Proposal 4: Approval of the Private Placement
We are seeking stockholder approval, for purposes of complying with Listing Rule 5635(d) of The Nasdaq Stock Market LLC (“Listing Rule 5635(d)”), for the sale in a private placement of units comprised of (i) 1,500,000 shares of the Company’s common stock, par value $0.01 (the “Private Placement Shares”), and (ii) warrants exercisable into 1,500,000 shares of the Company’s common stock at an exercise price of $11.00 per share (the “Warrants”), with such units being sold for $10.00 per unit (the “Private Placement”).
The information set forth in this Proposal No. 4 is qualified in its entirety by reference to the full text of the form of SPA, form of RRA, the form of VSA (each as defined below) and the Form of Common Stock Purchase Warrant attached as exhibits 10.1, 10.2, 10.3 and 4.1, respectively, to our Current Report on Form 8-K filed with the SEC on June [•], 2022. Stockholders are urged to carefully read these documents.
On June 26, 2022, we entered into (i) a securities purchase agreement (the “SPA”) with Armistice Capital Master Fund Ltd. (“Armistice”) pursuant to which Armistice agreed to purchase the Private Placement Shares and the Warrants for an aggregate purchase price of $15 million and (ii) a registration rights agreement with Armistice (the “RRA”), pursuant to which the Company will file a registration statement covering the Private Placement Shares and the shares of common stock underlying the Warrants within 15 days of the date of execution of the RRA (the “Registration Statement”). The Private Placement closed on June [•], 2022.
The Warrants will become exercisable upon the earlier of (i) effective date of the Registration Statement and (ii) 90 days from the closing of the Private Placement, into shares of the Company’s common stock at an exercise price of $11.00 per share for a term of five years from the date the Warrants become exercisable. Exercise of the Warrants is subject to a condition that the Company shall not effect any exercise if after giving effect to such exercise Armistice would beneficially own in excess of 4.99% of the total outstanding shares of the Company’s common stock.
The SPA contains a provision providing that, until the Company obtains stockholder approval for the Private Placement, the Warrants cannot be exercised into shares that, taken together with the shares previously issued pursuant to the Private Placement, aggregate to more than 19.9% of the Company’s total outstanding shares of common stock or of the total voting power of the Company’s securities as of June 26, 2022, the date of execution of the SPA.
On June 26, 2022, Amin J. Khoury PhD (Hon), Lewis C. Pell, David Helfet M.D. and Dateline TV Holdings, Inc. (the “Majority Stockholders”), representing approximately 65% of the voting power of the Company’s outstanding shares of common stock as of May 23, 2022, entered into a voting support agreement (the “VSA”) pursuant to which the Majority Stockholders committed to attending the Annual Meeting or otherwise causing their respective shares of the Company’s common stock (the “Covered Shares”) to be counted as present at the Annual Meeting for the purpose of establishing a quorum and further committed to voting or causing their respective Covered Shares to be voted in favor of this Proposal No. 4.
The Company gained U.S. Food and Drug Administration clearance to market and sell its Pūrgo device as a Class II Medical Device on June 1, 2022. The Company’s strategy includes continuously evaluating a wide range of strategic opportunities including acquisitions. As part of that strategy, the Company is in discussions with several acquisition candidates and may use the proceeds of the Private Placement together with other sources of capital to effect transactions that the Company believes would substantially increase revenues, distribution and selling capability, and expand product lines, and, most importantly, add sensor and monitoring technology to enable the Company to effect its recurring revenue “Safe Air As a Service” model. The Company’s goal is to provide actionable data to clients through the internet of things to enable clients to provide Indoor Air Quality as part of their Indoor Environmental Quality initiatives. The Company currently has no material agreements or arrangements with any of the several acquisition candidates and there can be no assurance that any of these acquisitions, or any others, will be consummated.