Cause or resignation by Mr. Albanna for
Good Reason and a Change of Control (as defined in the Amro Employment Agreement) of the Company occurs within six (6) months after
such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Mr. Albanna
in connection to such termination. Upon such termination, Mr. Albanna will be entitled to receive any Accrued Compensation, and subject
to Mr. Albanna’s execution of an irrevocable release, receive (i) on the sixtieth (60th) day of termination,
a lump sum cash-payment equal to the product of three times Mr. Albanna’s salary then in effect as of the date of termination,
less applicable taxes and withholdings; (ii) provide reimbursement to Mr. Albanna’s medical insurance premiums for a period
of twenty-four (24) months following the date of termination; and (iii) notwithstanding any provision of any stock incentive
plan, stock option agreement, realization bonus, restricted stock agreement or other agreement relating to capital stock of the Company,
cause any equity awards granted prior to the that are then outstanding and unvested to immediately vest and, with respect to all options
and stock appreciation rights, to become fully exercisable for twenty-four (24) months (but not later than when the award would otherwise
expire).
The Amro Employment Agreement
also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for twelve (12) months following
any cessation of employment with respect to Mr. Albanna. To the extent any of the payments or benefits provided for under the Amro
Employment Agreement or any other agreement or arrangement between Mr. Albanna and the Company (collectively, the “Payments”),
(a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section 280G”)
of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject to the
excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Mr. Albanna the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments
not in excess of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Corinne Pankovcin, Chief Commercialization
Officer
On November 14, 2021,
the Company entered into a new employment agreement (the “Pankovcin Employment Agreement”) with the Company’s President,
Corinne Pankovcin, pursuant to which Ms. Pankovcin will continue to serve as the Company’s President and Secretary until the date
upon which Ms. Pankovcin’s employment may be terminated in accordance with the terms of the Pankovcin Employment Agreement. In February
2023, the Company formed a wholly-owned subsidiary, Pearsanta, Inc. in order to accelerate the growth of the Company’s AditxtScore
program through future strategic revenue and growth oriented transactions. In connection with the formation of Pearsanta, Inc. and Ms.
Pankovcin’s anticipated role in driving such strategic revenue and growth oriented transactions, Ms. Pankovcin’ s title was
changed from President to Chief Commercialization Officer, effective April 12, 2023.
The term of Ms. Pankovcin’s
engagement under the Pankovcin Employment Agreement commences as of the Effective Date (as defined in the Pankovcin Employment Agreement)
and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Pankovcin Employment Agreement.
The term of Ms. Pankovcin’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated
by Ms. Pankovcin or the Company.
Pursuant to the Pankovcin
Employment Agreement, Ms. Pankovcin will receive: (i) a base salary at the annual rate of $250,000 for the remainder of calendar
year 2021, and effective January 1, 2022, $385,000 (prorated for any partial year) payable in bimonthly installments and (ii) eligible
to earn an annual discretionary bonus with a target amount of 45% of Base Compensation, which is based on the achievement of performance
objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Ms. Pankovcin shall
be eligible to earn an additional discretionary bonus as determined by the Company.
Under the Pankovcin Employment
Agreement, termination of Ms. Pankovcin by the Company for “Cause,” “Death,” or “Disability,” (as
such terms are defined in the Pankovcin Employment Agreement), or resignation by Ms. Pankovcin for “Good Reason” (as defined
in the Pankovcin Employment Agreement), will not require the Company to pay severance to Ms. Pankovcin. Upon any such termination, Ms.
Pankovcin will be entitled to receive any Accrued Compensation (as defined in the Pankovcin Employment Agreement), which in the case of
termination by the Company for Cause or resignation by Ms. Pankovcin for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Ms. Pankovcin by the Company without “Cause” or resignation by Ms. Pankovcin for “Good Reason,”
then under the Pankovcin Employment Agreement will require the Company to pay severance to Ms. Pankovcin. Upon any such termination, Ms.
Pankovcin will be entitled to receive any Accrued Compensation and, subject to Ms. Pankovcin’s execution of an irrevocable release,
receive: (i) on the sixtieth day (60th) day following termination, a lump sum amount equal to twelve (12) months
base salary then in effect as of the date of termination, less applicable taxes and withholdings; (ii) provide reimbursement to Ms.
Pankovcin’s medical insurance premiums for a period of twelve (12) months following the date of termination; and (iii) cause
any equity awards granted prior to the Effective Date (as defined in the Pankovcin Employment Agreement), that are then outstanding and
unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding the foregoing,
under the Pankovcin Employment Agreement, termination of Ms. Pankovcin by the Company without Cause or resignation by Ms. Pankovcin for
Good Reason and a Change of Control (as defined in the Pankovcin Employment Agreement) of the Company occurs within six (6) months
after such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Ms. Pankovcin
in connection to such termination. Upon such termination, Ms. Pankovcin will be entitled to receive any Accrued Compensation, and subject
to Ms. Pankovcin’s execution of an irrevocable release, receive (i) on the sixtieth (60th) day of termination,
a lump sum cash-payment equal to the sum of (A) the product of two times Ms. Pankovcin’s salary then in effect as of the date
of termination, less applicable taxes and withholdings, and (B) the product of two times Ms. Pankovcin’s Target Bonus; (ii) provide
reimbursement to Ms. Pankovcin’s medical insurance premiums for a period of twenty-four (24) months following the date of termination;
and (iii) notwithstanding any provision of any stock incentive plan, stock option agreement, realization bonus, restricted stock
agreement or other agreement relating to capital stock of the Company, cause any equity awards granted prior to the that are then outstanding
and unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable for twenty-four
(24) months (but not later than when the award would otherwise expire).
The Pankovcin Employment
Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for twelve (12) months
following any cessation of employment with respect to Ms. Pankovcin. To the extent any of the payments or benefits provided for under
the Pankovcin Employment Agreement or any other agreement or arrangement between Ms. Pankovcin and the Company (collectively, the “Payments”),
(a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section 280G”)
of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject to the
excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Ms. Pankovcin the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments
not in excess of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Thomas J. Farley, Chief Financial Officer
On November 14, 2021,
Aditxt, Inc. the Company entered into a new employment agreement (the “Farley Employment Agreement”) with the Company’s
Chief Financial Officer, Thomas Farley, pursuant to which Mr. Farley will continue to serve as the Company’s Chief Financial
Officer until the date upon which Mr. Farley’s employment may be terminated in accordance with the terms of the Farley Employment
Agreement.
The term of Mr. Farley’s
engagement under the Farley Employment Agreement commences as of the Effective Date (as defined in the Farley Employment Agreement) and
continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Farley Employment Agreement. The
term of Mr. Farley’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated
by Mr. Farley or the Company.
Pursuant to the Farley Employment
Agreement, Mr. Farley will receive: (i) a base salary at the annual rate of $225,000 for the remainder of calendar year 2021,
and effective January 1, 2022, $355,000 (prorated for any partial year) payable in bimonthly installments and, (ii) eligible
to earn an annual discretionary bonus with a target amount of 40% of Base Compensation, which is based on the achievement of performance
objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Mr. Farley will
be eligible to earn an additional discretionary bonus as determined by the Company.
Under the Farley Employment
Agreement, termination of Mr. Farley by the Company for “Cause,” “Death,” or “Disability,” (as
such terms are defined in the Farley Employment Agreement), or resignation by Mr. Farley without “Good Reason” (as defined
in the Farley Employment Agreement), will not require the Company to pay severance to Mr. Farley. Upon any such termination, Mr. Farley
will be entitled to receive any Accrued Compensation (as defined in the Farley Employment Agreement which in the case of termination by
the Company for Cause or resignation by Mr. Farley for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Mr. Farley by the Company without “Cause” or resignation by Mr. Farley for “Good Reason,”
then under the Farley Employment Agreement will require the Company to pay severance to Mr. Farley. Upon any such termination, Mr. Farley
will be entitled to receive any Accrued Compensation and, subject to Mr. Farley’s execution of an irrevocable release, receive
(i) on the sixtieth day (60th) day following termination, a lump sum cash-payment equal to the sum of (A) the
product of two times Mr. Farley’s salary then in effect as of the date of termination, less applicable taxes and withholdings,
and (B) the product of two times Mr. Farley’s Target Bonus (as defined in the Farley Employment Agreement); (ii) provide
reimbursement to Mr. Farley’s medical insurance premiums for a period of twelve (12) months following the date of termination;
and (iii) cause any equity awards granted prior to the Effective Date (as defined in the Farley Employment Agreement), that are then
outstanding and unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding the foregoing,
under the Farley Employment Agreement, termination of Mr. Farley by the Company without Cause or resignation by Mr. Farley for
Good Reason and a Change of Control (as defined in the Farley Employment Agreement) of the Company occurs within six (6) months after
such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Mr. Farley
in connection to such termination. Upon such termination, Mr. Farley will be entitled to receive any Accrued Compensation, and subject
to Mr. Farley’s execution of an irrevocable release, receive (i) on the sixtieth (60th) day of termination,
a lump sum cash-payment equal to the product of two times Mr. Farley’s salary then in effect as of the date of termination,
less applicable taxes and withholdings; (ii) provide reimbursement to Mr. Farley’s medical insurance premiums for a period
of twelve (12) months following the date of termination; and (iii) notwithstanding any provision of any stock incentive plan,
stock option agreement, realization bonus, restricted stock agreement or other agreement relating to capital stock of the Company, cause
any equity awards granted prior to the that are then outstanding and unvested to immediately vest and, with respect to all options and
stock appreciation rights, to become fully exercisable (but not later than when the award would otherwise expire).
The Farley Employment Agreement
also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for twelve (12) months following
any cessation of employment with respect to Mr. Farley. To the extent any of the payments or benefits provided for under the Farley
Employment Agreement or any other agreement or arrangement between Mr. Farley and the Company (collectively, the “Payments”),
(a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section 280G”)
of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject to the
excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Mr. Farley the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments
not in excess of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Shahrokh Shabahang, Chief Innovation Officer
On November 14, 2021,
the “Company entered into a new employment agreement (the “Shabahang Employment Agreement”) with the Company’s
Chief Innovation Officer, Shahrokh Shabahang, pursuant to which Mr. Shabahang will continue to serve as the Company’s Chief
Innovation Officer until the date upon which Mr. Shabahang’s employment may be terminated in accordance with the terms of the
Shabahang Employment Agreement.
The term of Mr. Shabahang’s
engagement under the Shabahang Employment Agreement commences as of the Effective Date (as defined in the Shabahang Employment Agreement)
and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Shabahang Employment Agreement.
The term of Mr. Shabahang’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated
by Mr. Shabahang or the Company.
Pursuant to the Shabahang
Employment Agreement, Mr. Shabahang will receive: (i) a base salary at the annual rate of $210,000 for the remainder of calendar
year 2021, and effective January 1, 2022, $325,000 (prorated for any partial year) payable in bimonthly installments, and (ii) eligible
to earn an annual discretionary bonus with a target amount of 40% of Base Compensation, which is based on the achievement of performance
objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Mr. Shabahang
will be eligible to earn an additional discretionary bonus as determined by the Company.
Under the Shabahang Employment
Agreement, termination of Mr. Shabahang by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Shabahang Employment Agreement), or resignation by Mr. Shabahang without “Good Reason”
(as defined in the Shabahang Employment Agreement), will not require the Company to pay severance to Mr. Shabahang. Upon any such
termination, Mr. Shabahang will be entitled to receive any Accrued Compensation (as defined in the Shabahang Employment Agreement),
which in the case of termination by the Company for Cause or resignation by Mr. Shabahang for Good Reason will not include payment
of pro rata bonus; provided, however, if termination of Mr. Shabahang by the Company without
“Cause” or resignation by Mr. Shabahang for “Good Reason,” then under the Shabahang Employment Agreement
will require the Company to pay severance to Mr. Shabahang. Upon any such termination, Mr. Shabahang will be entitled to receive
any Accrued Compensation and, subject to Mr. Shabahang’s execution of an irrevocable release, receive: (i) on the sixtieth day
(60th) day following termination, a lump sum cash-payment equal to the sum of (A) the product of two times Mr. Shabahangs’s
salary then in effect as of the date of termination, less applicable taxes and withholdings, and (B) the product of two times Mr. Shabahang’s
Target Bonus (as defined in the Shabahang Employment Agreement); (ii) provide reimbursement to Mr. Shabahang’s medical
insurance premiums for a period of twelve (12) months following the date of termination; and (iii) cause any equity awards granted
prior to the Effective Date (as defined in the Shabahang Employment Agreement), that are then outstanding and unvested to immediately
vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding the foregoing,
under the Shabahang Employment Agreement, termination of Mr. Shabahang by the Company for without Cause or resignation by Mr. Shabahang
for Good Reason and a Change of Control (as defined in the Shabahang Employment Agreement) of the Company occurs within six (6) months
after such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Mr. Shabahang
in connection to such termination. Upon such termination, Mr. Shabahang will be entitled to receive any Accrued Compensation, and
subject to Mr. Shabahang’s execution of an irrevocable release, receive: (i) on the sixtieth (60th) day
of termination, a lump sum cash-payment equal to the product of two times Mr. Shabahang’s salary then in effect as of the date
of termination, less applicable taxes and withholdings; (ii) provide reimbursement to Mr. Shabahang’s medical insurance
premiums for a period of twenty-four (24) months following the date of termination; and (iii) notwithstanding any provision
of any stock incentive plan, stock option agreement, realization bonus, restricted stock agreement or other agreement relating to capital
stock of the Company, cause any equity awards granted prior to the that are then outstanding and unvested to immediately vest and, with
respect to all options and stock appreciation rights, to become fully exercisable for twenty-four (24) months (but not later than
when the award would otherwise expire).
The Shabahang Employment
Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for twelve (12) months
following any cessation of employment with respect to Mr. Shabahang. To the extent any of the payments or benefits provided for under
the Shabahang Employment Agreement or any other agreement or arrangement between Mr. Shabahang and the Company (collectively, the
“Payments”), (a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section 280G”)
of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject to the
excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Mr. Shabahang the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments
not in excess of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Rowena Albanna, Chief Operating Officer
On November 14, 2021,
Aditxt, Inc. (the “Company”) entered into a new employment agreement (the “Rowena Employment Agreement”) with
the Company’s Chief Operating Officer, Rowena Albanna, pursuant to which Ms. Albanna will continue to serve as the Company’s
Chief Operating Officer until the date upon which Ms. Albanna’s employment may be terminated in accordance with the terms of the
Rowena Employment Agreement.
The term of Ms. Albanna’s
engagement under the Rowena Employment Agreement commences as of the Effective Date (as defined in the Rowena Employment Agreement) and
continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Rowena Employment Agreement. The
term of Ms. Albanna’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated by
Ms. Albanna or the Company.
Pursuant to the Rowena Employment
Agreement, Ms. Albanna will receive: (i) a base salary at the annual rate of $210,000 for the remainder of calendar year 2021 and
effective January 1, 2022, $325,000 (prorated for any partial year) payable in bimonthly installments, and (ii) eligible to
earn an annual discretionary bonus with a target amount of 40% of Base Compensation, which is based on the achievement of performance
objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Ms. Albanna will be
eligible to earn an additional discretionary bonus as determined by the Company.
Under the Rowena Employment
Agreement, termination of Ms. Albanna by the Company for “Cause,” “Death,” or “Disability,” (as such
terms are defined in the Rowena Employment Agreement), or resignation by Ms. Albanna for “Good Reason” (as defined in the
Rowena Employment Agreement), will not require the Company to pay severance to Ms. Albanna. Upon any such termination, Ms. Albanna will
be entitled to receive any Accrued Compensation (as defined in the Rowena Employment Agreement), which in the case of termination by the
Company for Cause or resignation by Ms. Albanna for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Ms. Albanna by the Company without “Cause” or resignation by Ms. Albanna for “Good Reason” (as
such terms are defined in the Rowena Employment Agreement), then under the Rowena Employment Agreement will require the Company to pay
severance to Ms. Albanna. Upon any such termination, Ms. Albanna will be entitled to receive any Accrued Compensation and, subject to
Ms. Albanna’s execution of an irrevocable release, receive: (i) on the sixtieth day (60th) day following
termination, a lump sum amount equal to twelve (12) months base salary then in effect as of the date of termination, less applicable
taxes and withholdings; (ii) provide reimbursement to Ms. Albanna’s medical insurance premiums for a period of twelve
(12) months following the date of termination; and (iii) cause any equity awards granted prior to the Effective Date (as defined
in the Rowena Employment Agreement), that are then outstanding and unvested to immediately vest and, with respect to all options and stock
appreciation rights, to become fully exercisable.
Notwithstanding the foregoing,
under the Rowena Employment Agreement, termination of Ms. Albanna by the Company without Cause or resignation by Ms. Albanna for Good
Reason and a Change of Control (as defined in the Rowena Employment Agreement) of the Company occurs within six (6) months after
such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Ms. Albanna in connection
to such termination. Upon such termination, Ms. Albanna will be entitled to receive any Accrued Compensation, and subject to Ms. Albanna’s
execution of an irrevocable release, receive: (i) on the sixtieth (60th) day of termination, a lump sum cash-payment
equal to the sum of (A) the product of two times Ms. Albanna’s salary then in effect as of the date of termination, less applicable
taxes and withholdings, and (B) the product of two times Ms. Albanna’s Target Bonus; (ii) provide reimbursement to Ms.
Albanna’s medical insurance premiums for a period of twenty-four (24) months following the date of termination; and (iii) notwithstanding
any provision of any stock incentive plan, stock option agreement, realization bonus, restricted stock agreement or other agreement relating
to capital stock of the Company, cause any equity awards granted prior to the that are then outstanding and unvested to immediately vest
and, with respect to all options and stock appreciation rights, to become fully exercisable for twenty-four (24) months (but not
later than when the award would otherwise expire).
The Rowena Employment Agreement
also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for twelve (12) months following
any cessation of employment with respect to Ms. Albanna. To the extent any of the payments or benefits provided for under the Rowena
Employment Agreement or any other agreement or arrangement between Ms. Albanna and the Company (collectively, the “Payments”),
(a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section 280G”)
of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject to the
excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater (whichever
gives Ms. Albanna the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments not in excess
of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Matthew Shatzkes, Chief Legal Officer and General
Counsel
On January 28, 2022,
Aditxt, Inc. (the “Company”) entered into an employment agreement (the “Employment Agreement”) with Matthew Shatzkes,
the Chief Legal Officer and General Counsel of the Company. Pursuant to the Employment Agreement, Mr. Shatzkes will (i) receive
a base salary at the annual rate of $385,000 (the “Base Compensation”) payable in bimonthly installments, (ii) receive
a one-time sign-on bonus (the “Sign-on Bonus”), (iii) a minimum 2022 quarterly bonus (the “Minimum 2022 Bonus”),
and (iv) will be entitled to earn an annual discretionary bonus beginning in fiscal year 2022.
Following the first anniversary
of the Employment Agreement (the “Anniversary Date”), in addition to Mr. Shatzkes’ Base Compensation, Mr. Shatzkes
will be entitled to a minimum quarterly bonus (the “Subsequent Year Minimum Bonus”). Following the Anniversary Date, in addition
to Mr. Shatzkes’ Base Compensation and Subsequent Year Minimum Bonus, Mr. Shatzkes will also be eligible to earn an annual
discretionary bonus.
Under the Employment Agreement,
Mr. Shatzkes will also receive (i) a restricted stock unit award that will entitle Mr. Shatzkes to receive 150,000 shares
of the Company’s common stock which shall vest immediately, and (ii) a restricted stock unit award of an additional 330,000
shares of the Company’s common stock, which shall vest ratably over eight successive equal quarterly installments over a two-year
period commencing on March 1, 2022 and ending on December 1, 2023.
The term of Mr. Shatzkes
engagement under the Employment Agreement commences on the Effective Date (as defined in the Employment Agreement) and continues until
January 16, 2024, unless earlier terminated in accordance with the terms of the Employment Agreement. The term of Mr. Shatzkes’
Employment Agreement is automatically renewed for successive one-year periods until terminated by Mr. Shatzkes or the Company.
Under the Employment Agreement,
termination of Mr. Shatzkes by the Company for “Cause,” “Death,” or “Disability,” (as such terms
are defined in the Employment Agreement), or resignation by Mr. Shatzkes without “Good Reason” (as defined in the Employment
Agreement), will not require the Company to pay severance to Mr. Shatzkes. Upon any such termination, Mr. Shatzkes will be entitled
to receive any Accrued Compensation (as defined in the Employment Agreement), which in the case of termination by the Company for Cause
or resignation by Mr. Shatzkes for Good Reason will not include payment of pro rata bonus. If, however, termination of Mr. Shatzkes
by the Company without “Cause”, resignation by Mr. Shatzkes for “Good Reason” or and a Change of Control
(as defined in the Employment Agreement) event occurs, then the Employment Agreement will require the Company to pay severance to Mr. Shatzkes.
Upon any such termination, Mr. Shatzkes will be entitled to receive any Accrued Compensation and, subject to Mr. Shatzkes’
execution of an irrevocable release, (i) on the sixtieth day following termination, a lump sum amount equal (a) twelve months
of his Base Compensation, Sign-on Bonus and Minimum 2022 Bonus if his Employment Agreement is terminated prior to December 31, 2022,
or (b) his Base Compensation and Subsequent Year Minimum Bonus if his Employment Agreement is terminated after December 31,
2022; (ii) provide reimbursement to Mr. Shatzkes’ medical insurance premiums for a period of twelve months following
the date of termination; and (iii) notwithstanding any provision of any stock incentive plan, stock option agreement, realization
bonus, restricted stock agreement or other agreement relating to capital stock of the Company, cause any equity awards granted prior to
that termination that are then outstanding and unvested to immediately vest and, with respect to all options and stock appreciation rights,
to become fully exercisable.
To the extent any of the
payments or benefits provided for under the Employment Agreement or any other agreement or arrangement between Mr. Shatzkes and the
Company (collectively, the “Payments”), (a) constitute an “excess parachute payment” within the meaning of
Section 280G (“Section 280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”),
and (b) would otherwise be subject to the excise tax imposed by Section 4999 of the Code (“Section 4999”),
then the Company will pay or provide the greater (whichever gives Mr. Shatzkes the highest net after-tax amount) of (i) all
of the Payments or (ii) the portion of Payments not in excess of the greatest amount of Payments that can be paid that would not
result in the imposition of the excise tax under Section 4999.
Outstanding Equity Awards at Fiscal Year-End
The following table presents
information concerning unexercised options and unvested restricted stock awards for each Named Executive Officer outstanding as of December 31,
2022.
|
|
Option Awards |
|
Restricted Stock Awards |
|
|
Restricted Stock Units |
|
Name |
|
Number of
securities
underlying
unexercised
options (#)
exercisable |
|
|
Number of
securities
underlying
unexercised
options (#)
unexercisable |
|
|
Option
Exercise
Price |
|
|
Option
Expiration Date |
|
Number of
securities
underlying
unexercised
restricted
stock
awards (#)
exercisable |
|
|
Number of
securities
underlying
unexercised
restricted
stock
awards (#)
unexercisable |
|
|
Number of
securities
underlying
unexercised
restricted
stock
units (#)
exercisable |
|
|
Number of
securities
underlying
unexercised
restricted
stock
units (#)
unexercisable |
|
Amro Albanna |
|
|
4,000 |
|
|
|
— |
|
|
$ |
200.00 |
|
|
March 6, 2023 |
|
|
— |
|
|
|
2,000 |
|
|
|
— |
|
|
|
— |
|
Amro Albanna |
|
|
8,000 |
|
|
|
— |
|
|
$ |
200.00 |
|
|
April 17, 2024 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Corinne Pankovcin |
|
|
3,300 |
|
|
|
— |
|
|
$ |
201.00 |
|
|
March 20, 2025 |
|
|
— |
|
|
|
1,100 |
|
|
|
— |
|
|
|
— |
|
Corinne Pankovcin |
|
|
150 |
|
|
|
— |
|
|
$ |
550.00 |
|
|
October 5, 2027 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Corinne Pankovcin |
|
|
2,475 |
|
|
|
825 |
|
|
$ |
96.00 |
|
|
November 2, 2030 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Corinne Pankovcin |
|
|
300 |
|
|
|
— |
|
|
$ |
96.00 |
|
|
November 2, 2030 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Thomas J. Farley |
|
|
1,200 |
|
|
|
— |
|
|
$ |
96.00 |
|
|
November 2, 2030 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
712 |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership of shares of our common stock as of July [*], 2023, based
on 6,760,064 shares issued and outstanding by (i) each person known to beneficially own more than
5% of our outstanding common stock, (ii) each of our directors, (iii) our executive officers and (iv) all directors and executive
officers as a group. Shares are beneficially owned when an individual has voting and/or investment power over the shares or could obtain
voting and/or investment power over the shares within 60 days of April 26, 2023. Except as otherwise indicated, the persons named in the
table have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws, where applicable.
Unless otherwise indicated, the address of each beneficial owner listed below is c/o Aditxt, Inc., 737 N. Fifth Street, Suite 200, Richmond,
VA 23219.
| |
Number of
shares of
Common
Stock
Beneficially
Owned | | |
Percentage | |
Directors and Officers: | |
| | |
| |
Shahrokh Shabahang, D.D.S., MS, Ph.D. (1) | |
| 29,005 | | |
| * | % |
Amro Albanna (2) | |
| 27,873 | | |
| * | % |
Corinne Pankovcin (3) | |
| 10,160 | | |
| * | % |
Rowena Albanna (4) | |
| 10,135 | | |
| * | % |
Brian Brady (5) | |
| 680 | | |
| * | % |
Namvar Kiaie (6) | |
| 498 | | |
| * | % |
Jeffrey Runge, M.D. (7) | |
| 480 | | |
| * | % |
Thomas J. Farley (8) | |
| 4,350 | | |
| * | % |
Matthew Shatzkes (9) | |
| 8,775 | | |
| * | % |
All directors and executive officers as a group (9 persons) | |
| 91,956 | | |
| 1.23 | % |
* |
Less than 1% |
|
|
(1) |
Includes (i) 20,301 beneficially owned by Shabahang-Hatami Family Trust, of which Shahrokh Shabahang, D.D.S., MS, Ph.D. is the Trustee; (ii) warrants to purchase 4,404 shares, including 945 Series A Warrants issued as part of the conversion of outstanding accrued compensation through March 31, 2020, and 3,459 warrants beneficially owned by the Shabahang-Hatami Family Trust; (iii) 2,200 shares issuable pursuant to options that are fully vested or will vest within 60 days of July [*], 2023; (iv) 125 restricted stock units that will vest within 60 days of July [*], 2023; and (v) 1,975 shares directly owned by Mr. Shabahang. |
|
|
(2) |
Includes (i) 12,000 shares issuable pursuant to options that are fully vested or will vest within 60 days of April 26, 2023; (ii) 6,000 shares beneficially owned by the Albanna Family Trust, of which Mr. Albanna is the Trustee; (iii) 9,111 shares directly owned by Mr. Albanna; and (iv) 762 Series A Warrants issued as part of the conversion of outstanding accrued compensation through March 31, 2020. Mr. Albanna may be deemed to beneficially own the securities held by his wife Rowena Albanna, the Company’s Chief Operating Officer. |
|
|
(3) |
Includes (i) 3,385 shares held directly by Ms. Pankovcin; and (ii) 6,775 shares issuable pursuant to options that are fully vested or will vest within 60 days of July [*], 2023. |
|
|
(4) |
Includes (i) 3,298 shares held directly by Ms. Albanna; (ii) 6,000 shares issuable pursuant to options that are fully vested or will vest within 60 days of April 26, 2023; (iii) 125 restricted stock units that will vest within 60 days of July [*], 2023; and (iv) 712 Series A Warrants issued as part of the conversion of outstanding accrued compensation through March 31, 2020. Ms. Albanna may be deemed to beneficially own the securities held by her husband Amro Albanna, the Company’s Chief Executive Officer. |
|
|
(5) |
Includes (i) 480 shares held directly by Mr. Brady; and (ii) 200 shares issuable pursuant to options that have vested as of July [*], 2023. |
(6) |
Includes (i) 275 shares held directly by Mr. Kiaie; (ii) 23 shares issuable upon exercise of Series A Warrants; and (iii) 200 shares issuable pursuant to options that have vested as of July [*], 2023. |
(7) |
Includes (i) 50 shares held by Biologue, Inc., over which Dr. Runge has voting and dispositive control; (ii) 230 shares held directly by Dr. Runge; and (iii) 200 shares issuable pursuant to options that have vested as of July [*], 2023. |
|
|
(8) |
Includes (i) 2,912 shares held directly by Mr. Farley; (ii) 1,200 shares issuable pursuant to options that have vested or will vest within 60 days of July [*], 2023; and (iii) 238 restricted stock units that will vest within 60 days of July [*], 2023. |
|
|
(9) |
Includes (i) 7,950 shares held directly by Mr. Shatzkes; and (ii) 825 restricted stock units that will vest within 60 days of July [*], 2023. |
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of
the Exchange Act requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC
initial reports of ownership and reports of changes in the ownership of our common stock and other equity securities. Such persons are
required to furnish us copies of all Section 16(a) filings. Based solely upon a review of the copies of the forms furnished
to us, we believe that our officers, directors and holders of more than 10% of our common stock complied with all applicable filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
Except as described below
and except for employment arrangements which are described under “executive compensation,” since January 1, 2018, there
has not been, nor is there currently proposed, any transaction in which we are or were a participant, the amount involved exceeds the
lesser of $120,000 or 1% of the average of the total assets at December 31, 2022 and 2021, and any of our directors, executive officers,
holders of more than 5% of our common stock or any immediate family member of any of the foregoing had or will have a direct or indirect
material interest.
During the years ended
December 31, 2019 and 2018, Rowena Albanna, the wife of Amro Albanna, our Chief Executive Officer, provided the Company with operations
consulting services. In July 2020, Ms. Albanna joined the Company as its Chief Operating Officer. As of December 31, 2018, $112,000
was accrued as compensation. An additional $180,000 was expensed as compensation during the year ended December 31, 2019, and $17,000
was paid on the accrued balance. As of December 31, 2019, $275,000 remained accrued and outstanding.
On January 22, 2018,
the Company issued an unsecured promissory note to Sekris for $40,000 that accrued interest of 4% annually. The note was due on the earlier
of July 22, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December 31, 2019.
On February 12, 2018,
the Company issued an unsecured promissory note to Sekris for $50,000 that accrued interest of 4% annually. The note was due on the earlier
of August 12, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December 31, 2019.
On March 2, 2018, the
Company issued an unsecured promissory note to Sekris for $10,000 that accrued interest of 4% annually. The note was due on the earlier
of September 2, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December 31, 2019.
On March 8, 2018, we
entered into an Assignment Agreement (the “Assignment Agreement”) with Sekris. See “Summary — Overview — License
Agreement with Loma Linda University.” Dr. Shabahang, our Chief Innovative Officer, was the Chief Executive Officer of Sekris.
Sekris was subsequently dissolved in 2019.
On March 8, 2018, we
issued a warrant to purchase up to 10,000 shares of our common stock to Sekris. On March 2, 2018, we issued a 4% unsecured promissory
note to Sekris in the principal amount of $10,000. Principal and interest was due on September 2, 2018 or immediately upon an event
of default. On February 12, 2018, we issued a 4% unsecured promissory note to Sekris in the principal amount of $50,000. Principal
and interest was due on August 12, 2018 or immediately upon an event of default. On January 22, 2018, we issued a 4% unsecured
promissory note to Sekris in the principal amount of $40,000. Principal and interest was due on July 22, 2018 or immediately upon
an event of default.
On June 18, 2018, the
Company issued an unsecured promissory note to Sekris for $17,502 that accrued interest of 4% annually. The note was due on the earlier
of December 18, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December 31, 2019.
On January 1, 2019,
we entered into a consulting agreement with Rowena Albanna, the wife of Amro Albanna, our Chief Executive Officer, to perform operations
consulting services. As part of this agreement, we pay Ms. Albanna $15,000 per month for her services. This agreement terminated on June 30,
2020. In July 2020, Ms. Albanna joined the Company as its Chief Operating Officer.
On March 21, 2019, we
issued a promissory note to Dr. Shabahang, our Chief Innovative Officer. The note has a principal amount of $10,000, was due on September 21,
2019, and bears an interest rate of 4% per year. This note remains outstanding.
During the year ended December 31,
2019, we assumed an aggregate of $189,625 of liabilities from Sekris in exchange for the return of 94,813 shares of our common stock.
On January 20, 2020,
we issued a promissory note to Brian Brady, a member of our board of directors. The note has a principal amount of $50,000, was due on
the earlier of April 19, 2020 or within 10 days of the closing of our initial public offering. This note carried an original
issue discount of $25,000. The note was amended on April 23, 2020 to extend the maturity date to the earlier of June 30, 2020
or within 10 days of the closing of our initial public offering. This note was repaid in July 2020.
In July 2020, we issued
units of securities to the related parties listed below in conversion of their outstanding accrued compensation through March 31,
2020. The units were the same type and form of the units offered in the IPO.
|
● |
762 units to Amro Albanna, our Chairman and Chief Executive Officer, in conversion of $342,500 in accrued compensation through March 31, 2020; |
|
● |
945 units to Shahrokh Shabahang, D.D.S., MS, Ph.D., our Chief Innovation Officer and Director, in conversion of $425,000 in accrued compensation through March 31, 2020; and |
|
● |
712 units to Rowena Albanna, the wife of our Chief Executive Officer and an independent contractor providing services to the Company, in conversion of $320,000 in accrued compensation through March 31, 2020. In July 2020, Ms. Albanna joined the Company as its Chief Operating Officer. |
Review, Approval and Ratification of Related
Party Transactions
Given our small size and
limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions,
such as those described above, with our executive officer(s), Director(s) and significant stockholders. We intend to establish formal
policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such transactions
will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. On a moving forward
basis, our Directors will continue to approve any related party transaction.
AUDIT COMMITTEE REPORT
The following Audit Committee
Report shall not be deemed to be “soliciting material,” deemed “filed” with the SEC or subject to the liabilities
of Section 18 of the Exchange Act. Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under
the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act that might incorporate by reference future
filings, including this Proxy Statement, in whole or in part, the following Audit Committee Report shall not be incorporated by reference
into any such filings.
The Audit Committee is comprised
of three independent directors (as defined under Nasdaq Listing Rule 5605(a)(2)). The Audit Committee operates under a written charter,
which is available on our website at https://aditxt.com/investor-relations/2325-2/.
We have reviewed and discussed
with management and the Company’s auditors, the Company’s audited financial statements as of and for the fiscal year ended
December 31, 2022.
We have discussed with dbbmckennon,
the Company’s independent registered public accounting firm, the matters as required to be discussed by the Public Company Accounting
Oversight Board (the “PCAOB”) Auditing Standard No. 1301 (Communications with Audit Committees).
We have received the written
disclosures and the letter from dbbmckennon required by applicable requirements of the PCAOB regarding dbbmckennon’s communications
with the Audit Committee concerning independence, and have discussed with dbbmckennon, their independence from management and the
Company.
Based on the review and discussions
referred to above, we recommended to the Board that the financial statements referred to above be included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2022 for filing with the SEC.
|
|
Submitted by the Audit Committee |
|
|
Brian Brady, Chairman |
|
|
Namvar Kiaie |
|
|
Jeffrey Runge, M.D. |
PROPOSAL
No. 2:
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Our board of directors has
selected dbbmckennon to audit our financial statements for the fiscal year ending December 31, 2023. dbbmckennon has
audited our financial statements since fiscal year 2018.
Although stockholder approval
of the selection of dbbmckennon is not required by law, our board of directors believes it is advisable to give stockholders an
opportunity to ratify this selection. If this proposal is not approved at the Annual Meeting, the board of directors may reconsider its
selection of dbbmckennon.
Fees of Independent Registered Public Accounting
Firm
dbbmckennon acted as
the Company’s independent registered public accounting firm for the years ended December 31, 2022 and 2021 and for the
interim periods in such fiscal years. The following table shows the fees that were incurred by the Company for audit and other services
provided by dbbmckennon for the years ended December 31, 2022 and 2021.
| |
Year Ended December 31, | |
| |
2022 | | |
2021 | |
Audit Fees(a) | |
$ | 111,250 | | |
$ | 99,065 | |
Tax Fees(b) | |
$ | — | | |
$ | — | |
Other Fees(c) | |
$ | 7,400 | | |
$ | 35,518 | |
Total | |
$ | 118,650 | | |
$ | 134,538 | |
| (a) | Audit fees represent fees for professional services provided
in connection with the audit of the Company’s annual financial statements and the review of its financial statements included in
the Company’s Quarterly Reports on Form 10-Q and services that are normally provided in connection with statutory or regulatory
filings. |
| (b) | Tax fees represent fees for professional services related to
tax compliance, tax advice and tax planning. |
| (c) | Other fees represent fees related to our filing of certain Registration
Statements. |
Pre-Approval Policies and Procedures
All audit related services,
tax services and other services rendered by dbbmckennon were pre-approved by the Company’s Board of Directors. Commencing
in 2020, the Audit Committee was charged with all pre-approval activities with respect to the Company’s independent registered public
accounting firm. The Audit Committee has adopted a pre-approval policy that provides for the pre-approval of all services performed for
the Company by its independent registered public accounting firm. Our independent registered public accounting firm and management are
required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public
accounting firm in accordance with this pre-approval policy, and the fees for the services performed to date.
Interests of Officers and Directors in this
Proposal
Our officers and directors
do not have any substantial interest, direct or indirect, in in this proposal.
Required Vote of Stockholders
The affirmative vote of a majority
of the votes cast at the Annual Meeting is required to ratify the appointment of the independent registered public accounting firm.
Board Recommendation
The board of directors unanimously
recommends a vote “FOR” Proposal No. 2.
PROPOSAL
No. 3:
THE AUGUST 2022 TRANSACTION PROPOSAL
Background
On August 4, 2022, August
11, 2022 and September 12, 2022, we entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain accredited
investors (the “Investors”) for the offering, sale, and issuance (the “Offering”) of an aggregate of $2,388,888
in principal amount of Senior Secured Promissory Notes (the “Notes”). Concurrently with the sale of the Notes, pursuant to
the Purchase Agreements, we also issued an aggregate of 47,780 shares of our common stock as
commitment fees and warrants (the “August Warrants”) to purchase up to 229,773 shares of our common stock to the Investors.
Furthermore,
on August 31, 2022, we entered into an Agreement for the Purchase and Sale of Future Receipts (the “Agreement”) with a commercial
funding source (the “Funder”) pursuant to which we, among other things, issued the Funder a warrant (the “Funder
Warrant” and together with the August Warrants, the “Warrants”) to purchase up to 26,667 shares of our common stock.
The Purchase Agreements require
that we call and hold a meeting of our stockholders for the purpose of requesting approval (“Stockholder Approval”) of the
issuance of shares of common stock underlying the Notes and the Warrants pursuant to Nasdaq Listing Rule 5635(d).
Nasdaq Listing Rule 5635(d)
provides that stockholder approval is required prior to the issuance of securities in a transaction, other than a public offering, involving
the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable for common stock),
which equals 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance, at a price less than
the lower of: (i) the closing price immediately preceding the signing of the binding agreement, or (ii) the average closing
price of the common stock for the five trading days immediately preceding the signing of the binding agreement for the transaction. See
“— Reasons for Stockholder Approval” below.
In light of this rule, the
Purchase Agreements, the Notes and the Warrants provide that, unless we obtain the approval of our stockholders as required by Nasdaq,
the Company is prohibited from issuing any shares of common stock pursuant to the terms of the Notes and Warrants, if (i) the issuance
of such shares of common stock pursuant to the Notes and Warrants would exceed 19.99% of the Company’s outstanding shares of common
stock as of August 4, 2022, or, (ii) if such issuance would otherwise exceed the aggregate number of shares of common stock which
the Company may issue without breaching its obligations under the rules and regulations of Nasdaq.
On or about September 30,
2022, prior to the issuance of any shares of common stock upon conversion of the Notes, we repaid the outstanding balance of the Notes,
including all accrued and unpaid interest thereon.
Accordingly, at the Annual
Meeting, stockholders will vote on the approval of the issuance of securities in the transaction contemplated by the Purchase Agreements
and the Warrants, including the shares of common stock issuable upon exercise of the Warrants.
The following is a summary
of the material features of the Warrants. This summary is qualified in its entirety by the full text of the Form of Warrant, a copy
of which is attached to this Proxy Statement as Appendix A.
The Warrants
The Warrants are exercisable
for a period of five years commencing on the Commencement Date (as defined in the Warrants) at an initial exercise price of $11.78 per
share, which was subsequently adjusted to $7.50, and may be subject to additional adjustment (including cashless exercise).
The Company is prohibited
from effecting an exercise of the Warrants to the extent that, as a result of such exercise, the holder of the Warrant together with the
holder’s affiliates, would beneficially own more than 4.99% of the number of shares of common stock of the Company outstanding immediately
after giving effect to the issuance of such shares.
Effect on Current Stockholders
The issuance of securities
pursuant to the Warrants will not affect the rights of the holders of outstanding common stock, but such issuances will have a dilutive
effect on the existing stockholders, including the voting power and economic rights of the existing stockholders.
The Warrant provides that
the holder is prohibited from exercising the warrant to the extent the holder would beneficially own more than 4.99% of the Company’s
outstanding shares of common stock after such conversion or exercise.
Unlike Nasdaq Rule 5635(d),
which limits the aggregate number of shares the Company may issue to the holder of the Warrant, this beneficial ownership limitation limits
the number of shares the holder may beneficially own at any one time. Consequently, the number of shares the holder may beneficially own
in compliance with the beneficial ownership limitation may increase over time as the number of outstanding shares of common stock increases
over time. In addition, the holder may sell some or all of the shares it receives under the Warrant, permitting it to acquire additional
shares in compliance with the beneficial ownership limitation.
Description of Common Stock
The Company is currently
authorized to issue 100,000,000 shares of common stock, par value $0.001, and 3,000,000 shares of preferred stock, par value $0.001.
Common Stock
Voting
The holders of our common
stock are entitled to one vote for each share held on all matters to be voted on by the Company’s stockholders. There is no cumulative
voting.
Liquidation
In the event of any voluntary
or involuntary liquidation, dissolution or winding up of our affairs, the holders of our common stock will be entitled to share ratably
in the net assets legally available for distribution to stockholders after the payment of or provision for all of our debts and other
liabilities.
Fully Paid and Non-assessable
All outstanding shares of
common stock are duly authorized, validly issued, fully paid and non-assessable.
Dividends
The Company has not paid
any cash dividends on its common stock to date. Any future decisions regarding dividends will be made by its board of directors. The Company
does not anticipate paying dividends in the foreseeable future but expect to retain earnings to finance the growth of its business. The
Company’s board of directors has complete discretion on whether to pay dividends. Even if the Company’s board of directors
decides to pay dividends, the form, frequency and amount will depend upon the Company’s future operations and earnings, capital
requirements and surplus, general financial condition, contractual restrictions and other factors the board of directors may deem relevant.
Market
The Company’s common
stock is traded on the Nasdaq Capital Market under the symbol “ADTX.”
Anti-Takeover Provisions
Provisions of the General
Corporation Law of the State of Delaware (“DGCL”) and the Company’s Certificate of Incorporation and Bylaws could make
it more difficult to acquire the Company by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and
directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids
that the Company’s board of directors may consider inadequate and to encourage persons seeking to acquire control of the Company
to first negotiate with its board of directors. The Company believes that the benefits of increased protection of its ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging
takeover or acquisition proposals because, among other things, negotiation of these proposals could result in improved terms for its stockholders.
Delaware Anti-Takeover
Statute. We may become subject to Section 203 of the DGCL, which prohibits persons deemed to be “interested stockholders”
from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these
persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested
stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder”
is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder
status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision
may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors. A Delaware corporation
may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding
voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us may
be discouraged or prevented.
Vacancies in the Board
of Directors. Our Certificate of Incorporation and Bylaws provide that, subject to limitations, any vacancy occurring in its
board of directors for any reason may be filled by a majority of the remaining members of its board of directors then in office. Each
director elected to fill a vacancy resulting from the death, resignation or removal of a director shall hold office until the expiration
of the term of the director whose death, resignation or removal created the vacancy.
Advance Notice of Nominations
and Stockholder Proposals. Our Bylaws establish an advance notice procedure for stockholder proposals to be brought before an
annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors. At an annual meeting,
stockholders may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the
direction of our board of directors. Stockholders may also consider a proposal or nomination by a person who was a stockholder at the
time of giving notice and at the time of the meeting, who is entitled to vote at the meeting and who has complied with the notice requirements
of our Bylaws in all respects. Our Bylaws do not give our board of directors the power to approve or disapprove stockholder nominations
of candidates or proposals regarding other business to be conducted at a special or annual meeting of our stockholders. However, our Bylaws
may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions
may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of
directors or otherwise attempting to obtain control of our company.
No Cumulative Voting. The
DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our Certificate of Incorporation
provides otherwise. Our Certificate of Incorporation does not provide for cumulative voting.
Calling of a Stockholder
Meeting. Our Bylaws provide that a special meeting of our stockholders may be called only by our Chairman or by resolution adopted
by a majority of our board of directors. Because our stockholders do not have the right to call a special meeting, a stockholder could
not force stockholder consideration of a proposal over the opposition of our board of directors by calling a special meeting of stockholders
prior to such time as a majority of our board of directors, the chairperson of our board of directors, the president or the chief executive
officer believed the matter should be considered or until the next annual meeting provided that the requestor met the
notice requirements. The restriction on the ability of stockholders to call a special meeting means that a proposal to replace our board
of directors also could be delayed until the next annual meeting.
Exclusive Forum. Our
Certificate of Incorporation provides that unless the Company consents in writing to the selection of an alternative forum, the State
of Delaware is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any
action asserting a claim against the us, our directors, officers or employees arising pursuant to any provision of the DGCL or our Certificate
of Incorporation or the Bylaws, or (iv) any action asserting a claim against us, our directors, officers, employees or agents governed
by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery
determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party
does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested
in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject
matter jurisdiction.
Additionally, our Bylaws
provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States
of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock are deemed to have notice of and consented
to this provision. The Supreme Court of Delaware has held that this type of exclusive federal forum provision is enforceable. There may
be uncertainty, however, as to whether courts of other jurisdictions would enforce such a provision, if applicable.
Reasons for Stockholder Approval
Our common stock is listed
on The Nasdaq Capital Market, and, as such, we are subject to the Nasdaq Listing Rules. Nasdaq Listing Rule 5635(d) requires stockholder
approval prior to the issuance of securities in a transaction, other than a public offering, involving the sale, issuance or potential
issuance by us of common stock (or securities convertible into or exercisable for common stock), which equals 20% or more of the common
stock or 20% or more of the voting power outstanding before the issuance, at a price less than the lower of: (i) the closing price
immediately preceding the signing of the binding agreement, or (ii) the average closing price of the common stock for the five trading
days immediately preceding the signing of the binding agreement for the transaction.
The board has determined
that the ability to issue securities pursuant to the Warrants is in the best interests of the Company and its stockholders in order to
comply with the terms of the Purchase Agreements and to receive the economic benefits of the Warrants upon exercise thereof.
Effect of Failure to Obtain Stockholder Approval
Pursuant to the Purchase
Agreement we are obligated to cause stockholder meetings to be held until Stockholder Approval is obtained.
Effect of Approval
Upon obtaining Stockholder
Approval requested in this proposal, we would no longer be bound by Nasdaq Listing Rule 5635(d)’s restriction on the number
or shares of common stock we are able to issue under the Warrants. As the exercise price of the Warrants could be adjusted downwards upon
the occurrence of certain events in the future, we are unable to accurately predict how many shares may be issuable upon full exercise
of the Warrants. As such, the additional shares that the Company could issue to the holder of the Warrants may result in significant dilution
to existing stockholders, a decline in our share price, or greater price volatility.
Each additional common share
that would be issuable to the holders of the Warrants would have the same rights and privileges as each of our currently authorized common
shares. See “— Description of Common Stock” above.
Interests of Officers and Directors in this Proposal
Our officers and directors
do not have any substantial interest, direct or indirect, in in this proposal.
Required Vote of Stockholders
The affirmative vote of a
majority of the votes cast at the Annual Meeting is required to approve Proposal No. 3.
Board Recommendation
The board of directors unanimously
recommends a vote “FOR” Proposal No. 3.
PROPOSAL
No. 4:
THE JULY 2023 TRANSACTION PROPOSAL
Background
On July 3, 2023, we entered
into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an accredited investor pursuant to which we
issued and sold a secured promissory note in the principal amount of $375,000 (the “Note”) resulting in gross proceeds of
$250,000. In connection with the issuance of the Note, we issued 156,250 shares of its common stock (the “Commitment Shares”)
as a commitment fee to the investor. Pursuant to the Securities Purchase Agreement, we are obligated to obtain approval of its shareholders
with respect to the issuance of any securities in connection with the Securities Purchase Agreement and the Note in excess of 19.99% of
our issued and outstanding shares on the closing date. The Note has a maturity date of December 31, 2023 and is convertible following
shareholder approval and the occurrence of an Event of Default (as defined in the Note) at a conversion price of $0.45 per share. This
summary is qualified in its entirety by the full text of the Form of Note, a copy of which is attached to this Proxy Statement as Appendix
B.
Reasons for Stockholder Approval
Our common stock is listed
on The Nasdaq Capital Market, and, as such, we are subject to the Nasdaq Marketplace Rules. Nasdaq Marketplace Rule 5635(d) requires
stockholder approval prior to the issuance of securities in a transaction, other than a public offering, involving the sale, issuance
or potential issuance by us of common stock (or securities convertible into or exercisable for common stock), which equals 20% or more
of the common stock or 20% or more of the voting power outstanding before the issuance, at a price less than the lower of: (i) the
closing price immediately preceding the signing of the binding agreement, or (ii) the average closing price of the common stock for
the five trading days immediately preceding the signing of the binding agreement for the transaction.
The board has determined
that the ability to issue securities pursuant to the promissory notes is in the best interests of the Company and its stockholders in
order to comply with the terms of the Securities Purchase Agreement and to conserve cash upon the occurrence of an Event of Default.
Effect of Failure to Obtain Stockholder Approval
Pursuant to the Securities
Purchase Agreement we are obligated to cause stockholder meetings to be held until stockholder approval is obtained.
Effect of Approval
Upon obtaining stockholder
approval requested in this proposal, we would no longer be bound by Nasdaq Listing Rule 5635(d)’s restriction on the number
or shares of common stock we are able to issue under the Notes.
Each additional common share
that would be issuable to the holders of the Notes would have the same rights and privileges as each of our currently authorized common
shares. See “— Description of Common Stock” under Proposal No. 3 above.
Interests of Officers and Directors in this Proposal
Our officers and directors
do not have any substantial interest, direct or indirect, in in this proposal.
Required Vote of Stockholders
The affirmative vote of a
majority of the votes cast at the Annual Meeting is required to approve Proposal No. 4.
Board Recommendation
The board of directors unanimously
recommends a vote “FOR” Proposal No. 4.
PROPOSAL No. 5:
AUTHORIZATION TO ISSUE SECURITIES IN ONE OR
MORE NON-PUBLIC OFFERINGS IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE 5635(D)
Our common stock is listed
on The Nasdaq Capital Market, and, as such, we are subject to the Nasdaq Marketplace Rules. Nasdaq Marketplace Rule 5635(d) requires
stockholder approval prior to the issuance of securities in a transaction, other than a public offering, involving the sale, issuance
or potential issuance by us of common stock (or securities convertible into or exercisable for common stock), which equals 20% or more
of the common stock or 20% or more of the voting power outstanding before the issuance, at a price less than the lower of: (i) the
closing price immediately preceding the signing of the binding agreement, or (ii) the average closing price of the common stock for
the five trading days immediately preceding the signing of the binding agreement for the transaction.
We
may seek to raise additional capital to implement our business strategy and enhance our overall capitalization. We have not determined
the particular terms for such prospective offerings. Because we may seek additional capital that triggers the requirements of Rule 5635(d),
we are seeking stockholder approval now, so that we will be able to move quickly to take full advantage of any opportunities that may
develop in the equity markets.
We
are seeking stockholder approval for the potential issuance of shares of our common stock, or securities convertible into our common stock,
in one or more capital-raising transactions, or offerings, subject to the following limitations:
| ● | The
aggregate number of shares issued in the offerings will not exceed [*] million shares of
our common stock, subject to adjustment for any reverse stock split effected prior to the
offerings (including pursuant to preferred stock, options, warrants, convertible debt or
other securities exercisable for or convertible into Common Stock); |
| ● | The
total aggregate consideration will not exceed $[*] in cash; |
| ● | Such
offerings will occur, if at all, on or before [*], 2024; and |
| | |
| ● | Such
other terms as our Board of Directors shall deem to be in the best interests of the Company
and its stockholders, not inconsistent with the foregoing. |
The
issuance of shares of our common stock, or other securities convertible into shares of our common stock, in accordance with
any offerings would dilute, and thereby reduce, each existing stockholder’s proportionate ownership in our common stock.
The
issuance of shares of common stock in one or more non-public offerings could have an anti-takeover effect. Such issuance could dilute
the voting power of a person seeking control of the Company, thereby deterring or rendering more difficult a merger, tender offer, proxy
contest or an extraordinary corporate transaction opposed by the Company.
Our
Board of Directors has not yet determined the terms and conditions of any offerings. As a result, the level of potential dilution cannot
be determined at this time, but as discussed above, we may not issue more than [*] million shares of common stock in the aggregate pursuant
to the authority requested from stockholders under this proposal (subject to adjustment for any reverse stock split). It is possible that
if we conduct a non-public stock offering, some of the shares we sell could be purchased by one or more investors who could acquire a
large block of our common stock. This would concentrate voting power in the hands of a few stockholders who could exercise greater influence
on our operations or the outcome of matters put to a vote of stockholders in the future.
We
cannot determine what the actual net proceeds of the offerings will be until they are completed, but as discussed above, the aggregate
dollar amount of the non-public offerings will be no more than $[*] million. If all or part of the offerings is completed, the net proceeds
will be used for general corporate purposes, including our strategic M&A initiatives. We currently have no arrangements or understandings
regarding any specific transaction with investors, so we cannot predict whether we will be successful should we seek to raise capital
through any offerings.
Financial Statements
and Supplementary Data
The full text of our
audited consolidated financial statements as of December 31, 2022 and 2021 and the interim unaudited financial statements as of March
31, 2023 and 2022 are incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 accompanying
this Proxy Statement and Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, filed with the SEC on April 17, 2023
and May 15, 2023, respectively.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
For “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2022 and 2021, please
see Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 17, 2023 and accompanying
this Proxy Statement, which is incorporated herein by reference.
For “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for the three months ended March 31, 2023 and 2022, please
see Item 2 in our quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, filed with the SEC on May 15, 2023, which
is incorporated herein by reference.
Changes
In and Disagreements with Accountants on Accounting and Financial Disclosure
For
“Changes in and Disagreements With Accountants on Accounting and Financial Disclosure”, please see Item 9 in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 17, 2023 and accompanying this Proxy
Statement, which is incorporated herein by reference.
Quantitative
and Qualitative Disclosures about Market Risk
Not required for Smaller
Reporting Companies.
Required Vote of Stockholders
The
affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve Proposal No. 5.
Board Recommendation
The board of directors unanimously recommends
a vote “FOR” Proposal 5.
PROPOSAL No. 6:
APPROVAL OF ANY CHANGE IN CONTROL UNDER NASDAQ
MARKETPLACE RULE 5635(D) THAT MAY RESULT FROM THE NON-PUBLIC OFFERINGS
Nasdaq
Marketplace Rule 5635(b) requires us to obtain stockholder approval prior to certain issuances with respect to common stock or securities
convertible into common stock which will result in a change of control of the issuer. This rule does not specifically define
when a change in control of an issuer may be deemed to occur; however, Nasdaq suggests in its guidance that a change of control would
occur, subject to certain limited exceptions, if after a transaction a person or an entity will hold 20% or more of the issuer’s then
outstanding capital stock. For the purpose of calculating the holdings of such person or entity, Nasdaq would take into account,
in addition to the securities received by such person or entity in the transaction, all of the shares owned by such person or entity unrelated
to the transaction and would assume the conversion of any convertible securities held by such person or entity. We are seeking
the stockholders approval on any change in control as used in Rule 5635(b) in the event that potential issuance of securities in the offerings
proposed in Proposal No. 5 would result in a change in control.
Stockholders
should note that a change of control as described under Rule 5635(b) applies only with respect to the application of such rule. Neither
Delaware law nor our Certificate of Incorporation or bylaws require us to obtain stockholder approval of such change in control as used
in Rule 5635 (b).
Required Vote of Stockholders
The
affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve Proposal No. 6.
Board Recommendation
The
board of directors unanimously recommends a vote “FOR” Proposal No. 6.
PROPOSAL No.
7:
THE REVERSE STOCK SPLIT PROPOSAL
Our board of directors has
approved an amendment to our Certificate of Incorporation, as amended, to combine the outstanding shares of our common stock into a lesser
number of outstanding shares (a “Reverse Stock Split”). If approved by the stockholders as proposed, the board of directors
would have the sole discretion to effect the Reverse Stock Split, if at all, within one (1) year of the date the proposal is approved
by stockholders and to fix the specific ratio for the combination within a range of one-for-[*] (1:[*]) to a maximum of a one-for-[*]
(1:[*]) split. The board of directors has the discretion to abandon the amendment and not implement the Reverse Stock Split.
If approved by our stockholders,
this proposal would permit (but not require) the board of directors to effect a Reverse Stock Split of the outstanding shares of our
common stock within one (1) year of the date the proposal is approved by stockholders, at a specific ratio within a range of one-for-[*]
(1:[*]) to a maximum of a one-for-[*] (1:[*]) split, with the specific ratio to be fixed within this range by the board of directors
in its sole discretion without further stockholder approval. We believe that enabling the board of directors to fix the specific ratio
of the Reverse Stock Split within the stated range will provide us with the flexibility to implement it in a manner designed to maximize
the anticipated benefits for our stockholders.
In fixing the ratio, the board
of directors may consider, among other things, factors such as: the initial and continued listing requirements of the Nasdaq Capital Market;
the number of shares of our common stock outstanding; potential financing opportunities; and prevailing general market and economic conditions.
The Reverse Stock Split, if
approved by our stockholders, would become effective upon the filing of the amendment to our certificate of incorporation with the Secretary
of State of the State of Delaware, or at the later time set forth in the amendment. The exact timing of the amendment will be determined
by the board of directors based on its evaluation as to when such action will be the most advantageous to our Company and our stockholders.
In addition, the board of directors reserves the right, notwithstanding stockholder approval and without further action by the stockholders,
to abandon the amendment and the Reverse Stock Split if, at any time prior to the effectiveness of the filing of the amendment with the
Secretary of State of the State of Delaware, the board of directors, in its sole discretion, determines that it is no longer in our best
interest and the best interests of our stockholders to proceed.
The proposed form of amendment
to our certificate of incorporation to effect the Reverse Stock Split is attached as Appendix C to this Proxy Statement. Any amendment
to our certificate of incorporation to effect the Reverse Stock Split will include the Reverse Stock Split ratio fixed by the board of
directors, within the range approved by our stockholders.
Reasons for the Reverse Stock Split
The Company’s primary
reasons for approving and recommending the Reverse Stock Split are to make our common stock more attractive to certain institutional investors,
which would provide for a stronger investor base and to increase the per share price and bid price of our common stock to regain compliance
with the continued listing requirements of Nasdaq.
On January 18, 2022, we received
a notification from Nasdaq related to our failure to maintain a minimum bid price of $1 per share. Based upon the closing bid price for
the prior 30 consecutive business days, we no longer met this requirement. However, under the Nasdaq Listing Rules, we were entitled to
a compliance period of 180 calendar days in which to regain compliance. In order to regain compliance, we attempted to obtain stockholder
approval for a reverse stock split at our 2022 Annual Meeting of stockholders (the “2022 Reverse Stock Split”), originally
scheduled for June 24, 2022, and further adjourned to and reconvened on July 8, 2022 and July 15, 2022. At such reconvened meeting, although
we received the affirmative vote of more than a majority of the shares present in person or by proxy, there were not sufficient votes
to approve the 2022 Reverse Stock Split proposal because of the voting standard of approval by a majority of outstanding shares.
On July 20, 2022, we received
a notification from Nasdaq that we had not regained compliance with the minimum bid price rule within the compliance period and that our
common stock would be suspended from trading on Nasdaq unless we requested a hearing before a hearings panel no later than July 26, 2022.
We timely requested a hearing with the panel, which request stayed any trading suspension of our common stock until the completion of
the Nasdaq hearing process and the expiration of any additional extension period granted by the panel following the hearing. The hearing
was held on September 8, 2022.
In
order to procure the vote necessary to effect the 2022 Reverse Stock Split, we created a supermajority voting class of preferred stock,
which we designated as Series B preferred stock. we issued one share of our Series B preferred stock to our Chief Executive Officer,
Amro Albanna in a private placement transaction. With respect to the 2022 Reverse Stock Split proposal, the outstanding share of Series
B preferred stock was entitled to 250,000,000 votes on such proposal, which is referred to as supermajority voting; however the votes
by the holder of Series B preferred stock were counted in the same “mirrored” proportion as the aggregate votes cast by the
holders of common stock who vote on this proposal. On September 7, 2022, the holders of our outstanding shares of common stock and Series
B preferred stock approved the 2022 Reverse Stock Split and our Board of Directors subsequently approved
a one-for-fifty (1-for-50) reverse split of the Company’s issued and outstanding shares of common stock and our common stock began
trading on a split-adjusted basis on September 14, 2022. On September 20, 2022, we completed a public offering resulting in gross proceeds
to the Company of approximately $20 million, which brought the Company back into compliance with the minimum stockholders’ equity
requirement.
On
September 28, 2022, we received the determination from Nasdaq that we had regained compliance with the requirements to remain listed
in The Nasdaq Capital Market subject to a Panel Monitor of the Company’s ongoing compliance with such requirements as set forth
in Listing Rule 5815(d)(4)(A) until March 28, 2023, which, on April 24, 2023, was subsequently extended to September 28, 2023. If, within
that monitoring period, the Listing Qualifications staff (“Staff”) finds the Company out of compliance with one or more listing
standards during that period notwithstanding Rule 5810(c)(2), we will not be permitted to provide the Staff with a plan of compliance
with respect to that deficiency and Staff will not be permitted to grant additional time for the Company to regain compliance with respect
to that deficiency, nor will the company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff
will issue a Staff Delist Determination and the Company will have an opportunity to request a new hearing with the initial Hearings Panel
or a newly convened Hearings Panel if the initial Hearings Panel is unavailable. On April 28, 2023, we received a written
notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) that we were not in compliance with Nasdaq Listing
Rule 5550(a)(2), ( the “Rule”) as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business
days. On May 23, 2023, we received written notice from Nasdaq that, based upon the stockholders
equity reported by the Company in its Form 10-Q for the period ended March 31, 2023, and as of March 31, 2023, the Company was no longer
in compliance with Nasdaq Listing Rule 5550(b)(1), which requires a company to maintain a minimum of $2,500,000 in stockholders’
equity, a market value of listed securities of at least $35 million, or net income from continuing operations of $500,000 in the most
recently completed fiscal year or in two of the three most recently completed fiscal years (the “Continued Listing Requirements”).
On June 28, 2023, we received a letter from Nasdaq notifying us that we have failed to maintain compliance with the stockholders’
equity requirement in Listing Rule 5550(b)(1). and the minimum bid price rule in Nasdaq Listing Rule 5550(a)(2) as the closing price of
Company’s common stock has remained below $1.00 for over 30 consecutive trading days. On July 5, 2023, we submitted an appeal to
Nasdaq, which will stay the suspension of our common stock pending a final decision by the Panel. On July 5, 2023, we received notice
from Nasdaq that the hearing will be held on August 31, 2023. We will monitor the closing bid price of our common stock and will
consider all of our options to regain compliance with Nasdaq’s minimum bid price requirement and the stockholders’ equity
requirement. At the hearing, we intend to present our views and plans to regain compliance with the particular deficiencies noted by the
Staff, as well as our ability to sustain long-term compliance with all applicable maintenance criteria. There can be no assurance that
the Company will regain compliance with the minimum bid price requirement, the stockholders’ equity requirement or maintain compliance
with any of the other Nasdaq continued listing requirements.
In order to attempt to procure
the vote necessary to effect the current Reverse Stock Split proposal, on July 10, 2023, we issued one share of our Series C preferred
stock to our Chief Executive Officer, Amro Albanna. The terms of the Series C preferred stock are set forth in a Certificate of Designation
of Series C preferred stock, filed with the Secretary of State of the State of Delaware, and effective on July 10, 2023. The Series C
preferred stock does not have any voting rights except with respect to a reverse stock split proposal, or otherwise as required by law.
With respect to the Reverse Stock Split proposal, the outstanding share of Series C preferred stock is entitled to [*] votes on such proposal,
which is referred to as supermajority voting; however the votes by the holder of Series C preferred stock will be counted in the same
“mirrored” proportion as the aggregate votes cast by the holders of common stock who vote on this proposal. For example, if
50.5% of the shares of common stock voted in person or by proxy at the Annual Meeting are voted FOR Proposal 7, then we will count 50.5%
of the votes cast (or votes) by the holder of the Series B preferred stock as votes FOR Proposal 7. Holders of common stock and Series
C preferred stock will vote on the Reverse Stock Split proposal as a single class. If the Reverse Stock Split proposal is approved, the
outstanding share of Series C preferred stock will be automatically redeemed upon the effectiveness of the amendment to the Restated Certificate
of Incorporation implementing the Reverse Stock Split.
In evaluating whether to seek
stockholder approval for the Reverse Stock Split, our Board took into consideration negative factors associated with reverse stock splits.
These factors include: the negative perception of reverse stock splits that investors, analysts and other stock market participants may
hold; the fact that the stock prices of some companies that have effected reverse stock splits have subsequently declined, sometimes significantly,
following their reverse stock splits; the possible adverse effect on liquidity that a reduced number of outstanding shares could cause;
and the costs associated with implementing a reverse stock split. Even if our stockholders approve the Reverse Stock Split, our Board
reserves the right not to effect the Reverse Stock Split if in our Board’s opinion it would not be in the best interests of the
Company or our stockholders to effect such Reverse Stock Split.
Reducing the number of outstanding
shares of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of
our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business may
adversely affect the market price of our common stock. As a result, there can be no assurance that the Reverse Stock Split, if completed,
will result in the intended benefits described above, that the market price of our common stock will increase following the Reverse Stock
Split, that as a result of the Reverse Stock Split we will be able to meet or maintain a bid price over the minimum bid price requirement
of Nasdaq or that the market price of our common stock will not decrease in the future. Additionally, we cannot assure you that the market
price per share of our common stock after the Reverse Stock Split will increase in proportion to the reduction in the number of shares
of our common stock outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our common stock after
the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.
In addition, the Company believes
the Reverse Stock Split will make its common stock more attractive to a broader range of investors, as it believes that the current market
price of the common stock may prevent certain institutional investors, professional investors and other members of the investing public
from purchasing stock. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them
from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Furthermore,
some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions
on higher-priced stocks, the current average price per share of common stock can result in individual stockholders paying transaction
costs representing a higher percentage of their total share value than would be the case if the share price were higher. The Company believes
that the Reverse Stock Split will make our common stock a more attractive and cost effective investment for many investors, which in turn
would enhance the liquidity of the holders of our common stock.
Potential Effects of the Proposed Amendment
If our stockholders approve
the Reverse Stock Split and the board of directors effects it, the number of shares of common stock issued and outstanding will be reduced,
depending upon the ratio determined by the board of directors. The Reverse Stock Split will affect all holders of our common stock uniformly
and will not affect any stockholder’s percentage ownership interest in the Company, except that as described below in “Fractional
Shares,” record holders of common stock otherwise entitled to a fractional share as a result of the Reverse Stock Split because
they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional
fraction of a share of common stock to round up to the next whole share. In addition, the Reverse Stock Split will not affect any stockholder’s
proportionate voting power (subject to the treatment of fractional shares).
The Reverse Stock Split will
not change the terms of the common stock. Additionally, the Reverse Stock Split will have no effect on the number of common stock that
we are authorized to issue. After the Reverse Stock Split, the shares of common stock will have the same voting rights and rights to dividends
and distributions and will be identical in all other respects to the common stock now authorized. The common stock will remain fully paid
and non-assessable.
After the effective time of
the Reverse Stock Split, we will continue to be subject to the periodic reporting and other requirements of the Exchange Act.
Registered “Book-Entry” Holders
of Common Stock
Our registered holders of common
stock hold some or all of their shares electronically in book-entry form with the transfer agent. These stockholders do not have stock
certificates evidencing their ownership of the common stock. They are, however, provided with statements reflecting the number of shares
registered in their accounts.
Stockholders who hold shares
electronically in book-entry form with the transfer agent will not need to take action to receive evidence of their shares of post-Reverse
Stock Split common stock.
Holders of Certificated Shares of Common Stock
Stockholders holding shares
of our common stock in certificated form will be sent a transmittal letter by the transfer agent after the effective time of the Reverse
Stock Split. The letter of transmittal will contain instructions on how a stockholder should surrender his, her or its certificate(s) representing
shares of our common stock (the “Old Certificates”) to the transfer agent. Unless a stockholder specifically requests
a new paper certificate or holds restricted shares, upon the stockholder’s surrender of all of the stockholder’s Old Certificates
to the transfer agent, together with a properly completed and executed letter of transmittal, the transfer agent will register the appropriate
number of shares of post-Reverse Stock Split common stock electronically in book-entry form and provide the stockholder with a statement
reflecting the number of shares registered in the stockholder’s account. No stockholder will be required to pay a transfer or other
fee to exchange his, her or its Old Certificates. Until surrendered, we will deem outstanding Old Certificates held by stockholders to
be cancelled and only to represent the number of shares of post-Reverse Stock Split common stock to which these stockholders are entitled.
Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be
exchanged for appropriate number of shares of post-Reverse Stock Split common stock. If an Old Certificate has a restrictive legend on
its reverse side, a new certificate will be issued with the same restrictive legend on its reverse side.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND
SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Fractional Shares
We will not issue fractional
shares in connection with the Reverse Stock Split. Instead, stockholders who otherwise would be entitled to receive fractional shares
because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an
additional fraction of a share of common stock to round down to the next whole share. In any event, cash will not be paid for fractional
shares.
Effect of the Reverse Stock Split on Outstanding
Stock Options and Warrants
Based upon the Reverse Stock
Split ratio, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable
upon the exercise of all outstanding options and warrants. This would result in approximately the same aggregate price being required
to be paid under such options or warrants upon exercise, and approximately the same value of shares of common stock being delivered upon
such exercise immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The number
of shares reserved for issuance pursuant to these securities will be reduced proportionately based upon the Reverse Stock Split ratio.
Accounting Matters
The proposed amendment to our
Certificate of Incorporation will not affect the par value of our common stock. As a result, at the effective time of the Reverse Stock
Split, the stated capital on our balance sheet attributable to the common stock will be reduced in the same proportion as the Reverse
Stock Split ratio, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced.
The per share net income or loss will be restated for prior periods to conform to the post-Reverse Stock Split presentation.
Certain Federal Income Tax Consequences of
the Reverse Stock Split
The following summary describes,
as of the date of this proxy statement, certain U.S. federal income tax consequences of the Reverse Stock Split to holders of our
common stock. This summary addresses the tax consequences only to a U.S. holder, which is a beneficial owner of our common stock
that is either:
| ● | an individual citizen or resident of the United States; |
| ● | a corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the
District of Columbia; |
| ● | an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or |
| ● | a trust, if: (i) a court within the United States
is able to exercise primary jurisdiction over its administration and one or more U.S. persons has the authority to control all of
its substantial decisions or (ii) it was in existence before August 20, 1996 and a valid election is in place under applicable
Treasury regulations to treat such trust as a U.S. person for U.S. federal income tax purposes |
This summary is based on the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations, administrative rulings
and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S. federal income tax
law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal
income tax consequences of the Reverse Stock Split.
This summary does not address
all of the tax consequences that may be relevant to any particular investor, including tax considerations that arise from rules of general
application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary also
does not address the tax consequences to (i) persons that may be subject to special treatment under U.S. federal income tax
law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt
organizations, U.S. expatriates, persons subject to the alternative minimum tax, persons whose functional currency is not the U.S. dollar,
partnerships or other pass-through entities, traders in securities that elect to mark to market and dealers in securities or currencies,
(ii) persons that hold our common stock as part of a position in a “straddle” or as part of a “hedging transaction,”
“conversion transaction” or other integrated investment transaction for federal income tax purposes or (iii) persons
that do not hold our common stock as “capital assets” (generally, property held for investment). This summary does not address
backup withholding and information reporting. This summary does not address U.S. holders who beneficially own common stock through
a “foreign financial institution” (as defined in Code Section 1471(d)(4)) or certain other non-U.S. entities specified
in Code Section 1472. This summary does not address tax considerations arising under any state, local or foreign laws, or under federal
estate or gift tax laws.
If a partnership (or other
entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal
income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.
Partnerships that hold our common stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal
income tax consequences of the Reverse Stock Split.
Each holder should consult
his, her or its own tax advisors concerning the particular U.S. federal tax consequences of the Reverse Stock Split, as well as the
consequences arising under the laws of any other taxing jurisdiction, including any foreign, state, or local income tax consequences.
General Tax Treatment of the Reverse Stock
Split
The Reverse Stock Split is
intended to qualify as a “reorganization” under Section 368 of the Code that should constitute a “recapitalization”
for U.S. federal income tax purposes. Assuming the Reverse Stock Split qualifies as a reorganization, a U.S. holder generally
will not recognize gain or loss upon the exchange of our ordinary shares for a lesser number of ordinary shares, based upon the Reverse
Stock Split ratio. A U.S. holder’s aggregate tax basis in the lesser number of ordinary shares received in the Reverse Stock
Split will be the same such U.S. holder’s aggregate tax basis in the shares of our common stock that such U.S. holder
owned immediately prior to the Reverse Stock Split. The holding period for the ordinary shares received in the Reverse Stock Split will
include the period during which a U.S. holder held the shares of our common stock that were surrendered in the Reverse Stock Split.
The United States Treasury regulations provide detailed rules for allocating the tax basis and holding period of the shares of our
common stock surrendered to the shares of our common stock received pursuant to the Reverse Stock Split. U.S. holders of shares of
our common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the
tax basis and holding period of such shares.
THE FOREGOING IS INTENDED
ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT, AND DOES NOT CONSTITUTE A TAX OPINION. EACH HOLDER
OF OUR COMMON SHARES SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO THEM AND FOR REFERENCE
TO APPLICABLE PROVISIONS OF THE CODE.
Interests of Officers and Directors in this
Proposal
Our officers and directors
do not have any substantial interest, direct or indirect, in in this proposal.
Required Vote of Stockholders
The affirmative vote of the
holders of a majority of the outstanding shares of our common stock is required to approve this proposal.
Board Recommendation
The board of directors unanimously
recommends a vote “FOR” Proposal No. 7.
PROPOSAL No.
8:
APPROVAL OF AN INCREASE TO THE NUMBER OF AUTHORIZED
SHARES ISSUABLE UNDER THE 2021 OMNIBUS EQUITY INCENTIVE PLAN
Our board of directors adopted
the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) in February 2021 and the 2021 Plan was approved by our stockholders
in May 2021. Our board of directors initially authorized the issuance of up to 3,000,000 shares of common stock under the 2021 Plan.
On September 13, 2022, we filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of the State
of Delaware to effectuate a one-for-fifty (1:50) reverse stock split (the “2022 Reverse Stock Split”). Following the 2022
Reverse Stock Split, up to 60,000 shares of common stock are authorized for issuance under the 2021 Plan.
As of the Record Date, excluding
the requested share increase, there were [*] shares of common stock available for issuance under the 2021 Plan.
Reasons for the Proposed Amendment
Sufficient Shares Are Required to Attract,
Motivate and Retain Key Employees and Non-Employee Directors
In connection with the 2022
Reverse Stock Split, the authorized number of shares of our common stock reserved for issuance under the 2021 Plan was decreased such
that 60,000 shares of common stock are currently authorized for issuance under the 2021 Plan. Our board of directors believes that it
is advisable and in the best interests of the Company and its stockholders to increase the number of shares reserved under the 2021 Plan
from 60,000 shares of common stock to [*] shares of common stock to attract, motivate and retain key employees and non-employee directors.
Executive Compensation is an Important Part
of Our Compensation Program
The Compensation Committee
established long-term equity-based compensation as an important element of our compensation program. The Compensation Committee emphasizes
long-term equity-based compensation in order to (i) align participants’ interests with the interests of the Company’s stockholders
in the long-term success of the Company; (ii) provide management with an equity ownership in the Company tied to Company performance;
(iii) attract, motivate and retain key employees and non-employee directors; and (iv) provide incentive to management for continuous employment
with the Company. The 2021 Plan is designed to advance these interests of the Company and its stockholders. Equity-based compensation
under the 2021 Plan encourages executives to act as owners with an equity stake in the Company, discourages inappropriate risk-taking
and contributes to the continuity and stability within the Company’s leadership.
The purpose of this requested
increase in the number of authorized shares under the 2021 Plan is to continue to be able to attract, retain and motivate executive officers
and other employees, non-employee directors and certain consultants. Upon stockholder approval of the amendment, additional shares of
common stock will be reserved for issuance under the 2021 Plan, which will enable us to continue to grant equity awards to our officers,
employees, consultants and non-employee directors at levels determined by the board of directors to be necessary to attract, retain and
motivate the individuals who will be critical to our success in achieving its business objectives and thereby creating greater value for
all our stockholders.
As described above, we are
seeking stockholder approval of an amendment to increase the number of shares issuable under the 2021 Plan by [*] shares. Such amendment
was adopted and approved by our board of directors on [*], 2023. We believe that equity awards have been critical in attracting and retaining
talented employees and officers, aligning their interests with those of stockholders, and focusing key employees on our long-term growth.
We anticipate that option grants and other forms of equity awards such as restricted stock awards may become an increasing component in
similarly motivating our consultants.
In determining the amount
of the increase contemplated by the proposed amendment to the 2021 Plan, our board of directors has taken into consideration the fact
that, excluding the requested share increase, as of the Record Date, there were approximately [*] shares of our common stock outstanding
on a fully-diluted basis, and the board of directors believes that this fully-diluted number, rather than the number of outstanding shares
of the Company, is the relevant number in determining the appropriate number of shares available under the 2021 Plan. Additionally, the
Company believes the increase is appropriate following the 2022 Reverse Stock Split. When approved by our stockholders in May 2021, the
3,000,000 (pre-split) shares initially authorized for issuance under the 2021 Plan represented approximately 21% of our common stock.
Assuming the approval of this increase, the total number of shares of our common stock available for issuance under the 2021 Plan will
be [*] shares, which will represent approximately [*]% of our common stock.
Approval of the amendment
to the 2021 Plan will permit us to continue to use stock-based compensation to align stockholder and employee interests and to motivate
employees and others providing services to us.
Description of 2021 Plan
The following is a summary
of the material features of the 2021 Plan. This summary is qualified in its entirety by the full text of the 2021 Plan, a copy of which
is attached to this Proxy Statement as Appendix D.
Types of Awards. The
2021 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights (“SARs”),
restricted stock, restricted stock units (“RSUs”), and other stock-based awards. Items described above in the Section
called “Shares Available” are incorporated herein by reference.
Administration. The
2021 Plan will be administered by our board of directors, or if our board of directors does not administer the 2021 Plan, a committee
or subcommittee of our board of directors that complies with the applicable requirements of Section 16 of the Exchange Act and any
other applicable legal or stock exchange listing requirements (each of our board of directors or such committee or subcommittee, the “plan
administrator”). The plan administrator may interpret the 2021 Plan and may prescribe, amend and rescind rules and make all other
determinations necessary or desirable for the administration of the 2021 Plan, provided that, subject to the equitable adjustment provisions
described below, the plan administrator will not have the authority to reprice or cancel and re-grant any award at a lower exercise,
base or purchase price or cancel any award with an exercise, base or purchase price in exchange for cash, property or other awards without
first obtaining the approval of our stockholders.
The 2021 Plan permits the plan
administrator to select the eligible recipients who will receive awards, to determine the terms and conditions of those awards, including
but not limited to the exercise price or other purchase price of an award, the number of shares of common stock or cash or other property
subject to an award, the term of an award and the vesting schedule applicable to an award, and to amend the terms and conditions of outstanding
awards.
Restricted Stock and Restricted
Stock Units. Restricted stock and RSUs may be granted under the 2021 Plan. The plan administrator will determine
the purchase price, vesting schedule and performance goals, if any, and any other conditions that apply to a grant of restricted stock
and RSUs. If the restrictions, performance goals or other conditions determined by the plan administrator are not satisfied, the restricted
stock and RSUs will be forfeited. Subject to the provisions of the 2021 Plan and the applicable award agreement, the plan administrator
has the sole discretion to provide for the lapse of restrictions in installments.
Unless the applicable award
agreement provides otherwise, participants with restricted stock will generally have all of the rights of a stockholder; provided that
dividends will only be paid if and when the underlying restricted stock vests. RSUs will not be entitled to dividends prior to vesting,
but may be entitled to receive dividend equivalents if the award agreement provides for them. The rights of participants granted restricted
stock or RSUs upon the termination of employment or service to us will be set forth in the award agreement.
Options. Incentive
stock options and non-statutory stock options may be granted under the 2021 Plan. An “incentive stock option” means an
option intended to qualify for tax treatment applicable to incentive stock options under Section 422 of the Internal Revenue Code.
A “non-statutory stock option” is an option that is not subject to statutory requirements and limitations required for
certain tax advantages that are allowed under specific provisions of the Internal Revenue Code. A non-statutory stock option under
the 2021 Plan is referred to for federal income tax purposes as a “non-qualified” stock option. Each option granted under
the Plan will be designated as a non-qualified stock option or an incentive stock option. At the discretion of the administrator,
incentive stock options may be granted only to our employees, employees of our “parent corporation” (as such term is defined
in Section 424(e) of the Code) or employees of our subsidiaries.
The exercise period of an
option may not exceed ten years from the date of grant and the exercise price may not be less than 100% of the fair market value of a
share of common stock on the date the option is granted (110% of fair market value in the case of incentive stock options granted to ten
percent stockholders). The exercise price for shares of common stock subject to an option may be paid in cash, or as determined by the
administrator in its sole discretion, (i) through any cashless exercise procedure approved by the administrator (including the withholding
of shares of common stock otherwise issuable upon exercise), (ii) by tendering unrestricted shares of common stock owned by the participant,
(iii) with any other form of consideration approved by the administrator and permitted by applicable law or (iv) by any combination
of these methods. The option holder will have no rights to dividends or distributions or other rights of a stockholder with respect to
the shares of common stock subject to an option until the option holder has given written notice of exercise and paid the exercise price
and applicable withholding taxes.
In the event of an participant’s
termination of employment or service, the participant may exercise his or her option (to the extent vested as of such date of termination)
for such period of time as specified in his or her option agreement.
Stock Appreciation Rights. SARs
may be granted either alone (a “free-standing SAR”) or in conjunction with all or part of any option granted under
the 2021 Plan (a “tandem SAR”). A free-standing SAR will entitle its holder to receive, at the time of exercise,
an amount per share up to the excess of the fair market value (at the date of exercise) of a share of common stock over the base price
of the free-standing SAR (which shall be no less than 100% of the fair market value of the related shares of common stock on the
date of grant) multiplied by the number of shares in respect of which the SAR is being exercised. A tandem SAR will entitle its holder
to receive, at the time of exercise of the SAR and surrender of the applicable portion of the related option, an amount per share up to
the excess of the fair market value (at the date of exercise) of a share of common stock over the exercise price of the related option
multiplied by the number of shares in respect of which the SAR is being exercised. The exercise period of a free-standing SAR may
not exceed ten years from the date of grant. The exercise period of a tandem SAR will also expire upon the expiration of its related option.
The holder of a SAR will
have no rights to dividends or any other rights of a stockholder with respect to the shares of common stock subject to the SAR until the
holder has given written notice of exercise and paid the exercise price and applicable withholding taxes.
In the event of a participant’s
termination of employment or service, the holder of a SAR may exercise his or her SAR (to the extent vested as of such date of termination)
for such period of time as specified in his or her SAR agreement.
Other Stock-Based Awards. The
administrator may grant other stock-based awards under the 2021 Plan, valued in whole or in part by reference to, or otherwise based
on, shares of common stock. The administrator will determine the terms and conditions of these awards, including the number of shares
of common stock to be granted pursuant to each award, the manner in which the award will be settled, and the conditions to the vesting
and payment of the award (including the achievement of performance goals). The rights of participants granted other stock-based awards
upon the termination of employment or service to us will be set forth in the applicable award agreement. In the event that a bonus is
granted in the form of shares of common stock, the shares of common stock constituting such bonus shall, as determined by the administrator,
be evidenced in uncertificated form or by a book entry record or a certificate issued in the name of the participant to whom such grant
was made and delivered to such participant as soon as practicable after the date on which such bonus is payable. Any dividend or dividend
equivalent award issued hereunder shall be subject to the same restrictions, conditions and risks of forfeiture as apply to the underlying
award.
Equitable Adjustment and Treatment of Outstanding Awards Upon
a Change in Control
Equitable Adjustments. In
the event of a merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase, reorganization, special or extraordinary
dividend or other extraordinary distribution (whether in the form of common shares, cash or other property), combination, exchange of
shares, or other change in corporate structure affecting our common stock, an equitable substitution or proportionate adjustment shall
be made in (i) the aggregate number and kind of securities reserved for issuance under the 2021 Plan, (ii) the kind and number
of securities subject to, and the exercise price of, any outstanding options and SARs granted under the 2021 Plan, (iii) the kind,
number and purchase price of shares of common stock, or the amount of cash or amount or type of property, subject to outstanding restricted
stock, RSUs and other stock-based awards granted under the 2021 Plan and (iv) the terms and conditions of any outstanding awards
(including any applicable performance targets). Equitable substitutions or adjustments other than those listed above may also be made
as determined by the plan administrator. In addition, the plan administrator may terminate all outstanding awards for the payment of cash
or in-kind consideration having an aggregate fair market value equal to the excess of the fair market value of the shares of common
stock, cash or other property covered by such awards over the aggregate exercise price, if any, of such awards, but if the exercise price
of any outstanding award is equal to or greater than the fair market value of the shares of common stock, cash or other property covered
by such award, the plan administrator may cancel the award without the payment of any consideration to the participant. With respect to
awards subject to foreign laws, adjustments will be made in compliance with applicable requirements. Except to the extent determined by
the plan administrator, adjustments to incentive stock options will be made only to the extent not constituting a “modification”
within the meaning of Section 424(h)(3) of the Code.
Change in Control. The
2021 Plan provides that, unless otherwise determined by the plan administrator and evidenced in an award agreement, if a “change
in control” (as defined below) occurs and a participant is employed by us or any of our affiliates immediately prior to the consummation
of the change in control, then the plan administrator, in its sole and absolute discretion, may (i) provide that any unvested or
unexercisable portion of an award carrying a right to exercise will become fully vested and exercisable; and (ii) cause the restrictions,
deferral limitations, payment conditions and forfeiture conditions applicable to any award granted under the 2021 Plan to lapse, and the
awards will be deemed fully vested and any performance conditions imposed with respect to such awards will be deemed to be fully achieved
at target performance levels. The administrator shall have discretion in connection with such change in control to provide that all outstanding
and unexercised options and SARs shall expire upon the consummation of such change in control.
For purposes of the 2021 Plan,
a “change in control” means, in summary, the first to occur of the following events: (i) a person or entity becomes the
beneficial owner of more than 50% of our voting power; (ii) an unapproved change in the majority membership of our board of directors;
(iii) a merger or consolidation of us or any of our subsidiaries, other than (A) a merger or consolidation that results in our
voting securities continuing to represent 50% or more of the combined voting power of the surviving entity or its parent and our board
of directors immediately prior to the merger or consolidation continuing to represent at least a majority of the board of directors of
the surviving entity or its parent or (B) a merger or consolidation effected to implement a recapitalization in which no person is
or becomes the beneficial owner of our voting securities representing more than 50% of our combined voting power; or (iv) stockholder
approval of a plan of our complete liquidation or dissolution or the consummation of an agreement for the sale or disposition of substantially
all of our assets, other than (A) a sale or disposition to an entity, more than 50% of the combined voting power of which is owned
by our stockholders in substantially the same proportions as their ownership of us immediately prior to such sale or (B) a sale or
disposition to an entity controlled by our board of directors. However, a change in control will not be deemed to have occurred as a result
of any transaction or series of integrated transactions following which our stockholders, immediately prior thereto, hold immediately
afterward the same proportionate equity interests in the entity that owns all or substantially all of our assets.
Tax Withholding
Each participant will be required
to make arrangements satisfactory to the plan administrator regarding payment of up to the maximum statutory tax rates in the participant’s
applicable jurisdiction with respect to any award granted under the 2021 Plan, as determined by us. We have the right, to the extent permitted
by applicable law, to deduct any such taxes from any payment of any kind otherwise due to the participant. With the approval of the plan
administrator, the participant may satisfy the foregoing requirement by either electing to have us withhold from delivery of shares of
common stock, cash or other property, as applicable, or by delivering already owned unrestricted shares of common stock, in each case,
having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations. We may also use any other method
of obtaining the necessary payment or proceeds, as permitted by applicable law, to satisfy our withholding obligation with respect to
any award.
Amendment and Termination of the 2021 Plan
The 2021 Plan provides our
board of directors with authority to amend, alter or terminate the 2021 Plan, but no such action impair the rights of any participant
with respect to outstanding awards without the participant’s consent. The plan administrator may amend an award, prospectively or
retroactively, but no such amendment may materially impair the rights of any participant without the participant’s consent. Stockholder
approval of any such action will be obtained if required to comply with applicable law. The 2021 Plan will terminate on the tenth anniversary
of the Effective Date (although awards granted before that time will remain outstanding in accordance with their terms).
Clawback. If
we are required to prepare a financial restatement due to the material non-compliance with any financial reporting requirement, then
the plan administrator may require any Section 16 officer to repay or forfeit to us that part of the cash or equity incentive compensation
received by that Section 16 officer during the preceding three years that the plan administrator determines was in excess of the
amount that such Section 16 officer would have received had such cash or equity incentive compensation been calculated based on the
financial results reported in the restated financial statement. The plan administrator may take into account any factors it deems reasonable
in determining whether to seek recoupment of previously paid cash or equity incentive compensation and how much of such compensation to
recoup from each Section 16 officer (which need not be the same amount or proportion for each Section 16 officer). The amount
and form of the incentive compensation to be recouped shall be determined by the administrator in its sole and absolute discretion.
US Federal Income Tax Consequences
The following is a summary
of certain United States federal income tax consequences of awards under the 2021 Plan. It does not purport to be a complete description
of all applicable rules, and those rules (including those summarized here) are subject to change.
Non-Qualified Stock Options. A
participant who has been granted a non-qualified stock option will not recognize taxable income upon the grant of a non-qualified stock
option. Rather, at the time of exercise of such non-qualified stock option, the participant will recognize ordinary income for income
tax purposes in an amount equal to the excess of the fair market value of the shares of common stock purchased over the exercise price.
We generally will be entitled to a tax deduction at such time and in the same amount that the participant recognizes ordinary income.
If shares of common stock acquired upon exercise of a non-qualified stock option are later sold or exchanged, then the difference
between the amount received upon such sale or exchange and the fair market value of such shares on the date of such exercise will generally
be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the participant) depending
upon the length of time such shares were held by the participant.
Incentive Stock Options. In
general, no taxable income is realized by a participant upon the grant of an ISO. If shares of common stock are purchased by a participant,
or option shares, pursuant to the exercise of an ISO granted under the 2021 Plan and the participant does not dispose of the option shares
within the two-year period after the date of grant or within one year after the receipt of such option shares by the participant,
such disposition a disqualifying disposition, then, generally (1) the participant will not realize ordinary income upon exercise
and (2) upon sale of such option shares, any amount realized in excess of the exercise price paid for the option shares will be taxed
to such participant as capital gain (or loss). The amount by which the fair market value of the common stock on the exercise date of an
ISO exceeds the purchase price generally will constitute an item which increases the participant’s “alternative minimum taxable
income.” If option shares acquired upon the exercise of an ISO are disposed of in a disqualifying disposition, the participant generally
would include in ordinary income in the year of disposition an amount equal to the excess of the fair market value of the option shares
at the time of exercise (or, if less, the amount realized on the disposition of the option shares), over the exercise price paid for the
option shares. Subject to certain exceptions, an option generally will not be treated as an ISO if it is exercised more than three months
following termination of employment. If an ISO is exercised at a time when it no longer qualifies as an ISO, such option will be treated
as a nonqualified stock option as discussed above. In general, we will receive an income tax deduction at the same time and in the same
amount as the participant recognizes ordinary income.
Stock Appreciation Rights. A
participant who is granted an SAR generally will not recognize ordinary income upon receipt of the SAR. Rather, at the time of exercise
of such SAR, the participant will recognize ordinary income for income tax purposes in an amount equal to the value of any cash received
and the fair market value on the date of exercise of any shares of common stock received. We generally will be entitled to a tax deduction
at such time and in the same amount, if any, that the participant recognizes as ordinary income. The participant’s tax basis in
any shares of common stock received upon exercise of an SAR will be the fair market value of the shares of common stock on the date of
exercise, and if the shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and
the fair market value of such shares on the date of exercise will generally be taxable as long-term or short-term capital gain
or loss (if the shares are a capital asset of the participant) depending upon the length of time such shares were held by the participant.
Restricted Stock. A
participant generally will not be taxed upon the grant of restricted stock, but rather will recognize ordinary income in an amount equal
to the fair market value of the shares of common stock at the earlier of the time the shares become transferable or are no longer subject
to a substantial risk of forfeiture (within the meaning of the Code). We generally will be entitled to a deduction at the time when, and
in the amount that, the participant recognizes ordinary income on account of the lapse of the restrictions. A participant’s tax
basis in the shares of common stock will equal their fair market value at the time the restrictions lapse, and the participant’s
holding period for capital gains purposes will begin at that time. Any cash dividends paid on the shares of common stock before the restrictions
lapse will be taxable to the participant as additional compensation and not as dividend income, unless the individual has made an election
under Section 83(b) of the Code. Under Section 83(b) of the Code, a participant may elect to recognize ordinary income at the
time the restricted shares are awarded in an amount equal to their fair market value at that time, notwithstanding the fact that such
stock is subject to restrictions or transfer and a substantial risk of forfeiture. If such an election is made, no additional taxable
income will be recognized by such participant at the time the restrictions lapse, the participant will have a tax basis in the shares
of common stock equal to their fair market value on the date of their award, and the participant’s holding period for capital gains
purposes will begin at that time. We generally will be entitled to a tax deduction at the time when, and to the extent that, ordinary
income is recognized by such participant.
Restricted Stock Units. In
general, the grant of RSUs will not result in income for the participant or in a tax deduction for us. Upon the settlement of such an
award in cash or shares of common stock, the participant will recognize ordinary income equal to the aggregate value of the payment received,
and we generally will be entitled to a tax deduction at the same time and in the same amount.
Other Awards. With
respect to other stock-based awards, generally when the participant receives payment in respect of the award, the amount of cash
and/or the fair market value of any shares of common stock or other property received will be ordinary income to the participant, and
we generally will be entitled to a tax deduction at the same time and in the same amount.
New Plan Benefits
Future grants under the 2021
Plan will be made at the discretion of the plan administrator and, accordingly, are not yet determinable. In addition, benefits under
the 2021 Plan will depend on a number of factors, including the fair market value of our common stock on future dates and the exercise
decisions made by participants. Consequently, at this time, it is not possible to determine the future benefits that might be received
by participants receiving discretionary grants under the 2021 Plan.
Effects of Proposed Share Increase
The proposed share increase
will not have any immediate effect on the rights of existing stockholders. However, our board of directors will have the authority to
issue common stock without requiring future stockholder approval of such issuances, except as may be required by the Certificate of Incorporation,
Nasdaq or applicable law. To the extent that the additional authorized shares of common stock are issued in the future, they could decrease
the Company’s existing stockholders’ percentage equity ownership and could potentially have a dilutive effect on our earnings
per share, book value per share and the voting power and interest of current stockholders.
Interests of Officers and Directors in this
Proposal
Members of our board of directors
and the executive officers are eligible to receive awards under the terms of the 2021 Plan, and they therefore have a substantial interest
in this proposal.
Required Vote of Stockholders
The affirmative vote of a
majority of the votes cast at the Annual Meeting is required to approve the increase in the number of shares available under the 2021
Plan to [*] shares.
Board Recommendation
The board of directors recommends
a vote “FOR” Proposal No. 8.
PROPOSAL No. 9:
AUTHORIZATION
TO ADJOURN THE ANNUAL MEETING IF NECESSARY OR APPROPRIATE
At
the Annual Meeting, we may ask our stockholders to vote on a proposal to adjourn the Annual Meeting if necessary or appropriate in the
sole discretion of our Board of Directors, including to solicit additional proxies in the event that there are not sufficient votes at
the time of the Annual Meeting or any adjournment or postponement of the Annual Meeting to approve any of the other proposals.
If
at the Annual Meeting the number of shares authorized to vote present or represented by proxy and voting in favor of a proposal is insufficient
to approve such proposal, then our Board of Directors may hold a vote on each proposal that has garnered sufficient votes, if any, and
then move to adjourn the Annual Meeting as to the remaining proposals in order to solicit additional proxies in favor of those remaining
proposals.
Alternatively,
even if there are sufficient shares authorized to vote present or represented by proxy voting in favor of all of the proposals, our Board
of Directors may hold a vote on the adjournment proposal if, in its sole discretion, it determines that it is necessary or appropriate
for any reason to adjourn the Annual Meeting to a later date and time. In that event, the Company will ask its stockholders to vote only
upon the adjournment proposal and not any other proposal.
Any
adjournment may be made without notice (if the adjournment is not for more than thirty days and a new record date is not fixed for the
adjourned meeting), other than by an announcement made at the Annual Meeting of the time, date and place of the adjourned meeting.
Any
adjournment of the Annual Meeting will allow our stockholders who have already sent in their proxies to revoke them at any time prior
to their use at the Annual Meeting as adjourned.
If
we adjourn the Annual Meeting to a later date, we will transact the same business and, unless we must fix a new record date, only the
stockholders who were eligible to vote at the original meeting will be permitted to vote at the adjourned meeting.
Required Vote of Stockholders
The
affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve Proposal No. 9.
Board Recommendation
The board of directors
recommends a vote “FOR” Proposal No. 9.
OTHER MATTERS
The board of directors knows
of no other business, which will be presented to the Annual Meeting. If any other business is properly brought before the Annual Meeting,
proxies will be voted in accordance with the judgment of the persons voting the proxies. The proxies also have discretionary authority
to vote to adjourn the Annual Meeting, including for the purpose of soliciting votes in accordance with our board of director’s
recommendations.
We will bear the cost of
soliciting proxies in the accompanying form. In addition to the use of the mails, proxies may also be solicited by our directors, officers
or other employees, personally or by telephone, facsimile or email, none of whom will be compensated separately for these solicitation
activities. We have engaged Kingsdale Advisors to assist in the solicitation of proxies. We will pay a fee of approximately $[*] plus
reasonable out-of-pocket charges.
If you do not plan to attend
the Annual Meeting, in order that your shares may be represented and in order to assure the required quorum, please sign, date and return
your proxy promptly. In the event you are able to attend the Annual Meeting virtually, at your request, we will cancel your previously
submitted proxy.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR
Stockholders who intend to
have a proposal considered for inclusion in our proxy materials for presentation at our 2023 Annual Meeting of Stockholders must submit
the proposal to us at our corporate headquarters no later than [ ], which proposal must be made in accordance with the provisions of Rule 14a-8
of the Exchange Act. Stockholders who intend to present a proposal at our 2024 Annual Meeting of Stockholders without inclusion of
the proposal in our proxy materials are required to provide notice of such proposal to our Corporate Secretary so that such notice is
received by our Corporate Secretary at our principal executive offices on or after [ ], 2024 but no later than [ ], 2024. We reserve the
right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other
applicable requirements.
HOUSEHOLDING
The SEC has adopted rules that
permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and other Annual Meeting
materials with respect to two or more stockholders sharing the same address by delivering a proxy statement or other Annual Meeting materials
addressed to those stockholders. This process, which is commonly referred to as householding, potentially provides extra convenience for
stockholders and cost savings for companies. Stockholders who participate in householding will continue to be able to access and receive
separate proxy cards.
If you share an address with
another stockholder and have received multiple copies of our proxy materials, you may write or call us at the address and phone number
below to request delivery of a single copy of the notice and, if applicable, other proxy materials in the future. We undertake to deliver
promptly upon written or oral request a separate copy of the proxy materials, as requested, to a stockholder at a shared address to which
a single copy of the proxy materials was delivered. If you hold stock as a record stockholder and prefer to receive separate copies of
our proxy materials either now or in the future, please contact us at 737 N. Fifth Street, Suite 200, Richmond, VA 23219, Attn:
Corporate Secretary. If your stock is held through a brokerage firm or bank and you prefer to receive separate copies of our proxy materials
either now or in the future, please contact your brokerage firm or bank.
ANNUAL REPORT
Copies of our Annual Report
on Form 10-K for the fiscal year ended December 31, 2022 may be obtained without charge by writing to the Company’s
Secretary, Aditxt, Inc., 737 N. Fifth Street, Suite 200, Richmond, VA 23219. The Notice, our Annual Report on Form 10-K
and this proxy statement are also available online at www.proxyvote.com.
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BY ORDER OF THE BOARD OF DIRECTORS |
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/s/ Amro Albanna |
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Amro Albanna |
[*], 2023 |
Chief Executive Officer and Chairman of the Board of Directors |
PROXY CARD
ADITXT, INC.
PROXY FOR ANNUAL MEETING TO BE HELD ON [*],
2023
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints,
Amro Albanna and Thomas J. Farley, as proxies with full power of substitution, to represent and to vote all the shares of common stock
of Aditxt, Inc. (the “Company”), which the undersigned would be entitled to vote, at the Company’s Annual Meeting of
Stockholders to be held on [*], 2023 and at any adjournments thereof, subject to the directions indicated on this Proxy Card.
In his discretion, the proxy
is authorized to vote upon any other matter that may properly come before the meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED BY THE PROXY HOLDERS FOR THE ELECTION
OF ALL NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE AND IN THEIR DISCRETION ON ANY OTHER MATTERS THAT ARE PROPERLY PRESENTED
AT THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
IMPORTANT — This
Proxy must be signed and dated below.
The Annual Meeting of
Stockholders of Aditxt, Inc. will be held on [*], 2023 at [*] at [*]
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
We cordially invite you
to attend the Annual Meeting of Stockholders of Aditxt, Inc. to be held at [*] on [*], 2023 beginning at [*.]
Please read the proxy statement
which describes the proposals and presents other important information, and complete, sign and return your proxy promptly in the enclosed
envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1-9.
1. Election of Director Nominees |
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FOR |
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WITHHOLD |
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|
01 – Amro Albanna
02 – Brian Brady
03 – Namvar Kiaie
04 – Jeffrey Runge, M.D.
05 – Shahrokh Shabahang, D.D.S., MS, Ph.D. |
|
☐ |
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☐ |
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2. Proposal to ratify dbbmckennon as the Company’s independent registered public accountants for the fiscal year ending December 31, 2023. |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
3. Proposal to approve, for the purpose of Nasdaq Marketplace Rule 5635(d), the issuance of shares of common stock underlying warrants originally issued by the Company in August 2022. |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
4. Proposal to approve, for the purpose of Nasdaq Marketplace Rule, the issuance of shares of common stock underlying secured promissory notes originally issued by the Company in July 2023. |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
5. Proposal for authorization to issue securities in one or more non-public offerings in accordance with Nasdaq Marketplace Rule 5635(d) |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
6. Proposal to approve any change of control under NASDAQ Marketplace Rule 5635 that may result from the potential issuance of securities in the non-public offerings; |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
7. Proposal to amend the Company’s amended and restated certificate of incorporation to effect the reverse stock split. |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
8. Proposal to amend our 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) to increase the number of shares of common stock issuable thereunder to [*] shares from 60,000 shares |
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FOR
☐ |
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AGAINST
☐ |
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ABSTAIN
☐ |
9. Proposal to authorize the adjournment of the Annual Meeting if necessary or appropriate |
|
FOR
☐ |
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AGAINST
☐ |
|
ABSTAIN
☐ |
NOTE: Such other business
as may properly come before the meeting or any adjournment thereof will be voted on by the proxy holders in their discretion.
Please indicate if you plan
to attend this meeting: ☐ Yes ☐ No
Important: Please sign exactly
as name appears on this proxy. When signing as attorney, executor, trustee, guardian, corporate officer, etc., please indicate full title.
|
Dated:________________, 2023 |
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|
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Signature |
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Signature |
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(Joint Owners) |
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Name (printed) |
APPENDIX A
FORM OF WARRANT
NEITHER THIS SECURITY NOR THE SECURITIES AS TO
WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
ADITXT, INC.
Warrant Shares: ________
Date of Issuance: ________, 2022 (“Issuance
Date”)
This COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the senior secured promissory
note in the principal amount of $________ to the Holder (as defined below) of even date) (the “Note”), ______________, a _____________
(including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations
on exercise and the conditions hereinafter set forth, at any time during the Exercise Period, to purchase from ADITXT, INC., a Delaware
corporation (the “Company”), _________ shares of Common Stock (the “Warrant Shares”) (whereby such
number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in
effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated
________, 2022, by and among the Company and the Holder (the “Purchase Agreement”). In the event the Exercise Price
(as defined in this Warrant) is reduced for any reason, including but not limited to pursuant to Section 2 of this Warrant, the number
of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account
the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.
Capitalized terms used in
this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section
12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.15, subject to adjustment as provided herein
(including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Commencement
Date (as defined in this Warrant) and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the Issuance
Date. “Commencement Date” shall mean the date on which the Company obtains approval by from the shareholders of the Company
with respect to the issuance of any Warrant Shares.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise.
Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or
times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number
of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder
in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share
Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer
agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price”
and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately
available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct
its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered
in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder).
Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates
evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant
(in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause
its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at
law, under this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Note, a material breach under
this Warrant, and a material breach under the Purchase Agreement.
If the Market Price of one
share of Common Stock is greater than the Exercise Price, then, unless there is an effective non-stale registration statement of the Company
which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers
the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation,
the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this
Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an
Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
Where X = |
the number of Shares to be issued to Holder. |
|
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Y = |
the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). |
|
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A = |
the Market Price (at the date of such calculation). |
|
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B = |
Exercise Price (as adjusted to the date of such calculation). |
(b) No Fractional Shares.
No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant
Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise
would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional
share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash
equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s Exercise
Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant,
and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that
after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s
affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s
Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and
Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this
Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed
in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining
the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in
(A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common
Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding
at the time of the respective calculation hereunder. In addition to the beneficial ownership limitations provided in this Warrant, the
sum of the number of shares of Common Stock that may be issued under the August 2022 Securities (as defined in the Purchase Agreement),
which includes the Warrant Shares under this Warrant, shall be limited to 19.99% of the Company’s outstanding shares of Common Stock
as of the Issuance Date (the “Exchange Cap”), unless Shareholder Approval (as defined in the Purchase Agreement) is obtained
by the Company to issue more than the Exchange Cap. The Exchange Cap shall be appropriately adjusted for any reorganization, recapitalization,
non-cash dividend, stock split (including forward and reverse), or other similar transaction. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.
(d) Compensation for
Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share Delivery
Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within
one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving
rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to
the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates
a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of
the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to
timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS. The Exercise Price
and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution
of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash,
stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Exercise Price
in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined
by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock
on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s
Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the
shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of
Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to
the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that
the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities
exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive
a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common
Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior
to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant
Shares calculated in accordance with the first part of this clause (ii).
(b) Anti-Dilution
Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time beginning on the Issuance Date
and continuing through the date that the second Subsequent Placement (as defined in the Purchase Agreement) occurs after the date that
the Note is extinguished in the entirety (for the avoidance of doubt, this shall include the second Subsequent Placement that occurs after
the date that the Note is extinguished in the entirety), shall sell or grant any option to purchase, or sell or grant any right to reprice,
or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock
or securities (including but not limited to Common Stock Equivalents) entitling any person or entity (for purposes of clarification, including
but not limited to the Holder pursuant to (i) any other security of the Company currently held by Holder, (ii) any other security of the
Company issued to Holder on or after the Issuance Date (including but not limited to the Note), or (iii) any other agreement entered into
between the Company and Holder) to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per
share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase
price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of
time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due
to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive
shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common
Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the
Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price
shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently
redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share
Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually
issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the
Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this
Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company
provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately
refers to the number of Warrant Shares or Base Share Price in the Exercise Notice, the Holder is entitled to receive the Base Share Price
upon the occurrence of any Dilutive Issuance.
(c) Subdivision
or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment
under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective.
Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively
whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS.
If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the
Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale
of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether
by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock
are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50%
of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a
result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of
the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable
upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number
of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise
contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price
shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the
Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration.
4. NON-CIRCUMVENTION.
The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality
of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii)
shall, beginning on the date that is sixty (60) calendar days after the Issuance Date and for so long as this Warrant is outstanding,
have authorized and reserved, free from preemptive rights, two (2) times the number of shares of Common Stock into which the Warrants
are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on
exercise).
5. WARRANT HOLDER
NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed
as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant.
If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably
impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and
tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of
New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall
be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date.
7. TRANSFER. This
Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors
and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be
assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder,
which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company
does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to
the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need
to obtain the Company’s consent thereto.
8. NOTICES. Whenever
notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the
notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20
days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the
shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or
(C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER.
The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Holder.
10. GOVERNING LAW
AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this
Warrant shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter
jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has
jurisdiction, the Superior Court of the State of Delaware. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum
non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS
WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party
its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Warrant or any other transaction document entered into in connection with this Warrant by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices
to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this
Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes
of this Warrant, the following terms shall have the following meanings:
(a) [Intentionally Omitted].
(b) “Closing Sale Price”
means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Quotestream
or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as
reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if the foregoing does not apply,
the last trade price of such security in the over-the-counter market for such security as reported by Quotestream or other similar quotation
service provider designated by the Holder, or (iii) if no last trade price is reported for such security by Quotestream or other similar
quotation service provider designated by the Holder, the average of the bid and ask prices of any market makers for such security as reported
by Quotestream or other similar quotation service provider designated by the Holder. If the Closing Sale Price cannot be calculated for
a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c) “Common Stock”
means the Company’s common stock, par value $0.001, and any other class of securities into which such securities may hereafter be
reclassified or changed.
(d) “Common Stock Equivalents”
means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation
any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.
(e) “Person”
and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(f) “Principal Market”
means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any
tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor
to such markets.
(g) “Market Price”
means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise
Notice.
(h) “Trading Day”
means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not
then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company
has caused this Warrant to be duly executed as of the Issuance Date set forth above.
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ADITXT, INC. |
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Name: |
Amro Albanna |
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Title: |
Chief Executive Officer |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise
this Common Stock Purchase Warrant)
THE UNDERSIGNED holder
hereby exercises the right to purchase of
the shares of Common Stock (“Warrant Shares”) of ADITXT, INC., a Delaware corporation (the “Company”), evidenced
by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Warrant.
1. |
Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one): |
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☐ |
a cash exercise with respect to Warrant Shares; or |
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☐ |
by cashless exercise pursuant to the Warrant. |
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2. |
Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant. |
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3. |
Delivery of Warrant Shares. The Company shall deliver to the holder ______________ Warrant Shares in accordance with the terms of the Warrant. |
Date:__________________________ |
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(Print Name of Registered Holder) |
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By: |
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Name: |
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Title: |
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EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of
the Warrant)
FOR VALUE RECEIVED,
the undersigned hereby sells, assigns, and transfers unto the
right to purchase shares
of common stock of ADITXT, INC., to which the within Common Stock Purchase Warrant relates and appoints ,
as attorney-in-fact, to transfer said right on the books of ADITXT, INC. with full power of substitution and re-substitution in the premises.
By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated: |
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(Signature) * |
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(Name) |
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(Address) |
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(Social Security or Tax Identification No.) |
* | The signature on this Assignment of Warrant must correspond
to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any
change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and
title(s) with such entity. |
APPENDIX B
FORM OF NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR
OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $[*] |
Issue Date: [*], 2023 |
Actual Amount of Purchase Price: $[*] |
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SECURED PROMISSORY NOTE
FOR VALUE RECEIVED,
ADITXT, INC., a Delaware corporation (hereinafter called the “Borrower” or the “Company”) (Trading Symbol:
ADTX), hereby promises to pay to the order of [*], a [*], or registered assigns (the “Holder”), in the form of lawful money
of the United States of America, the principal sum of $[*] (the “Principal Amount”) (subject to adjustment herein), of $[*]
is the actual amount of the purchase price hereof plus an original issue discount in the amount of $[*] (the “OID”), and to
pay interest on the unpaid Principal Amount hereof at the rate of ten percent (10%) (the “Interest Rate”) per annum from the
date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise, as further provided herein. The maturity date shall be December 31, 2023 (the “Maturity Date”), and is the date
upon which the Principal Amount (which includes the OID) and any accrued and unpaid interest and other fees, shall be due and payable.
This Note may not be prepaid or repaid in whole or in part
except as otherwise explicitly set forth herein.
Any Principal Amount or interest
on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum and (ii)
the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Default Interest
shall be computed on the basis of a 365-day year and the actual number of days elapsed.
All payments due hereunder
(to the extent not converted into shares of common stock, $0.001 par value per share, of the Borrower (the “Common Stock”)
in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such
address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due
on the next succeeding day which is a business day.
Each capitalized term used
herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of
the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York,
New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means
any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement),
provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
This Note is free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar
rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall also apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right.
If (i) the Company has obtained the Shareholder Approval (as defined in the Purchase Agreement) and (ii) an Event of Default (as defined
in this Note) has occurred under the Note, then the Holder shall have the right, on any calendar day, at any time on or following the
Commencement Date to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default
Interest) into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital
stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price
(as defined below) determined as provided herein (a “Conversion”), by submitting to the Borrower or Borrower’s transfer
agent a Notice of Conversion (as defined in this Note) by facsimile, e-mail or other reasonable means of communication dispatched on the
Conversion Date prior to 11:59 p.m., New York, New York time; provided, however, that notwithstanding anything to the contrary
contained herein, the a Holder shall not have the right to convert any portion of this Note, pursuant to Section 1 or otherwise, to the
extent that after giving effect to such issuance after conversion as set forth on the applicable Notice of Conversion, the Holder (together
with the Holder’s affiliates (the “Affiliates”), and any other Persons (as defined below) acting as a group together
with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion
of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would
be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates
or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any
of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.1, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith.
In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.1, in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s
most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates or Attribution
Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. “Person”
and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and any governmental entity or any department or agency thereof. The limitations contained
in this paragraph shall apply to a successor holder of this Note. The number of Conversion Shares to be issued upon each conversion of
this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on
the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower or Borrower’s transfer agent by the Holder in accordance with Section 1.4 below; provided that the Notice
of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the
Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time on such conversion date (the “Conversion
Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal
Amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any,
on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest,
if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).
1.2 Conversion Price.
(a) Calculation of Conversion
Price. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall
be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal to the Nasdaq official closing price
of the Common Stock”) on the Issue Date according to Nasdaq’s official NOCP website (https://www.nasdaq.com/market-activity/stocks/reli/historical-nocp),
subject to adjustment as provided in this Note. If at any time the Conversion Price as determined hereunder for any conversion would be
less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such
par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional
Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion
shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price
not been adjusted by the Holder to the par value price. Holder shall be entitled to deduct $1,000.00 from the conversion amount in each
Notice of Conversion to cover Holder’s fees associated with each Notice of Conversion. All such Conversion Price determinations
are to be appropriately adjusted for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar
transaction that proportionately decreases or increases the Common Stock. If the Company, at any time while this Note is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock
or any Common Stock Equivalents, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding
immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after
such event. Any adjustment made pursuant to the immediately preceding sentence shall become effective immediately after the record date
for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification. “Common Stock Equivalents” means any securities
of the Company or the Company’s subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
1.3 Authorized and Reserved
Shares. The Borrower covenants that at all times beginning on the Issue Date and until the Note is satisfied in full, the Borrower
will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for
the issuance of a number of Conversion Shares equal to the greater of: (a) 5,000,000 shares of Common Stock or (b) the sum of (i) the
number of Conversion Shares issuable upon the full conversion of this Note (assuming no payment of Principal Amount or interest) at the
time of such calculation (taking into consideration any adjustments to the Conversion Price as provided in this Note) multiplied by
(ii) two (2) (the “Reserved Amount”). The Borrower represents that upon issuance, the Conversion Shares will be duly and validly
issued, fully paid and non-assessable. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates
for the Conversion Shares or instructions to have the Conversion Shares issued as contemplated by Section 1.4(f) hereof effective upon
the Authorized Capital Adjustment Date, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers
and agents who are charged with the duty of executing stock certificates or cause the Company to electronically issue shares of Common
Stock to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued as contemplated
by Section 1.4(f) hereof in accordance with the terms and conditions of this Note.
1.4 Method of Conversion.
(a) Exchange Cap. In
addition to the beneficial ownership limitations provided in this Note, the sum of the aggregate number of shares of Common Stock that
may be issued to all July 2023 Buyers (as defined in the Purchase Agreement) under the July 2023 Securities (as defined in the Purchase
Agreement), which includes the Conversion Shares under this Note, shall be limited to the Exchange Cap (as defined in the Purchase Agreement)
as further provided in the Purchase Agreement.
(b) Surrender of Note Upon
Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof,
the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount is so converted.
The Holder and the Borrower shall maintain records showing the Principal Amount so converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon
each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling
and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower
will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the
Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal Amount of this Note.
The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following
conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than
the amount stated on the face hereof.
(c) Payment of Taxes.
The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street
name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the
person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account)
requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction
of the Borrower that such tax has been paid.
(d) Delivery of Common
Stock Upon Conversion. Upon receipt by the Borrower or Borrower’s transfer agent from the Holder of a facsimile transmission
or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in
this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates
for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) within
one (1) business day after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid Principal
Amount and interest (including any Default Interest) under this Note, surrender of this Note). If on or prior to the Deadline the Company
shall fail to issue and deliver a certificate to the Holder and register such Conversion Shares on the Company’s share register
or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holder’s
exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below, and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder
of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then the Company shall,
within two (2) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in
an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation
to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s balance account with DTC for such Conversion
Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such
Conversion Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing sales price of the Common
Stock on the date of exercise. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing the Conversion Shares (or to electronically deliver such Conversion Shares) upon the
conversion of this Note as required pursuant to the terms hereof.
(e) Obligation of Borrower
to Deliver Common Stock. At the time that the Holder submits the Notice of Conversion to the Borrower or Borrower’s transfer
agent, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon such conversion, the outstanding Principal
Amount and the amount of accrued and unpaid interest (including any Default Interest) under this Note shall be reduced to reflect such
conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this
Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets,
as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s
obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares
as contemplated by Section 1.4(f) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder
to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the
Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection
with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of
Conversion is sent to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time, on such date.
(f) Delivery of Conversion
Shares by Electronic Transfer. In lieu of delivering physical certificates representing the Conversion Shares issuable upon conversion
hereof, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer
or Deposit/Withdrawal at Custodian programs, upon request of the Holder and its compliance with the provisions contained in Section 1.1
and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Conversion
Shares issuable upon conversion hereof to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
1.5 Concerning the Shares.
The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to
an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion
of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the Purchase Agreement)) to the effect that the shares to
be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred
pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred to an “affiliate”
(as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5
and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under the 1933 Act or
otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number
of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that has not been
so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption
that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT,
OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above
shall be removed and the Company shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon
which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account
of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares
are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144,
Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) the Company or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance
with Section 4(m) of the Purchase Agreement) to the effect that a public sale or transfer of such Conversion Shares may be made without
registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company
shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell
all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Holder
with respect to the transfer of Conversion Shares pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation
S, or other applicable exemption, at the Deadline, notwithstanding that the conditions of Rule 144, Rule 144A, Regulation S, or other
applicable exemption, as applicable, have been met, it will be considered an Event of Default under this Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation,
Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or
the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when
the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower shall be required
to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined
in this Note) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall
be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares
of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or
securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower
other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right
to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled
to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations
on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of
the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least thirty (30) days prior written notice
(but in any event at least ten (10) days prior written notice) of the record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor
or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution.
If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then
the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled
to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.
(d) Purchase Rights.
If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities or rights
to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class
of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e) Reserved.
(f) Notice of Adjustments.
Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this
Note, the Borrower shall, at its expense and within one (1) calendar day after the occurrence of each respective adjustment or readjustment
of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth (i)
the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount,
if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon
which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction
documents) that evidences the adjustment or readjustment. In addition, the Borrower shall, within one (1) calendar day after each written
request from the Holder, furnish to such Holder a like certificate setting forth (i) the Conversion Price in effect at such time based
upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based,
and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment.
For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6
of this Note shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions
in Section 1.6 of this Note.
1.7 Reserved.
1.8 Status as Shareholder.
Upon submission of a Notice of Conversion by a Holder, (i) the Conversion Shares covered thereby (other than the Conversion Shares, if
any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum
Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion
of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies
provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms
of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then
(unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain
the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable,
return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of
this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure
to convert this Note.
1.9 Prepayment. At any
time prior to the date that an Event of Default occurs under this Note, the Borrower shall have the right, exercisable on three (3) Trading
Days prior written notice to the Holder of the Note, to prepay the outstanding Principal Amount and interest then due under this Note
in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note,
and (2) the date of prepayment which shall be three (3) Trading Days from the date of the Optional Prepayment Notice (the “Optional
Prepayment Date”). If permissible under Section 1.1 of this Note, the Holder shall have the right, during the period beginning on
the date of Holder’s receipt of the Optional Prepayment Notice and until the Holder’s actual receipt of the full prepayment
amount on the Optional Prepayment Date (the “Prepayment Conversion Period”), to instead convert all or any portion of the
Note pursuant to the terms of this Note, including the amount of this Note to be prepaid by the Borrower in accordance with this Section
1.9. On the Optional Prepayment Date, the Borrower shall make payment of the amounts designated below to or upon the order of the Holder
as specified by the Holder in writing to the Borrower. If the Borrower exercises its right to prepay the Note in accordance with this
Section 1.9, the Borrower shall make payment to the Holder of an amount in cash equal to the sum of: (w) 110% multiplied by the Principal
Amount then outstanding plus (x) accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date. If the Borrower
delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note as provided in
this Section 1.9, then the Borrower shall forever forfeit its right to prepay any part of the Note pursuant to this Section 1.9.
1.10 Repayment from Proceeds.
If, at any time prior to the full repayment or full conversion of all amounts owed under this Note, the Company receives cash proceeds
from any source or series of related or unrelated sources, including but not limited to, the issuance of equity or debt, the exercise
of outstanding warrants of the Borrower, the issuance of securities pursuant to an Equity Line of Credit (as defined in this Note) of
the Borrower, or the sale of assets, but excluding payments from customers, the Borrower shall, within two (2) business days of Borrower’s
receipt of such proceeds, inform the Holder of or publicly disclose such receipt, following which the Holder shall have the right in its
sole discretion to require the Borrower to immediately apply up to 25% of such proceeds to repay all or any portion of the outstanding
Principal Amount and interest (including any Default Interest) then due under this Note. Failure of the Borrower to comply with this provision
shall constitute an Event of Default. “Equity Line of Credit” shall mean any transaction involving a written agreement between
the Company and an investor or underwriter whereby the Company has the right to “put” its Common Stock to the investor or
underwriter over an agreed period of time and at an agreed price or price formula (such Common Stock must be registered pursuant to a
registration statement of the Company for the investor’s or underwriter’s resale).
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security.
This Note shall be a secured obligation of the Borrower, with priority over all existing and future indebtedness of the Borrower, as provided
in that certain security agreement entered into between the Borrower and the Holder on the Issue Date (the “Security Agreement”),
provided, however, that the Note shall be junior to (in priority of payment and performance) (i) the secured position in the Company’s
accounts receivable in the aggregate amount of $2,880,000 pursuant to an agreement for the purchase and sale of future receipts by the
holder thereof as further described in the Form 8-K filed by the Borrower on May 31, 2023 (the “First Senior Debt”), and (ii)
the secured position the amount of $1,590,000 pursuant to the terms of that certain business loan and security agreement as further described
in the Form 8-K filed by the Borrower on April 25, 2023, which amount may be increased by up to an additional $350,000 in the sole discretion
of Holder (the “Second Senior Debt, and collectively with the First Senior Debt, the “Specified Secured Indebtedness”)
and shall be pari passu with (in priority of payment and performance) the July 2023 Notes (as defined in the Purchase Agreement) (the
“July 2023 Notes”).
2.2 Other Indebtedness. In addition to all
obligations under the Security Agreement, and so long as the Borrower shall have any obligation under this Note, the Borrower shall not
(directly or indirectly through any Subsidiary or affiliate) incur or suffer to exist or guarantee any indebtedness that is senior to
or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder (except with respect to the Specified
Secured Indebtedness and July 2023 Notes as provided in Section 2.1 of this Note and the Security Agreement).
2.3 Distributions on Capital
Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written
consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b)
directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions
pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.4 Reserved.
2.5 Sale of Assets. So
long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell,
lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent by the Holder
to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.6 Advances and Loans; Affiliate
Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit, make advances to or enter into any transaction with any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) in
regard to transactions with unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with
unaffiliated third parties, not in excess of $100,000. So long as the Borrower shall have any obligation under this Note, the Borrower
shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with
any indebtedness or accrued amounts owed to any such party.
2.7 Reserved.
2.8 Preservation of Business
and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, (a) change the nature of its business or (b) sell, divest, change the structure of any material assets other than in
the ordinary course of business. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain
and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain,
and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified
and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary.
2.9 Noncircumvention.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate or Articles of Incorporation or Bylaws,
or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all
times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.10 Lost, Stolen or Mutilated
Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation
of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder
a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an
event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal
or Interest. The Borrower fails to pay the Principal Amount hereof or interest thereon when due on this Note, whether at maturity,
upon acceleration or otherwise, or fails to fully comply with Section 1.10 of this Note.
3.2 Conversion and the Shares.
The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will not honor its obligation
to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to
transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for the Conversion Shares
issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) fails to reserve
the Reserved Amount at any time on or after the Issue Date, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs,
and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion
Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove
(or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat
that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written
announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder
shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but
not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note
is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder
advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the
principal balance of the Note.
3.3 Breach of Agreements
and Covenants. The Borrower breaches any covenant, agreement, or other term or condition contained in the Purchase Agreement, this
Note, Irrevocable Transfer Agent Instructions, Registration Rights Agreement (as defined in the Purchase Agreement) (the “Registration
Rights Agreement”), Security Agreement, or in any agreement, statement or certificate given in writing pursuant hereto or in connection
herewith or therewith.
3.4 Breach of Representations
and Warranties. Any representation or warranty of the Borrower made in the Purchase Agreement, this Note, Irrevocable Transfer Agent
Instructions, Registration Rights Agreement, Security Agreement, or in any agreement, statement or certificate given in writing pursuant
hereto or in connection herewith or therewith shall be false or misleading in any material respect when made.
3.5 Receiver or Trustee.
The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment
of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be
appointed.
3.6 Judgments. Any money
judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property
or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise
consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.8 Failure to Comply with
the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act
and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.9 Liquidation. Any
dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation of Operations.
Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due,
provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission
that the Borrower cannot pay its debts as they become due.
3.11 Maintenance of Assets.
The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary
to conduct its business (whether now or in the future).
3.12 Financial Statement
Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years
prior to the Issue Date of this Note and until this Note is no longer outstanding.
3.13 Replacement of Transfer
Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective
date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase
Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by
the successor transfer agent to Borrower and the Borrower.
3.14 Cross-Default. The
declaration of an event of default by any lender or other extender of credit to the Company under any notes, loans, agreements or other
instruments of the Company evidencing any indebtedness of the Company (including those filed as exhibits to or described in the Company’s
filings with the SEC), after the passage of all applicable notice and cure or grace periods.
3.15 Reserved.
3.16 Inside Information.
Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance,
or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower,
to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation
FD on that same date.
3.17 Unavailability of Rule
144. If, at any time on or after the date that is six (6) calendar months after the Issue Date, the Holder is unable to (i) obtain
a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm
(and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion
of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such shares
into the Holder’s brokerage account.
3.18 Delisting, Suspension,
or Quotation of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended
from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on a Principal Market.
3.19 Registration Statement
Failures. The Borrower fails to (i) file a registration statement (the “Registration Statement”) covering the Holder’s
resale at prevailing market prices (and not fixed prices) of all of the Conversion Shares (as defined in the Purchase Agreement) (the
“Conversion Shares”) and Commitment Shares (as defined in the Purchase Agreement) (the “Commitment Shares”) within
one hundred twenty (120) calendar days following the Issue Date, (ii) cause the Registration Statement to become effective within one
hundred fifty (150) calendar days following the date that the Registration Statement is initially filed, (iii) cause the Registration
Statement to remain effective until the Holder no longer owns the Note, Conversion Shares, or Commitment Shares, (iv) comply with the
provisions of the Registration Rights Agreement in all respects, or (v) immediately amend the Registration Statement or file a new Registration
Statement (and cause such Registration Statement to become effective as provided in the Registration Rights Agreement) if there are no
longer sufficient shares registered under the initial Registration Statement for the Holder’s resale at prevailing market prices
(and not fixed prices) of all of the Conversion Shares, Exercise Shares, and Commitment Shares.
3.20 Reserved.
3.21 Reserved.
3.22 Penny Stock. The
Borrower’s Common Stock is deemed to be a “penny stock” as defined in SEC Rule 240.3a51-1 at any time after the Issue
Date.
3.23 Reserved.
3.24 Rights and Remedies
Upon an Event of Default. Upon the occurrence of any Event of Default specified in this Article III, this Note shall become immediately
due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal
Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 200% (collectively
the “Default Amount”), as well as all costs, including, without limitation, legal fees and expenses, of collection, all without
demand, presentment or notice, all of which hereby are expressly waived by the Borrower. Holder may, in its sole discretion, determine
to accept payment part in Common Stock and part in cash. For purposes of payments in Common Stock, the conversion formula set forth in
Section 1.2 shall apply as well as all other provisions of this Note. The Holder shall be entitled to exercise all other rights and remedies
available at law or in equity.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence
Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices,
demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage
prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail
or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery
by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
ADITXT, INC.
737 N. Fifth Street, Suite 200
Richmond, VA 23219
Attention: Amro Albanna
e-mail:
If to the Holder: to its address and e-mail address set forth
on the signature page to the Purchase Agreement
4.3 Amendments. This
Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note”
and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented.
4.4 Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors
and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder.
The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private
transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent
of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that
following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may
be less than the amount stated on the face hereof.
4.5 Cost of Collection.
If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’
fees.
4.6 Governing Law; Venue;
Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this
Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of
the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the
District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware.
The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate,
instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with
this the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall be entitled to recover
from the other party its reasonable attorney’s fees and costs.
4.7 Certain Amounts.
Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion
thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the
Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the
amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part
for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion
of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that
such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment
without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement.
The Company and the Holder shall be bound by the applicable terms of the Purchase Agreement, Security Agreement, and the documents entered
into in connection herewith and therewith.
4.9 Notice of Corporate Events.
Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent
that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s
shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of
a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining
shareholders who are entitled to vote in connection with any change in control or any proposed liquidation, dissolution or winding up
of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record
is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character
of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of
any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance
with the terms of this Section 4.9.
4.10 Remedies. The Borrower
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose
of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations
under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this
Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings.
This Note shall be deemed to be jointly drafted by the Company and all the Holder and shall not be construed against any person as the
drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of,
this Note.
4.12 Usury. To the extent
it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and
all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in
connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding
any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Company under
this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the
Company may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the
Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective
date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess
of the Maximum Rate is paid by the Company to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be
applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such
excess to be at the Holder’s election.
4.13 Severability. In
the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial
ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of this Note.
4.14 Terms of Future Financings.
So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security, or amendment to a security
that was originally issued before the Issue Date, with any term that the Holder reasonably believes is more favorable to the holder of
such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to
the Holder in this Note (even if the holder of such other security does not receive the benefit of such more favorable term until a default
occurs under such other security), then (i) the Borrower shall notify the Holder of such additional or more favorable term within one
(1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder’s option,
shall become a part of the transaction documents with the Holder (regardless of whether the Borrower complied with the notification provision
of this Section 4.14). The types of terms contained in another security that may be more favorable to the holder of such security include,
but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts.
4.15 Dispute Resolution.
In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount,
Issue, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the
Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations
or arithmetic calculations via facsimile (i) within one (1) Trading Day after receipt of the applicable notice giving rise to such dispute
to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances
giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within one (1)
Trading Day of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder,
then the Borrower shall, within one (1) Trading Day, submit (a) the disputed determination of the Conversion Price, the closing bid price,
the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the
Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount,
to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at
its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder
of the results no later than one (1) Trading Day from the time it receives such disputed determinations or calculations. Such investment
bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
[signature page follows]
IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer on July 3, 2023.
ADITXT, INC. |
|
|
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By: |
|
|
|
Name: |
Amro Albanna |
|
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Title: |
Chief Executive Officer |
|
EXHIBIT A -- NOTICE OF CONVERSION
The undersigned hereby elects
to convert $ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion
of the Note (“Common Stock”) as set forth below, of ADITXT, INC., a Delaware corporation (the “Borrower”),
according to the conditions of the secured promissory note of the Borrower dated as of July 3, 2023 (the “Note”), as of the
date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically
transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through
its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
Name of DTC Prime Broker:
Account Number:
| ☐ | The undersigned hereby requests
that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based
on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on
an attachment hereto: |
Date of Conversion: | |
| |
Applicable Conversion Price: | |
$ | | |
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Note: | |
| | |
Amount of Principal Balance Due remaining Under the Note after this conversion: | |
| | |
APPENDIX C
CERTIFICATE OF AMENDMENT
to the
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
of
ADITXT, INC.
ADITXT, INC., a corporation
organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify
as follows:
FIRST: The name of the
Corporation is Aditxt, Inc. The Certificate of Incorporation was filed with the Secretary of State of the State of Delaware (the “Secretary
of State”) on September 28, 2017, as amended (the “Certificate of Incorporation”).
SECOND: ARTICLE IV,
SECTION I of the Corporation’s Certificate of Incorporation shall be amended by inserting Subsection “(d)” at the
end of such section which shall read as follows:
C. Reverse Stock Split.
As of at Eastern Time (the “Effective Time”) of this Certificate of Amendment pursuant to the Section 242 of the General
Corporation Law of the State of Delaware, each ( )
shares of the Corporation’s Common Stock, issued and outstanding immediately prior to the Effective Time (the “Old Common
Stock”) shall automatically without further action on the part of the Corporation or any holder of Old Common Stock, be reclassified,
combined, converted and changed into ( ) fully paid and nonassessable
shares of common stock, par value of $0.001 per share (the “New Common Stock”), subject to the treatment of fractional share
interests as described below (the “reverse stock split”). The conversion of the Old Common Stock into New Common Stock will
be deemed to occur at the Effective Time. From and after the Effective Time, certificates representing the Old Common Stock shall represent
the number of shares of New Common Stock into which such Old Common Stock shall have been converted pursuant to this Certificate of Amendment.
Holders who otherwise would be entitled to receive fractional share interests of New Common Stock upon the effectiveness of the reverse
stock split shall be entitled to receive a whole share of New Common Stock in lieu of any fractional share created as a result of such
reverse stock split.
THIRD: The stockholders
of the Corporation have duly approved the foregoing amendment in accordance with the provisions of Section 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation
has caused this Certificate of Amendment to be duly adopted and executed in its corporate name and on its behalf by its duly authorized
officer as of the day of ,
20 .
ADITXT, INC. |
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By: |
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Name: |
Amro Albanna |
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Title: |
Chief Executive Officer |
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APPENDIX D
ADITX THERAPEUTICS, INC.
2021 OMNIBUS EQUITY INCENTIVE PLAN
Section 1. Purpose of Plan.
The name of the Plan is the
Aditx Therapeutics, Inc. (the “Company” or “Aditxt”) 2021 Omnibus Equity Incentive Plan (the “Plan”).The
purposes of the Plan are to (i) provide an additional incentive to selected employees, directors, and independent contractors of the Company
or its Affiliates whose contributions are essential to the growth and success of the Company, (ii) strengthen the commitment of such individuals
to the Company and its Affiliates, (iii) motivate those individuals to faithfully and diligently perform their responsibilities and (iv)
attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of the
Company. To accomplish these purposes, the Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Other Stock-Based Awards or any combination of the foregoing.
Section 2. Definitions.
For purposes of the Plan, the
following terms shall be defined as set forth below:
(a) “Administrator”
means the Board, or, if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 3 hereof.
(b) “Affiliate”
means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified as of any date of determination.
(c) “Applicable Laws”
means the applicable requirements under U.S. federal and state corporate laws, U.S. federal and state securities laws, including the Code,
any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction
where Awards are granted under the Plan, as are in effect from time to time.
(d) “Award”
means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Other Stock-Based Award granted under the
Plan.
(e) “Award Agreement”
means any written notice, agreement, contract or other instrument or document evidencing an Award, including through electronic medium,
which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan.
(f) “Beneficial Owner” (or
any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.
(g) “Board”
means the Board of Directors of the Company.
(h) “Bylaws”
mean the bylaws of the Company, as may be amended and/or restated from time to time.
(i) “Cause”
has the meaning assigned to such term in any individual service, employment or severance agreement or Award Agreement with the Participant
or, if no such agreement exists or if such agreement does not define “Cause,” then “Cause” means (i) a continuing
material breach or material breach or material default (including, without limitation, any material dereliction of duty) by the Participant
of any agreement between the Participant and the Company, except for any such breach or default which is caused by the physical disability
of the Participant (as determined by a neutral physician), or a continuing failure by the Participant to follow the direction of a duly
authorized representative of the Company; (ii) gross negligence, willful misfeasance or breach of fiduciary duty by the Participant; (iii)
the commission by the Participant of an act of fraud, embezzlement or any felony or other crime of dishonesty in connection with the Participant’s
duties; or (iv) conviction of the Participant of a felony or any other crime that would materially and adversely affect: (A) the business
reputation of the Company or (B) the performance of the Participant’s duties to the Company. Any voluntary termination of employment
or service by the Participant in anticipation of an involuntary termination of the Participant’s employment or service, as applicable,
for Cause shall be deemed to be a termination for Cause.
(j) “Change in Capitalization”
means any (i) merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate
transaction or event, (ii) special or extraordinary dividend or other extraordinary distribution (whether in the form of cash, Common
Stock or other property), stock split, reverse stock split, share subdivision or consolidation, (iii) combination or exchange of shares
or (iv) other change in corporate structure, which, in any such case, the Administrator determines, in its sole discretion, affects the
Shares such that an adjustment pursuant to Section 5 hereof is appropriate.
(k) “Change in Control”
means the first occurrence of an event set forth in any one of the following paragraphs following the Effective Date:
(1) any Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such
Person which were acquired directly from the Company or any Affiliate thereof) representing more than fifty percent (50%) of the combined
voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (i) of paragraph (3) below; or
(2) the date on which individuals
who constitute the Board as of the Effective Date and any new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election
of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders
was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors
on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended cease for any
reason to constitute a majority of the number of directors serving on the Board; or
(3) there is consummated a
merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation or other entity, other than (i)
a merger or consolidation (A) which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any Subsidiary, fifty percent (50%) or more of the combined voting power of the securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or consolidation and (B) following which the individuals who comprise
the Board immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity surviving such
merger or consolidation or, if the Company or the entity surviving such merger or consolidation is then a Subsidiary, the ultimate parent
thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Company or its Affiliates) representing more than fifty percent (50%) of
the combined voting power of the Company’s then outstanding securities; or
(4) the stockholders of the
Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than (A) a sale or disposition by the Company of all or
substantially all of the Company’s assets to an entity, more than fifty percent (50%) of the combined voting power of the voting
securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions
as their ownership of the Company immediately prior to such sale or (B) a sale or disposition of all or substantially all of the Company’s
assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of
the board of directors of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent
thereof.
Notwithstanding the foregoing,
(i) a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated
transactions immediately following which the holders of Common Stock immediately prior to such transaction or series of transactions continue
to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions and (ii) to the extent required to avoid accelerated taxation and/or tax penalties
under Section 409A of the Code, a Change in Control shall be deemed to have occurred under the Plan with respect to any Award that constitutes
deferred compensation under Section 409A of the Code only if a change in the ownership or effective control of the Company or a change
in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code.
For purposes of this definition of Change in Control, the term “Person” shall not include (i) the Company or any Subsidiary
thereof, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary thereof,
(iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of the Company.
(l) “Code”
means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(m) “Committee”
means any committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee
shall be composed entirely of individuals who meet the qualifications of a “non-employee director” within the meaning
of Rule 16b-3 under the Exchange Act and any other qualifications required by the applicable stock exchange on which the Common Stock
is traded.
(n) “Common Stock”
means the common stock of the Company, par value $0.001.
(o) “Company”
means Aditx Therapeutics, Inc., a Delaware corporation (or any successor company, except as the term “Company” is used in
the definition of “Change in Control” above).
(p) “Disability”
has the meaning assigned to such term in any individual service, employment or severance agreement or Award Agreement with the Participant
or, if no such agreement exists or if such agreement does not define “Disability,” then “Disability” means that
a Participant, as determined by the Administrator in its sole discretion, (i) is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the
Company or an Affiliate thereof.
(q) “Effective Date”
has the meaning set forth in Section 17 hereof.
(r) “Eligible Recipient”
means an employee, director or independent contractor of the Company or any Affiliate of the Company who has been selected as an eligible
participant by the Administrator; provided, however, to the extent required to avoid accelerated taxation and/or
tax penalties under Section 409A of the Code, an Eligible Recipient of an Option or a Stock Appreciation Right means an employee, non-employee director
or independent contractor of the Company or any Affiliate of the Company with respect to whom the Company is an “eligible issuer
of service recipient stock” within the meaning of Section 409A of the Code.
(s) “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time.
(t) “Exempt Award”
shall mean the following:
(1) An Award granted in assumption
of, or in substitution for, outstanding awards previously granted by a corporation or other entity acquired by the Company or any of its
Subsidiaries or with which the Company or any of its Subsidiaries combines by merger or otherwise. The terms and conditions of any such
Awards may vary from the terms and conditions set forth in the Plan to the extent the Administrator at the time of grant may deem appropriate,
subject to Applicable Laws.
(2) An award that an Eligible
Recipient purchases at Fair Market Value (including awards that an Eligible Recipient elects to receive in lieu of fully vested compensation
that is otherwise due) whether or not the Shares are delivered immediately or on a deferred basis.
(u) “Exercise Price”
means, (i) with respect to any Option, the per share price at which a holder of such Option may purchase Shares issuable upon exercise
of such Award, and (ii) with respect to a Stock Appreciation Right, the base price per share of such Stock Appreciation Right.
(v) “Fair Market Value”
of a share of Common Stock or another security as of a particular date shall mean the fair market value as determined by the Administrator
in its sole discretion; provided, that, (i) if the Common Stock or other security is admitted to trading on a national securities exchange,
the fair market value on any date shall be the closing sale price reported on such date, or if no shares were traded on such date, on
the last preceding date for which there was a sale of a share of Common Stock on such exchange, or (ii) if the Common Stock or other security
is then traded in an over-the-counter market, the fair market value on any date shall be the average of the closing bid and asked
prices for such share in such over-the-counter market for the last preceding date on which there was a sale of such share in such
market.
(w) “Free Standing
Rights” has the meaning set forth in Section 8.
(x) “Good Reason”
has the meaning assigned to such term in any individual service, employment or severance agreement or Award Agreement with the Participant
or, if no such agreement exists or if such agreement does not define “Good Reason,” “Good Reason” and any provision
of this Plan that refers to “Good Reason” shall not be applicable to such Participant.
(y) “Grandfathered
Arrangement” means an Award which is provided pursuant to a written binding contract in effect on November 2, 2017, and
which was not modified in any material respect on or after November 2, 2017, within the meaning of Section 13601(e)(2) of P.L. 115.97,
as may be amended from time to time (including any rules and regulations promulgated thereunder).
(z) “Incentive Compensation”
means annual cash bonus and any Award.
(aa) “ISO”
means an Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
(bb) “Nonqualified
Stock Option” shall mean an Option that is not designated as an ISO.
(cc) “Option”
means an option to purchase shares of Common Stock granted pursuant to Section 7 hereof. The term “Option” as used in the
Plan includes the terms “Nonqualified Stock Option” and “ISO.”
(dd) “Other Stock-Based Award”
means a right or other interest granted pursuant to Section 10 hereof that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to, Common Stock, including, but not limited to, unrestricted Shares, dividend equivalents
or performance units, each of which may be subject to the attainment of performance goals or a period of continued provision of service
or employment or other terms or conditions as permitted under the Plan.
(ee) “Participant”
means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority provided for in Section 3
below, to receive grants of Awards, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case
may be.
(ff) “Person”
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(gg) “Plan”
means this 2021 Omnibus Equity Incentive Plan.
(hh) “Prior Plan”
means the Company’s 2017 Equity Incentive Plan, as in effect immediately prior to the Effective Date.
(ii) “Related Rights”
has the meaning set forth in Section 8.
(jj) “Restricted Period”
has the meaning set forth in Section 9.
(kk) “Restricted Stock”
means a Share granted pursuant to Section 9 below subject to certain restrictions that lapse at the end of a specified period (or periods)
of time and/or upon attainment of specified performance objectives.
(ll) “Restricted Stock
Unit” means the right granted pursuant to Section 9 hereof to receive a Share at the end of a specified restricted period (or
periods) of time and/or upon attainment of specified performance objectives.
(mm) “Rule 16b-3”
has the meaning set forth in Section 3.
(nn) “Section 16 Officer”
means any officer of the Company whom the Board has determined is subject to the reporting requirements of Section 16 of the Exchange
Act, whether or not such individual is a Section 16 Officer at the time the determination to recoup compensation is made.
(oo) “Shares”
means Common Stock reserved for issuance under the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a merger, consolidation
or other reorganization) security.
(pp) “Stock Appreciation
Right” means a right granted pursuant to Section 8 hereof to receive an amount equal to the excess, if any, of (i) the aggregate
Fair Market Value, as of the date such Award or portion thereof is surrendered, of the Shares covered by such Award or such portion thereof,
over (ii) the aggregate Exercise Price of such Award or such portion thereof.
(qq) “Subsidiary”
means, with respect to any Person, as of any date of determination, any other Person as to which such first Person owns or otherwise controls,
directly or indirectly, more than 50% of the voting shares or other similar interests or a sole general partner interest or managing member
or similar interest of such other Person.
(rr) “Transfer”
has the meaning set forth in Section 15.
Section 3. Administration.
(a) The Plan shall be administered
by the Administrator and shall be administered, to the extent applicable, in accordance with Rule 16b-3 under the Exchange Act (“Rule
16b-3”).
(b) Pursuant to the terms of
the Plan, the Administrator, subject, in the case of any Committee, to any restrictions on the authority delegated to it by the Board,
shall have the power and authority, without limitation:
(1) to select those Eligible
Recipients who shall be Participants;
(2) to determine whether and
to what extent Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards or a combination
of any of the foregoing, are to be granted hereunder to Participants;
(3) to determine the number
of Shares to be covered by each Award granted hereunder;
(4) to determine the terms
and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder (including, but not limited to, (i) the restrictions
applicable to Restricted Stock or Restricted Stock Units and the conditions under which restrictions applicable to such Restricted Stock
or Restricted Stock Units shall lapse, (ii) the performance goals and periods applicable to Awards, (iii) the Exercise Price of each Option
and each Stock Appreciation Right or the purchase price of any other Award, (iv) the vesting schedule and terms applicable to each Award,
(v) the number of Shares or amount of cash or other property subject to each Award and (vi) subject to the requirements of Section 409A
of the Code (to the extent applicable) any amendments to the terms and conditions of outstanding Awards, including, but not limited to,
extending the exercise period of such Awards and accelerating the payment schedules of such Awards and/or, to the extent specifically
permitted under the Plan, accelerating the vesting schedules of such Awards);
(5) to determine the terms
and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Awards;
(6) to determine the Fair Market
Value in accordance with the terms of the Plan;
(7) to determine the duration
and purpose of leaves of absence which may be granted to a Participant without constituting termination of the Participant’s service
or employment for purposes of Awards granted under the Plan;
(8) to adopt, alter and repeal
such administrative rules, regulations, guidelines and practices governing the Plan as it shall from time to time deem advisable;
(9) to construe and interpret
the terms and provisions of, and supply or correct omissions in, the Plan and any Award issued under the Plan (and any Award Agreement
relating thereto), and to otherwise supervise the administration of the Plan and to exercise all powers and authorities either specifically
granted under the Plan or necessary and advisable in the administration of the Plan; and
(10) to prescribe, amend and
rescind rules and regulations relating to sub-plans established for the purpose of satisfying applicable non-United States laws
or for qualifying for favorable tax treatment under applicable non-United States laws, which rules and regulations may be set forth
in an appendix or appendixes to the Plan.
(c) Subject to Section 5,
neither the Board nor the Committee shall have the authority to (i) reprice or cancel and regrant any Award at a lower exercise, base
or purchase price or cancel any Award with an exercise, base or purchase price in exchange for cash, property or other Awards without
first obtaining the approval of the Company’s stockholders; or (ii) accelerate the vesting of any Awards (except pursuant to Section
11).
(d) All decisions made by the
Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all Persons, including the Company and
the Participants.
(e) The expenses of administering
the Plan shall be borne by the Company and its Affiliates.
(f) If at any time or to any
extent the Board shall not administer the Plan, then the functions of the Administrator specified in the Plan shall be exercised by the
Committee. Except as otherwise provided in the Articles of Incorporation or Bylaws of the Company, any action of the Committee with respect
to the administration of the Plan shall be taken by a majority vote at a meeting at which a quorum is duly constituted or unanimous written
consent of the Committee’s members.
Section 4. Shares Reserved for Issuance Under the Plan.
(a) Subject to Section 5 hereof,
the number of shares of Common Stock that are reserved and available for issuance pursuant to Awards granted under the Plan shall be equal
to the sum of (i) 3,000,000 shares, plus (ii) the number of shares of Common Stock reserved, but unissued under the Prior Plan; (iii)
the number of shares of Common Stock underlying forfeited awards under the Prior Plan; and (iv) an annual increase on the first day of
each calendar year beginning with the first January 1 following the Effective Date and ending with the last January 1 during the initial
ten-year term of the Plan, equal to the lesser of (A) five percent (5%) of the Shares outstanding (on an as-converted basis)
on the final day of the immediately preceding calendar year and (B) such lesser number of Shares as determined by the Board; provided, that,
shares of Common Stock issued under the Plan with respect to an Exempt Award shall not count against such share limit. Following the Effective
Date, no further awards shall be issued under the Prior Plan, but all awards under the Prior Plan which are outstanding as of the Effective
Date (including any Grandfathered Arrangement) shall continue to be governed by the terms, conditions and procedures set forth in the
Prior Plan and any applicable Award Agreement.
(b) Shares issued under the
Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in
the open market, in private transactions or otherwise. If an Award entitles the Participant to receive or purchase Shares, the number
of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate
number of Shares available for granting Awards under the Plan. If any Shares subject to an Award are forfeited, cancelled, exchanged or
surrendered or if an Award otherwise terminates or expires without a distribution of Shares to the Participant, the Shares with respect
to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available
for granting Awards under the Plan. Notwithstanding the foregoing, Shares surrendered or withheld as payment of either the Exercise Price
of an Award (including Shares otherwise underlying a Stock Appreciation Right that are retained by the Company to account for the Exercise
Price of such Stock Appreciation Right) and/or withholding taxes in respect of an Award shall no longer be available for grant under
the Plan. In addition, (i) to the extent an Award is denominated in shares of Common Stock, but paid or settled in cash, the number of
shares of Common Stock with respect to which such payment or settlement is made shall again be available for grants of Awards pursuant
to the Plan and (ii) shares of Common Stock underlying Awards that can only be settled in cash shall not be counted against the aggregate
number of shares of Common Stock available for Awards under the Plan. Upon the exercise of any Award granted in tandem with any other
Awards, such related Awards shall be cancelled to the extent of the number of Shares as to which the Award is exercised and, notwithstanding
the foregoing, such number of Shares shall no longer be available for grant under the Plan.
(c) No more than 500,000 Shares
(as increased on an annual basis, on the first day of each calendar year beginning with the first January 1 following the Effective Date
and ending with the last January 1 during the initial ten-year term of the Plan, by the lesser of (A) five percent (5%) of the Shares
outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year; (B) 500,000 Shares, and (C) such
lesser number of Shares as determined by the Board) shall be issued pursuant to the exercise of ISOs.
Section 5. Equitable Adjustments.
In the event of any Change
in Capitalization, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number and kind of securities
reserved for issuance under the Plan pursuant to Section 4, (ii) the kind, number of securities subject to, and the Exercise Price
subject to outstanding Options and Stock Appreciation Rights granted under the Plan, (iii) the kind, number and purchase price of Shares
or other securities or the amount of cash or amount or type of other property subject to outstanding Restricted Stock, Restricted Stock
Units or Other Stock-Based Awards granted under the Plan; and/or (iv) the terms and conditions of any outstanding Awards (including,
without limitation, any applicable performance targets or criteria with respect thereto); provided, however, that
any fractional shares resulting from the adjustment shall be eliminated. Such other equitable substitutions or adjustments shall be made
as may be determined by the Administrator, in its sole discretion. Without limiting the generality of the foregoing, in connection with
a Change in Capitalization, the Administrator may provide, in its sole discretion, but subject in all events to the requirements of Section
409A of the Code, for the cancellation of any outstanding Award granted hereunder in exchange for payment in cash or other property having
an aggregate Fair Market Value equal to the Fair Market Value of the Shares, cash or other property covered by such Award, reduced by
the aggregate Exercise Price or purchase price thereof, if any; provided, however, that if the Exercise Price
or purchase price of any outstanding Award is equal to or greater than the Fair Market Value of the shares of Common Stock, cash or other
property covered by such Award, the Administrator may cancel such Award without the payment of any consideration to the Participant. Further,
without limiting the generality of the foregoing, with respect to Awards subject to foreign laws, adjustments made hereunder shall be
made in compliance with applicable requirements. Except to the extent determined by the Administrator, any adjustments to ISOs under this
Section 5 shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the
Code. The Administrator’s determinations pursuant to this Section 5 shall be final, binding and conclusive.
Section 6. Eligibility.
The Participants in the Plan
shall be selected from time to time by the Administrator, in its sole discretion, from those individuals that qualify as Eligible Recipients.
Section 7. Options.
(a) General. Options
granted under the Plan shall be designated as Nonqualified Stock Options or ISOs. Each Participant who is granted an Option shall enter
into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion,
including, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the
Option, and whether the Option is intended to be an ISO or a Nonqualified Stock Option (and in the event the Award Agreement has no such
designation, the Option shall be a Nonqualified Stock Option). The provisions of each Option need not be the same with respect to each
Participant. More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under
the Plan shall be subject to the terms and conditions set forth in this Section 7 and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Administrator shall deem desirable and set forth in the applicable Award Agreement.
(b) Exercise Price.
The Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of
grant, but in no event shall the exercise price of an Option be less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock on the date of grant.
(c) Option Term.
The maximum term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten (10) years after
the date such Option is granted. Each Option’s term is subject to earlier expiration pursuant to the applicable provisions in the
Plan and the Award Agreement. Notwithstanding the foregoing, subject to Section 4(d) of the Plan, the Administrator shall have the authority
to accelerate the exercisability of any outstanding Option at such time and under such circumstances as the Administrator, in its sole
discretion, deems appropriate.
(d) Exercisability.
Each Option shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of performance
goals, as shall be determined by the Administrator in the applicable Award Agreement. The Administrator may also provide that any Option
shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole
or in part, based on such factors as the Administrator may determine in its sole discretion.
(e) Method of Exercise.
Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of whole Shares
to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent,
as determined by the Administrator. As determined by the Administrator, in its sole discretion, with respect to any Option or category
of Options, payment in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure
approved by the Administrator (including the withholding of Shares otherwise issuable upon exercise), (ii) in the form of unrestricted
Shares already owned by the Participant which have a Fair Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which such Option shall be exercised, (iii) any other form of consideration approved by the Administrator and permitted
by Applicable Laws or (iv) any combination of the foregoing.
(f) ISOs. The terms
and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations
and administrative procedures established by the Administrator from time to time in accordance with the Plan. At the discretion of the
Administrator, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in
Section 424(e) of the Code) or a Subsidiary of the Company.
(1) ISO Grants to 10%
Stockholders. Notwithstanding anything to the contrary in the Plan, if an ISO is granted to a Participant who owns shares representing
more than ten percent (10%) of the voting power of all classes of shares of the Company, its “parent corporation” (as such
term is defined in Section 424(e) of the Code) or a Subsidiary of the Company, the term of the ISO shall not exceed five (5) years from
the time of grant of such ISO and the Exercise Price shall be at least one hundred and ten percent (110%) of the Fair Market Value of
the Shares on the date of grant.
(2) $100,000 Per Year
Limitation For ISOs. To the extent the aggregate Fair Market Value (determined on the date of grant) of the Shares for which ISOs
are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such
excess ISOs shall be treated as Nonqualified Stock Options.
(3) Disqualifying Dispositions.
Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date the Participant makes a
“disqualifying disposition” of any Share acquired pursuant to the exercise of such ISO. A “disqualifying disposition”
is any disposition (including any sale) of such Shares before the later of (i) two years after the date of grant of the ISO and (ii) one
year after the date the Participant acquired the Shares by exercising the ISO. The Company may, if determined by the Administrator and
in accordance with procedures established by it, retain possession of any Shares acquired pursuant to the exercise of an ISO as agent
for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions
from such Participant as to the sale of such Shares.
(g) Rights as Stockholder.
A Participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect
to the Shares subject to an Option until the Participant has given written notice of the exercise thereof, and has paid in full for such
Shares and has satisfied the requirements of Section 15 hereof.
(h) Termination of
Employment or Service. Treatment of an Option upon termination of employment of a Participant shall be provided for by the Administrator
in the Award Agreement.
(i) Other Change in
Employment or Service Status. An Option shall be affected, both with regard to vesting schedule and termination, by leaves of absence,
including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial Disability
or other changes in the employment status or service status of a Participant, in the discretion of the Administrator.
Section 8. Stock Appreciation Rights.
(a) General. Stock
Appreciation Rights may be granted either alone (“Free Standing Rights”) or in conjunction with all or part of any
Option granted under the Plan (“Related Rights”). Related Rights may be granted either at or after the time of the
grant of such Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Stock
Appreciation Rights shall be made. Each Participant who is granted a Stock Appreciation Right shall enter into an Award Agreement with
the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, including, among other
things, the number of Shares to be awarded, the Exercise Price per Share, and all other conditions of Stock Appreciation Rights. Notwithstanding
the foregoing, no Related Right may be granted for more Shares than are subject to the Option to which it relates. The provisions of Stock
Appreciation Rights need not be the same with respect to each Participant. Stock Appreciation Rights granted under the Plan shall be subject
to the following terms and conditions set forth in this Section 8 and shall contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Administrator shall deem desirable, as set forth in the applicable Award Agreement.
(b) Awards; Rights
as Stockholder. A Participant shall have no rights to dividends or any other rights of a stockholder with respect to the shares of
Common Stock, if any, subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof and
has satisfied the requirements of Section 15 hereof.
(c) Exercise Price.
The Exercise Price of Shares purchasable under a Stock Appreciation Right shall be determined by the Administrator in its sole discretion
at the time of grant, but in no event shall the exercise price of a Stock Appreciation Right be less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the date of grant.
(d) Exercisability.
(1) Stock Appreciation Rights
that are Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined
by the Administrator in the applicable Award Agreement.
(2) Stock Appreciation Rights
that are Related Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall
be exercisable in accordance with the provisions of Section 7 hereof and this Section 8 of the Plan.
(e) Payment Upon Exercise.
(1) Upon the exercise of a
Free Standing Right, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the
excess of the Fair Market Value as of the date of exercise over the Exercise Price per share specified in the Free Standing Right multiplied
by the number of Shares in respect of which the Free Standing Right is being exercised.
(2) A Related Right may be
exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant
shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the Fair Market Value as
of the date of exercise over the Exercise Price specified in the related Option multiplied by the number of Shares in respect of which
the Related Right is being exercised. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the
extent the Related Rights have been so exercised.
(3) Notwithstanding the foregoing,
the Administrator may determine to settle the exercise of a Stock Appreciation Right in cash (or in any combination of Shares and cash).
(f) Termination of
Employment or Service. Treatment of a Stock Appreciation Right upon termination of employment of a Participant shall be provided for
by the Administrator in the Award Agreement.
(g) Term.
(1) The term of each Free Standing
Right shall be fixed by the Administrator, but no Free Standing Right shall be exercisable more than ten (10) years after the date such
right is granted.
(2) The term of each Related
Right shall be the term of the Option to which it relates, but no Related Right shall be exercisable more than ten (10) years after the
date such right is granted.
(h) Other Change in
Employment or Service Status. Stock Appreciation Rights shall be affected, both with regard to vesting schedule and termination, by
leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment,
partial Disability or other changes in the employment or service status of a Participant, in the discretion of the Administrator.
Section 9. Restricted Stock and Restricted
Stock Units.
(a) General. Restricted
Stock or Restricted Stock Units may be issued under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the
time or times at which, Restricted Stock or Restricted Stock Units shall be made. Each Participant who is granted Restricted Stock or
Restricted Stock Units shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator
shall determine, in its sole discretion, including, among other things, the number of Shares to be awarded; the price, if any, to be paid
by the Participant for the acquisition of Restricted Stock or Restricted Stock Units; the period of time restrictions, performance goals
or other conditions that apply to Transferability, delivery or vesting of such Awards (the “Restricted Period”); and
all other conditions applicable to the Restricted Stock and Restricted Stock Units. If the restrictions, performance goals or conditions
established by the Administrator are not attained, a Participant shall forfeit his or her Restricted Stock or Restricted Stock Units,
in accordance with the terms of the grant. The provisions of the Restricted Stock or Restricted Stock Units need not be the same with
respect to each Participant.
(b) Awards and Certificates.
Except as otherwise provided below in Section 9(c), (i) each Participant who is granted an Award of Restricted Stock may, in the Company’s
sole discretion, be issued a share certificate in respect of such Restricted Stock; and (ii) any such certificate so issued shall be registered
in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to
any such Award. The Company may require that the share certificates, if any, evidencing Restricted Stock granted hereunder be held in
the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of Restricted Stock,
the Participant shall have delivered a share transfer form, endorsed in blank, relating to the Shares covered by such Award. Certificates
for shares of unrestricted Common Stock may, in the Company’s sole discretion, be delivered to the Participant only after the Restricted
Period has expired without forfeiture in such Restricted Stock Award. With respect to Restricted Stock Units to be settled in Shares,
at the expiration of the Restricted Period, share certificates in respect of the shares of Common Stock underlying such Restricted Stock
Units may, in the Company’s sole discretion, be delivered to the Participant, or his legal representative, in a number equal to
the number of shares of Common Stock underlying the Restricted Stock Units Award. Notwithstanding anything in the Plan to the contrary,
any Restricted Stock or Restricted Stock Units to be settled in Shares (at the expiration of the Restricted Period, and whether before
or after any vesting conditions have been satisfied) may, in the Company’s sole discretion, be issued in uncertificated form. Further,
notwithstanding anything in the Plan to the contrary, with respect to Restricted Stock Units, at the expiration of the Restricted Period,
Shares, or cash, as applicable, shall promptly be issued (either in certificated or uncertificated form) to the Participant, unless otherwise
deferred in accordance with procedures established by the Company in accordance with Section 409A of the Code, and such issuance or payment
shall in any event be made within such period as is required to avoid the imposition of a tax under Section 409A of the Code.
(c) Restrictions and
Conditions. The Restricted Stock or Restricted Stock Units granted pursuant to this Section 9 shall be subject to the following restrictions
and conditions and any additional restrictions or conditions as determined by the Administrator at the time of grant or, subject to Section
409A of the Code where applicable, thereafter:
(1) The Administrator may,
in its sole discretion, provide for the lapse of restrictions in installments and may accelerate or waive such restrictions in whole or
in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance goals, the Participant’s termination of employment or service with the Company or any
Affiliate thereof, or the Participant’s death or Disability. Notwithstanding the foregoing, upon a Change in Control, the outstanding
Awards shall be subject to Section 11 hereof.
(2) Except as provided in the
applicable Award Agreement, the Participant shall generally have the rights of a stockholder of the Company with respect to Restricted
Stock during the Restricted Period; provided, however, that dividends declared during the Restricted Period with
respect to an Award, shall only become payable if (and to the extent) the underlying Restricted Stock vests. Except as provided in the
applicable Award Agreement, the Participant shall generally not have the rights of a stockholder with respect to Shares subject to Restricted
Stock Units during the Restricted Period; provided, however, that, subject to Section 409A of the Code, an amount
equal to dividends declared during the Restricted Period with respect to the number of Shares covered by Restricted Stock Units shall,
unless otherwise set forth in an Award Agreement, be paid to the Participant at the time (and to the extent) Shares in respect of the
related Restricted Stock Units are delivered to the Participant. Certificates for Shares of unrestricted Common Stock may, in the Company’s
sole discretion, be delivered to the Participant only after the Restricted Period has expired without forfeiture in respect of such Restricted
Stock or Restricted Stock Units, except as the Administrator, in its sole discretion, shall otherwise determine.
(3) The rights of Participants
granted Restricted Stock or Restricted Stock Units upon termination of employment or service as a director or independent contractor to
the Company or to any Affiliate thereof terminates for any reason during the Restricted Period shall be set forth in the Award Agreement.
(d) Form of Settlement.
The Administrator reserves the right in its sole discretion to provide (either at or after the grant thereof) that any Restricted Stock
Unit represents the right to receive the amount of cash per unit that is determined by the Administrator in connection with the Award.
Section 10. Other Stock-Based Awards.
Other Stock-Based Awards
may be issued under the Plan. Subject to the provisions of the Plan, the Administrator shall have sole and complete authority to determine
the individuals to whom and the time or times at which such Other Stock-Based Awards shall be granted. Each Participant who is granted
an Other Stock-Based Award shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator
shall determine, in its sole discretion, including, among other things, the number of shares of Common Stock to be granted pursuant to
such Other Stock-Based Awards, or the manner in which such Other Stock-Based Awards shall be settled (e.g., in shares of Common
Stock, cash or other property), or the conditions to the vesting and/or payment or settlement of such Other Stock-Based Awards (which
may include, but not be limited to, achievement of performance criteria) and all other terms and conditions of such Other Stock-Based Awards.
In the event that the Administrator grants a bonus in the form of Shares, the Shares constituting such bonus shall, as determined by the
Administrator, be evidenced in uncertificated form or by a book entry record or a certificate issued in the name of the Participant to
whom such grant was made and delivered to such Participant as soon as practicable after the date on which such bonus is payable. Notwithstanding
anything set forth in the Plan to the contrary, any dividend or dividend equivalent Award issued hereunder shall be subject to the same
restrictions, conditions and risks of forfeiture as apply to the underlying Award.
Section 11. Change in Control.
Unless otherwise determined
by the Administrator and evidenced in an Award Agreement, in the event that (a) a Change in Control occurs, and (b) the Participant is
employed by the Company or any of its Affiliates immediately prior to the consummation of such Change in Control then upon the consummation
of such Change in Control, the Administrator, in its sole and absolute discretion, may:
(a) provide that any unvested
or unexercisable portion of any Award carrying a right to exercise become fully vested and exercisable; and
(b) cause the restrictions,
deferral limitations, payment conditions and forfeiture conditions applicable to an Award granted under the Plan to lapse and such Awards
shall be deemed fully vested and any performance conditions imposed with respect to such Awards shall be deemed to be fully achieved at
target performance levels.
If the Administrator determines
in its discretion pursuant to Section 3(b)(4) hereof to accelerate the vesting of Options and/or Share Appreciation Rights in connection
with a Change in Control, the Administrator shall also have discretion in connection with such action to provide that all Options and/or
Stock Appreciation Rights outstanding immediately prior to such Change in Control shall expire on the effective date of such Change in
Control.
Section 12. Amendment and Termination.
The Board may amend, alter
or terminate the Plan at any time, but no amendment, alteration or termination shall be made that would impair the rights of a Participant
under any Award theretofore granted without such Participant’s consent. The Board shall obtain approval of the Company’s stockholders
for any amendment that would require such approval in order to satisfy the requirements of any rules of the stock exchange on which the
Common Stock is traded or other Applicable Law. Subject to Section 3(c), the Administrator may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to Section 5 of the Plan and the immediately preceding sentence, no such amendment
shall materially impair the rights of any Participant without his or her consent.
Section 13. Unfunded Status of Plan.
The Plan is intended to constitute
an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company,
nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
Section 14. Withholding Taxes.
Each Participant shall, no
later than the date as of which the value of an Award first becomes includible in the gross income of such Participant for purposes of
applicable taxes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of an amount up to the
maximum statutory tax rates in the Participant’s applicable jurisdiction with respect to the Award, as determined by the Company.
The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall,
to the extent permitted by Applicable Laws, have the right to deduct any such taxes from any payment of any kind otherwise due to such
Participant. Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient
to satisfy any applicable withholding tax requirements related thereto. Whenever Shares or property other than cash are to be delivered
pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient
to satisfy any related taxes to be withheld and applied to the tax obligations; provided, that, with the approval
of the Administrator, a Participant may satisfy the foregoing requirement by either (i) electing to have the Company withhold from delivery
of Shares or other property, as applicable, or (ii) delivering already owned unrestricted shares of Common Stock, in each case, having
a value not exceeding the applicable taxes to be withheld and applied to the tax obligations. Such already owned and unrestricted shares
of Common Stock shall be valued at their Fair Market Value on the date on which the amount of tax to be withheld is determined and any
fractional share amounts resulting therefrom shall be settled in cash. Such an election may be made with respect to all or any portion
of the Shares to be delivered pursuant to an award. The Company may also use any other method of obtaining the necessary payment or proceeds,
as permitted by Applicable Laws, to satisfy its withholding obligation with respect to any Award.
Section 15. Transfer of Awards.
Until such time as the Awards
are fully vested and/or exercisable in accordance with the Plan or an Award Agreement, no purported sale, assignment, mortgage, hypothecation,
transfer, charge, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest
in or lien on, any Award or any agreement or commitment to do any of the foregoing (each, a “Transfer”) by any holder
thereof in violation of the provisions of the Plan or an Award Agreement will be valid, except with the prior written consent of the Administrator,
which consent may be granted or withheld in the sole discretion of the Administrator. Any purported Transfer of an Award or any economic
benefit or interest therein in violation of the Plan or an Award Agreement shall be null and void ab initio and shall
not create any obligation or liability of the Company, and any Person purportedly acquiring any Award or any economic benefit or interest
therein transferred in violation of the Plan or an Award Agreement shall not be entitled to be recognized as a holder of such Shares or
other property underlying such Award. Unless otherwise determined by the Administrator in accordance with the provisions of the immediately
preceding sentence, an Option or a Stock Appreciation Right may be exercised, during the lifetime of the Participant, only by the Participant
or, during any period during which the Participant is under a legal Disability, by the Participant’s guardian or legal representative.
Section 16. Continued Employment or Service.
Neither the adoption of the
Plan nor the grant of an Award shall confer upon any Eligible Recipient any right to continued employment or service with the Company
or any Affiliate thereof, as the case may be, nor shall it interfere in any way with the right of the Company or any Affiliate thereof
to terminate the employment or service of any of its Eligible Recipients at any time.
Section 17. Effective Date.
The Plan was approved by the
Board on February 24, 2021 and shall be adopted and become effective on the date that it is approved by the Company’s stockholders
(the “Effective Date”).
Section 18. Electronic Signature.
Participant’s electronic
signature of an Award Agreement shall have the same validity and effect as a signature affixed by hand.
Section 19. Term of Plan.
No Award shall be granted pursuant
to the Plan on or after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.
Section 20. Securities Matters and Regulations.
(a) Notwithstanding anything
herein to the contrary, the obligation of the Company to sell or deliver Shares with respect to any Award granted under the Plan shall
be subject to all Applicable Laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining
of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. The Administrator may require,
as a condition of the issuance and delivery of certificates evidencing shares of Common Stock pursuant to the terms hereof, that the recipient
of such shares make such agreements and representations, and that such certificates bear such legends, as the Administrator, in its sole
discretion, deems necessary or advisable.
(b) Each Award is subject to
the requirement that, if at any time the Administrator determines that the listing, registration or qualification of Shares is required
by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Shares, no such Award shall be granted
or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected
or obtained free of any conditions not acceptable to the Administrator.
(c) In the event that the disposition
of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act or regulations
thereunder, and the Administrator may require a Participant receiving Common Stock pursuant to the Plan, as a condition precedent to receipt
of such Common Stock, to represent to the Company in writing that the Common Stock acquired by such Participant is acquired for investment
only and not with a view to distribution.
Section 21. Section 409A of the Code.
The Plan as well as payments
and benefits under the Plan are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code,
and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained
herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code,
the Participant shall not be considered to have terminated employment or service with the Company for purposes of the Plan and no payment
shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation
from service” from the Company and its Affiliates within the meaning of Section 409A of the Code. Any payments described in the
Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred
compensation unless Applicable Law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent that any Awards
(or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation
from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section
409A of the Code, the settlement and payment of such awards (or other amounts) shall instead be made on the first business day after the
date that is six (6) months following such separation from service (or death, if earlier). Each amount to be paid or benefit to be provided
under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code. The Company makes no representation
that any or all of the payments or benefits described in this Plan will be exempt from or comply with Section 409A of the Code and makes
no undertaking to preclude Section 409A of the Code from applying to any such payment. The Participant shall be solely responsible for
the payment of any taxes and penalties incurred under Section 409A.
Section 22. Notification of Election Under Section 83(b) of
the Code.
If any Participant shall, in
connection with the acquisition of shares of Common Stock under the Plan, make the election permitted under Section 83(b) of the Code,
such Participant shall notify the Company of such election within ten (10) days after filing notice of the election with the Internal
Revenue Service.
Section 23. No Fractional Shares.
No fractional shares of Common
Stock shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, other Awards, or other property
shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
Section 24. Beneficiary.
A Participant may file with
the Administrator a written designation of a beneficiary on such form as may be prescribed by the Administrator and may, from time to
time, amend or revoke such designation. If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s
estate shall be deemed to be the Participant’s beneficiary.
Section 25. Paperless Administration.
In the event that the Company
establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards,
such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards
by a Participant may be permitted through the use of such an automated system.
Section 26. Severability.
If any provision of the Plan
is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid
or unenforceable provision had not been included in the Plan.
Section 27. Clawback.
(a) If the Company is required
to prepare a financial restatement due to the material non-compliance of the Company with any financial reporting requirement, then
the Committee may require any Section 16 Officer to repay or forfeit to the Company, and each Section 16 Officer agrees to so repay or
forfeit, that part of the Incentive Compensation received by that Section 16 Officer during the three-year period preceding the publication
of the restated financial statement that the Committee determines was in excess of the amount that such Section 16 Officer would have
received had such Incentive Compensation been calculated based on the financial results reported in the restated financial statement.
The Committee may take into account any factors it deems reasonable in determining whether to seek recoupment of previously paid Incentive
Compensation and how much Incentive Compensation to recoup from each Section 16 Officer (which need not be the same amount or proportion
for each Section 16 Officer), including any determination by the Committee that a Section 16 Officer engaged in fraud, willful misconduct
or committed grossly negligent acts or omissions which materially contributed to the events that led to the financial restatement. The
amount and form of the Incentive Compensation to be recouped shall be determined by the Committee in its sole and absolute discretion,
and recoupment of Incentive Compensation may be made, in the Committee’s sole and absolute discretion, through the cancellation
of vested or unvested Awards, cash repayment or both.
(b) Notwithstanding any other
provisions in this Plan, any Award which is subject to recovery under any Applicable Laws, government regulation or stock exchange listing
requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such Applicable Law, government
regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation
or stock exchange listing requirement).
Section 28. Governing Law.
The Plan shall be governed
by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflicts of law of such
state.
Section 29. Indemnification.
To the extent allowable pursuant
to applicable law, each member of the Board and the Administrator and any officer or other employee to whom authority to administer any
component of the Plan is designated shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be a party or in which he or she may be involved by reason of any action or
failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action,
suit, or proceeding against him or her; provided, however, that he or she gives the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such individuals may be entitled pursuant to the Company’s
Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
Section 30. Titles and Headings, References to Sections of
the Code or Exchange Act.
The titles and headings of
the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such
titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.
Section 31. Successors.
The obligations of the Company
under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization
of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
Section 32. Relationship to other Benefits.
No payment pursuant to the
Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance,
welfare, or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other
plan or an agreement thereunder.
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