As filed with the Securities and Exchange Commission on July 16, 2020

 

Registration No. [*]

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

Applied UV, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   3648   84-4373308

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

150 N. Macquesten Parkway

Mount Vernon, NY 10550

(914) 665-6100

(Address, including zip code, and telephone number, including area code,

“of registrant’s principal executive offices)

 

Keyoumars Saeed

Chief Executive Officer

Applied UV, Inc.

150 N. Macquesten Parkway

Mount Vernon, NY 10550

(914) 665-6100

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

Ross D. Carmel, Esq.  
Jeffrey P. Wofford, Esq. Lawrence Cohen, Esq.
Carmel, Milazzo & Feil LLP Gordon Rees Scully Mansukhani, LLP
55 West 39th Street, 18th Floor Two North Central Avenue, Suite 2200
New York, New York 10018 Phoenix, AZ 85004
Telephone: (212) 658-0458 Telephone: (602) 794-2485

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  x

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company x
       
    Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ¨

 

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of
Securities to be Registered
  Amount
 to be Registered (1)(2)
  Proposed Maximum
Offering Price
Per Unit(3)
    Proposed
Maximum
Aggregate
Offering Price(1)(3)
    Amount of
Registration Fee (4)
 
Common Stock, $0.0001 par value per share (1)(4)   1,150,000   $ 5.00     $ 5,750,000     $ 746.35  
Warrants to purchase Common Stock to be issued to the Underwriter (2)(5)                            
Common Stock issuable upon exercise of Warrants to purchase Common Stock to be issued to the Underwriters (2)(4)   80,000   $ 6.25     $ 500,000     $ 64.90  
Total   1,230,000     --     $ 6,250,000     $ 811.25  

 

(1)      Includes 150,000 shares that may be purchased by the underwriters pursuant to their over-allotment option that may be exercised over a 45 period.

(2)      We have agreed to issue to the representative of the several underwriters, who we refer to as the representative, warrants to purchase the number of shares of common stock in the aggregate equal to eight percent (8%) of the shares of common stock to be issued and sold in this offering (excluding shares of common stock sold to cover over-allotments, if any). The warrants are exercisable for a price per share equal to 125% of the public offering price.

(3)      There is no current market for the securities or price at which the shares are being offered. Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(4)      Pursuant to Rule 416 under the Securities Act of 1933, as amended, there is also being registered hereby such indeterminate number of additional shares as may be issued or issuable because of stock splits, stock dividends and similar transactions.

(5)      No fee required pursuant to Rule 457(g).

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

 

 

 

 

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated [*], 2020

 

PRELIMINARY PROSPECTUS

  

Applied UV, Inc.

 

1,000,000 Shares of Common Stock

 

This is an initial public offering of shares of common stock of Applied UV, Inc. We are offering 1,000,000 shares of our common stock. Upon completion of this offering, a single shareholder will own approximately 81% of our outstanding common stock (approximately 79% if the underwriters exercise their over-allotment option in full). For additional information regarding this shareholder, see “Principal Stockholders.” Upon completion of this offering, we will be a “controlled company” within the meaning of the listing rules of The Nasdaq Stock Market LLC.

 

Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price will be $5.00 per share. We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “AUVI” which listing is a condition to this offering.

  

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Network 1 Financial Securities, Inc. is acting as representative, have severally agreed to purchase, and we have agreed to sell to them, severally, 1,000,000 shares of common stock and the representative shall have an option, exercisable for 45 days from the date of this prospectus, to purchase up to an additional 150,000 shares of common stock.

 

We intend to use the proceeds from this offering for laboratory testing, expansion of sales staff, and general corporate purposes, including working capital and sales and marketing activities. See “Use of Proceeds.”

 

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 10 of this prospectus for a discussion of information that should be considered in connection with an investment in our common stock.

 

Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and we have elected to comply with certain reduced public company reporting requirements.

 

    Per Share     Total  
Initial public offering price   $ 5.00     $ 5,000,000  
Underwriting discounts and commissions (1)(2)   $ 0.45     $ 450,000  
Proceeds, before expenses, to us   $ 4.55     $ 4,550,000  

 

(1) Represents underwriting discount and commissions equal to 9% per share (or $0.45 per share), which is the underwriting discount we have agreed to pay on all investors in this offering introduced by the underwriters.

 

(2) Does not include a non-accountable expense allowance equal to 2% of the gross proceeds of this offering, payable to Network 1 Financial Securities, Inc., as representative of the underwriters, or the reimbursement of certain expenses of the underwriters. See “Underwriting” beginning on page 64 of this prospectus for additional information regarding underwriting compensation.
   
  In addition to the underwriting discounts listed above and the non-accountable expense allowance described in the footnote, we have agreed to issue upon the closing of this offering to Network 1 Financial Securities, Inc., as representative of the underwriters, warrants that will expire on the fifth anniversary of the effective date of this registration statement entitling the representative to purchase 8% of the number of shares of common stock sold in this offering (excluding shares of common stock sold to cover over-allotments, if any). The registration statement of which this prospectus is a part also covers the underwriters’ warrants and the common shares issuable upon the exercise thereof. For additional information regarding our arrangement with the underwriters, please see “Underwriting” beginning on page 64.
   
  We have granted the representative an option, exercisable for 45 days from the date of this prospectus, to purchase up to an additional 150,000 shares of common stock on the same terms as the other shares being purchased by the underwriters from us.

 

The underwriters expect to deliver the shares against payment in New York, New York on             , 2020.

 

Prospectus dated                , 2020

 

N E T W O R K 1 F I N A N C I A L

S E C U R I T I E S, I N C.

 

 

 

 

Table of Contents

 

ABOUT THIS PROSPECTUS 2
MARKET DATA 3
PROSPECTUS SUMMARY 3
SUMMARY OF THE OFFERING 8
RISK FACTORS 10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 30
USE OF PROCEEDS 30
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 31
CAPITALIZATION 32
DILUTION 33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 34
BUSINESS 41
MANAGEMENT 53
EXECUTIVE COMPENSATION 58
PRINCIPAL STOCKHOLDERS 59
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 60
DESCRIPTION OF SECURITIES 60
Shares Eligible for Future Sale 63
UNDERWRITING 64
EXPERTS 68
LEGAL MATTERS 68
WHERE YOU CAN FIND MORE INFORMATION 68
INDEX TO FINANCIAL STATEMENTS F-1

 

Through and including        , 2020 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriter and with respect to their unsold allotments or subscriptions.

 

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment. Neither we, nor the underwriters, have authorized any other person to provide you with information that is different from, or adds to, that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should assume that the information contained in this prospectus or any free writing prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of any securities in any jurisdiction in which such offer is unlawful.

 

No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this public offering and the distribution of this prospectus applicable to that jurisdiction.

 

ABOUT THIS PROSPECTUS

 

Throughout this prospectus, unless otherwise designated or the context suggests otherwise,

 

  all references to the “Company,” the “registrant,” “we,” “our,” or “us” in this prospectus mean Applied UV, Inc. and its subsidiaries;
     
  an initial public offering price of our common stock of $5.00 per share;
     
  “year” or “fiscal year” mean the year ending December 31st;
     
  all common share and per common share information in this prospectus gives effect to a 1 for 5 reverse stock split of our common stock, which became effective as of June 17, 2020, and all preferred share and per preferred share information in this prospectus gives effect to a 1 for 5 reverse stock split of our preferred stock, which became effective as of June 23, 2020, and
     
  all dollar or $ references, when used in this prospectus, refer to United States dollars.

 

  2  

 

 

Market Data

 

Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. To our knowledge, certain third-party industry data that includes projections for future periods does not take into account the effects of the worldwide coronavirus pandemic. Accordingly, those third-party projections may be overstated and should not be given undue weight. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

 

PROSPECTUS SUMMARY

 

This summary provides a brief overview of the key aspects of our business and our securities. The reader should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors.” Some of the statements contained in this prospectus, including statements under “Summary” and “Risk Factors” as well as those noted in the documents incorporated herein by reference, are forward-looking statements and may involve a number of risks and uncertainties. Our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.

 

As used in this prospectus, all references to “capital stock,” “common stock,” “Shares,” “preferred stock,” “stockholders,” “shareholders” applies only to Applied UV, Inc. and “we,” “our,” “us,” the “Company,” the “registrant,” or “Applied UV” refer to Applied UV, Inc., a Delaware corporation and its subsidiaries, which currently consist of SteriLumen, Inc., a New York corporation (“SteriLumen”) and Munn Works, LLC, a New York limited liability company (“Munn Works”).

 

About our Company

 

The Company was formed on February 26, 2019, for the purpose of acquiring all of the equity of SteriLumen and Munn Works. The Company acquired all of the capital stock of SteriLumen in March of 2019 pursuant to two exchange agreements in which the shareholders of SteriLumen exchanged all of their shares in SteriLumen for shares of common stock in the Company. The Company acquired all of the membership interests of Munn Works in July of 2019 pursuant to an exchange agreement in exchange for shares of common stock in the Company. The Company conducts all of its operations through SteriLumen and Munn Works. 

 

SteriLumen. SteriLumen was incorporated on December 8, 2016 in New York for the purpose of developing, designing and manufacturing disinfection systems, that eliminate pathogens that may cause healthcare-acquired infections (“HAIs”), for distribution and sale to facilities that have high customer or patient turnover such as hospitals, assisted living facilities, doctors’ offices and walk-in clinics as well as hotels, cruise lines, airplanes, schools, government buildings, commercial offices and other facilities that offer access to the public. SteriLumen has developed, designed and manufactured a unique, patented and automated disinfecting system that will be embedded into certain bathroom fixtures (in each case, a “SteriLumen Disinfecting System”), which we believe will be effective in reducing HAIs caused by viruses, bacteria, fungi, and other pathogens, including the virus the causes COVID-19, severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) (referred to herein as the “Coronavirus”) and human coronaviruses in general. The SteriLumen Disinfecting System currently has five product lines: (i) disinfecting back-lit mirror that replaces the typical mirror (and wall lighting) found above the sink in a public facility bathroom; (ii) disinfecting drain device; (iii) disinfecting shelf that would be installed above the sink in cases where there is not enough room for a bathroom mirror or beneath an existing bathroom mirror; (iv) disinfecting mirrored medicine cabinet for residential use and (v) retrofit kit. The Company has received confirmation from the U.S. Food & Drug Administration that the SteriLumen Disinfecting System is not a “device” under Section 201(h) of the Federal Food, Drug, and Cosmetic Act (the “FDA Act”) and therefore the Company is not required to comply with the requirements of the FDA Act.

 

  3  

 

 

The SteriLumen Disinfecting System has previously been submitted to ResInnova Laboratories (“ResInnova”), a laboratory that tests products that reduce pathogens on solid and porous surfaces, for an analysis of its effectiveness in killing certain pathogens such as Clostridium difficile spores (“C diff”), Escherichia coli (“E coli”) and Staphylococcus aureus (“MRSA”). ResInnova provided SteriLumen with their findings in a report dated September 8, 2017, which were updated on May 8, 2020 (the “Initial ResInnova Report”) which found the SteriLumen Disinfecting System to be effective in dramatically reducing pathogens in the bathroom vanity/sink area. In a Report dated June 30, 2020, ResInnova found the SteriLumen Disinfecting System to be effective in killing OC43 human coronavirus, which according to ResInnova is a common surrogate for coronavirus as described in further detail under “Business—Second ResInnova Report.” Furthermore, SteriLumen has an agreement (the “Mount Sinai Agreement”) with Icahn School of Medicine at Mount Sinai (“Mount Sinai”) dated April 20, 2020, in which the Company will sponsor an evaluation by Mount Sinai of the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms in Mount Sinai St. Luke’s Hospital in New York, NY. Mount Sinai has agreed to provide SteriLumen the results of their research in a report by the second quarter of 2021 as well as publishing their results in an academic, peer-reviewed journal. The Initial ResInnova Report and the Mount Sinai Agreement are more fully described in the sections entitled “Business—SteriLumen—The Initial ResInnova Report,” and “—The Mount Sinai Agreement.”

 

Since its inception, SteriLumen has devoted substantially all of its efforts to research and development, business planning, recruiting management and sales personnel, raising capital, developing relationships with existing and new suppliers and creating its own network of professional consultants. SteriLumen has manufacturing and assembly suppliers in Warwick, Rhode Island, southern China and South Korea, and warehousing and distribution suppliers in California. By outsourcing the manufacturing, assembly, warehousing and distribution of SteriLumen Disinfecting Systems and other related products, we can efficiently focus our resources on the design, marketing and sales of SteriLumen’s products while keeping overhead costs lower. SteriLumen recently sold in Saudi Arabia and is currently in discussions with two major international hotel chains who have expressed interest in reducing pathogen levels in their hotels and restaurants.

 

HAIs. The U.S. Center for Disease Control (“CDC”) defines HAIs as infections patients contract, while receiving treatment in a healthcare facility. HAI is a significant problem in the United States and is the cause of an estimated 99,000 deaths annually. The CDC states that preventing HAI is a national priority. Between 2000 and 2050, the percentage of people aged 85 and over will increase by 350%1. This estimated increase will result in more HAIs for this age group. While this problem is of great concern to the elderly, it also affects the population at large.2 Research shows that the most common germs causing HAIs are C diff (12%), MRSA(11%), E coli (9%), and Candida auris (7%).3 Environmental disinfection is an important method in reducing the risk of HAIs. Evidence shows that traditional cleaning methods still leave persistent contamination of environmental surfaces.4 Without question, secondary disinfection technologies are needed for reducing the risk of surface contamination.

 

According to the CDC:

 

· approximately 1.7 million people in the United States contract a HAI every year, or 1 out of every 25 hospital patients;

 

· an estimated 99,000 people die from HAI’s annually;

 

· HAI cost to the healthcare system is $45 billion annually;

 

· patients with a HAI spend an average of 6.5 extra days in the hospital; and

 

· patients with a HAI are five times more likely to be readmitted and twice as likely to die.

 

HAI’s are preventable, and the federal government has instituted policies and penalties to ensure this issue is being addressed. In 2009, the Centers for Medicare and Medicaid Services (“CMS”) stopped paying hospital-related reimbursement for patients who acquired a HAI during their hospital stay. In 2011, CMS established fines for facilities with high rates of infection. The effects of reduced reimbursements have seriously impacted healthcare facilities. Some facilities have reported a reduction of up to 40% of their total revenue due to lost reimbursement.

 

______________________

1 American Journal of Infection Control (“AJIC”)

2 AJIC

3 AJIC

4 AJIC

 

  4  

 

 

Munn Works. Munn Works was formed on November 9, 2012, as a New York limited liability company. It manufactures and supplies custom designed decorative framed mirrors, framed art, and bathroom vanities primarily to the hospitality market. Max Munn, the President of Applied UV, is also the Chief Executive Officer of Munn Works and has been involved in related businesses for over 35 years. Munn Works manufactures its products domestically and overseas. Its domestic manufacturing operations are located in its headquarters in Mount Vernon, New York. Munn Works supplies the major hotel brands in North America with its products. These brands include Hilton Hotels & Resorts, the various Hyatt branded hotels, the various Marriott branded hotels, Four Seasons Hotels and Resorts and the subsidiary hotel brands for each of these major brands. Munn Works has a national sales force and an established distribution network for hotels and restaurants in every major market in the United States and has begun to develop a distribution network for the assisted living market. These distribution networks will also be a significant asset for SteriLumen, as those networks will be utilized for the marketing and sales of the SteriLumen Disinfecting System. Additionally, Munn Works advertises its products in hotel design magazines and participates in major national trade shows. During the last three years, Munn Works has significantly expanded its sales force, including hiring a vice president of sales, increased investments in advertising, including expanding its presence at industry trade shows and full-page advertising in trade magazines such as Boutique Design and Hospitality Design and establishing a presence on social media outlets such as Facebook, Instagram, and Twitter.

 

Recent Developments

 

Acquisition of SteriLumen and Munn Works. The Company acquired all of the issued and outstanding common shares of SteriLumen pursuant to an Exchange Agreement dated March 26, 2019 among the Company, SteriLumen and the shareholders of SteriLumen in which the SteriLumen shareholders exchanged their SteriLumen common shares for 201,250 shares of Company common stock, of which Laurie Munn, the spouse of Max Munn, our President and a director of the Company, received 200,000 shares. The Company acquired all of the issued and outstanding preferred shares of SteriLumen pursuant to an Exchange Agreement dated March 27, 2019 among the Company, SteriLumen and Laurie Munn in which Ms. Munn exchanged all of her SteriLumen Series A preferred stock for 1,800,000 shares of Company common stock and 2,000 shares of Company Series A preferred stock. Upon consummation of this exchange the Company owned 100% of the capital shares of SteriLumen. The Company acquired all of the membership interests in Munn Works pursuant to an Exchange Agreement dated July 1, 2019 among the Company, Munn Works and Laurie Munn in which Laurie Munn exchange her membership interests in Munn Works for 3,000,000 shares of Company common stock. All of the equity in the Company owned by Laurie Munn has been transferred to The Munn Family 2020 Irrevocable Trust, of which the spouse of Max Munn is the trustee.

 

Effects of Coronavirus Outbreak. In December 2019, a novel strain of Coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries and every state in the United States. On January 30, 2020, the World Health Organization declared the outbreak of Coronavirus a “Public Health Emergency of International Concern.” On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.

 

The spread of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets and supply chains. The pandemic has had, and could have a significantly greater, material adverse effect on the U.S. economy where we conduct a majority of our business. The pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

 

Most states and cities have reacted by instituting quarantines, restrictions on travel, “stay at home” and “social distancing” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it. On March 20, 2020, the Governor of New York announced a stay at home order to go into effect on March 22, 2020, that has been extended to at least June 6, 2020, unless regions in the state can meet certain criteria related to the Coronavirus. Pursuant to this order, non-essential businesses were forced to close. However, as of the date of this prospectus, our Mount Vernon office is open with the majority of our employees working from home.

 

We have taken steps to take care of our employees, including providing the ability for employees to work remotely and implementing strategies to support appropriate social distancing techniques for those employees who are not able to work remotely. We have also taken precautions with regard to employee, facility, and office hygiene as well as implementing significant travel restrictions. We are also assessing our business continuity plans for all business units in the context of the pandemic. This is a rapidly evolving situation, and we will continue to monitor and mitigate developments affecting our workforce, our suppliers, our customers, and the public at large to the extent we are able to do so. We have and will continue to carefully review all rules, regulations, and orders and responding accordingly.

 

  5  

 

 

We are dependent upon suppliers to provide us with all of the raw materials for products that we manufacture and sell and we currently manufacture the majority of our products in China. The pandemic has impacted and may continue to impact suppliers of materials and the manufacturing locations for our products. As a result, we have faced and may continue to face delays or difficulty manufacturing certain products, which could negatively affect our business and financial results. Even if we are able to find alternate sources for materials and manufacturing, they may cost more, which could adversely impact our profitability and financial condition. Also, because of the disruption to travel and the decline in the demand for and the closure of hotels, Munn Works has experienced and may continue to experience a decline in demand for its products which could have a material adverse effect on its operations and financial condition.

 

If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.

 

Although it is difficult to predict the effect and ultimate impact of the Coronavirus outbreak on our business, it is likely that the impact of Coronavirus will adversely affect our results of operations, financial condition and cash flows in fiscal year 2020. See “Risk Factors—Risks Related to our Business and Operations—The Coronavirus pandemic may cause a material adverse effect on our business.”

 

Options. On February 18, 2020, the Board approved the grant to each member of the Board, on a quarterly basis, of options to purchase 500 shares of the Company’s common stock at a per share exercise equal to the greater of $2.50 and the market value per share of the Company’s common stock on the date of the grant. Market value will be determined by an independent valuation company engaged by the Company; provided, however, if on the date of the grant the Company common stock is listed on a national exchange or quoted on an established quotation system, then the market value shall equal the closing price of the Company common stock listed on such exchange or quoted on such quotation system on the trading day immediately prior to the date of the grant. On April 1, 2020, we issued options to purchase 2,000 shares of Company common stock to members the Board, of which 1,250 have been cancelled. The options are subject to equal quarterly vesting over a one-year period. On July 1, 2020, we issued an additional 1,000 options to certain Board members. To date 375 of these options have vested. On July 9, 2020, the Board cancelled any further issuance of these quarterly options.

  

Applied UV, Inc. 2020 Omnibus Incentive Plan. On May 4, 2020, we adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”). Under the Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 600,000 shares of common stock to Company employees, officers, directors, consultants, and advisors are available under the Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant.

 

Mount Sinai Agreement. On April 20, 2020, SteriLumen entered into the Mount Sinai Agreement pursuant to which Mount Sinai has agreed to conduct a study of the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms at Mount Sinai St. Luke’s Hospital in New York, NY. SteriLumen will be responsible for funding the direct and indirect costs of Mount Sinai’s research in the amount of $160,000 plus all of the cost of microbiological testing. To the extent any intellectual property resulting from the research is conceived by Mount Sinai it will be the intellectual property of Mount Sinai and to the extent it is conceived by SteriLumen it will be the intellectual property of SteriLumen. SteriLumen has a 60-day exclusive option to negotiate a license for Mount Sinai’s resulting patent rights if such patent was obtained at SteriLumen’s request and SteriLumen has paid for all the costs in obtaining the patent. If the results of the study contained in Mount Sinai’s final report are used by SteriLumen in a successful regulatory filing or a successful fundraising effort, the Sponsor will be obligated to pay Mount Sinai a fee of $30,000.

 

Second ResInnova Report. In April 2020, the Company submitted the SteriLumen Disinfecting System to ResInnova for testing on its effectiveness in killing the Coronavirus. ResInnova tested the SteriLumen mirror and drain product lines against OC43 human coronavirus. In a Report dated June 30, 2020, ResInnova found the SteriLumen mirror and drain to be greater than 97% and 99.99%, respectively, effective in killing the OC43 human coronavirus in the bathroom sink area. According to ResInnova, it is expected that the Coronavirus, will be killed in a similar manner to OC43 since they both are in the Beta genre of coronaviruses. See “Business—Second ResInnova Report” and “Risk Factors—Certain ResInnova Testing Limitations.”

  

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Paycheck Protection Program Loan. On May 4, 2020, Munn Works received $296,287 in net proceeds from a loan (the “PPP Loan”) from JP Morgan Chase Bank under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration. The proceeds from the PPP Loan will be used in accordance with the terms of the CARES Act program, as described further below.

 

The term of the PPP Loan is two years with an interest rate of 1.00% per annum, which shall be deferred for the first six months of the term of the loan. Pursuant to the terms of the CARES Act, the proceeds of the PPP Loan may be used for payroll costs, mortgage interest, rent, or utility costs. Under the terms of the CARES Act, Munn Works can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during the 8-week period after loan origination and the maintenance or achievement of certain employee levels. No assurance is provided that Munn Works will obtain forgiveness under the PPP Loan in whole or in part.

 

Reverse Stock Splits. On June 17, 2020 and June 23, 2020, the Company effected a 1 for 5 reverse stock split of its issued and outstanding Common Stock and effected a 1 for 5 reverse stock split of its issued and outstanding preferred stock, respectively (each a "Reverse Stock Split") by filing on each date an amendment of the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. No fractional shares were issued as a result of a Reverse Stock Split. Any fractional shares that would have resulted from a Reverse Stock Split were rounded up to the nearest whole share. The authorized common stock and preferred stock of the Company was not impacted by the Reverse Stock Splits. Immediately following the Reverse Stock Splits, the Company had outstanding 5,103,316 shares of Common Stock and 2,000 shares of preferred stock. The Company has retrospectively adjusted the 2018, 2019 and March 31, 2020 financial statements for profit per share and share amounts as a result of the reverse stock splits.

 

Appointment of Executive Officers. On June 30, 2020 the Company entered into employment agreements and appointed the Company’s Chief Executive Officer and Chief Operations Officer.

 

Non-Employee Director Compensation. On July 9, 2020 the Board approved a compensation package for non-employee directors of the Board. The compensation for non-employee directors include; (i) upon of each such director, such director shall be issued 10,000 shares of restricted common stock which vests evenly on an annual basis over a four year period beginning on January 1, 2021; (ii) the annual issuance of 7,500 shares of restricted common stock to each such director which vests in full in next calendar year from the date of issuance; (iii) quarterly cash payments of $6,250 to each such director; (iv) the annual issuance of 10,000 shares of restricted common stock to the Chairman of the Board which vests in full in next calendar year from the date of issuance and (v) the annual issuance of 5,000 shares of restricted common stock to each chairman of the Audit, Nominating, Compensation and Corporate Governance Committees(Corporate Governance and Nominating Committees have not yet been established).

 

Risk Factors

 

Our business is subject to a number of risks. You should be aware of these risks before making an investment decision. These risks are discussed more fully in the section of this prospectus titled “Risk Factors,” which begins on page 10 of this prospectus.

 

Information Regarding our Capitalization

 

As of June 23, 2020, we have 5,103,316 shares of common stock issued and outstanding, of which Max Munn, our President and a director of the Company has beneficial ownership of 5,000,000 shares through a trust for which his spouse is the trustee. We also have 2,000 shares of Series A preferred stock issued and outstanding which provide the holder thereof with 1,000 votes per share (2 million votes in aggregate) and vote as a single class with common stock on all matters submitted to the shareholders for a vote. Mr. Munn is the beneficial owner of all of the Series A Preferred Stock through a trust in which his spouse is the trustee. Additional information regarding our issued and outstanding securities may be found under “Market for Common Equity and Related Stockholder Matters” and “Description of Securities.”

 

Unless otherwise specifically stated, information throughout this prospectus does not assume the exercise of outstanding options or warrants to purchase shares of our common stock.

   

Corporate Information

 

Our principal executive offices are located at 150 N. Macquesten Parkway, Mount Vernon, NY 10550. Our website address is www.applieduvinc.com. The information included on our website is not part of this prospectus.

 

Implications of Being an Emerging Growth Company

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable SEC rules. We expect that we will remain an emerging growth company for the foreseeable future, but cannot retain our emerging growth company status indefinitely and will no longer qualify as an emerging growth company on or before the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies.

 

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These exemptions include:

 

  being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
     
  not being required to comply with the requirement of auditor attestation of our internal controls over financial reporting;

 

  not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
     
  reduced disclosure obligations regarding executive compensation; and
     
  not being required to hold a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

 

We have taken advantage of certain reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 

An emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the dates on which adoption of such standards is required for other public reporting companies.

 

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and have elected to take advantage of certain of the scaled disclosure available for smaller reporting companies.

 

SUMMARY OF THE OFFERING

 

Common stock offered by us 1,000,000 shares.
   
Common stock outstanding prior to the offering 5,013,316 shares common stock.
   
Common stock to be outstanding after the offering (1)(2) 6,186,855 (6,319,494 shares if the underwriters exercise their option to purchase additional shares in full).
   
Over-allotment option of common stock offered by us The underwriters have a 45-day option to purchase up to 150,000 additional shares of common stock.
   
Use of Proceeds We currently intend to use the net proceeds to us from this offering to hire additional employees, including executive officers and sales professionals and for general corporate purposes, including working capital and sales and marketing activities. See the section of this prospectus titled “Use of Proceeds” beginning on page 30.

 

Proposed Listing

We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “AUVI” which listing is a condition to this offering.

   
Underwriters’ warrants Upon the closing of this offering, we have agreed to issue to Network 1 Financial Securities, Inc., as representative of the underwriters, warrants, that will expire on the fifth anniversary of the effective date of this offering, entitling the representative to purchase 8% of the number of shares of common stock sold in this offering (excluding shares of common stock sold to cover over-allotments, if any). The registration statement of which this prospectus is a part also covers the underwriters’ warrants and the common shares issuable upon the exercise thereof. For additional information regarding our arrangement with the underwriters, please see “Underwriting.”

 

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Lock-up agreements Our executive officers and directors have agreed with the underwriters not to sell, transfer or dispose of any shares or similar securities for 180 days following the effective date of the registration statement for this offering. For additional information regarding our arrangement with the underwriters, please see “Underwriting.”
   
Risk Factors You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 10 of this prospectus before deciding whether or not to invest in shares of our common stock.

 

  (1) As of June 23, 2020. Does not include 51,034 shares of common stock to be issued to Carmel, Milazzo & Feil LLP upon the effectiveness of the registration statement related to the offering or 161,000 shares of our common stock issuable upon exercise of common stock purchase warrants. For voting purposes only, does not include 2,000 shares of preferred stock that have been designated as Series A Preferred Stock, all of which are issued and outstanding and are entitled to 1,000 votes per share (2,000,000 votes in aggregate) and vote with the common stock as a single class.
  (2)

Includes 51,034 shares of common stock to be issued to Carmel, Milazzo & Feil LLP upon the effectiveness of the registration statement related to the offering and 32,506 shares (37,145 shares if the underwriters exercise their option to purchase additional shares in full) to be issued to Carmel, Milazzo & Feil LLP on the closing date of this offering.

 

On June 17, 2020 we effected a 1 for 5 reverse stock split of the issued and outstanding shares of our common stock. On June 23, 2020 we effected a 1 for 5 reverse stock split of the issued and outstanding shares of our preferred stock. Except as otherwise indicated, all of the common stock and preferred stock information in this prospectus gives effect to the reverse stock splits.

 

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RISK FACTORS

 

Our business is subject to many risks and uncertainties, which may affect our future financial performance. If any of the events or circumstances described below occur, our business and financial performance could be adversely affected, our actual results could differ materially from our expectations, and the price of our stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may adversely affect our business and financial performance. You should carefully consider the risks described below, together with all other information included in this prospectus including our financial statements and related notes, before making an investment decision. The statements contained in this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and investors in our securities may lose all or part of their investment.

 

Risks Related to Our Business and Operations

 

The Company operates through SteriLumen and Munn Works and its only material assets are its equity interests in those subsidiaries. As a result, our only current source of revenue is distributions from our subsidiaries and SteriLumen has incurred losses since its inception and we anticipate it will continue to incur significant losses for the foreseeable future and revenue from Munn Works may not be sufficient to offset those loses.

 

The Company is a holding company for SteriLumen and Munn Works and has no material assets other than its equity interests in those subsidiaries. Therefore, the only current revenue source is future distributions from its subsidiaries. SteriLumen is an early-stage designer and marketer of disinfection systems with limited operating history spanning from December 2016. We expect negative cash flows from SteriLumen’s operations for the foreseeable future which may not be off-set by cash flows from Munn Works. Our utilization of cash has been and will continue to be highly dependent on SteriLumen’s product development programs and cash flow from Munn Works’ operations. Our cash expenses will be highly dependent on the product development programs SteriLumen chooses to pursue, the progress of these product development programs, the results of SteriLumen’s validation/marketing studies, the terms and conditions of SteriLumen’s contracts with service providers and manufacturing contractors, and the terms of recruitment of facilities in our validation/marketing studies. In addition, the continuation of SteriLumen’s validation/marketing studies, and quite possibly its entire business, will depend on results of upcoming clinical data analyses and our financial resources at the time. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and SteriLumen’s ability to develop its product candidates.

 

SteriLumen has devoted substantially all of its financial resources to develop its product candidates. SteriLumen has financed its operations primarily through the contributions of its founders. The amount of SteriLumen’s future net losses will depend, in part, on the development of adequate distribution channels for the SteriLumen Disinfecting System, the demand for the SteriLumen Disinfecting System, the rate of its future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. Disinfection product development is a highly speculative undertaking and involves a substantial degree of risk. SteriLumen successfully completed the prototype phase of testing and development for the SteriLumen Disinfecting System, but has not yet commenced pivotal testing in health care facility settings. Even if SteriLumen obtains positive results from such testing, its future revenue will depend upon its ability to achieve sufficient market acceptance, pricing, the performance of its independent sales representatives and its manufacturing and distribution suppliers.

 

We expect SteriLumen to continue to incur significant losses until it is able to commercialize the SteriLumen Disinfecting System, which it may not be successful in achieving. We anticipate that SteriLumen’s expenses will increase substantially if and as SteriLumen:

 

   · continues the research and development of the SteriLumen Disinfecting System and other disinfecting products;
     
   · expands the scope of its testing for the SteriLumen Disinfecting System and other disinfecting products;
     
   · establishes a sales, marketing, and distribution infrastructure to commercialize its product candidates;
     
   · seeks to maintain, protect, and expand its intellectual property portfolio;
     
   · seeks to attract and retain skilled personnel; and

 

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   · creates additional infrastructure to support its product candidate development and planned future commercialization efforts. 

 

Furthermore, any additional fundraising efforts may divert our management from our subsidiaries’ day-to-day activities, which may adversely affect our ability to develop and commercialize their product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

 

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

 

The pandemic caused by the spread of the Coronavirus could have an adverse impact on our financial condition and results of operations and other aspects of our business.

 

In December 2019, a novel strain of Coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries and every state in the United States. On January 30, 2020, the World Health Organization declared the outbreak of Coronavirus a “Public Health Emergency of International Concern.” On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.

 

The spread of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets and supply chains. The pandemic has had, and could have a significantly greater, material adverse effect on the U.S. economy where we conduct a majority of our business. The pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity

 

Most states and cities have reacted by instituting quarantines, restrictions on travel, “stay at home” and “social distancing” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it. On March 20, 2020, the Governor of New York announced a stay at home order to go into effect on March 22, 2020 that has been extended to at least June 6, 2020, unless regions in the state can meet certain criteria related to the Coronavirus. Pursuant to this order, non-essential businesses were forced to close. However, as of the date of this prospectus, our Mount Vernon office is open with the majority of our employees working from home.

 

We have taken steps to take care of our employees, including providing the ability for employees to work remotely and implementing strategies to support appropriate social distancing techniques for those employees who are not able to work remotely. We have also taken precautions with regard to employee, facility, and office hygiene as well as implementing significant travel restrictions. We are also assessing our business continuity plans for all business units in the context of the pandemic. This is a rapidly evolving situation, and we will continue to monitor and mitigate developments affecting our workforce, our suppliers, our customers, and the public at large to the extent we are able to do so. We have and will continue to carefully review all rules, regulations, and orders and responding accordingly.

 

We are dependent upon suppliers to provide us with all of the raw materials for products that we manufacture and sell and we currently manufacture the majority of our products in China. The pandemic has impacted and may continue to impact suppliers of materials and the manufacturing locations for our products. As a result, we have faced and may continue to face delays or difficulty manufacturing certain products, which could negatively affect our business and financial results. Even if we are able to find alternate sources for materials and manufacturing, they may cost more, which could adversely impact our profitability and financial condition.

 

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If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.

 

Although it is difficult to predict the effect and ultimate impact of the Coronavirus outbreak on our business, it is likely that the impact of Coronavirus will adversely affect our results of operations, financial condition and cash flows in fiscal year 2020.

 

We are vulnerable to continued global economic uncertainty and volatility in financial markets.

 

Our business is highly sensitive to changes in general economic conditions as a seller of goods and services. Financial markets inside the United States and internationally have experienced extreme disruption in recent times, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, and declining valuations of investments. We believe these disruptions are likely to have an ongoing adverse effect on the world economy. A continuing economic downturn and financial market disruptions could have a material adverse effect on our business, financial condition, and results of operations, including by:

 

· reducing demand for our products and services, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies;

 

· increasing the difficulty of collecting accounts receivable and the risk of excess and obsolete inventories;

 

· increasing price competition in our served markets; and

 

· resulting in supply interruptions, which could disrupt our ability to produce our products.

  

We could need to raise additional capital in the future, and if we are unable to secure adequate funds on terms acceptable to us, we could be unable to execute our business plan.

 

To remain competitive, we must continue to make significant investments in the development of our products, the expansion of our sales and marketing activities, and the expansion of our operating and management infrastructure as we increase sales domestically and internationally. If cash generated from our operations is insufficient to fund such growth, we could be required to raise additional funds through the issuance of equity or debt securities in the public or private markets, or through a collaborative arrangement or sale of assets. Additional financing opportunities may not be available to us, or if available, may not be on favorable terms. The availability of financing opportunities will depend, in part, on market conditions, and the outlook for our business. Any future issuance of equity securities or securities convertible into equity securities could result in substantial dilution to our stockholders, and the securities issued in such a financing could have rights, preferences or privileges senior to those of our common stock. In addition, if we raise additional funds through debt financing, we could be subject to debt covenants that place limitations on our operations. We could not be able to raise additional capital on reasonable terms, or at all, or we could use capital more rapidly than anticipated. If we cannot raise the required capital when needed, we may not be able to satisfy the demands of existing and prospective customers, we could lose revenue and market share and we may have to curtail our capital expenditures.

 

The following factors, among others, could affect our ability to obtain additional financing on favorable terms, or at all:

 

our results of operations;

 

general economic conditions and conditions in the sanitation and disinfection industries and performance of sanitation devices as opposed to sanitation and disinfection substances;

 

the perception of our business in the capital markets;

 

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making capital improvements to improve our infrastructure;

 

hiring qualified management and key employees;

 

responding to competitive pressures;

 

complying with regulatory requirements, if any;

 

our ratio of debt to equity;

 

our financial condition;

 

our business prospects; and

 

interest rates.

 

If we are unable to obtain sufficient capital in the future, we could have to curtail our capital expenditures. Any curtailment of our capital expenditures could result in a reduction in net revenue, reduced quality of our products, increased manufacturing costs for our products, harm to our reputation, or reduced manufacturing efficiencies and could have a material adverse effect on our business, financial condition, and results of operations.

 

Raising additional capital may cause dilution to our existing stockholders and restrict our operations or require us to relinquish certain intellectual property rights.

 

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances, licensing arrangements, and grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt and receivables financings may be coupled with an equity component, such as warrants to purchase shares, which could also result in dilution of our existing stockholders’ ownership. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our or our subsidiaries’ products or grant licenses on terms that are not favorable to us. A failure to obtain adequate funds may cause us to curtail certain operational activities, including research and development, validation/marketing studies, sales and marketing, and manufacturing operations, in order to reduce costs and sustain the business, and would have a material adverse effect on our business and financial condition.

 

Our success depends, in part, on our relationships with, and the efforts of, third-party manufacturers, distributors, and other third parties that perform various tasks for us. If these third parties do not successfully carry out their contractual duties or meet expected, we may not be able to commercialize our product candidates and our business could be substantially harmed.

 

While we internally manufacture all of Munn Works’ products that are manufactured domestically, currently approximately 75% of Munn Works’ products and all of SteriLumen’s products are manufactured overseas in China by third party manufacturers. We do not currently have the infrastructure or capability internally to manufacture all of the components of our products and systems, and we lack the resources and the capability to manufacture and distribute the SteriLumen Disinfecting System on a commercial scale. We plan to rely on third parties for such operations. There are a limited number of manufacturers who have the ability to produce our products, and there may be a need to identify alternate manufacturers to prevent a possible disruption of our manufacturing and distribution process. Switching manufacturers or distributors, if necessary, may involve substantial costs and is likely to result in a delay in our desired commercial timelines, which could harm our business and results of operations.

 

Our suppliers may not supply us with a sufficient amount or adequate quality of materials, which could have a material adverse effect on our business, financial condition, and results of operations.

 

Our business depends on our ability to obtain timely deliveries of materials, components, and subassemblies of acceptable quality and in acceptable quantities from third-party suppliers. We generally purchase components and subassemblies from a limited group of suppliers through purchase orders, rather than written supply contracts. Consequently, many of our suppliers have no obligation to continue to supply us on a long-term basis. In addition, our suppliers manufacture products for a range of customers, and fluctuations in demand for the products those suppliers manufacture for others could affect their ability to deliver components for us in a timely manner. Moreover, our suppliers could encounter financial hardships, be acquired, or experience other business events unrelated to our demand for components, which could inhibit or prevent their ability to fulfill our orders and satisfy our requirements.

 

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If any of our suppliers cease to provide us with sufficient quantities of our components in a timely manner or on terms acceptable to us, or ceases to manufacture components of acceptable quality, we could incur manufacturing delays and sales disruptions while we locate and engage alternative qualified suppliers, and we might be unable to engage acceptable alternative suppliers on favorable terms. In addition, we could need to reengineer our components, which could significantly delay production. Any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive procedures. We are continually in the process of identifying and qualifying alternate source suppliers for our key components. There can be No assurance, however, that we will successfully identify and qualify an alternate source supplier for any of our key components or that we could enter into an agreement with any such alternate source supplier on terms acceptable to us, or at all.

 

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

 

Because we rely on third parties to develop and manufacture our products, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

 

Our near-term success is dependent in large part upon SteriLumen’s ability to commence sales of the SteriLumen Disinfecting System and continued sales and positive cash flow from Munn Works’ products.

 

Our success will depend, in part, upon SteriLumen’s ability to create a commercial market for the SteriLumen Disinfecting System. Attracting new customers and distribution networks requires substantial time and expense. Any failure to commercialize SteriLumen’s products would adversely affect its operating results and adversely affect our business, results of operations and financial condition. Many factors could affect the market acceptance and commercial success of SteriLumen’s products, including:

 

SteriLumen’s ability to convince its potential customers of the advantages and economic value of products over competing products and methodologies;

 

the breadth of its product menu;

 

changes to policies, procedures or currently accepted best practices in the health care industry;

 

the extent and success of its marketing and sales efforts; and

 

its ability to manufacture in quantity its products and meet demand in a timely fashion.

 

Recent U.S. tax legislation may materially affect our financial condition, results of operations and cash flows.

 

The recently enacted Tax Cuts and Jobs Act (the “Tax Act”) has significantly changed the U.S. federal income taxation of U.S. businesses, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, modifying or repealing many business deductions and credits.

 

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modifies certain provisions of the Tax Act, including increasing the amount of interest expense that may be deducted.

 

The Tax Act as modified by the CARES Act is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and IRS, any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. Our analysis and interpretation of this legislation is preliminary and ongoing and there may be material adverse effects resulting from the legislation that we have not yet identified. While some of the changes made by the tax legislation may adversely affect us, other changes may be beneficial. We continue to work with our tax advisors and auditors to determine the full impact that the recent tax legislation as a whole will have on us. We urge our investors to consult with their legal and tax advisors with respect to such legislation and its potential effect on an investment in our common stock.

 

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Our operating results are affected by many factors and may fluctuate significantly on a quarterly basis.

 

Our operating results may vary substantially from quarter to quarter and may be greater or less than those achieved in the immediately preceding period or in the comparable period of the prior year. Factors that may cause quarterly results to vary include, but are not limited to, the following:

 

the number of new product introductions by our subsidiaries;

 

losses related to inventory write-offs;

 

marketing exclusivity, if any, which may be obtained on certain new products;

 

the level of competition in the marketplace for certain products;

 

our subsidiaries’ ability to create demand in the marketplace for their products;

 

availability of raw materials and finished products from suppliers;

 

our subsidiaries’ ability to contract manufacturers to make their products;

 

SteriLumen’s dependence on a small number of products for a significant portion of net revenue or income;

 

price erosion and customer consolidation; and

 

uncertainty of future import tariffs.

 

The profitability of our subsidiaries’ product sales is also dependent upon the prices they are able to charge for their products, the costs to purchase products from third parties, and their ability to manufacture their products in a cost-effective manner. If their revenues decline or do not grow as anticipated, they may not be able to reduce their operating expenses to offset such declines. Failure to achieve anticipated levels of revenues could, therefore, significantly harm our operating results for a particular fiscal period.

 

We could be subject to significant warranty obligations if our products are defective, which could have a material adverse effect on our business, financial condition, and results of operations.

 

In manufacturing our products, we depend upon third parties for the supply of various components. Many of these components require a significant degree of technical expertise to design and produce. If we fail to adequately design, or if our suppliers fail to produce components to specification, or if the suppliers, or we, use defective materials or workmanship in the manufacturing process, the reliability and performance of our products will be compromised. Our products could contain defects that cannot be repaired easily and inexpensively that can result some or all of the following:

 

· loss of customer orders and delay in order fulfillment;

 

· damage to our brand reputation;

 

· increased cost of our warranty program due to product repair or replacement;

 

· inability to attract new customers;

 

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· diversion of resources from our manufacturing and engineering and development departments into our service department; and

 

· legal action.

 

We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

 

Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such information. We have also outsourced significant elements of our information technology infrastructure; as a result, we manage independent vendor relationships with third parties who are responsible for maintaining significant elements of our information technology systems and infrastructure and who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of our third-party vendors, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors. These systems are also vulnerable to attacks by malicious third parties and may be susceptible to intentional or accidental physical damage to the infrastructure maintained by us or by third parties. Maintaining the secrecy of confidential, proprietary, and/or trade secret information is important to our competitive business position. While we have taken steps to protect such information and have invested in systems and infrastructures to do so, there can be no guarantee that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations and/or cash flow.

 

Product liability claims against us could be costly and could harm our reputation.

 

The sale of our products involves the risk of product liability claims against us. Claims could exceed our product liability insurance coverage limits. Our insurance policies are subject to various standard coverage exclusions, including damage to the product itself, losses from recall of our product, and losses covered by other forms of insurance such as workers compensation. We cannot be certain that we will be able to successfully defend any claims against us, nor can we be certain that our insurance will cover all liabilities resulting from such claims. In addition, we cannot provide assurance that we will be able to obtain such insurance in the future on terms acceptable to us, or at all. Regardless of merit or eventual outcome, any product liability claim brought against us could result in harm to our reputation, decreased demand for our products, costs related to litigation, product recalls, loss of revenue, an increase in our product liability insurance rates, or the inability to secure coverage in the future, and could have a material adverse effect on our business by reducing cash collections from customers and limiting our ability to meet our operating cash flow requirements.

 

Litigation against us could be costly and time-consuming to defend and could materially and adversely affect our business, financial condition, and results of operations.

 

We are from time to time involved in various claims, litigation matters and regulatory proceedings incidental to our business, including claims for damages arising out of the use of our products or services and claims relating to intellectual property matters, employment matters, commercial disputes, competition, sales and trading practices, environmental matters, personal injury, and insurance coverage. Some of these lawsuits include claims for punitive as well as compensatory damages. The defense of these lawsuits could divert our management’s attention, and we could incur significant expenses in defending these lawsuits. In addition, we could be required to pay damage awards or settlements or become subject to unfavorable equitable remedies. Moreover, any insurance or indemnification rights that we could have may be insufficient or unavailable to protect us against potential loss exposures.

 

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If we lose our key management personnel, or are unable to attract or retain qualified personnel, it could adversely affect our ability to execute our growth strategy.

 

Our success is dependent, in part, upon our ability to hire and retain management, engineers, marketing and sales personnel, and technical, research and other personnel who are in high demand and are often subject to competing employment opportunities. Our success will depend on our ability to retain our current personnel and to attract and retain qualified like personnel in the future. Competition for senior management, engineers, marketing and sales personnel, and other specialized technicians is intense and we may not be able to retain our personnel. If we lose the services of any executive officers or key employees, our ability to achieve our business objectives could be harmed or delayed, which could have a material adverse effect on our daily operations, operating cash flows, results of operations, and ultimately share price. In general, our officers could terminate their employment at any time without notice for any reason.

 

Climate change initiatives could materially and adversely affect our business, financial condition, and results of operations.

 

Both domestic and international legislation to address climate change by reducing greenhouse gas emissions and establishing a price on carbon could create increases in energy costs and price volatility. Considerable international attention is now focused on development of an international policy framework to address climate change. Proposed and existing legislative efforts to control or limit greenhouse gas emissions could increase the cost of raw materials derived from sources that generate greenhouse gas emissions. If our suppliers are unable to obtain energy at a reasonable cost in the future, the cost of our raw materials could be negatively impacted which could result in increased manufacturing costs.

 

Risks Related to SteriLumen’s Business

 

Certain ResInnova testing limitations.

 

Our claims on the effectiveness of the SteriLumen Disinfecting System against certain pathogens are supported by the analysis of the SteriLumen Disinfecting System performed in ResInnova’s laboratory. The environment in ResInovva’s laboratory is controlled and does not account for all of the variables that can occur outside of the laboratory such as [get variables from Matthew Hardwick]. If any one of these un-accounted for variables proves to be significant in the evaluation of the effectiveness of the SteriLumen Disinfecting System, the laboratory results obtained by ResInnova could be significantly more favorable than the results experienced by our customers. Furthermore, in accordance with CDC guidelines only laboratories with a biosafety level 3 or 4 may test against SAR-CoV-2, the virus that causes COVID-19. Since ResInnova is a biosafety level 2 laboratory it cannot test against SAR-CoV-2 and instead tested against OC43 human coronavirus, which, according to ResInnova is a common surrogate for SAR-CoV-2 as both are of the Beta genre of coronaviruses. If the results of testing the StertiLumen Disinfecting System against OC43 are different from the results that would have occurred with SAR-CoV-2, the laboratory results obtained by ResInnova with respect to OC43 could be significantly more favorable than the results experienced by our customers with respect to SAR-CoV-2. If the results contained in ResInnova’s reports are materially more favorable than the results experienced by our customers, this could have a material adverse effect on the sales of the SteriLumen Disinfecting System, which would have a material adverse effect on our business and financial condition.

 

If SteriLumen is unable to develop a successful marketing approach, our business will suffer.

 

If SteriLumen fails to develop a successful marketing approach or to manage its growth effectively, our business and financial results will be materially harmed. Healthcare facilities operate in a highly regulated and dynamic market with changing regulations, codes, standards and guidelines and as a result are very loyal to vendors they trust. Achieving market acceptance will require extensive customer education and product validation. Some of the ways in which SteriLumen intends on achieving market acceptance is through working with professional trade organizations, having articles published in industry trade publications, conducting validation/marketing studies at well-known hospitals and lab testing. However, there is no assurance that SteriLumen will be successful in organizing these efforts or if the results from them will be positive. SteriLumen may also seek to expand its business through complementary or strategic acquisitions of other businesses, products or assets, or through joint ventures, strategic partnerships or other arrangements with established and trusted disinfection companies. Any such acquisitions, joint ventures or other business combinations may involve significant integration challenges, operational complexities and time consumption and require substantial resources and effort. It may also disrupt SteriLumen’s ongoing businesses, which may adversely affect its relationships with customers, employees and others with whom it has business or other dealings. Further, if SteriLumen is unable to realize synergies or other benefits expected to result from any acquisitions, joint ventures or other business combinations, or to generate additional revenue to offset any unanticipated inability to realize these expected synergies or benefits, its growth and ability to compete may be impaired, which would require it and us to focus additional resources on the integration of operations rather than other profitable areas of its business, and may otherwise cause a material adverse effect on our business, results of operations and financial condition. However, failure to acquire or partner with established and trusted disinfection companies would prevent SteriLumen’s products from being part of a bundle of disinfection products that could be sold all at once, which could have a material adverse effect on the financial results of our business.

 

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SteriLumen’s success depends, in part, on its relationships with healthcare providers and hotel developers and the success of the Mount Sinai study.

 

To date, SteriLumen has invested substantially all of its efforts and financial resources to design, develop and market the SteriLumen Disinfecting System, including conducting laboratory studies and providing general and administrative support for these operations. SteriLumen’s future success is dependent on its ability to successfully commercialize the SteriLumen Disinfecting System.

 

Mount Sinai has agreed to conduct a study on the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms in Mount Sinai St. Luke’s Hospital in New York, NY, however a final report with their findings will not be completed until the second quarter of 2021. The Mount Sinai study will be the first time the SteriLumen Disinfecting System is tested in an actual healthcare facility setting. There is no guarantee that the results of this study will be positive or even completed. Resolution of any issues raised in the study could require capital that we have not budgeted for and require us to seek additional funding at less than favorable terms, which could have a material adverse effect on our business, results of operations and financial condition.

 

Additionally, we may be limited in publications and applications of the Mount Sinai study due to the intellectual property and confidentiality provisions of said agreement.

 

SteriLumen’s business is highly dependent on its suppliers’ and any disruption in their operations could have a material adverse effect on our business, results of operations and financial condition.

 

SteriLumen’s operations will be dependent upon the continued ability of its suppliers to deliver systems, components, raw materials, and finished disinfection products. Its UVC LEDs are manufactured in South Korea and then shipped to China or the United States for assembly with all other components, which if manufactured in China, the finished products are shipped to Long Beach, California for warehousing and distribution, otherwise the units are shipped from Mount Vernon. Any number of factors, including labor disruptions, catastrophic weather events, contractual or other disputes with suppliers, and supplier financial difficulties or solvency problems could disrupt its suppliers' operations and lead to uncertainty in its supply chain or cause supply disruptions, which could, in turn, disrupt its operations. If SteriLumen experiences supply disruptions, it may not be able to develop alternate sourcing quickly. Any disruption of its production schedule caused by an unexpected shortage of systems, components, raw materials or parts even for a relatively short period of time could cause it to alter production schedules or suspend production entirely. If any such disruptions occur it could have a material adverse effect on our business, results of operations and financial condition.

 

SteriLumen’s business is highly dependent on market perceptions of it and the safety and quality of its products.

 

Market perceptions of SteriLumen’s business are very important to us, especially market perceptions of the safety and quality of SteriLumen’s products. If any of its products or similar products that other companies distribute are subject to market withdrawal or recall or are proven to be, or are claimed to be, harmful to end users, then this could have a material adverse effect on our business, results of operations and financial condition. Also, because SteriLumen’s business is dependent on market perceptions, negative publicity associated or perceived to be associated with its business, products or product pricing could have a material adverse impact on our business, results of operations and financial condition.

 

SteriLumen is working in a highly competitive market

 

Our disinfection system has not yet been manufactured at a commercial scale for use as a partial substitute of chemical disinfectants and this process has significant risks. Additionally, while our patented technology does not require approval by any regulatory authority in the United States, including the Food and Drug Administration (“FDA”) or to our knowledge any foreign regulatory authority, if such approval is required in the future, it may cause significant delays in the commercialization process of the SteriLumen Disinfecting System. Danish company UVD Robots and Texas based Xenex Disinfection Services, believe that they are effective at killing pathogens, including Coronavirus and have sent shipments of the disinfecting devices to Italy and East Asia in an effort to stop further spread in hotels and hospitals. In addition, Boeing has designed a prototype for a self-cleaning airplane bathroom that uses UV light to disinfect after each use. Outside of those industrial uses, there are a number of consumer-oriented portable UV sanitizing boxes, wands, and water bottles that claim to kill 99.9% of bacteria and viruses on phones, toothbrushes, pacifiers, and a number of other surfaces.

 

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Customers may be hesitant in adopting UV light-based technologies, and our inability to overcome this hesitation could limit the market acceptance of our products and our market share.

 

Our UV light disinfection systems represent relatively new technologies in the market. Only a small percentage of professional medical institutions or hospitality providers are immediately willing to conduct sanitation using our systems. Our future success will depend on our ability to increase demand for our products by demonstrating to a broad spectrum of medical professional, dentists, hospitality industry, their patients and customers, the potential performance advantages of our UV light systems over traditional methods of disinfection over competitive UV light systems, and our inability to do so could have a material adverse effect on our business, financial condition, and results of operations.

 

Conventional germicidal UV light was historically considered as a human health hazard if improperly used and can lead to skin cancer and cataracts. We may experience long sales cycles because healthcare facilities and hotels and other facilities may be slow to adopt new technologies on a widespread basis and admit that such technologies can sanitize public space without damaging public health. As a result, we generally are required to invest a significant amount of time and resources to educate general public about the benefits of our products in comparison to competing products and technologies before completing a sale, if any. Factors that could inhibit adoption of UV technologies by healthcare facilities or hospitality companies include the initial cost and concerns about the safety, efficacy, and reliability of our UV systems. In addition, economic pressure, caused, for example, by an economic slowdown as a result of Coronavirus, changes in health care reimbursement or by competitive factors in a specific market, could make businesses reluctant to purchase substantial capital equipment or invest in new technologies. Customer acceptance will depend on the recommendations of governmental authorities, as well as other factors, including the relative effectiveness, safety, reliability, and comfort of our systems as compared to other instruments and methods for performing disinfecting procedures.

 

If future data proves to be inconsistent with our research results or if competitors’ products present more favorable results our revenues could decline and our business, financial condition, and results of operations could be materially and adversely affected.

 

Even though our disinfecting devices are protected with patents, if new studies or comparative studies generate results that are not as favorable as our research results, our revenues could decline. Additionally, if future studies indicate that our competitors’ products are more effective or safer than ours, our revenues could decline. Furthermore, hospitals and businesses could choose not to purchase our UV light sanitation systems until they receive additional published long-term clinical evidence and recommendations from prominent hospitals and businesses that indicate our UV light sanitation systems are effective for disinfecting applications.

 

We may face competition from other companies, many of which have substantially greater resources than we do. If we do not successfully develop and commercialize enhanced or new products that remain competitive with products or alternative technologies developed by others, we could lose revenue opportunities and customers and our ability to grow our business would be impaired.

 

A number of competitors have substantially greater capital resources, larger customer bases, larger technical, sales and marketing forces and stronger reputations with target customers than ours. We compete with a number of domestic and foreign companies that market traditional chemical sanitation products, as well as companies that market UV technologies. The marketplace is highly fragmented and very competitive. We expect that the rapid technological changes occurring in the health care industry could lead to the entry of new competitors, particularly if UV disinfecting increases market acceptance. If we do not compete successfully, our revenue and market share could decline, which would impact our ability to meet our operating cash flow requirements and our business, financial condition, and results of operations could be adversely affected.

 

Our long-term success depends upon our ability to (i) distinguish our products through improving our product performance and pricing, protecting our intellectual property, improving our customer support, accurately timing the introduction of new products, and developing sustainable distribution channels worldwide; and (ii) develop and successfully commercialize new products, new or improved technologies, and additional applications for our UV light sanitation systems. We may not be able to distinguish our products and commercialize any new products, new or improved technologies, or additional applications for our UV light disinfecting systems.

 

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We could incur problems in manufacturing our products.

 

In order to grow our business, we must expand our manufacturing capabilities to produce the systems and accessories necessary to meet any demand we may experience. We could encounter difficulties in increasing the production of our products, including problems involving production capacity and yields, quality control and assurance, component supply, and shortages of qualified personnel. In addition, before we can begin commercial manufacture of our products, we must ensure our manufacturing facilities, processes, and quality systems, and the manufacture of our UV light sanitation systems, quality control, and documentation policies and procedures.

 

From time to time, we could expend significant resources in obtaining, maintaining, and addressing our compliance with various federal and requirements that may be subject to changes. Our success will depend in part upon our ability to manufacture our products without FDA approval or compliance with and other regulatory requirements.

 

We have not experienced significant quality issues with components of our products supplied by third parties, however, we could in the future. Our future success depends on our ability to manufacture our products on a timely basis with acceptable manufacturing costs, while at the same time maintaining good quality control and complying with applicable regulatory requirements, and an inability to do so could have a material adverse effect on our product sales, cash collections from customers, and our ability to meet operating cash flow requirements, which could have a material adverse effect on our business, financial condition, and results of operations.

 

Adverse publicity regarding our technology or products could negatively impact us.

 

Adverse publicity regarding any of our products or similar products marketed or sold by others could negatively affect us. If any studies raise or substantiate concerns regarding the efficacy or safety of our products or other concerns, our reputation could be harmed and demand for our products could diminish, which could have a material adverse effect on growth in new customers and sales of our products, leading to a decline in revenues, cash collections, and ultimately our ability to meet operating cash flow requirements.

 

Rapidly changing standards and competing technologies could harm demand for our products, result in significant additional costs, and have a material adverse effect on our business, financial condition, and results of operations.

 

The markets in which our products compete are subject to rapid technological change, evolving industry standards, changes in the regulatory environment, and frequent introductions of new devices and evolving sanitizing solutions and practices, specifically catalyzed by the impact of the Coronavirus pandemic. Competing products could emerge that render our products uncompetitive or obsolete. We cannot guarantee that we will successfully identify new product opportunities, identify new and innovative applications of our technology, or be financially or otherwise capable of completing the research and development required to bring new products to market in a timely manner. An inability to expand our product offerings or the application of our technology could limit our growth. In addition, we could incur higher manufacturing costs if manufacturing processes or standards change, and we could need to replace, modify, design, or build and install equipment, all of which would require additional capital expenditures.

 

We could be unable to effectively manage and implement our growth strategies, which could have a material adverse effect on our business, financial condition, and results of operations.

 

Our growth strategy includes expanding our product line and applications by developing enhancements and transformational innovations, including new solutions for various fields and industries. Expansion of our existing product line and entry into new applications divert the use of our resources and systems, require additional resources that might not be available (or available on acceptable terms), may require regulatory approvals, result in new or increasing competition, could require longer implementation times or greater start-up expenditures than anticipated, and could otherwise fail to achieve the desired results in a timely fashion, if at all. These efforts could also require that we successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively, and manufacture and deliver sufficient volumes of new products of appropriate quality on time. We could be unable to increase our sales and earnings by expanding our product offerings in a cost-effective manner, and we could fail to accurately predict future customer needs and preferences or to produce viable technologies. In addition, we could invest heavily in research and development of products that do not lead to significant revenue. Even if we successfully innovate and develop new products and product enhancements, we could incur substantial costs in doing so. In addition, promising new products could fail to reach the market or realize only limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, or uncertainty over third-party reimbursement.

 

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International sales may comprise a significant portion of SteriLumen’s revenues and will be subject to risks associated with operating in domestic and international markets.

 

International sales may comprise a significant portion of SteriLumen’s revenue, and we intend to continue to pursue and expand our international business activities. Political and economic conditions outside the United States could make it difficult for us to increase our international revenue or to operate abroad. International operations are subject to many inherent risks, which could have a material adverse effect on our revenues and operating cash flow, including among others:

 

adverse changes in tariffs and trade restrictions;

 

political, social, and economic instability and increased security concerns;

 

fluctuations in foreign currency exchange rates;

 

longer collection periods and difficulties in collecting receivables from foreign entities;

 

exposure to different legal standards;

 

transportation delays and difficulties of managing international distribution channels;

 

reduced protection for our intellectual property in some countries;

 

difficulties in obtaining domestic and foreign export, import, and other governmental approvals, permits, and licenses, and compliance with foreign laws;

 

the imposition of governmental controls;

 

unexpected changes in regulatory or certification requirements;

 

difficulties in staffing and managing foreign operations; and

 

potentially adverse tax consequences and the complexities of foreign value-added tax systems.

 

We believe that international sales may represent a significant portion of SteriLumen’s revenue, and we intend to expand its international operations. In international markets where our sales are denominated in U.S. dollars, an increase in the relative value of the dollar against the currency in such markets could indirectly increase the price of our products in those markets and result in a decrease in sales. We do not currently engage in any transactions as a hedge against risks of loss due to foreign currency fluctuations. However, we could do so in the future.

 

SteriLumen’s collaborations with outside scientists and consultants may be subject to restriction and change.

 

SteriLumen works with scientists at academic and other institutions, and consultants who assist it in its research, development, and design efforts. These scientists and consultants have provided, and we expect that they will continue to provide, valuable advice on SteriLumen’s programs. These scientists and consultants are not our or SteriLumen’s employees, may have other commitments that would limit their future availability to SteriLumen and typically will not enter into non-compete agreements with SteriLumen. If a conflict of interest arises between their work for SteriLumen and their work for another entity, SteriLumen may lose their services. In addition, SteriLumen will be unable to prevent them from establishing competing businesses or developing competing products. For example, if a key scientist acting as a principal investigator in any of SteriLumen’s clinical trials identifies a potential product or compound that is more scientifically interesting to his or her professional interests, his or her availability to remain involved in its clinical trials could be restricted or eliminated.

 

SteriLumen has entered into or intends to enter into non-competition agreements with certain of SteriLumen’s employees. These agreements prohibit its employees, if they cease working for it, from competing directly against it or working for its competitors for a limited period. However, under current law, SteriLumen may be unable to enforce these agreements against certain of its employees and it may be difficult for it to restrict their competitors from gaining the expertise its former employees gained while working for it. If SteriLumen cannot enforce its employees’ non-compete agreements, it may be unable to prevent its competitors from benefiting from the expertise of its former employees.

 

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Risks Related to Munn Works’ Business

 

The custom design decorative framed mirror supply market is highly competitive, and we may not be able to compete successfully.

 

Munn Works operates within the highly competitive custom design decorative framed mirror supply market, which is characterized by competition from a number of other manufacturers. Competition is further intensified during economic downturns. Munn Works competes with numerous large national and regional companies for, among other things, customers, raw materials and skilled management and labor resources. Purchase volumes have fluctuated substantially from time to time in the past, and we expect such fluctuations to occur from time to time in the future. Some of its competitors have greater financial, marketing and other resources than it does and, therefore, may be able to adapt to changes in customer preferences more quickly, devote more resources to the marketing and sale of their products, generate greater national brand recognition or adopt more aggressive pricing policies than Munn Works can.

 

In addition, some of our competitors may resort to price competition to sustain or gain market share and manufacturing capacity utilization, and Munn Works may have to adjust the prices on some of its products to stay competitive, which could reduce its revenues. Munn Works may not ultimately succeed in competing with other manufacturers and distributors in its market, which may have a material adverse effect on our business, financial condition or results of operations.

 

Munn Works’ possible failure to develop new products or respond to changing consumer preferences and purchasing practices could have a material adverse effect on our business, financial condition or results of operations.

 

The custom design decorative framed mirror supply market is subject to changing consumer trends, demands and preferences. The uncertainties associated with developing and introducing new products, such as gauging changing consumer preferences and successfully developing, manufacturing, marketing and selling new products, could lead to, among other things, rejection of a new product line, reduced demand and price reductions for our products. If Munn Works’ products do not keep up with consumer trends, demands and preference, it could lose market share, which could have a material adverse effect on our business, financial condition or results of operations.

 

Changes to the buying strategies of Munn Works’ customer’s could also affect its ability to compete. Further, the volatile and challenging economic environment of recent years has caused shifts in trends, demands, preferences and purchasing practices and changes in the business models and strategies of its customers. Shifts in consumer preferences, which may or may not be long-term, have altered the quantity, type and prices of products demanded by the end-consumer and Munn Works’ customers. If it does not timely and effectively identify and respond to these changing consumer preferences and purchasing practices, its relationships with our customers could be harmed, the demand for its products could be reduced and its market share could be negatively affected.

 

Munn Works’ independent sales force may not be effective.

 

Munn Works hires independent sales representatives who have primary responsibility for contacting existing and potential customers and are paid on a commission basis. While this sales model has proven successful in the past, to continue to be effective, sales representatives will need to continue to be extremely knowledgeable about Munn Works’ products. However, these independent sales representatives may be selling products from different non-competitive sellers, which could prevent them from focusing on Munn Works’ products and providing the required information to the customers, which could have a material adverse effect on our business, results of operations and financial condition.

 

Munn Works’ business is highly dependent on its suppliers’ and any disruption in their operations could have a material adverse effect on our business, results of operations and financial condition.

 

Munn Works’ operations will be dependent upon the continued ability of its suppliers to deliver components, raw materials, and finished products. Although many of its products are manufactured at our corporate headquarters in New York, many of its products are manufactured overseas. Any number of factors, including labor disruptions, catastrophic weather events, contractual or other disputes with suppliers, and supplier financial difficulties or solvency problems could disrupt its suppliers' operations and lead to uncertainty in its supply chain or cause supply disruptions, which could, in turn, disrupt its operations. If Munn Works experiences supply disruptions, it may not be able to develop alternate sourcing quickly. Any disruption of its production schedule caused by an unexpected shortage of systems, components, raw materials or parts even for a relatively short period of time could cause it to alter production schedules or suspend production entirely. If any such disruptions occur it could have a material adverse effect on our business, results of operations and financial condition.

 

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Munn Works’ business is highly dependent on market perceptions of it and the quality of its products.

 

Market perceptions of Munn Works’ business are very important to us, especially market perceptions of the quality of Munn Works’ products. Because Munn Works’ business is dependent on market perceptions, negative publicity associated or perceived to be associated with its business, products or product pricing could have a material adverse impact on our business, results of operations and financial condition.

 

Risks Related to Our Intellectual Property

 

If the patents that we own or license, or our other intellectual property rights, do not adequately protect our technologies, we could lose market share to our competitors and be unable to operate our business profitably.

 

Our future success depends, in part, on our ability to obtain and maintain patent protection for our products and technology, to preserve our trade secrets and to operate without infringing the intellectual property of others. We rely on patents to establish and maintain proprietary rights in our technology and products. We currently possess a number of issued patents and patent applications with respect to our products and technology. However, we cannot ensure that any additional patents will be issued, that the scope of any patent protection will be effective in helping us address our competition, or that any of our patents will be held valid if subsequently challenged. It is also possible that our competitors could independently develop similar or more desirable products, duplicate our products, or design products that circumvent our patents. The laws of foreign countries may not protect our products or intellectual property rights to the same extent as the laws of the United States. In addition, there have been recent changes in the patent laws and rules of the U.S. Patent and Trademark Office (“USPTO”), and there could be future proposed changes that, if enacted, have a significant impact on our ability to protect our technology and enforce our intellectual property rights. If we fail to protect our intellectual property rights adequately, our competitive position could be adversely affected, and there could be a material adverse effect on sales, cash collections, and our ability to meet operating cash flow requirements.

 

If third parties claim that we infringe their intellectual property rights, we could incur liabilities and costs and have to redesign or discontinue selling certain products, which could have a material adverse effect on our business, financial condition, and results of operations.

 

We face substantial uncertainty regarding the impact that other parties’ intellectual property positions will have on UV light applications. From time to time, we expect to continue to receive, notices of claims of infringement, misappropriation, or misuse of other parties’ proprietary rights. Some of these claims could lead to litigation. We may not prevail in any future intellectual property infringement litigation given the complex technical issues and inherent uncertainties in litigation. Any claims, with or without merit, could be time-consuming and distracting to management, result in costly litigation, or cause product shipment delays. Adverse determinations in litigation could subject us to significant liability and could result in the loss of proprietary rights. A successful lawsuit against us could also force us to cease selling or redesign products that incorporate the infringed intellectual property. Additionally, we could be required to seek a license from the holder of the intellectual property to use the infringed technology, and we may not be able to obtain a license on acceptable terms, or at all.

 

Patent terms are limited and we may not be able to effectively protect our products and business.

 

Patents have a limited lifespan. In the U.S., the natural expiration of a patent is generally 20 years after it is filed. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. In addition, upon issuance in the U.S., the patent term may be extended based on certain delays caused by the applicant(s) or the USPTO. Even if we obtain effective patent rights for all our current patent applications, we may not have sufficient patent terms or regulatory exclusivity to protect our products, and our business and results of operations would be adversely affected.

 

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

 

We may be subject to claims that former employees, collaborators or other third parties have an interest in or right to compensation with respect to our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. To the extent that our employees have not effectively waived the right to compensation with respect to inventions that they helped create, they may be able to assert claims for compensation with respect to our future revenue may be successful. As a result, we may receive less revenue from future products if such claims are successful which in turn could impact our future profitability.

 

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Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

 

As is the case with other equipment manufacturing companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involves both technological and legal complexity. Therefore, obtaining and enforcing patents is costly, time-consuming, and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

 

We may not be able to protect our intellectual property rights throughout the world.

 

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

Risks Related to this Offering

 

Our management will have broad discretion over the use of any net proceeds from this offering and you may not agree with how we use the proceeds, and the proceeds may not be invested successfully.

 

Our management will have broad discretion as to the use of any net proceeds from this offering and could use them for purposes other than those contemplated at the time of this offering. Accordingly, you will be relying on the judgment of our management with regard to the use of any proceeds from the exercise of warrants on a cash basis in this offering and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any, return for you.

 

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Investors in this offering may experience future dilution as a result of this and future equity offerings.

 

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock. Investors purchasing our shares or other securities in the future could have rights superior to existing common stockholders, and the price per share at which we sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price per share in this offering.

 

Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock.

 

Sales of a substantial number of shares of our common stock in the public markets could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock would have on the market price of our common stock.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Several analysts cover our stock. If one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

 

Risks Relating to Ownership of Our Securities.

 

There is no active public trading market for our common stock and we cannot assure you that an active trading market will develop in the near future.

 

Our common stock is not quoted in the over-the-counter markets and is not listed on any stock exchange and there is currently no active trading in our securities. We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “AUVI” which listing is a condition to this offering. We cannot assure you that an active trading market for our common stock will develop in the future due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained. You may not be able to liquidate your shares quickly or at the market price if trading in our common stock is not active.

 

The public price of our common stock may be volatile, and could, following a sale decline significantly and rapidly.

 

The initial public offering price for the shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in the offering, or at all. Following this Offering, the public price of our common stock in the secondary market will be determined by private buy and sell transaction orders collected from broker-dealers.

 

We may not be able to satisfy listing requirements of Nasdaq to maintain a listing of our common stock.

 

If our common stock is listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate the maintenance requirements for continued listing of our common stock, our common stock may be delisted. In addition, our board may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

 

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This offering has not been reviewed by independent professionals.

 

We have not retained any independent professionals to review or comment on this prospectus or otherwise protect the interest of the investors hereunder. Although we have retained our own counsel, neither such counsel nor any other counsel has made, on behalf of the investors, any independent examination of any factual matters represented by management herein. Therefore, for purposes of making a decision to purchase our common stock, you should not rely on our counsel with respect to any matters herein described. Prospective investors are strongly urged to rely on the advice of their own legal counsel and advisors in making a determination to purchase our shares of common stock. 

 

There has been no public market for our common stock prior to this offering, and an active market in which investors can resell their shares may not develop.

 

Prior to this offering, there has been no public market for our common stock. All investments in securities involve the risk of loss of capital. No guarantee or representation is made that an investor will receive a return of its capital. The value of our common stock can be adversely affected by a variety of factors, including development problems, regulatory issues, technical issues, commercial challenges, competition, legislation, government intervention, industry developments and trends, and general business and economic conditions. We cannot predict the extent to which an active market for our common stock will develop or be sustained after this Offering, or how the development of such a market might affect the market price of our common stock.

 

Max Munn, our President and a director of the Company indirectly owns or controls approximately 97% of our common stock and will be able to exert a controlling influence over our business affairs and matters submitted to stockholders for approval.

 

Max Munn, our President and a director of the Company beneficially owns approximately 97% of our common stock through a trust in which his spouse is the trustee. After this offering, it is anticipated that Mr. Munn will beneficially own or control 5,000,000 shares of our common stock (excluding 80,000 shares underlying a warrant issued to Mr. Munn), which will represent approximately81% of the outstanding shares of our common stock after the closing of the offering (excluding any over-allotment shares). Additionally, Mr. Munn beneficially owns 2,000 shares of the Company’s Series A Preferred Stock through a trust in which his spouse is the trustee, which is entitled to 1,000 votes per share and votes with the common stock as a single class. As a result, Mr. Munn will have control over all matters submitted to our stockholders for approval, including the election and removal of directors, amendments to our certificate of incorporation and bylaws, the approval of any business combination and any other significant corporate transaction. These actions may be taken even if they are opposed by other stockholders. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

 

Additionally, Mr. Munn has been assessed responsible person tax penalties of approximately (i) $516,000 imposed by the United States Internal Revenue Service and (ii) $185,000, in aggregate amount, imposed by the New York State Department of Taxation and Finance, in each case which arose out of Mr. Munn’s position as an executive officer and principal of APF Group, Inc. in 2008 and 2009. Although Mr. Munn and his tax counsel believe that Mr. Munn will either be able to successfully challenge the federal and state tax assessments or settle for an amount that will be well within Mr. Munn’s economic reach, no assurances can be given that Mr. Munn will succeed in his attempt to challenge or settle these claims. If Mr. Munn is not successful with respect to these claims, the economic consequences could become a significant distraction to Mr. Munn in the performance of his duties as President and a director of the Company, which could have a material adverse effect on the operations and financial condition of the Company.

 

Mr. Munn may have interests different from yours.

 

Our failure to maintain effective internal controls over financial reporting could have an adverse impact on us.

 

We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

 

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At present, we believe that we have effective internal controls in place. However, our management, including our Chief Executive Officer, cannot guarantee that our internal controls and disclosure controls that we have in place will prevent all possible errors, mistakes or all fraud.

 

Our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price.

 

We require significant financial resources to maintain our public reporting status. We cannot assure you we will be able to maintain adequate resources to ensure that we will not have any future material weakness in our system of internal controls. The effectiveness of our controls and procedures may in the future be limited by a variety of factors including:

 

· faulty human judgment and simple errors, omissions or mistakes;

 

· fraudulent action of an individual or collusion of two or more people;

 

· inappropriate management override of procedures; and

 

· the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial information.

 

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Despite these controls, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies like us face additional limitations. Smaller reporting companies employ fewer individuals and can find it difficult to employ resources for complicated transactions and effective risk management. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 

If we fail to have effective controls and procedures for financial reporting in place, we could be unable to provide timely and accurate financial information and be subject to investigation by the Securities and Exchange Commission and civil or criminal sanctions.

 

We must implement additional and expensive procedures and controls in order to grow our business and organization and to satisfy new reporting requirements, which will increase our costs and require additional management resources.

 

Upon becoming a fully public reporting company, we will be required to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the related rules and regulations of the SEC, including the requirements that we maintain disclosure controls and procedures and adequate internal control over financial reporting. In the future, if our securities are listed on a national exchange, we may also be required to comply with marketplace rules and heightened corporate governance standards. Compliance with the Sarbanes-Oxley Act and other SEC and national exchange requirements will increase our costs and require additional management resources. We recently have begun upgrading our procedures and controls and will need to continue to implement additional procedures and controls as we grow our business and organization and to satisfy new reporting requirements. If we are unable to complete the required assessment as to the adequacy of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act or if we fail to maintain internal control over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired.

 

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If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline.

 

We are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 (the “Securities Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.

 

 We will remain an “emerging growth company” until the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act, although we will lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.

 

Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.

 

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

 

We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

 

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings to support the development of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including, but not limited to, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by Delaware state law. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

 

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The elimination of personal liability against our directors and officers under Delaware law and the existence of indemnification rights held by our directors, officers and employees may result in substantial expenses.

 

Our Amended and Restated Certificate of Incorporation and our Bylaws eliminate the personal liability of our directors and officers to us and our stockholders for damages for breach of fiduciary duty as a director or officer to the extent permissible under Delaware law. Further, our amended and restated certificate of incorporation and our Bylaws and individual indemnification agreements we have entered with each of our directors and executive officers provide that we are obligated to indemnify each of our directors or officers to the fullest extent authorized by the Delaware law and, subject to certain conditions, advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those indemnification obligations could expose us to substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to afford. Further, those provisions and resulting costs may discourage us or our stockholders from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, even if such actions might otherwise benefit our stockholders.

 

Our certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

 

Our amended and restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Company’s Certificate of Incorporation or the Bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above.

 

We believe these provisions benefit us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes and in the application of the Securities Act by federal judges, as applicable, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

 

You should consult your own independent tax advisor regarding any tax matters arising with respect to the securities offered in connection with this offering.

 

Participation in this offering could result in various tax-related consequences for investors. All prospective purchasers of the resold securities are advised to consult their own independent tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences relevant to the purchase, ownership and disposition of the resold securities in their particular situations.

 

IRS CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE, WE INFORM YOU THAT ANY U.S. TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE. IN ADDITION, ANY U.S. TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS) IS WRITTEN TO SUPPORT THE “PROMOTION OR MARKETING” OF THE MATTER(S) ADDRESSED HEREIN. YOU SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM YOUR OWN INDEPENDENT TAX ADVISOR.

 

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IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS FILING, POTENTIAL INVESTORS SHOULD KEEP IN MIND THAT OTHER POSSIBLE RISKS MAY ADVERSELY IMPACT THE COMPANY’S BUSINESS OPERATIONS AND THE VALUE OF THE COMPANY’S SECURITIES.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains “forward-looking statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:

 

  1. Our ability to effectively operate our business segments;

 

  2. Our ability to manage our research, development, expansion, growth and operating expenses;

 

  3. Our ability to evaluate and measure our business, prospects and performance metrics;

 

  4. Our ability to compete, directly and indirectly, and succeed in the highly competitive and evolving ridesharing industry;

 

  5. Our ability to respond and adapt to changes in technology and customer behavior;

 

  6. Our ability to protect our intellectual property and to develop, maintain and enhance a strong brand; and

 

  7. other factors (including the risks contained in the section of this prospectus entitled “Risk Factors”) relating to our industry, our operations and results of operations.

 

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

USE OF PROCEEDS

 

We estimate that we will receive net proceeds of approximately $4,550,000 (or approximately $5,232,500 if the underwriters’ option to purchase additional shares is exercised in full) from the sale of the common stock offered by us in this offering, based on public offering price of $5.00 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

The principal purposes of this offering are to increase our capitalization and financial flexibility, increase our visibility in the marketplace and create a public market for our common stock. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. However, we currently intend to use the net proceeds to us from this offering to hire additional employees, including executive officers and sales professionals and for general corporate purposes, including working capital and sales and marketing activities.

 

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We will retain broad discretion in the allocation of the net proceeds from this offering and could utilize the proceeds in ways that do not necessarily improve our results of operations or enhance the value of our common stock.

 

The table below sets forth the manner in which we expect to use the net proceeds we receive from this offering. All amounts included in the table below are estimates.

 

Description   Amount  
Research and Development   $ 250,000  
Hiring Staff     800,000  
Sales and Marketing   $ 500,000  
Working Capital and General Corporate Purposes   $ 3,000,000  
Total   $ 4,550,000  

 

The foregoing information is an estimate based on our current business plan. We may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category to another, and we will have broad discretion in doing so. Pending these uses, we intend to invest the net proceeds of this offering in a money market or other interest-bearing account.

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock is not listed on any stock exchange or over-the-counter market or quotation system. There is currently no active trading market in our common stock. We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “AUVI” which listing is a condition to this offering. For more information see the section “Risk Factors.”

 

As of July [*], 2020, we have 5,013,316 shares of our common stock issued and outstanding and held by 7 stockholders of record.

 

We also have outstanding:

 

  A warrant issued to Max Munn, our President and a director of the Company to purchase up to 80,000 shares of our common stock at an exercise price equal to the greater of $5.00 per share and the market value of our common stock on the date of issuance, subject to adjustment in certain circumstances as provided therein;

 

  Warrants to purchase 1,000 shares of our common stock in the aggregate, each at an exercise price of $5.00 per share, subject to adjustment in certain circumstances provided therein;

 

  Options granted to members of the Board of Directors to purchase up to 1,375 shares of our common stock at an exercise price equal to the greater of $2.50 per share and the per share market value of the Company’s common stock on the date of the grant, subject to quarterly equal vesting over a one year period and adjustment in certain circumstances as provided therein (375 of which are vested);

 

  40,000 unvested shares of our common stock in aggregate issued to four (4) members of our Board of Directors which vest evenly over a period of four years, with the first vesting to occur on January 1, 2021;

 

  89,308 unvested shares of our common stock, issued to our Chief Executive Officer pursuant to his employment agreement with the Company. The shares vest quarterly on an equal basis over a period of 18 months, with the first vesting to occur on September 30, 2020;

 

  38,275 unvested shares of our common stock, issued to our Chief Operations Officer pursuant to his employment agreement with the Company. The shares vest quarterly on an equal basis over a period of 18 months, with the first vesting to occur on September 30, 2020;

 

  2,000 shares of preferred stock have been designated as Series A Preferred Stock all of which are beneficially owned by Max Munn through a trust in which his spouse is the trustee.  The Series A Preferred Stock entitles the holder thereof to 1,000 votes per share and vote with the Company’s common stock as a single class and provides the trust with 2,000,000 votes on all matters submitted to the stockholders for a vote.

 

Dividends

 

We have not declared any cash dividends since inception and we do not anticipate paying any dividends in the foreseeable future. Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business, including potentially the acquisition of, or investment in, businesses, technologies or products that complement our existing business. The payment of dividends is within the discretion of the board of directors and will depend on our earnings, capital requirements, financial condition, prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits, and other factors our board might deem relevant. There are no restrictions that currently limit our ability to pay dividends on our common stock other than those generally imposed by applicable state law.

 

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Securities Authorized for Issuance under Equity Compensation Plan

 

On May 4, 2020, the Board of Directors of the Company adopted the Plan. The Plan governs equity awards to our employees, directors, officers, consultants, and other eligible participants. Under the 2020 Plan there are 600,000 shares of common stock reserved for issuance.

 

The types of awards permitted under the Plan include nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Each option shall be exercisable at such times and subject to such terms and conditions as the Board may specify.

 

The Board of Directors has the power to amend, suspend or terminate the Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our common stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year.

 

The Company has not granted any awards under the plan.

 

CAPITALIZATION

 

The following table sets forth our consolidated cash and capitalization, as of March 31, 2020. Such information is set forth on the following basis:

 

- actual basis (giving effect, on a retroactive basis, to a 1 for 5 reverse stock splits for both common stock and preferred stock which were consummated in June of 2020; and
   
- on a pro forma basis giving effect to the sale of 1,000,000 shares of common stock by us in this offering at a public offering price of $5.00 per share after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

You should read the following table in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included in this prospectus. The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2020:

 

    Actual     Pro Forma (1)(2)  
Cash   $ 1,712,387     $ 6,012,391  
                 
Short term liabilities, including deferred revenue due within one year   $ 2,836,706     $ 2,836,706  
                 
Total liabilities including lease obligations - net of current portion   $ 583,573     $ 583,573  
                 
Stockholders’ equity:                
Common stock, $0.0001 par value, 150,000,000 shares authorized, 5,001,250 shares outstanding actual, 6,186,856 shares outstanding as adjusted     500       619  
Preferred stock, $0.0001 par value, 1,000,000 shares authorized; 2,000 shares of Series A Preferred Stock outstanding     1       1  
Additional paid-in capital             4,299,881  
Accumulated deficit     1,362,678       1,362,678  
                 
Total stockholders’ equity     1,363,179       5,663,179  
Total capitalization   $ 4,697,058     $ 9,083,458  

 

(1) Does not include: (a) shares issuable upon the exercise of the underwriter’s option to purchase up to 150,000 additional shares of common stock; (b) 80,000 shares of our common stock issuable up exercise of the underwriter’s warrant and (c) 80,000 shares of our common stock issuable upon exercise of the warrant issued to Max Munn.

(2) Includes 102,066 shares issued subsequent to March 31, 2020, but prior to the effective date of the registration statement and 51,034 shares to be issued to Carmel, Milazzo & Feil LLP on the effective date of the registration statement for this offering and 32,506 shares (37,145 shares if the underwriters exercise their option to purchase additional shares in full) to be issued to Carmel, Milazzo & Feil LLP on the closing date of the offering.

 

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DILUTION

 

Purchasers of our common stock in this offering will experience an immediate and substantial dilution in the as adjusted net tangible book value of their shares of common stock. Dilution in as adjusted net tangible book value represents the difference between the public offering price per share and the as adjusted net tangible book value per share of our common stock immediately after the offering.

 

The historical net tangible book value of our common stock as of March 31, 2020, was $1,247,142 or $0.25 per share. Historical net tangible book value per share of our common stock represents our total tangible assets (total assets less intangible assets) less total liabilities divided by the number of shares of common stock outstanding as of that date. After giving effect to the sale of 1,000,000 shares in this offering at an initial public offering price of $5.00 per share for net proceeds of approximately $4.55 million, as if such offering had occurred at the end of March 31, 2020, our pro forma net tangible book value as of March 31, 2020 would have been approximately $5,663,176, or approximately $0.92 per share of our common stock. This represents an immediate increase in as adjusted pro forma, net tangible book value per share of $0.67 to the existing stockholders and an immediate dilution in as adjusted pro forma net tangible book value per share of $4.08 to new investors who purchase shares of common stock in the offering. The following table illustrates this per share dilution to new investors:

  

Public offering price per share   $ 5.00  
Historical net tangible book value per share as of March 31, 2020   $ 0.25  
Increase in as adjusted pro forma net tangible book value per share attributable to the offering     0.67  
Pro forma net tangible book value (deficit) per share as of March 31, 2020     0.92  
Dilution in net tangible book value per share to new investors   $ 4.08  

 

After completion of this offering, our existing stockholders would own approximately 84% and our new investors would own approximately 16% of the total number of shares of our common stock outstanding after this offering.

 

To the extent that outstanding options or warrants are exercised, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our stockholders.

 

Capitalization Table

 

    Shares Purchased     Total Consideration        
    Number     Percent     Amount     Percent     Per Share  
                               
Existing stockholders     5,186,855 (1)     83.8 %   $ 22,629,805 (2)     81.9 %   $ 4.36  
New Investors     1,000,000       16.2 %   $ 5,000,000       18.1 %   $ 5.00  
      6,186,855       100.00 %   $ 27,629,805       100.00 %     --  

 

(1)Includes 51,034 shares to be issued to Carmel, Milazzo & Feil LLP on the effective date of the registration statement for this offering and 32,506 shares (37,145 shares if the underwriters exercise their option to purchase additional shares in full) to be issued to Carmel, Milazzo & Feil LLP on the closing date of the offering.

(2) Includes (i) the combined appraised value of Munn Works and SteriLumen (the combined equity of which was exchanged for 5,000,000 shares of Company common stock held by an existing shareholder) of $22,122,000 as of December 31, 2019, set forth in an appraisal report prepared on May 13, 2020 by an independent appraisal firm and (ii) a liability for legal services in the amount of $507,805 that the Company has accrued and which will be satisfied with the payment of shares of the Company’s common stock

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Certain statements made in this prospectus are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the “Company” to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and therefore, there can be no assurance the forward-looking statements included in this prospectus will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus. Our fiscal year ends on December 31.

 

Overview

 

The Company was formed on February 26, 2019 for the purpose of acquiring all of the equity of SteriLumen and Munn Works. The Company acquired all of the capital stock of SteriLumen in March of 2019 pursuant to two exchange agreements in which all of the stockholders of SteriLumen exchanged their shares in SteriLumen for shares of common stock in the Company. The Company acquired all of the equity of Munn Works in July of 2019 pursuant to an exchange agreement in exchange for shares of common stock in the Company. The Company conducts all of its operations through SteriLumen and Munn Works.

 

Sterilumen was formed to engage in the design, manufacture, assembly and distribution of the SteriLumen Disinfecting System for use in hospitals and other healthcare facilities. The Company has received several patent approvals for the SteriLumen Disinfecting System from the United States and the European Union and is in the process of receiving approval from various countries including China, Japan, Taiwan, South Korea and the Gulf Cooperation Council. The technology of the SteriLumen Disinfecting System uses UVC LED embedded in various bathroom fixtures as an infection prevention apparatus for use in inhabited facilities for killing airborne bacteria and other pathogens as well as killing bacteria and other pathogens residing on hard surfaces in proximity to the apparatus.

 

Munn Works is a manufacturer of custom designed fine mirrors specifically for the hospitality industry with one manufacturing facility in Mount Vernon, New York. Our goal is to contribute to the creation of what our design industry clients seek: manufacturing better framed mirrors on budget and on time. As part of our long-term strategy, we have instituted multi-site production for high-value items, complicated designs and finishes. Our headquarters in Mount Vernon, NY serves as the center for multi-country manufacturing. We work with a satellite network of artisans and craftsmen, including gilders, carvers, and old-world finishers. In addition to our domestic partners, we maintain overseas production capability with on-site Munn Works employees. Moreover, as company policy, we conduct on-site factory visits for all in-process and outgoing orders, which are observed and checked by a project manager from our home office in Mount Vernon, NY before they leave our overseas partners’ facilities. The combination of quality, innovative, stylish merchandise, and value pricing has led us to develop a loyal customer base.

 

Principal Factors Affecting Our Financial Performance

 

Our operating results are primarily affected by the following factors:

 

• our ability to acquire new customers or retain existing customers;

 

• our ability to offer competitive product pricing;

 

• our ability to broaden product offerings;

 

• industry demand and competition; and

 

• market conditions and our market positions

 

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Results of Operations

 

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

 

    2020           2019        
                         
Net Sales   $ 1,528,400             $ 1,460,737          
Cost of Goods Sold     1,161,813       76.0 %     1,138,252       77.9 %
Gross Profit     366,587       24.0 %     322,485       22.1 %
Selling. General and Administrative Expenses     388,198       25.4 %     327,879       22.4 %
Operating Loss     (21,611 )     -1.4 %     (5,394 )     -0.4 %
Other Income (Expense)                                
Interest income (expense)             0.0 %     465       0.0 %
Total Other Expense     -       0.0 %     465       0.0 %
Loss Before Provision for Income Taxes     (21,611 )     -1.4 %     (4,929 )     -0.3 %
Provision for Income Taxes     -       0.0 %     -       0.0 %
Net Loss   $ (21,611 )     -1.4 %   $ (4,929 )     -0.3 %

 

Net sales and gross profit are the most significant drivers of our operating performance. Net sales consist of all sales to customers, net of returns. Our net sales for the three months ended 2020 increased by 4.4% to $1,528,400 from $1,460,737 in the three months ended 2019. All net sales for all periods presented were generated entirely from our Munn Works subsidiary. Historically, first quarter revenues are typically the lowest for the Company as the third party facilities in China are closed for three weeks to celebrate the Chinese New Year. The net sales increase in 2020 resulted primarily from an increase in domestic manufacturing capabilities. An increase in our domestic manufacturing capabilities has resulted in less lead time from when a project is initiated to its completion. The Company plans to expand its manufacturing facility which will result in an increase in revenues generated from our domestic manufacturing.

 

Accordingly, gross profit expressed as a percentage of net sales can be influenced by many factors including overall sales performance. For three months ended 2020, gross profit increased to $366,587 from $322,485 for three month ended 2019. Gross profit as a percentage of net sales increased to 24.0% for three months ended 2020 from 22.1% in three months ended 2019, primarily driven by an increase in percentage of sales generated from our third party warehouses in China which is historically more profitable for our business. Margins from period to period and can vary based on the profitability of each individual job. In 2020, the Company worked on several large contracts that were slightly more profitable than the previous year. Major components and cost drivers of our cost of sales is influenced by the cost of materials, shipping, overhead, and labor costs. Historically, first quarter profits are typically the lowest for the Company as the third-party facilities in China are closed for three weeks to celebrate the Chinese New Year.

  

Selling, General and Administrative expenses, including the costs of operating our corporate office, are also an important component of our operating performance. Compensation and benefits comprise the majority of our operating expenses. Selling, General and Administrative expenses contain fixed and variable costs and managing the operating expense ratio (operating expenses expressed as a percentage of net sales) is an important focus of management as we seek to increase our overall profitability. Operating expenses include cash costs as well as non-cash costs, such as depreciation and amortization associated with corporate and property and equipment and impairment of long-lived assets. Operating expenses can also include certain costs that are of a one-time or non-recurring nature. For three months ended 2020, Selling, General and Administrative expenses increased to $388,198 from $327,879 in three months ended 2019. The increase was attributable to an increase in professional and consulting fees to assist the Company in financial reporting.

 

Selling, General and Administrative expenses expressed as a percentage of net sales can be influenced by many factors including overall sales performance. For three months ended 2020, selling, general and administrative expenses as a percentage of net sales increased 3.0% from 25.4% in three months ended 2020 and 22.4% in three months ended 2019. The company was able to maintain its fixed operating costs from year to year and generate slightly more revenues, however, the increase in professional fees caused the percentage to increase over the prior period.

 

We recorded net loss of $21,611 in the three months ended 2020, compared to net loss of $4,929 in the three months ended 2019, an increase of net loss of $16,682 from the three months ended 2019. The increase in net loss compared to 2019 was primarily attributable to an increase in professional fees.

 

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

 

    2019           2018        
                         
Net Sales   $ 9,329,720             $ 7,556,444          
Cost of Goods Sold     6,009,730       64.4 %     4,890,012       64.7 %
Gross Profit     3,319,990       35.6 %     2,666,432       35.3 %
Selling. General and Administrative Expenses     1,916,386       20.5 %     1,913,101       25.3 %
Operating Income     1,403,604       15.0 %     753,331       10.0 %
Other Income (Expense)                                
Gain on settlement (See Note 10)     1,520,399       16.3 %     -       0.0 %
Other income     -       0.0 %     2,552       0.0 %
Interest Expense     -15,736       -0.2 %     -35,640       -0.5 %
Total Other Income (Expense)     1,504,663       16.1 %     -33,088       -0.4 %
Income Before Provision for Income Taxes     2,908,267       31.2 %     720,243       9.5 %
Provision for Income Taxes     106,861       1.1 %     -       0.0 %
Net Income   $ 2,801,406       30.0 %   $ 720,243       9.5 %

 

Net sales and gross profit are the most significant drivers of our operating performance. Net sales consist of all sales to customers, net of returns. Our net sales for year ended 2019 increased by 19% to $9,329,720 from $7,556,444 in year ended 2018. All net sales for all periods presented were generated entirely from our Munn Works subsidiary. The net sales increase in fiscal 2019 resulted primarily from an increase in domestic manufacturing capabilities. An increase in our domestic manufacturing capabilities has resulted in less lead time from when a project is initiated to its completion. The Company plans to expand its manufacturing facility which will result in an increase in revenues generated from our domestic manufacturing.

 

Accordingly, gross profit expressed as a percentage of net sales can be influenced by many factors including overall sales performance. For year ended 2019, gross profit increased 19.7% to $3,319,990 from $2,666,432 for year ended 2018. Gross profit as a percentage of net sales increased to 35.6% for year ended 2019 from 35.3% in year ended 2018, primarily driven by an increase in sales generated from our domestic manufacturing. Margins remained consistent from year to year and can vary based on the profitability of each individual job. In 2019, the Company worked on several large contracts that were slightly more profitable than the previous year. Major components and cost drivers of our cost of sales is influenced by the cost of materials, freight, overhead, and labor costs.

 

Selling, General and Administrative expenses, including the costs of operating our corporate office, are also an important component of our operating performance. Compensation and benefits comprise the majority of our operating expenses. Selling, General and Administrative expenses contain fixed and variable costs and managing the operating expense ratio (operating expenses expressed as a percentage of net sales) is an important focus of management as we seek to increase our overall profitability. Operating expenses include cash costs as well as non-cash costs, such as depreciation and amortization associated with corporate and property and equipment and impairment of long-lived assets. Operating expenses can also include certain costs that are of a one-time or non-recurring nature. For year ended 2019, Selling, General and Administrative expenses increased 0.2% to $1,916,386 from $1,913,101 in year ended 2018. The change was primarily driven from an increase in sales commissions, professional fees, and office salaries, however, the increase was offset by a decrease in Officer Salaries in the amount of $400,000.

 

Selling, General and Administrative expenses expressed as a percentage of net sales can be influenced by many factors including overall sales performance. For year 2019, selling, general and administrative expenses as a percentage of net sales decreased 5% from 20.3% in year ended 2019 and 25.3% in year ended 2018. The decrease was primarily driven from a decrease in officer salaries of $400,000. The company was also able to maintain its fixed operating costs from year to year.

 

Net other income was $1,504,663 in year ended 2019, compared to net other expense of $33,088 in year ended 2018, representing an increase of $1,537,671. The increase from 2018 was primarily due to a gain on settlement of $1,520,399 from the Chapter 11 Bankruptcy Case. As a result of settlement in the bankruptcy case, the Company was able to settle certain liabilities at a significantly reduced amount. The difference between the carrying amount of the liability and the settled amount was recorded as a gain on settlement as other income.

 

Income tax expense was $106,801 in year ended 2019, compared to income tax expense of $- in year ended 2018, representing an increase of $106,801. Prior to the share exchange in 2019, Munn Works, LLC was taxed as a single member Limited Liability Company for federal and state income tax purposes. As such, the Company will not pay income taxes for earnings prior to the share exchange, as any income or loss will be included in the tax returns of the individual member. Accordingly, no provision is made for income taxes in the financial statements prior to the share exchange.

 

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We recorded net income of $2,801,466 in the year ended 2019, compared to net income of $720,243 in the year ended 2018, an increase of net income of $2,081,223 from the year ended 2018. The increase in net income compared to 2018 was primarily attributable to the increased revenues, gross profit and gain on settlement from the Chapter 11 Bankruptcy case.

 

Liquidity and Capital Resources

 

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

  

Net cash provided by operating activities   $ 813,429     $ 423,908  
Net cash used in investing activities     (98,244 )     -  
Net cash used in provided by financing activities     (32,734 )     -  
Net increase in cash and cash equivalents and restricted cash     682,451       423,908  
Cash and cash equivalents at beginning of year     1,029,936       793,766  
Cash and cash equivalents at end of year     1,712,387       1,217,674  

 

In three months ended 2020, cash provided by operating activities was $813,429, as compared to cash provided in operating activities was $423,908 in three months ended 2019. Our operating cash inflows include cash received primarily from sales of our product. These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing process, operation expenses, and employee compensation. The major operating activities that reduced cash in the three months ended 2020 was a decrease of accounts payable and accrued expenses of $78,103, increase in vendor deposits of $126,350, and an increase of prepaid expenses of $52,351. The major operating activity that provided cash for the three months ended March 31, 2020 was from a decrease of accounts receivable $965,883 and an increase of deferred revenue of $145,240.

 

In three months ended 2020, net cash used in investing activities was $98,244, as compared to cash used from investing activities of $0 in three months ended 2019. The increase in cash used was from purchases of machinery and equipment to improve our domestic facility.

 

In three months 2020, cash used in financing activities was $32,734, as compared to cash provided by financing activities of $0 in three months ended 2019. The major financing activities that used cash in year ended 2020 were loans to our officer.

 

Working Capital. We had a working capital of $600,511 at March 31, 2020, a decrease of $298,070 from a working capital of $898,581 as of March 31, 2019. The decrease in working capital is attributable from an increase in cash of $494,714 a decrease of deferred revenue of $1,190,242 offset by a decrease in accounts receivable of $1,377,900, an increase in lease liability-current of $134,706, a decrease of vendor payments of $230,867, an increase of accounts payable and accrued expenses of $58,797, an increase of current notes payable of $37,500, and an increase in income tax payable of $106,861.

  

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

 

Net cash provided by operating activities   $ 770,260     $ 528,561  
Net cash used in investing activities     (12,999 )     (3,865 )
Net cash (used in) provided by financing activities     (521,091 )     142,797  
Net increase in cash and cash equivalents and restricted cash     236,170       667,493  
Cash and cash equivalents at beginning of year     793,766       126,273  
Cash and cash equivalents at end of year     1,029,936       793,766  

 

In year ended 2019, cash provided by operating activities was $770,260, as compared to cash provided in operating activities was $528,561 in year ended 2018. Our operating cash inflows include cash received primarily from sales of our product. These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing process, operation expenses, employee compensation, and interest expenses of our financings. The major operating activities that reduced cash in the year ended 2019 was a decrease of accounts payable and accrued expenses of $382,343, increase in accounts receivable of $250,459, and an increase prepaid expenses of $146,676. The major operating activity that provided cash for year ended December 31, 2019 was income from operations of $1,403,604.

 

In year ended 2019, net cash used in investing activities was $12,999, as compared to cash used from investing activities of $3,865 in year ended 2018.

 

In year ended 2019, cash used in financing activities was $521,091, as compared to cash provided by financing activities of $142,797 in year ended 2018. The major financing activities that used cash in year ended 2019 were repayments for loans of $83,000 and cash paid to settle liabilities subject to compromise of $531,511. The major financing activity that provided cash for year ended December 31, 2019 was cash received from an officer of $99,496.

 

Working Capital. We had a working capital of $728,692 at December 31, 2019, a decrease of $183,700 from a working capital of $912,392 as of December 31, 2018. The decrease in working capital is attributable from an increase in cash of $236,170, an increase of accounts receivable of $250,459 offset by a decrease in loan to shareholder of $99,496, an increase in deferred revenue of $65,141, an increase in income tax payable of $106,861, an increase of accounts payable and accrued expenses of $254,960 and an increase of lease liability-current of $133,097

 

Contractual Obligations and Other Commitments

summarizes the obligations as of March 31, 2020, as derived from the unaudited consolidated financial statements of Applied UV, Inc. as of that date.

 

    Payment due by period  
    Total     2020     2021-2023     2024-2025     Thereafter  
Capital lease obligations (1)   $ 23,329     $ 7,280     $ 7,280     $ 7,280     $ 1,489  
Operating lease obligations     644,400       160,800       160,800       160,800       162,000  
Notes payable (2)     157,500       37,500       30,000       30,000       60,000  
                                         
Total   $ 825,229     $ 205,580     $ 198,080     $ 198,080     $ 223,489  

 

 

(1) The Company entered into a lease agreement in Mount Vernon, New York for a term that commenced on April 1, 2019 and expires on the 31st day of March 2024 at a monthly rate of $13,400.

 

(2) In March 2020, as part of the On-Deck Capital settlement, the Company issued a promissory note for the principal amount of $157,500 due within the next 5 years. The Company is required to pay $157,500 in five payments in the amount of $30,000 per year, with an additional $7,500 in year two.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Critical Accounting Policies

 

The following discussion relates to critical accounting policies for our company. The preparation of financial statements in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

 

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Revenue and Cost Recognition. On January 1, 2018, the Company adopted accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments using the modified retrospective method for all customer contracts not yet completed as of the adoption date. The adoption of ASC 606 did not have a significant impact on our Consolidated Financial Statements.

 

The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration we expect to receive in exchange for those services. To achieve this core principal, the Company applies the following five steps:

 

1)       Identify the contract with a customer. A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

2)       Identify the performance obligations in the contract. Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation. The Company promises to design, manufacture and sell custom mirrors through contractual arrangements. It was determined that most services within a contract are substantially the same and have the same pattern of transfer to the customer over the term of the agreement and are therefore highly interdependent upon each other. As such, the Company determined that the services within a contract are not separately identifiable in the context of the contract and should therefore be bundled into a single performance obligation.

 

3)       Determine the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. We evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less. The Company establishes pricing for contracts with customers based on a fixed price for a fixed fee. Contracts do not provide for a discount or refund to customers and historically, no discounts or refunds have been given.

 

4)       Allocate the transaction price to performance obligations in the contract. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price based on management's judgment. The identified promises are considered to be bundled in arriving at the overall promise within the contract. This promise therefore results in one performance obligation, to design, manufacture and sell custom mirrors to our customer, therefore, allocation of the transaction price is not necessary.

 

5)       Recognize revenue when or as the Company satisfies a performance obligation. Revenue is comprised of projects that are completed within our own facility or from a third-party vendor (Direct Sales). For projects that are completed within our own facility, the Company satisfies performance obligations at over time. For projects that are completed from a third-party vendor, the performance obligation is recognized at a point in time.

 

For projects that are completed within our own facility, we design, manufacture and sell custom mirrors for hotels and hospitals through contractual agreements. These sales require us to deliver our products within three to six months from commencement of order acceptance. We recognize revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred Revenue represents amounts billed in excess of revenues and profits recognized. Revenues and profits recognized in excess of amounts billed typically does not occur as we will not perform any work in excess of the amount we bill to our customers.

 

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Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. We report direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as Cost of Sales. We are the principal of direct sales because we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. We typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30-90 days of when the products are shipped from the third-party warehouse. Vendor payments are capitalized until completion of the project and are recorded as vendor deposits.

 

Accounts Receivable. Accounts receivables are non-collateralized customer obligations due under normal trade terms generally requiring payment within 30-90 days from the invoice date. The carrying amounts of accounts receivable is reduced by an allowance for doubtful accounts that reflects management’s best estimate of the amounts that will not be collected. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts. Management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes an allowance for doubtful accounts of $50,000 as of March 31, 2020 and December 31, 2019 is adequate.

 

Inventory. Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. Inventory is comprised of raw materials that are purchased on the initial start date of a specific project and are capitalized using the percentage of completion method of accounting. We amortize these costs to the associated contract proportion with our percentage of completion on the contract, calculated using a cost-based input method. Capitalized costs are considered impaired when the net contract cost asset plus future costs to complete the contract are less than the remaining revenue to be recognized under the contract. When capitalized costs are impaired, we record a charge to the impairment, impairment charges cannot be reversed. As of March 31, 2020 and December 31, 2019 no impairment charges were recorded and management has determined that an excess and obsolete reserve is not required.

 

Property and Equipment. Property and equipment are recorded at cost. Depreciation of furniture and fixtures is provided using the straight-line method, generally over the terms of the lease. Repairs and maintenance expenditures, which do not extend the useful lives of the related assets, are expensed as incurred. Depreciation of machinery and equipment is based on the estimated useful lives of the assets. Machinery and equipment have an estimated useful life of the lesser of term of lease or useful life. Furnitures and fixtures are based the estimated useful life of 7 years.

 

An asset is disposed of or retired when no future economic benefits are expected to arise from continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset.

 

Fair Value of Financial Instruments. The Company records the fair value of assets and liabilities in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurement. FASB ASC 820 establishes a framework for measuring fair value under accounting principles generally accepted in the United States. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. the three levels of the fair value hierarchy under FASB ASC 820 are as follows:

 

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- Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

 

- Level 2 - Valuations based generally on observable inputs for similar assets and liabilities, or identical or similar assets and liabilities in inactive markets.

 

- Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Valuation techniques could include the use of discounted cash flow models and other similar techniques

 

The carrying amounts reported in the consolidated balance sheets as of December 31, 2019 and 2018 for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair value of capital lease obligations approximates their carrying value because these financial instruments bear interest at rates that approximate current market rates for loans with similar maturities and credit quality.

 

Recent Accounting Pronouncements

 

Recently Adopted. In February 2016, FASB, issued in Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize right-of-use, or ROU, assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all our lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on our statements of income or cash flows.

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation — Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for our company on January 1, 2019. The adoption of this standard did not have a material impact on our financial statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The adoption of this standard did not have a material impact on our financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology for financial assets with a methodology that reflects expected credit losses. The new credit losses model must be applied to loans, accounts receivable, and other financial assets. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The adoption of this standard did not have a material impact on our financial statements.

 

We currently believe that all other issued and not yet effective accounting standards are not relevant to our financial statements.

 

Recent Developments

 

Acquisition of SteriLumen and Munn Works. The Company acquired all of the issued and outstanding common shares of SteriLumen pursuant to an Exchange Agreement dated March 26, 2019 among the Company, SteriLumen and the shareholders of SteriLumen in which the SteriLumen shareholders exchanged their SteriLumen common shares for 201,250 shares of Company common stock, of which Laurie Munn, the spouse of our President and a director of the Company received 200,000 shares. The Company acquired all of the issued and outstanding preferred shares of SteriLumen pursuant to an Exchange Agreement dated March 27, 2019 among the Company, SteriLumen and Laurie Munn in which Ms. Munn exchanged all of her SteriLumen Series A preferred shares for 1,800,000 shares of Company common stock and 2,000 shares of Company Series A preferred stock. Upon consummation of this exchange the Company owned 100% of the capital shares of SteriLumen. The Company acquired all of the membership interests in Munn Works pursuant to an Exchange Agreement dated July 1, 2019 among the Company, Munn Works and Laurie Munn in which Laurie Munn exchange her membership interests in Munn Works for 600,000 shares of Company common stock. All of the equity in the Company owned by Laurie Munn has been transferred to The Munn Family 2020 Irrevocable Trust, of which Laurie Munn is the trustee.

 

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Effects of Coronavirus Outbreak. In December 2019, a novel strain of Coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries and every state in the United States. On January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern.” On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.

 

Most states and cities have reacted by instituting quarantines, restrictions on travel, “stay at home” and “social distancing” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it. On March 20, 2020, the Governor of New York announced a stay at home order to go into effect on March 22, 2020 that has been extended to at least June 6, 2020, unless regions in the state can meet certain criteria related to the Coronavirus. Pursuant to this order, non-essential businesses were forced to close. However, as of the date of this prospectus, our Mount Vernon office is open with the majority of our employees working from home.

 

We have taken steps to take care of our employees, including providing the ability for employees to work remotely and implementing strategies to support appropriate social distancing techniques for those employees who are not able to work remotely. We have also taken precautions with regard to employee, facility and office hygiene as well as implementing significant travel restrictions. We are also assessing our business continuity plans for all business units in the context of the pandemic. This is a rapidly evolving situation, and we will continue to monitor and mitigate developments affecting our workforce, our suppliers, our customers, and the public at large to the extent we are able to do so. We have and will continue to carefully review all rules, regulations, and orders and responding accordingly.

 

We are dependent upon suppliers to provide us with all of the raw materials for products that we manufacture and sell and we are currently dependent on out-sourced manufactures in China to manufacture the SteriLumen Disinfecting System. The pandemic has impacted and may continue to impact suppliers of materials for and manufacturers of certain of our products. As a result, we have faced and may continue to face delays or difficulty manufacturing certain products, which could negatively affect our business and financial results. Even if we are able to find alternate sources for materials and manufacturing, they may cost more, which could adversely impact our profitability and financial condition.

 

If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.

 

Although it is difficult to predict the effect and ultimate impact of the Coronavirus outbreak on our business, it is likely that the impact of Coronavirus will adversely affect our results of operations, financial condition and cash flows in fiscal year 2020. See “Risk Factors—Our Business and Operations—Effect of the Coronavirus pandemic.”

 

Applied UV, Inc. 2020 Omnibus Incentive Plan. On May 4, 2020, we adopted the Plan. Under the Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 600,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant.

 

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Options. On February 18, 2020 the Board approved the grant to each member of the Board, on a quarterly basis, of options to purchase 500 shares of the Company’s common stock at an exercise price equal to the greater of $2.50 and the market value per share of the Company’s common stock on the date of the grant. Market value will be determined by an independent valuation company engaged by the Company; provided, however if on the date of grant the Company common stock is listed on a national exchange or quoted on an established quotation system, then market value shall equal the closing price of the Company common stock listed on such exchange or quoted on such quotation system on the trading day immediately prior to the date of the grant. On April 1, 2020, we issued options to purchase 2,000 shares of Company common stock to the Board, of which 1,250 have been cancelled. The options are subject to equal quarterly vesting over a one-year period. On July 1, 2020 we issued an additional 1,000 options to certain Board members. To date 375 of these options have vested. On July 9, 2020, the Board cancelled any further issuance of these quarterly options..

 

Mount Sinai Agreement. On April 20, 2020, SteriLumen entered into the Mount Sinai Agreement pursuant to which Mount Sinai has agreed to conduct a study of the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms at Mount Sinai St. Luke’s Hospital in New York, NY. SteriLumen will be responsible for funding the direct and indirect costs of Mount Sinai’s research in the amount of $160,000 plus all of the cost of microbiological testing. To the extent any intellectual property resulting from the research is conceived by Mount Sinai it will be the intellectual property of Mount Sinai and to the extent it is conceived by SteriLumen it will be the intellectual property of SteriLumen. SteriLumen has a 60-day exclusive option to negotiate a license for Mount Sinai’s resulting patent rights if such patent was obtained at SteriLumen’s request and SteriLumen has paid for all the costs in obtaining the patent. If the results of the study contained in Mount Sinai’s final report are used by SteriLumen in a successful regulatory filing or a successful fundraising effort, the Sponsor will be obligated to pay Mount Sinai a fee of $30,000.

 

Second ResInnova Report. In April 2020, the Company submitted the SteriLumen Disinfecting System to ResInnova for testing on its effectiveness in killing the Coronavirus. ResInnova tested the SteriLumen mirror and drain product lines against OC43 human coronavirus. In a Report dated June 30, 2020, ResInnova found the SteriLumen mirror and drain to be greater than 97% and 99.99%, respectively, effective in killing the OC43 human coronavirus in the bathroom sink area. According to ResInnova, it is expected that the Coronavirus will be killed in a similar manner to OC43 since they both are in the Beta genre of coronaviruses. See “Business—Second ResInnova Report” and “Risk Factors—Certain ResInnova Testing Limitations.”

 

Paycheck Protection Program Loan. On May 4, 2020, Munn Works received $296,287 in net proceeds from a PPP Loan from JP Morgan Chase Bank under the PPP, which was established under the CARES Act and administered by the U.S. Small Business Administration. The proceeds from the PPP Loan will be used in accordance with the terms of the CARES Act program, as described further below.

 

The term of the PPP Loan is two years with an interest rate of 1.00% per annum, which shall be deferred for the first six months of the term of the loan. Pursuant to the terms of the CARES Act, the proceeds of the PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs for up to an 8-week period after loan origination. Under the terms of the CARES Act, Munn Works can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during the 8-week period after loan origination and the maintenance or achievement of certain employee levels. No assurance is provided that Munn Works will obtain forgiveness under the PPP Loan in whole or in part.

 

Reverse Stock Splits. On June 17, 2020 and June 23, 2020, the Company effected a 1 for 5 reverse stock split of its issued and outstanding Common Stock and effected a 1 for 5 reverse stock split of its issued and outstanding preferred stock, respectively (each a "Reverse Stock Split") by filing on each date an amendment of the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. No fractional shares were issued as a result of a Reverse Stock Split. Any fractional shares that would have resulted from a Reverse Stock Split were rounded up to the nearest whole share. The authorized common stock and preferred stock of the Company was not impacted by the Reverse Stock Splits. Immediately following the Reverse Stock Splits, the Company had outstanding 5,103,316 shares of Common Stock and 2,000 shares of preferred stock. The Company has retrospectively adjusted the 2018, 2019 and March 31, 2020 financial statements for profit per share and share amounts as a result of the reverse stock splits.

 

Appointment of Executive Officers. On June 30, 2020 the Company entered into employment agreements and appointed the Company’s Chief Executive Officer and Chief Operations Officer.

 

Non-Employee Director Compensation. On July 9, 2020 the Board approved a compensation package for non-employee directors of the Board. The compensation for non-employee directors include; (i) upon of each such director, such director shall be issued 10,000 shares of restricted common stock which vests evenly on an annual basis over a four year period beginning on January 1, 2021; (ii) the annual issuance of 7,500 shares of restricted common stock to each such director which vests in full in next calendar year from the date of issuance; (iii) quarterly cash payments of $6,250 to each such director; (iv) the annual issuance of 10,000 shares of restricted common stock to the Chairman of the Board which vests in full in next calendar year from the date of issuance and (v) the annual issuance of 5,000 shares of restricted common stock to each chairman of the Audit, Nominating, Compensation and Corporate Governance Committees(Corporate Governance and Nominating Committees have not yet been established).

 

BUSINESS

 

Corporate History

 

The Company was incorporated in Delaware on February 26, 2019 for the purpose of acquiring all of the equity of SteriLumen and Munn Works. The Company acquired all of the capital stock of SteriLumen in March of 2019 pursuant to two exchange agreements in which the stockholders of SteriLumen exchanged all of their shares in SteriLumen for shares of common stock in the Company. The Company acquired all of the membership interests in Munn Works in July of 2019 pursuant to an exchange agreement in exchange for shares of common stock of the Company. The Company conducts all of its operations through SteriLumen and Munn Works. 

 

Our principal executive offices are located at 150 N. Macquesten Parkway, Mount Vernon, NY 10550 and our telephone number is (914) 665-6100. The Company currently has 26 employees, including executive officers, all of which are fulltime. Our website address is www.applieduvinc.com. The information contained therein or accessible thereby shall not be deemed to be incorporated into this Prospectus.

 

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SteriLumen

 

Business Overview. SteriLumen was incorporated on December 8, 2016 in New York. SteriLumen develops and may acquire medical devices that eliminate pathogens that may cause HAIs for distribution primarily to facilities that have high customer turnover such as hospitals, assisted living facilities, doctors’ offices and walk-in clinics as well as hotels, cruise lines, schools, airplanes and other public spaces. SteriLumen has developed and designed a unique, patented and automated disinfecting system that relies on UVC LED that will be embedded into certain bathroom fixtures (in each case, a “SteriLumen Disinfecting System”), which we believe will be effective in reducing HAIs caused by a virus, bacteria, fungus and other pathogens, including, Coronavirus and human coronaviruses in general in the bathroom sink area. The SteriLumen Disinfecting System was initially developed by Max Munn while working with NBBJ5, a global architectural firm whose clients include Cambridge University, Cleveland Clinic, Massachusetts General Hospital and Stanford University, and Healthcare Surface Consultants (“HSC”)6. However, SteriLumen owns all of the patents and other intellectual property with respect to the SteriLumen Disinfecting System and NBBJ and HSC have waived any claims they may have to any interest in the SteriLumen Disinfecting System. The SteriLumen Disinfecting System currently has five product lines: (i) disinfecting back-lit mirror that replaces the typical mirror (and wall lighting) found above the sink in a public facility bathroom; (ii) disinfecting drain device; (iii) disinfecting shelf that would be installed above the sink in cases where there is not enough room for a bathroom mirror or beneath an existing bathroom mirror; (iv) mirrored medicine cabinet for residential use and (v) retrofit kit. The Company has received confirmation from the U.S. Food & Drug Administration that the SteriLumen Disinfecting System is not a “device” under Section 201(h) of the FDA Act and therefore the Company is not required to comply with the requirements of the FDA Act.

 

During the last three years SteriLumen has focused on research and development, manufacturing and design and marketing and sales of the SteriLumen Disinfecting System. The SteriLumen Disinfecting System was initially submitted to ResInnova for an analysis of its effectiveness in killing certain pathogens such as C diff, MRSA and E coli. ResInnova provided SteriLumen with their findings in the Initial ResInnova Report which found the SteriLumen Disinfecting System to be effective in dramatically reducing pathogens in the bathroom vanity/sink area as described in greater detail below under “—Initial ResInnova Report.” SteriLumen also submitted the SteriLumen Disinfecting System to ResInnova for testing its effectiveness in killing the Coronavirus. On June 30 ResInovva issued a report on the effectiveness of the SteriLumen mirror and SteriLumen drain against OC43 human coronavirus as further described under “—Second ResInnova Report.” Furthermore, pursuant to the Mount Sinai Agreement SteriLumen will sponsor a study by Mount Sinai on the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms in Mount Sinai St. Luke’s Hospital in New York, NY. Mount Sinai has agreed to provide SteriLumen the results of their study in a report to be issued in the second quarter of 2021 as well as publishing their results in an academic, peer reviewed, journal. The study performed under the Mount Sinai Agreement will be the first test of the SteriLumen Disinfecting System in an actual healthcare facility setting.

 

Since its inception, SteriLumen has devoted substantially all of its efforts to research and development, business planning, recruiting management and sales personnel, raising capital, developing relationships with potential suppliers and creating its own network of professional consultants. SteriLumen has manufacturing and assembly suppliers in southern China and South Korea and warehousing and distribution suppliers in California. By outsourcing the manufacturing, assembly, warehousing and distribution of SteriLumen Disinfecting Systems and other related products, we can efficiently focus our resources on the design, marketing and sales of SteriLumen’s products while keeping overhead costs lower. SteriLumen recently sold units in Saudi Arabia and is currently in discussions with two major international hotel chains who have expressed interest in reducing pathogen levels in their hotels and restaurants and a cruise line that may have an interest in reducing its pathogen levels in its cruise ships. We intend to target international markets in Gulf Cooperation Council countries, China and Japan.

 

The Initial ResInnova Report. In 2017 SteriLumen submitted two wall mounted mirror prototypes of the SteriLumen Disinfecting System to ResInnova for testing of their effectiveness to kill three healthcare-relevant bacteria: C diff, E coli and MRSA. The production version of the SteriLumen Disinfecting System was submitted to ResInnova in 2020 for testing of its effectiveness to kill MRSA.

 

_____________________________

5 NBBJ was founded in 1943 and is highly regarded as an international leader in architecture for healthcare facilities. NBBJ have over 50 hospitals as clients. A few of their domestic healthcare clients are NYU Langone Health, Cleveland Clinic, Stanford University and Massachusetts General Hospital.

6 HSC was founded in 2012 with a mission to mitigate the spread of infection within the healthcare environment by addressing the critical issue of surfaces. HSC focuses on the science of surfaces and how they contribute to the spread of infection. HSC works with healthcare facilities and manufacturers to develop effective infection remediation procedures.

 

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The Initial ResInnova Report concluded that a prototype of the SteriLumen Disinfecting System caused the following reductions in pathogens in the following sink areas:

 

Faucet Handles

· C diff spores: greater than 4 logs (99.99%) reduction after one hour exposure;
· E coli: greater than 4 logs (99.99%) reduction after 30 minute exposure;
· MRSA: greater than 4 logs (99.99%) reduction after 30 minute exposure.

Drain

· C diff spores: greater than 3 logs (99.9%) reduction after two hour exposure;
· E coli: greater than 4 logs (99.99%) reduction after 30 minute exposure;
· MRSA: greater than 4 logs (99.99%) reduction after 30 minute exposure.

Side Edges

· C diff spores: almost 3 logs (99.9%) reduction after two hour exposure;
· E coli: almost 2 logs (99%) reduction after 1 hour exposure;
· MRSA: almost 2 logs (99%) reduction after 1 hour exposure.

 

The Initial Report concluded that the production version caused the following reductions in MRSA:

 

Faucet Handles

· greater than 6 logs (99.9999%) reduction after two hour exposure.

Drain

· greater than 4 logs (99.99%) reduction after two hour exposure.

Side Edges

· Greater than 6 logs (99.9999%) reduction after two hour exposure.

Backsplash

· Greater than 6 logs (99.9999%) reduction after two hour exposure.

 

The Initial ResInnova Report also concluded that “a 2 hour non-stop operation of the UV-emitting mirror should have a dramatic antimicrobial effect on the bathroom vanity/sink area.”

 

The Second ResInnova Report. In April 2020, the Company submitted the SteriLumen Disinfecting System to ResInnova for testing on its effectiveness in killing the Coronavirus. ResInnova tested the SteriLumen mirror and drain product lines against OC43 human coronavirus. In a Report dated June 30, 2020, ResInnova found that the SteriLumen drain demonstrated a greater than 97% kill after 15 minutes of exposure and the SteriLumen Mirror demonstarated a greater than 99.99% kill after a 2-hour exposure. According to ResInnova, it is expected that SAR-CoV-2, the virus that causes COVID19, will be killed in a similar manner to OC43 since they are both in the Beta genre of coronaviruses.

 

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CID:295A9464-8D5A-4EF5-A01C-B5E9057BA77F@FIOS-ROUTER.HOME

 

SteriLumen Disinfection System. The SteriLumen Disinfecting System consists of four product lines: (i) the SteriLumen Disinfecting Mirror; the SteriLumen Disinfecting Drain; the SteriLumen Disinfecting Shelf; and the SteriLumen Disinfecting Medicine Cabinet. Each product in the SteriLumen Disinfection System product line has the following attributes:

 

Focus on the sink area and drain. Focuses on pathogens that accumulate on the sink area, including handles, faucets and backsplash and in the drain.

 

UVC LED infection destruction. Destroys 4 logs (99.99%) of common pathogens, including, we believe, the Coronavirus in the bathroom vanity/sink area with at least two hours of continuous use.

 

Automatic operation. Has a built-in programmable controller that ensures operation for the full required daily and is not dependent on manual operation. Its functionality is expandable and may become a source for recurring income through additional data reporting, leasing and maintenance of add-on elements.

 

Continuous operation. Works in cycles of two hour on and four hours off, except for the disinfecting drain which is on 15 minutes every hour. The timing protocol is managed by a programmable controller and a motion detector enclosed within each device and works while the patient room is still occupied and while the bathroom is not in use, therefore, continuously disinfecting an area of ongoing high contamination. Research has shown that microbes can rebound to pre-disinfection levels within two hours following manual terminal cleaning and disinfection. UVC products generally used for terminal cleaning in patient rooms have helped to reduce infections. Unfortunately, these can only be used after a patient is transferred/discharged and the patient room is vacant.

 

Safety. Built-in motion detector and sensor automatically shuts off the UVC light when anyone enters the room eliminating any concern over UV safety. Once there is no movement in the room for 10 minutes the UVC light comes back on to restart and continue its cycle.

 

Removable UVC LED panel. The UVC LEDs are installed via a removable panel, leading to ease of replacement or upgrade. The UVC LEDs are expected to become more powerful over time and users may want to replace the earlier generation UVC LEDs (at an interval and cost not yet determined) with more powerful models as the microbial world continues to change.

 

Ease of Installation. The unit is easy to install and uses standard electrical wiring.

 

IOT connectivity. IOT connectivity uses Wi-Fi and RF technology that will enable continuous transmission of use and functionality data over the internet for collection and analysis. This could include data on the length of time the UVC light was on as well as the length of time, frequency and interval length concerning the bathroom use and its cleaning by the hospital staff. A companion software platform enables the administrator to view and analyze the use and functionality data.

 

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SteriLumen Disinfecting Mirror. SteriLumen has embedded its disinfection system into a mirror with electrified built-in “white day-light” LED lighting (typically found in better hotel bathrooms) that replaces the typical mirror (and also replaces the wall lighting) found above the sink in a hospital bathroom. As a mirror, the SteriLumen Disinfecting System meets all design and lighting requirements for healthcare facilities and provides disinfection for the backsplash, sink, drain and surrounding countertops. Underneath the mirror are eight UVC LEDs focused on high-risk bathroom sink surfaces, faucets and drains. This effectively reduces the bioburden of dangerous pathogens that are easily acquired and transmitted throughout the healthcare setting. It is safe, effective, patented and unique in the market. This mirror type without any disinfecting function is common in the hospitality industry which has an annual market size in excess of $100 million.

 

 

 

SteriLumen Disinfecting Drain. Consists of a stainless-steel pipe that is easily substituted for the ordinary pipe that fits between the bathroom sink drain cover and the C-trap. A UVC LED sits in a one-half inch perforation in the pipe and is covered with a waterproof sapphire lens which is in the plane of the interior of the pipe in order not to disrupt water flow. The UVC light destroys 6 logs (99.9999%) of the most common pathogens, thereby disinfecting the aerosol plume that rises out of the drain when the faucet is turned on.

 

A PICTURE CONTAINING INDOOR, APPLIANCE, DRYER, WHITE

DESCRIPTION AUTOMATICALLY GENERATED

 

SteriLumen Disinfecting Shelf. To be installed over the hospital sinks that do not have or require a mirror above them and incorporating the attributes of the SteriLumen Disinfecting Mirror, i.e., back-lit side lighting and UVC LEDs to disinfect the countertop and sink area. Additionally, the shelf could be installed under a simple ordinary mirror.

 

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A PICTURE CONTAINING INDOOR, SITTING, COMPUTER, WHITE

DESCRIPTION AUTOMATICALLY GENERATED A CLOSE UP OF A DOOR

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SteriLumen Disinfecting Medicine Cabinet. A traditional medicine cabinet incorporating the attributes of the SteriLumen Disinfecting Mirror, i.e., back-lit side lighting and UVC LEDs to disinfect the countertop or sink in a residential bathroom.

 

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HAIs. The Center for Disease Control defines HAIs as infections patients contract, while receiving treatment in a healthcare facility. HAI is a significant problem in the United States and is the cause of an estimated 99,000 deaths annually. The CDC states that preventing HAI is a national priority. Between 2000 and 2050, the percentage of people aged 85 and over will increase by 350%7. This estimated increase will result in more HAIs for this age group. While this problem is of great concern to the elderly, it also affects the population at large8. Research shows that the most common germs causing HAIs are C. difficile (12%), Staphylococcus aureus (MRSA, 11%), E. coli (9%) and Candida auris (7%)9. Environmental disinfection is an important method in reducing the risk of HAIs. Evidence shows that traditional cleaning methods still leave persistent contamination of environmental surfaces.10 Without question, secondary disinfection technologies are needed for reducing the risk of surface contamination.

 

According to the CDC:

 

approximately 1.7 million people in the United States contract a HAI every year, or 1 out of every 25 hospital patients;

 

an estimated 99,000 people die from HAI’s annually;

 

HAI cost to the healthcare system is $45 billion annually;

 

patients with a HAI spend an average of 6.5 extra days in the hospital; and

 

patients with a HAI are five times more likely to be readmitted and twice as likely to die.

 

HAI’s are preventable, and the federal government has instituted policies and penalties to ensure this issue is being addressed. In 2009, the Centers for Medicare and Medicaid Services (“CMS”) stopped paying hospital-related reimbursement for patients who acquired a HAI during their hospital stay. In 2011, CMS established fines for facilities with high rates of infection. The effects of reduced reimbursements have seriously impacted healthcare facilities. Some facilities have reported a reduction of up to 40% of their total revenue due to lost reimbursement.

 

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Many healthcare facilities have seen success with temporarily reducing their HAI rates, but may not have been able to sustain these reductions. A big part of the challenge is controlling the presence of infectious agents in the patient room.

 

Complications with disinfection. There are many issues that complicate effective disinfection including:

 

Current Hospital Designs: The bathroom is an area of high contamination. Toilets are located close to the sink and countertops. When flushed, they release a plume of microbial contamination into the air, ultimately landing on surfaces. Healthcare workers, the patient and visitors frequently use this room with many opportunities for acquisition and transmission of microbes throughout the patient care environment. Despite this, during a patient’s stay this room is typically cleaned only once a day.

 

Materials: Multiple surface materials and textiles cannot all be cleaned and disinfected effectively the same way. Surfaces that are not smooth can leave protective reservoirs for microbes to proliferate in and not be reached by the biocides used to destroy them.

 

Lack of Time: The average daily patient room disinfection time is 10 minutes (approximately 7 minutes for the main room and 3 minutes for the bathroom).

 

Standard Cleaning and Disinfection Protocol. Current infection control protocol focuses on manual cleaning, i.e. wiping hospital room and bathroom surfaces with a disinfecting system. The standard cleaning and disinfecting protocol address three types of cleaning and disinfection:

 

Daily: 10 minutes per room of manual wipe down using disinfecting fluids may not allow enough time to effectively disinfect areas of high contamination.

 

Outbreak: requiring different cleaning products and processes based on the type of microbe and where the outbreak is. Often disinfectant products require a 10-minute dwell time which is rarely followed. Pathogens are left on surfaces to proliferate and rebound to pre-disinfection levels.

 

Terminal: This is done following patient discharge. Typically, a process that takes 45 minutes to 1 ½ hours. First, a deep manual cleaning performed by the environmental services staff possibly followed by "no touch" disinfection technology. No touch disinfection includes UV disinfection robots or hydrogen peroxide mist or vapor machine. In either case, the rooms cannot be occupied.

 

All three processes require manual cleaning/disinfection and proper use of disinfectant products. Effective human behavior determines the success or failure of each process. Despite best cleaning/disinfecting efforts, microbes can continue to thrive on surfaces for days, weeks, and even months.

 

Facilities understand the limitations of their current approach and are increasingly open to bundled or system-based solutions utilizing a variety of products and processes including “no touch” technology. No-touch systems are gaining acceptance by providing additional disinfection to the standard and required manual disinfection protocol described above. Many of these have been successful in addressing areas that may not have been disinfected effectively before. Examples of no-touch products include: (a) Hydrogen peroxide vapor or mist to get disinfectant into areas not always reached in the regular wipe-down, and (b) robotic systems that shine UVC light to kill bacteria. Each of these systems has significant limitations:

 

Room occupation: Both systems require that the room be unoccupied. As a result, they can only be used for “terminal” disinfection following patient discharge.

 

Line of sight: UVC systems require “line-of-sight” to the affected areas. Microbes on surfaces outside the line of sight of the light source are not affected. When used in a patient bathroom, for example, UVC robots cannot reach areas such as the inside of the sink bowl, drain, and areas behind the faucet.

 

The SteriLumen Disinfecting System can operate while the patient room occupied and does not need human intervention.

 

Effective disinfection in a healthcare facility requires attention to detail. In a hospital bathroom, bacteria thrive in sink drains, splashing out when the faucet is turned on, contaminating the bowl, countertop, faucets, and backsplash. In 2011-2012 the Clinical Center of the National Institutes of Health faced an infection outbreak that originated from a sink drain, resulting in the deaths of 11 patients.

 

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UV Science

 

Ultraviolet light.

 

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Ultraviolet (“UV”) light is one form of electromagnetic energy produced primarily by the sun, although it can also come from made-made sources such as tanning beds and welding torches. As shown above, UV light is a designated band of light (or electromagnetic energy) with wavelength from 100 to 400 nanometers (nm), which is shorter than visible light but longer than x-rays. UV light has enough energy to break chemical bonds. Due to their higher energies, UV photons can cause ionization, a process in which electrons break away from atoms. The resulting vacancy affects the chemical properties of the atoms and causes them to form or break chemical bonds that they otherwise would not. This can be useful for chemical processing, or it can be damaging to materials and living tissues. This damage can be beneficial, for instance, in disinfecting surfaces, but it can also be harmful, particularly to skin and eyes. UV is generally divided into three sub-bands: UVA, UVB, and UVC. Of the three, UVC has the shortest wavelength, the highest energy, and is most easily absorbed by most organic material.

 

UVC Disinfection. Using UV light to disinfect is a fast, effective, and safe technique that utilizes UVC. When exposed to UVC light, microorganisms such as bacteria, viruses, fungi, cysts, and mold are affected in a way such that they can no longer multiply, rendering them harmless. UV disinfection can be used on surfaces, in air, and in water. Disinfection performance is a function of the UVC dose applied to the microorganism. While all micro-organisms respond to UVC light in different ways, if given the appropriate dose, which is the product of UVC power multiplied by time, 99.99% of micro-organisms can be killed. Microorganisms such as bacteria, viruses, fungi, cysts, and mold are simple life forms that reproduce by subdivision, budding, or by producing spores. Reproduction of these organisms is vital to their life cycle: loss of their ability to grow and multiply is classified as cellular death, and renders them harmless and no longer pathogenic. When exposing microorganisms to UVC light, the energy generated from UVC light is absorbed into the microbes’ cellular RNA and DNA, damaging nucleic acids and preventing microorganisms from infecting and reproducing. The absorption of UVC energy forms new bonds between nucleotides, creating double bonds or “dimers.” Demineralization of molecules, particularly thymine, is the most common type of damage done to microorganisms by UVC. Formation of thymine dimers in the DNA of bacteria, fungi and viruses prevents replication and the ability to infect. Because UVC disinfection does not rely on chemicals or filtration materials, it can be used effectively and safely in many applications including in drinking water, in air.

 

LEDs. The traditional approach to generating UV light for disinfection applications has been the mercury discharge lamp, which is a fluorescent bulb without the phosphor coating. Mercury lamps come in two main types: a low-pressure lamp that produces a single wavelength at 254nm; and a medium pressure lamp that emits a multiple wavelength output. Unlike traditional mercury lamps, whose output wavelength is fixed, UV LEDs can be manufactured to operate at the optimum wavelength for the application. UV LEDs also switch on and off instantly and can actually be pulsed without any detriment to lifetime, making them more user-friendly and safer for the operator. Miniature, robust, and operating with a low electrical power, UV LEDs can be manufactured with a highly stable output, operating at the optimum wavelength for the application, making them ideal for compact and portable systems. The design rules for UV LEDs open new opportunities of what can be disinfected as, unlike the long tube shape of mercury lamps, LEDs can be mounted in flat panels; on flexible circuit boards; on the outside of cylinders and elsewhere.

 

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Intellectual Property

 

Developing and maintaining a strong intellectual property position is an important element of our business. We maintain the intellectual property through a combination of patent protection, trademarks, and trade secrets. We have sought, and will continue to seek, patent protection for our technology, for improvements to our technology, as well as for any of our other technologies where we believe such protection will be advantageous.

 

As of July [*], 2020, SteriLumen owned five issued patents and two pending patent applications in the United States; owned one issued patent in the European Union and has 6 pending patent applications, which are in China, the Gulf Cooperation Council (GCC), Hong Kong, Japan, South Korea, and Taiwan.  The U.S. patent numbers are 9,724,442, 10,039,853, 10,307,504, 10,456,496 and 10,463,759 issued on August 8, 2017, August 7, 2018 and June 4, 2019, October 29, 2019 and November 5, 2019, respectively.  Two of the three pending U.S. patent applications have been allowed and these will be issued in due course. The issued patents and pending patent applications cover various aspects of the SteriLumen Disinfecting System including, the disinfection system; disinfection system embedded into a fixture generally, and a vanity mirror specifically, and the mechanical components of any such mirror, including hinge mount and programmable controller for regulating UV light.

 

On December 3, 2019, SteriLumen received a trademark registration of its trademark or brand name “SteriLumen.”

 

SteriLumen will be protecting and enforcing its issued patents, trade secrets, know-how, copyrights, and trademarks, as well as continuing to pursue technological innovation and licensing opportunities, and developing and maintaining its competitive position in the vanity mirror and disinfecting product markets for hospitality, hospital and healthcare facilities. Our success depends in part on SteriLumen obtaining and enforcing patent protection for its products and processes, preserving and maintaining trade secrets, issued patents, copyrights and trademarks, and operating with state of the art technologies while respecting the proprietary rights of third parties, and acquiring licenses for technology or products as may be beneficial to the company.

 

Our Strategy for SteriLumen

 

We believe that SteriLumen has developed a safe, effective, unique and patented disinfecting system that may significantly reduce the number of pathogens found in healthcare facilities. Our goal is to build a successful disinfecting system development and design company that contributes to a national decreased rate of HAIs through the commercialization of innovative, efficacious and cost-effective disinfection system products that address compelling market opportunities in the infection prevention industry. We will seek to achieve this goal by having SteriLumen actively involved in the following activities:

 

Focus on healthcare facilities: (i) Target infection prevention professionals’ at large hospitals and healthcare networks; (ii) Identify and target healthcare networks that have been fined for high infection rates; and (iii) Leverage key teaching hospitals to facilitate both scientific evidence as well as return on investment components.

 

Educate and work with healthcare professionals: Educate and work with healthcare professionals to address the gaps they face in existing disinfection processes and provide additional systems that can be used in conjunction with required disinfection protocol.

 

Leverage two routes to market: (i) Architects and contractors specializing in healthcare construction11; and (ii) Direct sales to healthcare facilities and contracted facility management companies.

 

Continue scientific validation: through lab testing and in situation research then publishing in peer review journals case studies and supporting data.

 

Establish a validation study: Establish a validation/marketing study to demonstrate the effectiveness of the SteriLumen Disinfecting System, which we have commissioned pursuant to the Mount Sinai Agreement.

 

Leverage an outsourced supply chain: Leverage an outsourced supply chain for production and warehousing.

 

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11 Architects are usually involved in major renovations and construction projects that are large. They specify products such as bathroom fixtures including the mirror. Healthcare-oriented architects such as NBBJ are also often seeking systems to support infection control. These firms serve as primary business development targets.

 

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The supply chain and production strategy are illustrated below:

 

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Hotels and Other Relevant Non-Healthcare Facilities

 

Beyond healthcare facilities, we focus our marketing efforts in the following additional market segments:

 

Hotels. Hotels, including those attached to hospitals or primarily serving patients traveling for medical care; hotels catering to an elderly clientele; and hotels wishing to make disinfection, safety, cleanliness, etc. part of their branded experience could all be potential targets in the future.

 

Airplane and Cruise Line Bathrooms. Because of the close quarters inside most airplane cabins, pathogens can easily be spread among passengers, especially on long flights where airplane bathrooms have more use and may not be cleaned before flight’s end. The SteriLumen Disinfecting could provide an important means for disinfecting airplane bathrooms and decrease the spread of germs in the airplane cabin.

 

Schools. Schools and education authorities pay very close attention to disinfection to prevent the spread of influenza as well as other contagious threats. The CDC maintains guidelines for disinfection of schools and many other organizations also advise schools on proper disinfection protocol. SteriLumen’s disinfection systems could find a receptive audience among school facilities managers looking for new solutions to this issue.

 

Restaurants. Given the need to prevent foodborne illness, restaurants are constantly urging staff to wash their hands and are required by public health authorities to keep their premises as clean and germ-free as possible. SteriLumen could become part of upscale restaurants’ strategy to demonstrate dedication and commitment to customers and health department to reduce the spread of infections within their establishment.

 

Homes. The general consumer market could become important, especially for patients receiving care at home, people with compromised immune systems or in homes with young children or elderly residents that are looking to reduce the chances of catching an infectious disease. SteriLumen has designed (and has a patent pending) a disinfecting medicine cabinet, in addition to its standard SteriLumen Disinfecting System, as a potential entry into this market.

 

Competition

 

Given the uniqueness of the SteriLumen Disinfecting System, we are not aware of any direct competition, including other manufacturers of mirrors and surface disinfection systems.

 

Competitive mirrors. Hospitals have been frequent buyers of mirrors not only in-patient bathrooms, but also other areas, none of which currently have disinfection capabilities. The same architects that specify other kinds of mirrors will specify the SteriLumen Disinfecting System. We believe that other mirror manufacturers will not be the most significant competition for SteriLumen, as most decision makers will view SteriLumen’s products as disinfection systems and overlook the current cost of buying a plain mirror, which in a hospital bathroom are priced in the $100-$300 range. For backlit (electrified) mirrors the range is wider, from $300-$700. Backlit mirrors are often sold to enhance design and create a healing environment. They are not common in hospitals, although that is rapidly changing. We anticipate that the unit price of the SteriLumen Disinfecting System will be more than these backlit mirrors, but initially less than $1,000. Because of this price differential, the SteriLumen Disinfecting System will be positioned in the market as an essential disinfecting tool, but as a mirror with supplemental lighting that also provides disinfection.

 

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Disinfecting Systems. While we are not aware of any disinfecting systems that are directly comparable to the SteriLumen Disinfecting System, no-touch disinfecting systems and Systems

 

No-touch Systems. No-touch systems have increased in popularity in recent years as complimentary and add on systems for addressing infection prevention issues following required cleaning and disinfection protocols. These have proven to be effective with a few major drawbacks. They are used only following patient transfer or discharge and cannot be used while the patient room is occupied. Due to the high cost for no touch systems, healthcare facilities generally choose one of several no-touch options, either UVC robots or peroxide vapor. An additional issue exists based on the available time for terminal disinfection if patients are waiting for a room or if staff is simply too busy to move this technology into the room and turn it on and off. Depending on the technology, the disinfecting system may need to be moved into the bathroom (additional cycle time) due to the constraints of the technology.

 

This system requires approximately 2 hours’ time. The applicable room is completely closed and sealed off. All vents are sealed, doors with the equipment inside to be run. Following the running of the machine, there is a specified time for the air to clear before anyone can go back into the room and remove all of the seals put in place. There is concern about potential residual effects and potential patient safety as well.

 

UVC systems. UVC disinfection is fast and very effective on surfaces in line of sight. Products on the market include but are not limited to ceiling mounted, wall-mounted, upper air UV disinfection units as well as UVC robots. Larger robot units recommend that their units be moved periodically to address critical areas that may be limited by shadowing or areas outside of the direct line of sight. Typically, the larger robots are used for terminal cleaning when the patient is discharged as a room must be empty to run these units. There are several manufacturers currently developing other products including smaller portable units that could be put in a patient room while the patient is receiving treatment elsewhere in the hospital. The competitive advantage of the SteriLumen system is its use of UVC LEDs. All of the below systems which generate UV light use mercury or xenon bulbs which are inherently dangerous if mishandled.

 

Peroxide vapor systems. Hydrogen peroxide vapor systems use machines to disperse a concentrated hydrogen peroxide vapor throughout a room. The micro condensation of the system on all surfaces deactivates harmful pathogens. The peroxide condensate breaks down to oxygen and water vapor, which means there is no harmful residue. Like UVC robot systems, peroxide vapor systems cannot be run when a patient is in the room. Furthermore, there is a need to seal the room and for personnel to wear hazmat suits during the disinfection process.

 

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Munn Works

 

Munn Works was formed on November 9, 2012, as a New York limited liability company. manufactures and supplies fine decorative framed mirrors, framed art, and vanities to primarily to the hospitality market. Max Munn, the President of Applied UV, is also the Chief Executive Officer of Munn Works and has been involved in related businesses for over 35 years. Munn Works has 37 fulltime employees and manufactures its products domestically and overseas. Its domestic manufacturing operations are located in its headquarters in Mount Vernon, New York. Munn Works supplies the major hotel brands in North America with its products. These brands include Hilton Hotels & Resorts, the various Hyatt branded hotels, the various Marriott branded hotels, Four Seasons Hotels and Resorts and the subsidiary hotel brands for each of these major brands. Munn Works has a national sales force and an established distribution network for hotels and restaurants in every major market in the United States and has begun to develop a distribution network for the assisted living market. These distribution networks will also be a significant asset for SteriLumen, as those networks will be utilized for the marketing and sales of the SteriLumen Disinfecting System. Additionally, Munn Works advertises its products in hotel design magazines and participates in major national trade shows. During the last three years, Munn Works has significantly expanded its sales force, including hiring a vice president of sales, increased investments in advertising, including expanding its presence at industry trade shows and full-page advertising in trade magazines such as Boutique Design and Hospitality Design and establishing a presence on social media outlets such as Facebook, Instagram, and Twitter. Munn Works currently manufactures approximately 20% to 25% of its products domestically, but expects this to increase to 35% due to increasing lead times, production costs and tariffs associated with manufacturing goods in China. We consider Munn Works to be a leader in the custom design decorative framed mirror market. Our main competitors are Majestic Mirror located in Miami Florida and Mirror Image located in Los Angeles who make decorative mirrors for hotels and Electric Mirror located in Seattle Washington who make backlit mirrors that are placed over vanities in the bathroom. None of these competitors have any meaning domestic manufacturing capability.

 

On June 25, 2018, Munn Works filed a voluntary petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code in order to (i) pursue its appeal of a $1.4 million New York State court judgment arising out of an employment and business dispute with a former employer of Mr. Munn (of which Mr. Munn’s family-owned 50% of the equity) and (ii) preserve its ongoing operations from collection efforts with respect to such judgment. Munn Works settled the dispute by making a $400,000 cash payment and on June 28, 2019, concluded its Chapter 11 proceedings.

 

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Litigation

 

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We may in the future receive claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. To date, we have not been made aware of any actual, pending or threatened litigation against the Company.

 

Property

 

We lease and maintain our primary offices and manufacturing facility at 150 N. Macquesten Parkway, Mount Vernon, NY 10550. We do not currently own any real estate.

 

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MANAGEMENT

 

The following are our executive officers and directors and their respective ages and positions as of July 15, 2020.

 

Name   Age   Position
Keyoumars Saeed   56   Chief Executive Officer and Director
Max Munn   75   President and Director
James L. Doyle, III   52   Chief Operations Officer
Joseph Himy   51   Chief Financial Officer
Joel Kanter   63   Chairman of the Board
Dr. Eugene A. Bauer, M.D.   78   Director
Dr. Alastair Clemow, Ph.D.   69   Director
Dallas C. Hack, M.D   67   Director
Eugene E. Burleson   79   Director

 

Keyoumars Saeed is our Chief Executive Officer. Mr. Saeed has over 25 years of proven experience in strategic planning, operations, sales and executive management of advanced technologies. A seasoned CEO and senior executive, under his leadership, record of achievement in sales, marketing and operations development, strategic planning, and business development. Mr. Saeed recently was CEO of Ubiquity LLC and advised the National Mental Health Innovation Center (NMHIC) and worked with CU Innovations on business partnerships and co development with their technology innovation network (TIN) on virtual and augmented reality to conduct interventions and training protocols and at the University of Colorado Anschutz Medical Center. Previously, in 2016 he was founder and CEO of Vital Neuro, Inc. which has converged machine learning, cloud technologies in a closed feedback system. Vital Neuro is an evidence based, proven service relieving employee stress with a personalized 15 minute daily session to a headphone through an app to company subscriber base. Prior to that and until the end of 2015 Mr. Saeed spent three and a half years at Kymeta Corporation, a Bill Gates company, as the EVP of Strategy and development creating a market approach to the connected car strategy, sourcing and securing unique raw materials and industry relations and partnerships. Among several smaller startups, Mr. Saeed Co-founded Open Range Communications in 2004 to deliver broadband to rural and underserved communities in the US. In 2001 Mr. Saeed was instrumental in the launch of the first cellular Blackberry at T-Mobile USA where he was part of the pioneering team introducing the first device converging voice and data to the market in 2001. He spent the worked at AT&T wireless advanced services organization introducing CDPD and converged wireless data through 1999.

 

Max Munn is the President and a director of the Company and is also CEO of Munn Works. Mr. Munn has held this position at Munn Works for over 20 years. Mr. Munn is also Co-chairman of Dieu Donne Inc., a not-for-profit and a leading, world recognized atelier wherein dimensional, handmade paper is utilized in the making of art. Mr. Munn attended MIT from 1961-1966, majored in chemistry and architecture; and received a Bachelors of Architecture degree. Mr. Munn also attended Columbia University for post graduate studies from 1966-1968, working toward a Ph.D. in architectural history.

 

James L. Doyle, III is our Chief Operations Officer. Mr. Doyle has over 28 years’ experience in general management, operations, marketing, sales and consulting. Most recently, Mr. Doyle was the President of Panasonic Enterprise Solutions company, a $450 million solution and engineering company focused primarily on North America, but with limited clients in Asia and Europe. This company built complex solutions for Panasonic’s global customers in sports and entertainment, energy, and smart city industries. His clients ranged from the Philadelphia Eagles to MGM to the US Government. Before joining Panasonic, Mr. Doyle was a Consulting Partner with IBM Global Business Services leading its North American Electronics industry solutions unit, the final role in a thirteen-year span with IBM. Mr. Doyle currently serves on the board of Mobilitynext, a nonprofit organization that brings public and private entities together to solve the world’s most challenging transportation and mobility challenges. Mr. Doyle also served as an Officer in the US Marine Corps, participating in Operation Restore Hope in Somalia. Mr. Doyle has an MBA in Marketing and Decision & Information Systems from Indiana University and a BS in Marketing from Syracuse University.

 

Joseph N. Himy is our Chief Financial Officer. Mr. Himy is a Director of The CFO Squad, a financial and business advisory firm providing outsourced CFO advisory and regulatory consulting services primarily for public companies, since August 2011. From May 2009 until August 2011, Mr. Himy was Chief Financial Officer of Vyteris, Inc., manufacturer of the first active transdermal patch approved by the U.S. Food and Drug Administration for the pain associated with blood draws, intravenous cannulations and laser ablation of superficial skin lesions. Prior to May 2009 and from October 2004, Mr. Himy held various other positions at Vyteris, including Corporate Controller and VP of Finance. Mr. Himy received a B.S. degree in Accounting from Brooklyn College of the City University of New York and is a certified public accountant. Mr. Himy’s accounting and financial and corporate governance experience background enhances the breadth of experience of the board of directors.  Mr. Himy is also Independent Director of Tofutti Brands Inc. and a member of its Audit Committee since October 30, 2013.

 

Joel Kanter is the Chairman of the Board of the Company. Mr. Kanter serves as President of Windy City, Inc., a privately held investment firm, since July 1986. From 1989 to November 1999, Mr. Kanter served as the President, and subsequently as the President and Chief Executive Officer of Walnut Financial Services, Inc., a publicly traded company (Nasdaq: WNUT). Walnut Financial’s primary business focus was the provision of various forms of financing to small business including equity financing to start-up and early stage development companies, bridge financing to small and medium-sized companies, and later stage institutional financing to mature enterprises. Tower Hill Capital bought the Company in 1999 in a transaction valued at approximately $400 million. From 1978 - 1980, Mr. Kanter served as a Legislative Assistant to former Congressman Abner J. Mikva (D-Ill.).  In that position, Mr. Kanter provided support to Congressman Mikva with respect to activities related to his position on the House Judiciary Committee.  In particular, Mr. Kanter was intimately involved in efforts to reform the Federal Criminal Code.  Mikva subsequently became the Chief Judge of the U.S. Court of Appeals for the District of Columbia Circuit, and then served as White House Counsel to President Clinton. From 1980 - 1983, Mr. Kanter served as Special Assistant to the National Association of Attorneys General.  In that position, he represented the interests of the State Attorneys General in Washington, D.C. in the criminal justice and environmental arenas.  Mr. Kanter serves on the Board of Directors of one currently public company, Magna-Labs, Inc., which was formerly involved in the development of a cardiac MRI device. Mr. Kanter also serves on the boards of several private biotechnology companies. Mr. Kanter is a National Association of Corporate Directors “Governance Fellow.” Mr. Kanter is a current Trustee Emeritus and past President of the Board of Trustees of The Langley School in McLean, Virginia, a former Trustee at the Georgetown Day School in Washington, D.C., and a former Trustee of the Union Institute & University, the Country’s first Online University.

 

We believe that Mr. Kanter is qualified to serve as a member of our board of directors because of his experience as a public company executive, his extensive finance background, his service as a current director of public and private companies, and his knowledge of the industry in which we operate.

 

Dr. Eugene A. Bauer, M.D. is a Director of the Company. In 2010, Dr. Bauer co-founded Dermira, a publicly traded specialty biopharmaceutical company acquired by Eli Lilly and Company in 2020. Dr. Bauer served as Chief Medical Officer of Dermira, a wholly-owned subsidiary of Lilly, through March 2020. Prior to founding Dermira, Dr. Bauer served as Director, President and Chief Medical Officer of Pelpin, Inc., a publicly traded specialty pharmaceutical company, from 2008 to 2010. Dr. Bauer served as Chief Executive Officer of Neosil, Inc., a specialty pharmaceutical company, from 2004 to 2008, and he co-founded and served as a member of the board of directors at Connetics, a publicly traded specialty pharmaceutical company, from 1990 to 2006. Prior to initiating his career in industry, Dr. Bauer served as Dean of Stanford University School of Medicine from 1995 to 2001 and as Chair of the Department of Dermatology at Stanford University School of Medicine from 1988 to 1995. Dr. Bauer is Professor Emeritus at Stanford University School of Medicine, a position he has held since 2002. Dr. Bauer was a U.S. National Institutes of Health (“NIH”)-funded investigator for 25 years and has served on review groups and Councils for the NIH. Dr. Bauer has served on the boards of directors of a number of public and private companies, including Aevi Genomic Medicine, Inc. (formerly Medgenics, Inc.), First Wave Technologies, Inc., and Kadmon Holdings, Inc. He is member of numerous honorific societies, including the National Academy of Medicine. Dr. Bauer received his B.S. in medicine from Northwestern University and his M.D. from Northwestern University Medical School.

 

We believe that Dr. Bauer’s background of service on the boards of directors of numerous public pharmaceutical companies and his vast industry experience provides him with the qualifications and skills to serve on our Board.

 

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Alastair J. Clemow, Ph.D. is a Director of the Company. Dr. Clemow currently serves as Chairman of Ensemble Orthopedics, an early-stage company developing an innovative pyrocarbon finger joint for the treatment for early state osteoarthritis. From 2010 to 2019, Dr. Clemow served as President and Chief Executive Officer of Regentis Biomaterials, a private company developing an innovative material for cartilage repair. He also held positions of president and chief executive officer in a number of companies that he helped found, including Nexgen Spine, Inc., which developed an artificial spinal disc; Gelifex, Inc., which developed an innovative spinal nucleus replacement implant and which was acquired in 2004 by Synthes Spine, Inc.; and Minimally Invasive Surgical Technologies, Inc., which developed a novel series of implants for minimally invasive total knee replacement and which was acquired in 2005 by MAKO Surgical Corp. From 2000 to 2004, Dr. Clemow served as Principal of Tanton Technologies, Inc., an organization that provided strategic and technical assessment of new medical device opportunities for large, mid-cap, and early-stage development companies. From 1981 to 2000, Dr. Clemow held numerous positions with Johnson & Johnson, including Vice President of Worldwide Business Development for Ethicon Endo-Surgery, Inc.; Vice President of New Business Development for Johnson & Johnson Professional, Inc.; and Director of Research and Development of Johnson & Johnson Orthopedics. In those capacities, Dr. Clemow was responsible for acquiring or developing what today represents billions of dollars of Johnson & Johnson revenue. Dr. Clemow serves or has served on the boards of numerous private and public companies including Aevi Genomics; Encore Medical; Echo Healthcare Acquisition Corp.; BioMedical Enterprises, Inc.; and Kinetic Muscles, Inc. He graduated from the University of Surrey with a Bachelor of Science Degree in metallurgy and Ph.D. in metallurgy and earned his MBA degree from Columbia University in New York.

 

With extensive senior management experience within healthcare companies, including Johnson & Johnson, as well as a member of the boards of numerous public and private companies, we believe that Dr. Clemow is qualified to serve as a member of our Board.

 

Dallas C. Hack, M.D., M.P.H. is a Director of the Company.

 

He is board certified in General Preventive Medicine and Public Health and a Fellow in the American College of Military Public Health. He directed trauma research for the military from 2008 to 2014, with responsibility for more than $2 billion in grant funding. He served as Command Surgeon at the strategic level during Operations Enduring Freedom and Iraqi Freedom. He held numerous military medical leadership positions including Commander of the NATO Headquarters Healthcare Facility, and Command Surgeon at the strategic level during Operations Enduring Freedom and Iraqi Freedom. COL(R) Hack received numerous military awards including the Bronze Star, two Legion of Merit awards, and was inducted as a Distinguished Member of the Military Order of Medical Merit. He has a BA from Andrews University (1972), an MPH from Johns Hopkins University (1995), a MD from Loma Linda University (1976), an MSS from the US Army War College (2004), and a CPE from the Certifying Commission in Medical Management (1997). He was recognized as the Distinguished Alumnus of the Year by Loma Linda University in May 2015. Dr. Hack has an appointment from the School of Medicine, University of Pittsburgh as Adjunct Professor of Neurosurgery and from Virginia Commonwealth University as an Associate Clinical Professor, Department of Physical Medicine and Rehabilitation. After retiring from 28 years of military service in 2015, Dr. Hack has worked with numerous biotechs and non-profits to advance medical research and transition the progress to improved clinical practice.

 

We believe that Dr. Hack is qualified to serve as a member of our Board because of his extensive knowledge of the industry in which we operate.

 

Eugene E. Burleson is a Director of the Company. He is a private investor and was Chairman of PET DRx Corporation from June 2005 to July 1, 2010, and its Chief Executive Officer from October 2008 until its acquisition by VCA Antech in July 2010. Mr. Burleson was a director of HealthMont Inc. from September 2000 until its acquisition by SunLink in October 2003. Mr. Burleson served as Chairman of the Board of Directors of Mariner Post-Acute Network, Inc. from January 2000 to June 2002. Mr. Burleson also served as Chairman of the Board of Directors of Alterra Healthcare Inc. a developer and operator of assisted living facilities and is on the Board of Deckers Outdoor Corporation Inc. Mr. Burleson served as Chairman of the Board of GranCare Inc. from October 1989 to November 1997. Additionally, Mr. Burleson served as President and Chief Executive Officer of GranCare Inc. from December 1990 to February 1997. Upon completion of the merger of GranCare’s pharmacy operations with Vitalink Pharmacy Services Inc. in February 1997, he became Chief Executive Officer and a Director of Vitalink Pharmacy Services Inc. Mr. Burleson resigned as Chief Executive Officer and Director of Vitalink Pharmacy Services in August 1997. From June 1986 to March 1989, Mr. Burleson served as President, Chief Operating Officer and a Director of American Medical International Inc. (“AMI”), an owner and operator of acute care hospitals. Based in London from May 1981 to June 1986, Mr. Burleson served as Managing Director of AMI’s international operations. Mr. Burleson received his early management training at Eastman Kodak from 1963 to 1974. He graduated from East Tennessee State University with a Bachelor of Science Degree in accounting and earned an MBA degree in 1972.

We believe Mr. Burleson vast business experience provides him with the qualifications and skills to serve on our Board.

 

Code of Ethics

 

Our Board plans to adopt a written code of business conduct and ethics (“Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. We intend to post on our website a current copy of the Code and all disclosures that are required by law in regard to any amendments to, or waivers from, any provision of the Code.

 

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, as set forth below, will also provide risk oversight in respect of its areas of concentration and reports material risks to the board for further consideration.

 

Board of Directors

 

Our business and affairs are managed under the direction of our Board. Our Board consists of seven directors, five of whom qualify as “independent” under the listing standards of Nasdaq.

 

Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the Board following the annual meeting of shareholders and until their successors have been elected and qualified.

 

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Director Independence

 

Our board of directors are composed of a majority of “independent directors” as defined under the rules of Nasdaq. We use the definition of “independence” applied by Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq listing rules provide that a director cannot be considered independent if:

 

  the director is, or at any time during the past three (3) years was, an employee of the company;

 

  the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12) consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);

 

  the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);

 

  the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3) years, any of the executive officers of the company served on the compensation committee of such other entity; or

 

  the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three (3) years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

Under such definitions, our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our Board has determined that Joel Kanter, Dr. Eugene A. Bauer, Dr. Alastair Clemow, Dr. Dallas Hack and Eugene Burleson are all independent directors of the Company. 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.

 

Committees of the Board of Directors

 

Our Board has established an audit committee and a compensation committee. Our Board has not yet adopted procedures by which stockholders may recommend nominees to the Board of Directors. The composition and responsibilities of each of the committees of our Board is described below. Members serve on these committees until their resignation or until as otherwise determined by our board of directors.

 

Audit Committee

 

We have established an audit committee consisting of Eugene Burleson, Alastair Clemow and Dallas Hack. Eugene Burleson is the Chairman of the audit Committee. In addition, our Board has determined that Eugene Burleson is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended, or the Securities Act. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:

 

  reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our annual disclosure report;

  discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;

  discussing with management major risk assessment and risk management policies;

  monitoring the independence of the independent auditor;

  verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;

 

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  reviewing and approving all related-party transactions;

  inquiring and discussing with management our compliance with applicable laws and regulations;

  pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;

  appointing or replacing the independent auditor;

  determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;

  establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and

  approving reimbursement of expenses incurred by our management team in identifying potential target businesses.

 

The audit committee is composed exclusively of “independent directors” who are “financially literate” as defined under the Nasdaq listing standards. The Nasdaq listing standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.

 

In addition, the Company intends to certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.

 

Compensation Committee

 

We have established a compensation committee of the board of directors to consist of Alastair Clemow, Eugene Bauer and Eugene Burleson, each of whom is an independent director. Each member of our compensation committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act, or Rule 16b-3, and an outside director, as defined pursuant to Section 162(m) of the Code, or Section 162(m). Alastair Clemow is the chairman of the compensation committee. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:

 

  reviews, approves and determines, or makes recommendations to our board of directors regarding, the compensation of our executive officers;

  administers our equity compensation plans;

  reviews and approves, or makes recommendations to our board of directors, regarding incentive compensation and equity compensation plans; and

  establishes and reviews general policies relating to compensation and benefits of our employees.

 

Director Compensation

 

On February 18, 2020, the Board approved the grant to each member of the Board, on a quarterly basis, of options to purchase 500 shares of the Company’s common stock at an exercise price equal to the greater of $2.50 per share and the per share market value of the Company’s common stock on the date of the grant. On April 1, 2020, we issued options to purchase 2,000 shares of Company common stock to members of the Board, of which 1,250 have been cancelled. On July 1, 2020, we issued an additional 1,000 options in aggregate to two members of the Board. The options are subject to quarterly equal vesting over a one-year period. To date 375 of these options have vested. On July 9, 2020, the Board cancelled any further issuance of these quarterly options.

 

On July 9, 2020 the Board approved a compensation package for non-employee directors of the Board. The compensation for non-employee directors include; (i) upon of each such director, such director shall be issued 10,000 shares of restricted common stock which vests evenly on an annual basis over a four year period beginning on January 1, 2021; (ii) the annual issuance of 7,500 shares of restricted common stock to each such director which vests in full in next calendar year from the date of issuance; (iii) quarterly cash payments of $6,250 to each such director; (iv) the annual issuance of 10,000 shares of restricted common stock to the Chairman of the Board which vests in full in next calendar year from the date of issuance and (v) the annual issuance of 5,000 shares of restricted common stock to each chairman of the Audit, Nominating, Compensation and Corporate Governance Committees(Corporate Governance and Nominating Committees have not yet been established).

 

Family Relationships

 

There are no family relationships among any of our officers or directors.

 

Involvement in Certain Legal Proceedings

 

Except as disclosed below, to our knowledge, none of our current directors or executive officers has, during the past ten (10) years:

 

  been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

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  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 was a general partner or executive officer, either at the time of the bankruptcy filing or within two (2) 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 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.

 

On July 5, 2011, Max Munn filed for bankruptcy pursuant to Chapter 7 of the Bankruptcy Code. Mr. Munn filed for bankruptcy as a result of guarantees made by Mr. Munn of construction loans made by APF Group that were defaulted on in 2008 and 2009 during the financial crisis. Mr. Munn was a principal of APF Group. On January 30, 2012, the Chapter 7 proceedings were concluded.

 

On June 25, 2018, Munn Works, all of the equity of which was beneficially owned by Max Munn as of such date, filed a voluntary petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code as further described in the section entitled “Business—Munn Works.”

 

Medical Advisory Board

 

The Company has established a Medical Advisory Board (the “MAB”), the purpose of which is to provide non-binding medical advice to the Board and the Company’s management relating to the development, manufacture, and sale of the Company’s disinfection devices and related products. The MAB shall meet at least twice annually with the Board and each member shall receive on an annual basis an option to purchase 5,000 shares of the Company’s common stock at initially $5.00 per share and the Chairman of the MAB shall receive on an annual basis an option to purchase 10,000 shares of the Company’s common stock at initially $5.00 per share. All of the options vest quarterly.

 

Currently, the MAB consists of the following two members and no chairman:

 

Dr. Nawar M. Shara, Ph.D. is a Director of the Company and is currently an Associate Professor of Medicine at Georgetown University Medical Center; Director, Biostatistics, Epidemiology and Research Design at Georgetown-Howard Universities Center for Clinical and Translational Science; and Director, Department of Biostatistics and Bioinformatics, MedStar Health Research Institute. Dr. Nawar has more than a decade of experience in grant proposal development, statistical consulting, clinical trials, statistical analysis, and data management; and teaching specialized courses to medical students and healthcare providers, including nurses and physicians. Dr. Nawar has more than seven years of experience in serving as a scientific reviewer on study sections for Veterans Affairs, Department of Defense (“DOD”), and National Institutes of Health (“NIH”). Dr Nawar has Developed biostatistics modular courses for professionals in health sciences, biostatistics, and regulatory science; served as statistical reviewer for peer-reviewed journals (e.g., American Journal of Cardiology, Diabetes, Diabetes Care, and Journal of Community Hospital Internal Medicine Perspectives). Dr Shara’s research focus includes Big Data solutions, Artificial Intelligence, Machine Learning, data visualization, Predictive Analytics, Adaptive Designs and Optimization schemes in clinical trials. Dr. Shara She is a member of American Statistical Association, the Royal Statistical Society, the American Society of Nephrology, the Women in Statistics Caucus, ASA Scientific and Public Affairs Advisory Committee. She is the President of the National Arab American Medical Association (NAAMA DC Chapter) as well as the chair of the Science and Research Committee for NAAMA. Dr. Shara has served as a peer reviewer for the following journals: Diabetes, American Journal of Cardiology and Journal of Community Hospital Internal Medicine Perspectives and has authored over 50 peer-reviewed journal publications. Dr. Shara served as Principal Investigator of several NIH-funded studies, National Kidney Foundation, Robert Wood Johnson Foundation. Her earlier work aimed at examining correlated of kidney and cardiovascular disease including oxidative Stress and surrogates of kidney function. She is currently the principal investigator of a NIH NCATS supplements looking to leverage voice activated technology (Alexa) to help patients with Heart Failure to better manage their disease. Dr. Shara conducts, supports and oversees clinical and translational research across MedStar hospitals and is involved in teaching and education at Georgetown she is also course Director for many offerings at Georgetown University including, Biostatistics in Medical Research, Research methodology and Analytic approaches in Regulatory Science, a course offered as part of the Master of Science in Regulatory Science program at Georgetown University (CERSI) and the Chair for a session on AI in medicine at the First International Conference in Systems and Network Medicine at Georgetown University, Washington DC, September 2019. Dr. Nawar received a Ph.D. in Applied Sciences from American University in 2002 and an M.S. in Applied Statistics from American University in 1996.

 

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Dr. Adam Auerbach, M.D. is a Director of the Company and is currently serving as the Medical Director of the Sandra Atlas Bass Heart Hospital at North Shore Hospital as well as the Associate Medical Director of North Shore University Hospital. Dr. Auerbach has been in these roles for two years. He is also currently serving as the head of quality for the department of cardiology. Dr. Auerbach has been in this role since 2014 and served as the Director of Inpatient Cardiac Services at North Shore University Hospital from 2012-2017. Dr. Auerbach graduated from Rutgers University in 1998 with a degree in Molecular Biology and Biochemistry, he then attended Albert Einstein College of Medicine of Yeshiva University from 1998 to 2002. Dr. Auerbach completed a residency in internal medicine at Long Island Jewish Medical Center from 2002 to 2005 and completed a fellowship in Cardiovascular Diseases at North Shore University Hospital and Long Island Jewish Medical Center from 2005 to 2008. Dr. Auerbach was briefly in a private cardiology practice until he joined the faculty of North Shore University Hospital in 2010. 

 

EXECUTIVE COMPENSATION

 

The following table illustrates the compensation paid by the Company to its executive officers. The disclosure is provided for the years ended December 31, 2019 and December 31, 2018.

 

Name and Principal Position   Year   Salary($)(1)   Total($)

Keyoumars Saeed(2)

Chief Executive Officer and

Director 

           
    2019   --   --
    2018   --   --
             

Max Munn,

President and

Director

           
    2019   $400,000(3)   $400,000
    2018   $400,000(4)   $400,000
             
James L. Doyle, III(5)            
Chief Operations Officer            
    2019   --   --
    2018   --   --
             
Joseph N. Himy(6)            
    2019   --   --
    2018   --   --

 

(1) We periodically review, and may increase, base salaries in accordance with the Company’s normal annual compensation review for each of our named executive officers.
(2) Mr. Saeed was hired as the Company’s Chief Executive Officer on June 30, 2020.
(3) The cash salary of $400,000 was forgone by Mr. Munn and on April 1, 2020, he was issued a five-year warrant to purchase 80,000 shares of the Company’s common stock at an exercise price equal to the greater of $5.00 per share and market value per share of the Company’s common stock on the date of issuance in lieu of cash salary.
(4) Represents amounts paid by Munn Works prior to the Company’s formation.
(5) Mr. Doyle was hired as the Company’s Chief Operations Officer on June 20, 2020.
(6) Joseph N. Himy was hired as the Company’s Chief Financial Officer on July, 15, 2020

 

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Equity Awards

 

As of December 31, 2019, and 2018, the Company did not have any outstanding equity awards.

 

Employment Agreements.

 

As of December 31, 2019, and 2018, the Company had no employment agreements with any of its named executive officers.

 

However, on June 30, 2020, the Company entered into employment agreements with its Chief Executive Officer and Chief Operations Officer.

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth certain information, as of July 15, 2020, with respect to the holdings of (1) each person who is the beneficial owner of more than 5% of Company voting stock, (2) each of our directors, (3) each executive officer, and (4) all of our current directors and executive officers as a group.

 

Beneficial ownership of the voting stock is determined in accordance with the rules of the SEC and includes any shares of Company voting stock over which a person exercises sole or shared voting or investment power, or of which a person has a right to acquire ownership at any time within 60 days of July 15, 2020. Except as otherwise indicated, we believe that the persons named in this table have sole voting and investment power with respect to all shares of voting stock held by them. Applicable percentage ownership in the following table is based on 5,103,316 shares of common stock issued and outstanding on July 15, 2020, and 6,186,856 after the offering assuming a common stock offering of 1,000,000 shares (excluding 150,000 shares which may be sold upon exercise of the underwriters’ over-allotment option and including 51,034 shares of common stock to be issued upon the effectiveness of the registration statement related to the offering and 32,506 shares to be issued by the closing date of this offering), plus, for each individual, any securities that individual has the right to acquire within 60 days of June 23, 2020.

 

To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our common stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our knowledge, there is no arrangement, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

 

Name and Address
of Beneficial Owner
  Title   Title of Class   Beneficially
owned
    Percent of Class
Before Offering
    Percent of Class
After Offering
 
Officers and Directors                                
                                 
Keyoumars Saeed   Chief Executive Officer and Director   Common Stock     --       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Max Munn   President   Common Stock     5,080,000       99.5 %     82.1 %
        Series A Preferred Stock     2,000       100 %     100 %
                                 
James L. Doyle III   Chief Operations Officer   Common Stock     --       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Joseph N. Himy   Chief Financial Officer   Common Stock     --       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Joel Kanter   Chairman of the Board   Common Stock     --       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Dr. Eugene A. Bauer, M.D.   Director   Common Stock     --       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Dr. Alastair Clemow, Ph.D   Director   Common Stock     5,000       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Dr. Dallas C. Hack, M.D.   Director   Common Stock     --       --       --  
        Series A Preferred Stock     --       --       --  
                                 
Eugene E. Burleson   Director   Common Stock     5,000       *       *  
        Series A Preferred Stock     --       --       --  
                                 
Officers and Directors as a Group (total of 9 persons)                                
        Common Stock     5,100,000       99.5 %     82.1 %
        Series A Preferred Stock     2,000       100 %     100 %
5% Stockholders                                
        Common Stock     5,000,000       98 %     80.8 %
        Series A Preferred Stock     2,000       100 %     100 %

 

(1) Unless otherwise indicated, the principal address of the named directors and directors and 5% stockholders of the Company is c/o Applied UV, Inc., 150 N. Macquesten Parkway, Mount Vernon, NY 10550.

(2) Includes 5,000,000 shares which are held in the name of The Munn Family 2020 Irrevocable Trust, for which the spouse of Max Munn is the trustee and 80,000 shares underlying a warrant issued to Mr. Munn.

(3) Held in the name of The Munn Family 2020 Irrevocable Trust, for which the spouse of Max Munn is the trustee. Each share of Series A Preferred Stock is entitled to 1,000 votes (2,000,000 votes in aggregate) and votes with the Company’s common stock as a single class.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

In February of 2019, the Company engaged Carmel, Milazzo & Feil LLP to represent and assist the company with all general corporate legal matters including this offering of the Company’s common stock. Ross Carmel, a former board member of Applied UV, is a partner at Carmel, Milazzo & Feil LLP. As partial compensation for its legal services, Carmel, Milazzo & Feil LLP will receive three percent of the outstanding shares of the Company’s common stock, including the shares issued in this offering and the shares issued to Carmel, Milazzo & Feil LLP. As of June 19, 2020, Carmel, Milazzo & Feil LLP, has been issued 102,066 shares of the Company’s common stock. Carmel, Milazzo & Feil LLP will receive an additional 51,034 upon the effectiveness of the registration statement for this offering and an additional 32,506 shares (37,145 shares if the underwriters exercise their option to purchase additional shares in full) on the closing date of the offering. As of March 31, 2020, the Company has recorded a liability to be settled in stock for an amount of $507,805, which does not include the shares to be issued at the closing of the offering.

 

 

DESCRIPTION OF SECURITIES

 

The following description of our securities is only a summary and is qualified in its entirety by reference to the actual terms and provisions of the capital stock contained in our certificate of incorporation and our bylaws.

 

General

 

The Company is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is 151,000,000 shares of capital stock, consisting of 150,000,000 shares of common stock, $0.0001 par value per share, and 1,000,000 shares of preferred stock, $0.0001 par value per share. On June 17, 2020 we effected a 1 for 5 reverse stock split of the issued and outstanding shares of our common stock. The number of authorized shares of common stock remained at 150,000,000. On June 23, 2020 we effected a 1 for 5 reverse stock split of the issued and outstanding shares of preferred stock. The number of authorized shares of preferred stock remained at 1,000,000.

 

Common Stock

 

The holders of our common stock are entitled to the following rights:

 

Voting Rights. Each share of our common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors.

 

Dividend Rights. Subject to limitations under Delaware law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our Board out of funds legally available therefor.

 

Liquidation Rights. In the event of the liquidation, dissolution or winding up of our business, the holders of our common stock are entitled to share ratably in the assets available for distribution after the payment of all of our debts and other liabilities, subject to the prior rights of the holders of our preferred stock.

 

Other Matters. The holders of our common stock have no subscription, redemption or conversion privileges. Our common stock does not entitle its holders to preemptive rights. All of the outstanding shares of our common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.

 

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Preferred Stock

 

As of July 15, 2020, 2,000 shares of preferred stock have been designated as Series A Preferred Stock, all of which are beneficially owned by a trust, the trustee of which is the spouse of our President, Max Munn. The holders of our Series A Preferred Stock are entitled to the following rights:

 

Voting Rights. Each share of our Series A Preferred Stock entitles its holder to 1,000 votes per share and votes with our common stock as a single class on all matters to be voted or consented upon by the stockholders.

 

Dividend Rights. The holders of our Series A Preferred Stock are not entitled to any dividend rights.

 

Liquidation Rights. The holders of the Series A Preferred Stock are not entitled to any liquidation preference.

 

Other Matters. The holders of our Series A Preferred Stock have no subscription, redemption or conversion privileges and are not subject to redemption. Our Series A Preferred Stock does not entitle its holders to preemptive rights. All of the outstanding shares of our Series A Preferred Stock are fully paid and non-assessable.

 

Additional Preferred Stock. Our Board has the authority to issue additional preferred stock in one or more classes or series and to fix the designations, powers, preferences, and rights, and the qualifications, limitations or restrictions thereof including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.

  

While we do not currently have any plans for the issuance of any additional preferred stock, the issuance of additional preferred stock could adversely affect the rights of the holders of common stock and, therefore, reduce the value of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the common stock until the Board of Directors determines the specific rights of the holders of the preferred stock; however, these effects may include:

 

  Restricting dividends on the common stock;

  Diluting the voting power of the common stock;

  Impairing the liquidation rights of the common stock; or

  Delaying or preventing a change in control of the Company without further action by the stockholders.

 

Warrants

 

On April 1, 2020, the Company issued to Max Munn, the Company’s President and a director of the Company, in lieu of paying his salary for 2019, warrants to purchase a total of 80,000 shares of Company common stock at the exercise equal to the greater of $5.00 and the market value per share of the Company’s common stock on the date of issuance. Market value will be determined by an independent valuation company engaged by the Company; provided, however, if on the date of the issuance of the warrant the Company common stock is listed on a national exchange or quoted on an established quotation system, then market value shall equal the closing price of the Company common stock listed on such exchange or quoted on such quotation system on the trading day immediately prior to the date of the grant. The warrant expires five years from the date of issuance.

 

On July 1, 2020, the Company issued two warrants to purchase 5,000 shares in aggregate, each at a $5.00 per share exercise price in exchange for consulting services.

 

Options

 

On February 18, 2020, the Board approved the quarterly issuance of options to the Board as described above in the section entitled “Management—Director Compensation.” Currently, such options to purchase 1,750 shares issued to the Board are outstanding, 375 of which are vested. No further issuances no further issuances of these options will be made.

 

On July 9, 2020, the Board approved the annual issuance of options to purchase 5,000 shares of restricted Common Stock to each member of the MAB and the annual issuance of an option to purchase 10,000 shares of restricted Company common stock to the Chairman of the MAB. The options have an exercise price of $5.00 per share and vest evenly on a quarterly basis over a period of one year. The Company has issued options to purchase 10,000 shares of Company common stock to members of the MAB, none of which are vested.

 

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Restricted Shares Subject to Vesting

 

On June 30, 2020 we entered into employment agreements with our Chief Executive Officer and our Chief Operating Officer, pursuant to which 89,308 unvested restricted shares of our common stock and 38,275 unvested shares of our common stock were issued to our Chief Executive Officer and our Chief Operations Officer, respectively. In each case, the shares will evenly vest on a quarterly basis over a period of 18 months, with the first vesting to occur on September 30, 2020

 

Only July 9, 2020, the Board approved the issuance of 10,000 unvested shares of restricted stock to each of four newly elected directors. In each case, the shares will evenly vest on an annual basis over a period of four (4) years, with the first vesting to occur on January 1, 2021.

 

On July 9, 2020, the Board approved the annual issuance of 7,500 unvested shares of restricted common stock to our non-employee directors. The shares will be issued on the first trading day of each year and vest on January 1 of the following year; provided however, the first issuance of 7,500 shares to a director will be issued immediately and vest on January 1 of the next calendar year. 37,500 shares were issued to our non-employee directors on July 9, 2020, which vest on January 1, 2021.

 

On July 9, 2020, the Board approved the annual issuance of 10,000 unvested shares of restricted common stock to the Board chairman. The shares will be issued on the first trading day of each year and vest on January 1 of the following year; provided however, the first issuance of 10,000 shares to a Board chairman will be issued immediately and vest on January 1 of the next calendar year. 10,000 shares were issued to our Chairman on July 9, 2020, which vest on January 1, 2021.

On July 9, 2020, the Board approved the annual issuance of 5,000 unvested shares of restricted common stock to the chairman of the Audit, Compensation, Nomination and Corporate Governance Committees (the Nominating and Corporate Governance Committees have not yet been established). The shares will be issued on the first trading day of each year and vest on January 1 of the following year; provided however, the first issuance of 5,000 shares to a committee chairman will be issued immediately and vest on January 1 of the next calendar year. 10,000 shares were issued to our committee chairman on July 9, 2020, which vest on January 1, 2021.

 

S-8 Registration Statement

 

On May 4, 2020, we adopted the Plan. Under the Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 600,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. Currently, no awards have been granted under the Plan. We may file one or more registration statements on Form S-8 under the Securities Act to register the shares of common stock issued or issuable under our Plan. Any such Form S-8 registration statement will become effective automatically upon filing. Once these shares are registered, they can be sold in the public market upon issuance, subject to Rule 144 limitations applicable to affiliates and vesting restrictions.

 

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Exclusive Forum

 

Our Certificate of Incorporation, as amended provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Company’s Certificate of Incorporation or the Bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage lawsuits against us or our directors or officers. Our Certificate of Incorporation also provides that this choice of forum provision does not apply to claims arising under federal securities laws.

 

Section 203 of the Delaware General Corporation Law

 

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:

 

  a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);

 

  an affiliate of an interested stockholder; or

 

  an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.

 

A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:

 

  our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;

 

  after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock will be VStock Transfer, LLC.

 

Listing

 

We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “AUVI” which listing is a condition to this offering.

 

SHARES ELIGIBLE FOR FUTURE SALE

 

There is not currently an established U.S. trading market for our common stock. We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding warrants, in the public market after this offering, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

 

Upon completion of the sale of 1,000,000 shares of common stock pursuant to this offering, we will have 6,196,856 shares of common stock issued and outstanding. In the event the underwriters exercise the over-allotment option in full, we will have 6,351,495 shares of common stock issued and outstanding. The common stock sold in this offering will be freely tradable without restriction or further registration or qualification under the Securities Act.

 

63

 

 

All previously issued shares of common stock that were not offered and sold in this offering, as well as shares issuable upon the exercise of warrants and subject to employee stock options, are or will be upon issuance, “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if such public resale is registered under the Securities Act or if the resale qualifies for an exemption from registration under Rule 144 under the Securities Act, which are summarized below.

 

In general, a person who has beneficially owned restricted shares of our common stock for at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the ninety (90) days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:

 

1% of the number of shares of our common stock then outstanding; or

 

1% of the average weekly trading volume of our common stock during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale;

 

provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.

 

Lock-Up Agreements

 

Our officers and directors have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days after the effective date of the registration statement for this offering without the prior written consent of the representative (as defined herein).

 

UNDERWRITING

 

Prior to this offering, there has been no public market for our common stock. We have applied for approval of our common stock for listing on The Nasdaq Capital Market under the symbol “AUVI.” Trading of our common stock on Nasdaq is expected to begin following this prospectus being declared effective by the SEC.

 

Underwriting

 

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Network 1 Financial Securities, Inc. is acting as the representative, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:

 

Name   Number of Shares  
Network 1 Financial Securities, Inc.        
Total:        

 

The underwriters and the representative are collectively referred to as the “underwriters” and the “representative,” respectively. The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.

 

64

 

 

The underwriters initially propose to offer part of the shares of common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representative.

 

Over-Allotment Option

 

We have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to 150,000 additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.

 

Discounts and Commissions and Expenses

 

We have agreed to pay the underwriters a cash fee equal to 9.0% of the aggregate gross proceeds.

 

The representative has advised us that the underwriters propose to offer the shares directly to the public at the public offering price set forth on the cover of this prospectus. In addition, the representative may offer some of the shares to other securities dealers at such price less a concession of up to $[ ] per share. After the offering to the public, the offering price and other selling terms may be changed by the representative without changing the Company's proceeds from the underwriters’ purchase of the shares.

 

The following table shows the public offering price, underwriting discounts and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option. The underwriting discounts are equal to the public offering price per share less the amount per share the underwriters pay us for the shares.

 

   

Per Share of

Common Stock

    Total without Over-allotment Option     Total with
Over-allotment Option
 
Public offering price   $       $ 5,000,000     $ 5,750,000  
Underwriting discounts   $       $ 450,000     $ 517,500  
Proceeds, before expenses, to us   $       $ 4,550,000     $ 5,232,500  

 

We have agreed to pay the representative a non-accountable expense allowance of 2% of the gross proceeds of the offering. We estimate that the total expenses, but excluding underwriting discounts and commissions and the 2% non-accountable expense allowances, will be approximately $[*], all of which are payable by us. This figure includes expense reimbursements we have agreed to pay the representative for reimbursement of its expenses related to the offering up to a maximum aggregate expense allowance of $75,000, for which we have paid a $35,000 advance, which will be returned to us to the extent not offset by actual expenses in accordance with FINRA Rule 5110(f)(2)(C).

 

Underwriters’ Warrants

 

As additional compensation to the underwriters, upon consummation of this offering, we will issue to the underwriters or their designees warrants to purchase an aggregate number of shares of our common stock equal to 8% of the number of shares of common stock issued in this offering (excluding shares of common stock sold to cover over-allotments, if any), at an exercise price per share equal to 125% of the initial public offering price (the “Underwriters’ Warrants”). The Underwriters’ Warrants and the underlying shares of common stock shall not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of the public offering in accordance with FINRA Rule 5110(g)(1). The Underwriters’ Warrants will be exercisable, in whole or in part, commencing 180 days from the closing date of the offering and will expire on the fifth anniversary of the effective date of the registration statement related to the offering in accordance with FINRA Rule 5110(f)(2)(G)(i). In addition, we have granted the underwriters a one-time demand registration right at our expense, an additional demand registration at the holder’s expense and unlimited “piggyback” registration rights with respect to the underlying shares. The demand registration rights will not be greater than five years from the effective date of the registration statement related to the offering in compliance with FINRA Rule 5110(f)(2)(G)(iv).The piggyback registration right will not be greater than five years from the effective date of the registration statement related to the offering in compliance with FINRA Rule 5110(f)(2)(G)(v).

 

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Determination of Offering Price

 

Before this offering, there has been no public market for our common stock. Accordingly, the public offering price will be negotiated between us and the Representative. Among the factors to be considered in these negotiations are:

 

  the information set forth in this prospectus and otherwise available to the underwriters;
  the prospects for our Company and the industry in which we operate;
  An assessment of our management;
  our past and present financial and operating performance;
  our prospects for future earnings;
  financial and operating information and market valuations of publicly traded companies engaged in activities similar to ours;
  the prevailing conditions of United States securities markets at the time of this offering; and
  other factors deemed relevant.

 

Neither we nor the underwriters can assure investors that an active trading market will develop for shares of our common stock, or that the shares will trade in the public market at or above the initial public offering price.

 

Lock-Up Agreements

 

We and each of our officers, directors affiliates and certain existing stockholders have agreed, for a period of 180 days after the effective date of the registration statement for this offering, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock without the prior written consent of the representative.

 

The representative may in its sole discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the lock-up period. When determining whether or not to release shares from the lock-up agreements, the representative will consider, among other factors, the security holder's reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time.

 

Pursuant to the underwriting agreement, we have also agreed, for a period of 180 days from the closing date of the offering, that we will not, subject to specified exempt issuances, offer, pledge, issue, sell, contract to sell, purchase, contract to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise; or (iii) file any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock.

 

Right of First Negotiation

 

According to the terms of the underwriting agreement, the representative shall have the right of first negotiation for a period of twelve months after the closing of this offering to act as co-manager for all future public or private securities offerings by us, or any successor to or subsidiary of our company, during such period.

 

Finder’s Fee

 

In the event that at any time prior to the second anniversary of the closing date of the offering , the Company enters into any transaction with a party introduced directly or indirectly to the Company by the representative, the Company shall pay the representative a transaction fee equal to a percentage of the consideration received by the Company in such transaction as follows:

 

5% of the first $1,000,000

4% of the next $1,000,000

3% of the next $1,000,000

2% of the next $1,000,000

1% of all amounts in excess of $4,000,000.

 

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Indemnification

 

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.

 

Electronic Offer, Sale and Distribution of Shares

 

A prospectus in electronic format may be made available on a website maintained by the representative and may also be made available on a website maintained by other underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the Representative to underwriters that may make Internet distributions on the same basis as other allocations. In connection with the offering, the underwriters or syndicate members may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.

 

The underwriters have informed us that they do not expect to confirm sales of shares offered by this prospectus to accounts over which they exercise discretionary authority.

 

Other than the prospectus in electronic format, the information on any underwriter's website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.

 

Price Stabilization, Short Positions and Penalty Bids

 

In connection with this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. Specifically, the underwriters may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our common stock for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of shares of common stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of common stock involved is greater than the number of shares of common stock in the over-allotment option. To close out a short position, the underwriters may elect to exercise all or part of the over-allotment option. The underwriters may also elect to stabilize the price of our common stock or reduce any short position by bidding for, and purchasing, common stock in the open market.

  

The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing a security in this offering because the underwriter repurchases that security in stabilizing or short covering transactions.

 

Finally, the underwriters may bid for, and purchase, shares of our common stock in market making transactions, including “passive” market making transactions as described below.

 

These activities may stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice.

 

In connection with this offering, the underwriters and selling group members, if any, or their affiliates may engage in passive market making transactions in our common stock immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that:

 

a passive market maker may not effect transactions or display bids for our common stock in excess of the highest independent bid price by persons who are not passive market makers:

 

  net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker's average daily trading volume in our common stock during a specified two-month prior period or 200 shares, whichever is greater, and must be discontinued when that limit is reached; and
  passive market making bids must be identified as such.

 

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Certain Relationships

 

Certain of the underwriters and their affiliates have provided and may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they have or may in the future receive customary fees, however, except for the right of first refusal and the finder’s fee disclosed in this prospectus, we have no present arrangements with any of the underwriters for any further services.

 

Offer Restrictions Outside the United States

 

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

  

EXPERTS

 

Adeptus Partners LLC, an independent certified public accounting firm, audited our financial statements for the years ended December 31, 2019 and 2018. We have included our financial statements in this prospectus and elsewhere in the registration statement in reliance on the reports of Adeptus Partners LLC, given on their authority as experts in accounting and auditing.

  

LEGAL MATTERS

 

Certain legal matters with respect to the validity of the securities being offered by this prospectus will be passed upon by Carmel, Milazzo & Feil LLP, New York, New York. Gordon Rees Scully Mansukhani, LLP, New York, New York, is acting as counsel for the representative of the underwriters with respect to the offering.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

 

We are subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, are required to file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above. We also maintain a website at www.applieduvinc.com. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

 

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Applied UV, Inc. and Subsidiaries

 

Consolidated Financial Statements

 

December 31, 2019 and 2018

 

 

  F-1  

 

 

Applied UV, Inc. and Subsidiaries

Index to the Consolidated Financial Statements

December 31, 2019 and 2018

 

  Page
   
Independent Auditors Report   F-3
   
Financial Statements  
   
Consolidated Balance Sheets F-4
   
Consolidated Statements of Income F-5
   
Consolidated Statements of Changes in Stockholders' Equity (Deficit) F-6
   
Consolidated Statements of Cash Flows F-7
   
Notes to the Consolidated Financial Statements F-8 - F-25

 

  F-2  

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and

Stockholders of Applied UV, Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of Applied UV, Inc. and Subsidiaries (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

 

Adeptus Partners, LLC

 

We have served as the Company’s auditor since 2020.

Ocean, New Jersey

June 23, 2020

 

  F-3  

 

 

Applied UV, Inc. and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2019 and 2018

 

    2019     2018  
Assets            
             
Current Assets                
Cash   $ 1,029,936     $ 793,766  
Vendor deposit     104,517       95,556  
Accounts receivable, net of allowance for doubtful accounts     2,227,792       1,977,333  
Inventory     99,543       112,113  
Loan to shareholder     4,225       103,721  
Prepaid expense and other current assets     30,639       -  
Total Current Assets     3,496,652       3,082,489  
                 
Machinery and equipment, net of accumulated depreciation     34,371       29,493  
Right of use asset     614,522       -  
Other assets     623,842       -  
                 
Total Assets   $ 4,769,387     $ 3,111,982  
                 
                 
Liabilities and Stockholders' Equity (Deficit)                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 1,238,822     $ 983,862  
Income tax payable     106,861       -  
Capital lease obligations-current portion     6,380       6,076  
Lease liability-current     133,097       -  
Notes payable     37,500       -  
Deferred revenue     1,245,300       1,180,159  
Total Current Liabilities     2,767,960       2,170,097  
Long-term Liabilities                
Capital lease obligations - less current portion     15,212       21,592  
Note payable-less current portion     120,000       -  
Lease liability-less current portion     481,425       -  
Liabilities subject to compromise     -       2,336,909  
                 
Total Long-Term Liabilities     616,637       2,358,501  
                 
Total Liabilities     3,384,597       4,528,598  
                 
Stockholders' Equity                
Common stock $.0001 par value, 150,000,000 shares authorized;
5,001,250 shares issued and outstanding, respectively
    500       500  
Series A voting preferred stock $.0001 par value, 1,000,000 shares
authorized; 10,000 shares issued and outstanding
    1       1  
Retained earnings (Deficit)     1,384,289       (1,417,117 )
                 
Total Stockholders' Equity (Deficit)     1,384,790       (1,416,616 )
                 
Total Liabilities and Stockholders' Equity (Deficit)   $ 4,769,387     $ 3,111,982  
                 

 

See accompanying notes to the financial statements.

 

  F-4  

 

 

Applied UV, Inc. and Subsidiaries

Consolidated Statements of Income

For the Years Ended December 31, 2019 and 2018

 

    2019     2018  
             
Net Sales   $ 9,329,720     $ 7,556,444  
                 
Cost of Goods Sold     6,009,730       4,890,012  
                 
Gross Profit     3,319,990       2,666,432  
                 
Selling. General and Administrative Expenses     1,916,386       1,913,101  
                 
Operating Income     1,403,604       753,331  
                 
Other Income (Expense)                
Gain on settlement (See Note 12)     1,520,399       -  
Other Income     -       2,552  
Interest Expense     (15,736 )     (35,640 )
Total Other Income (Expense)     1,504,663       (33,088 )
                 
Income Before Provision for Income Taxes     2,908,267       720,243  
                 
Provision for Income Taxes     106,861       -  
                 
Net Income   $ 2,801,406     $ 720,243  
                 
Basic and Diluted Earnings Per Common Share   $ 0.56     $ 0.14  

 

See accompanying notes to the financial statements.

 

  F-5  

 

 

Applied UV, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

For the Years Ended December 31, 2019 and 2018

 

    Preferred Stock     Common Stock           Total  
    Series A Voting                 Retained     Stockholders  
    Shares     Amount     Shares     Amount     Earnings     Equity  
                                     
Balance, January 1, 2018     10,000     $ 1       5,001,250     $ 500     $ (2,137,360 )   $ (2,136,859 )
                                                 
                                                 
Net income     -       -       -       -       720,243       720,243  
                                                 
Balance, December 31, 2018     10,000       1       5,001,250       500       (1,417,117 )     (1,416,616 )
                                                 
                                                 
Net Income     -       -       -       -       2,801,406       2,801,406  
                                                 
Balance, December 31, 2019     10,000     $ 1       5,001,250     $ 500     $ 1,384,289     $ 1,384,790  

 

See accompanying notes to the financial statements.

 

  F-6  

 

 

Applied UV, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2019 and 2018

 

    2019     2018  
Cash flows from Operating Activities                
Net Income   $ 2,801,406     $ 720,243  
Adjustments to Reconcile Net Income to Net Cash                
Provided by Operating Activities                
Stock based compensation     85,000       -  
Bad debt expense     -       50,000  
Amortization of debt discount     -       18,291  
Gain on settlement     (1,520,399 )     -  
Depreciation and amortization     8,121       6,250  
Changes in Assets and Liabilities                
Increase in accounts receivable     (250,459 )     (855,576 )
Decrease (increase) in inventories     12,570       (41,868 )
Increase in vendor deposits     (8,961 )     (5,661 )
(Increase) in prepaid expenses     (146,676 )     -  
Increase in income taxes payable     106,861       -  
Increase (decrease) in accounts payable and accrued expenses     (382,343 )     208,851  
Increase (decrease) in deferred revenue     65,140       428,031  
Total Adjustments     (2,031,146 )     (191,682 )
Net Cash Provided by Operating Activities     770,260       528,561  
                 
Cash Flows From Investing Activities                
Purchase of machinery and equipment     (12,999 )     (3,865 )
Net Cash Used in Investing Activities     (12,999 )     (3,865 )
                 
Cash Flows From Financing Activities                
Payments on capital leases     (6,076 )     (5,511 )
Increase (decrease) in liabilities subject to compromise     (531,511 )     234,746  
Loan from (to) officer     99,496       (133,303 )
Payments on loans payable     (83,000 )     (101,260 )
Proceeds from loans payable     -       148,125  
Net Cash (Used In) Provided by Financing Activities     (521,091 )     142,797  
                 
Net Increase in Cash and equivalents     236,170       667,493  
Cash and equivalents at January 1,     793,766       126,273  
Cash and equivalents at December 31,   $ 1,029,936     $ 793,766  
                 
Supplemental Disclosures of Cash Flow Information:                
Cash paid during the year for:                
Interest   $ -     $ 18,291  
Supplemental Non-Cash Items Not Included above resulting from the adoption of ASC 842                
Initial recognition of operating lease asset   $ 710,075     $ -  
Initial recognition of operating lease liabilities   $ 710,075     $ -  
Supplemental Non-Cash Items                
Capitalized stock based compensation for initial public offering costs   $ 507,805     $ -  

 

See accompanying notes to the financial statements.

 

  F-7  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

In March 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munn Works, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munn Works, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munn Works, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Company"). The combination met the criteria outlined in ASC 850 to be accounted for as a transaction between entities under common control and therefore the financial statements are being presented as if the transfer happened at the beginning of the period and prior year financial information has been retrospectively adjusted to furnish comparative information.

 

SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. The Company was incorporated in the State of New York in November of 2012 and is headquartered in Mount Vernon, New York. Munn Works, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry.

 

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

 

Principles of Consolidation

The consolidated financial statements include the accounts of Applied UV, Inc., Munn Works, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

 

Concentration of Credit and Business Risk

At times throughout the year, the Company maintains cash balances at various institutions, which may exceed the Federal Deposit Insurance Corporation limit. As of December 31, 2019 and 2018, amounts of $37,029 and $459,543, respectively were in excess of FDIC insured limits.

 

The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other information.

 

For the year ended December 31, 2019, the Company had four major suppliers that accounted for approximately 78% of supplies and materials used by the Company and for the year ended December 31, 2018, the Company had three major suppliers that accounted for approximately 76% of supplies and materials used by the Company. The amounts have been recorded as costs of sales in the consolidated statements of income.

 

Cash and Cash Equivalents

The Company considers all time deposits, certificates of deposit and all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. The Company does not have any cash equivalents at December 31, 2019 and 2018.

 

  F-8  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Accounts Receivable

Accounts receivable are non-collateralized customer obligations due under normal trade terms generally requiring payment within 30-60 days from the invoice date. The carrying amounts of accounts receivable is reduced by a an allowance for doubtful accounts that reflects management’s best estimate of the amounts that will not be collected. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts. Management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes an allowance for doubtful accounts of $50,000 as of December 31, 2019 and 2018 is adequate.

 

Inventory

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. Inventory is comprised of raw materials that are purchased on the initial start date of a specific project and are capitalized using the percentage of completion method of accounting. We amortize these costs to the associated contract proportion with our percentage of completion on the contract, calculated using a cost-based input method. Capitalized costs are considered impaired when the net contract cost asset plus future costs to complete the contract are less than the remaining revenue to be recognized under the contract. When capitalized costs are impaired, we record a charge to the impairment, impairment charges cannot be reversed. As of December 31, 2019 and 2018 no impairment charges were recorded and management has determined that an excess and obsolete reserve is not required.

 

Property and Equipment

Property and equipment are recorded at cost. Depreciation of furniture and fixtures is provided using the straight-line method, generally over the terms of the lease. Repairs and maintenance expenditures, which do not extend the useful lives of the related assets, are expensed as incurred. Depreciation of machinery and equipment is based on the estimated useful lives of the assets.

 

  Years
Machinery and equipment Lesser of term of lease or useful life
Furniture and fixtures 7

 

An asset is disposed of or retired when no future economic benefits are expected to arise from continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset.

 

Revenue and Cost Recognition

On January 1, 2018, the Company adopted accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments using the modified retrospective method for all customer contracts not yet completed as of the adoption date. The adoption of ASC 606 did not have a significant impact on our Consolidated Financial Statements.

 

  F-9  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition (continued)

The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration we expect to receive in exchange for those services. To achieve this core principal, the Company applies the following five steps:

 

1) Identify the contract with a customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation. The Company promises to design, manufacture and sell custom mirrors through contractual arrangements. It was determined that most services within a contract are substantially the same and have the same pattern of transfer to the customer over the term of the agreement and are therefore highly interdependent upon each other. As such, the Company determined that the services within a contract are not separately identifiable in the context of the contract and should therefore be bundled into a single performance obligation.

 

3) Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. We evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less. The Company establishes pricing for contracts with customers based on a fixed price for a fixed fee. Contracts do not provide for a discount or refund to customers and historically, no discounts or refunds have been given.

 

  F-10  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition (continued)

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price based on management's judgment. The identified promises are considered to be bundled in arriving at the overall promise within the contract. This promise therefore results in one performance obligation, to design, manufacture and sell custom mirrors to our customer, therefore, allocation of the transaction price is not necessary.

 

5) Recognize revenue when or as the Company satisfies a performance obligation

Revenue is comprised of projects that are completed within our own facility or from a third-party vendor (direct sales). For projects that are completed within our own facility, the Company satisfies performance obligations at over time. For projects that are completed from a third-party vendor, the performance obligation is recognized at a point in time.

 

As of December 31, 2019 and 2018, total deferred revenue was $1,245,300 and $1,180,159. As of December 31, 2019, deferred revenue was comprised of work generated from our own Mount Vernon facility of $844,331, work performed at the third-party manufacturer of $363,942 and billings made upfront of $37,029. As of December 31, 2018, deferred revenue was comprised of work generated from our own Mount Vernon facility of $514,280, work performed at the third-party manufacturer of $206,337 and billings made upfront of $459,542. Deferred revenue balances at the beginning of the 2019 and 2018 reporting periods was recognized in full during the years ended December 31, 2019 and 2018, respectively. Each component of deferred revenue is further explained below.

 

For projects, that are completed within our own facility, we design, manufacture and sell custom mirrors for hotels and hospitals through contractual agreements. These sales require us to deliver our products within three to six months from commencement of order acceptance. We recognize revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred Revenue represents amounts billed in excess of revenues and profits recognized. Total deferred revenue from the input method of accounting was $844,331 and $514,280 as of December 31, 2019 and 2018, respectively. Revenues and profits recognized in excess of amounts billed typically does not occur as we will not perform any work in excess of the amount we bill to our customers. On January 1, 2019, total deferred revenue from the input method of accounting was $204,880.

 

Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. We report direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as Cost of Sales. We are the principal of direct sales because we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. We typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Vendor payments are capitalized until completion of the project and are recorded as vendor deposits. As of December 31, 2019 and 2018, the vendor deposit balance was $104,517 and $95,556, respectively.

 

  F-11  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition (continued)

5) Recognize revenue when or as the Company satisfies a performance obligation (continued)

Losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Deferred revenue from these projects as of December 31, 2019 and 2018 was $363,942 and $206,337, respectively. On January 1, 2019, total deferred revenue from these projects were $255,875. At December 31, 2019 and 2018, there were no losses charged to expense.

 

There are times that we bill upfront where no work is performed until 30 to 60 days after the deposit is received from our customer. Accordingly, no revenue is recognized and the amounts are deferred. As of December 31, 2019 and 2018, deferred revenue balances related to these invoices were $37,029 and $459,542, respectively. On January 1, 2019, total deferred revenue related to these billings were $291,372.

 

For the year ended December 31, 2019, the Company generated revenues of $6,628,792 at a point in time and $2,700,928 over time.

 

For the year ended December 31, 2018, the Company generated revenues of $5,815,970 at a point in time and $1,740,474 over time.

 

Shipping and Handling Charges

The Company reports shipping and handling fees charged to customers as part of net sales and the associated expense as part of cost of sales. Shipping charges amounted to $1,664,950 and $938,111 for the years ended December 31, 2019 and 2018, respectively.

 

Advertising

Advertising costs are charged to operations when incurred. Advertising expense for the years ended December 31, 2019 and 2018 was $218,724 and $265,637, respectively.

 

Research and Development

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. The Company did not incur any research and development expenses during the years ended December 31, 2019 and 2018.

 

Income Taxes

The Company files income tax returns using the accrual basis of accounting. Income taxes are accounted for under the asset and liability method. Current income taxes are based on the year's income taxable for federal and state tax reporting purposes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extend that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.

 

Per FASB ASC 740-10, disclosure is not required of an uncertain tax position unless it is considered probable that a claim will be asserted and there is a more-likely-than-not possibility that the outcome will be unfavorable. Using this guidance, as of December 31, 2019 and 2018, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company's 2018, 2017 and 2016 Federal and State tax returns remain subject to examination by their respective taxing authorities. Neither of the Company's Federal or State tax returns are currently under examination.

 

  F-12  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

  

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair Value of Financial Instruments

The Company records the fair value of assets and liabilities in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurement. FASB ASC 820 establishes a framework for measuring fair value under accounting principles generally accepted in the United States. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

 

The three levels of the fair value hierarchy under FASB ASC 820 are as follows:

 

- Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
- Level 2 - Valuations based generally on observable inputs for similar assets and liabilities, or identical or similar assets and liabilities in inactive markets.
- Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Valuation techniques could include the use of discounted cash flow models and other similar techniques.

 

The carrying amounts reported in the consolidated balance sheets as of December 31, 2019 and 2018 for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair value of capital lease obligations approximate their carrying value because these financial instruments bear interest at rates that approximate current market rates for loans with similar maturities and credit quality.

 

Stock- Based Compensation

The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718 ("ASC"), Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock and modifications to existing stock options, to be recognized in the statements of operations based on their fair values.

 

Patent Costs

We capitalize costs consisting principally of outside legal costs and filing fees related to obtaining patents. We amortize patent costs over the useful life of the patent, beginning with the date the U.S. Patent and Trademark Office, or foreign equivalent, issues the patent. As of December 31, 2019 and 2018, we capitalized $60,092 and $0 of patent costs. As of December 31, 2019 and 2018, we have not recorded any amortization expense for these patents.

 

Warranty Costs

The Company typically provides warranty on its products. The Company accrues for the estimated warranty costs at the time when revenue is recognized. The warranty accruals are regularly monitored by management based upon historical experience and any specifically identified failures. While the Company engages in extensive product quality assessment, actual product failure rates, material usage or service delivery costs could differ from estimates and revisions to the estimated warranty liability would be required. There was no warranty accrual as of December 31, 2019 and 2018, respectively.

 

  F-13  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Subsequent Events Evaluation Date

The Company evaluated the events and transactions subsequent to the December 31, 2019 balance sheet date, in accordance with ASC 855-10-50, "Subsequent Events", through June 23, 2020, which is the date the consolidated financial statements were available to be issued.

 

Recent Accounting Pronouncements

 

Recently Adopted

In February 2016, the Financial Accounting Standards Board, or the FASB, issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize right-of-use, or ROU, assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all our lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on our statements of income or cash flows.

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation — Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for our company on January 1, 2019. The adoption of this standard did not have a material impact on our financial statements.

 

Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. We will modify our disclosures beginning in the first quarter of 2020 to conform to this guidance. We do not expect the adoption of this standard and the associated changes to our disclosures to have a material impact to our financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology for financial assets with a methodology that reflects expected credit losses. The new credit losses model must be applied to loans, accounts receivable, and other financial assets. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. We plan to adopt the new standard in the first quarter of 2020 using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. We do not believe this guidance will have a material impact on our statements of operations or cash flows.

 

We currently believe that all other issued and not yet effective accounting standards are not relevant to our financial statements.

 

  F-14  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 2 - INVENTORY

 

Inventory consists of raw materials of $99,543 and $112,113 at December 31, 2019 and 2018, respectively.

 

NOTE 3 - PROPERTY AND EQUIPMENT

 

Property and equipment are summarized by major classifications as follows:

 

    December 31,  
    2019     2018  
Machinery and Equipment   $ 39,583     $ 39,583  
Furniture and Fixtures     16,864       3,865  
      56,447       43,448  
Less: Accumulated Depreciation     (22,076 )     (13,955 )
    $ 34,371     $ 29,493  

 

Depreciation expense, including amortization of assets under capital leases, for the years ended December 31, 2019 and 2018 was $8,121 and $6,250, respectively.

 

NOTE 4 - DUE TO AND FROM SHAREHOLDER

 

As of December 31, 2019 and 2018 the Company loaned its majority shareholder noninterest-bearing advances, which are due upon demand. As of December 31, 2019 and 2018, amounts owed from the Company's majority shareholder was $4,225 and $103,721, respectively.

 

NOTE 5 - CAPITAL LEASE OBLIGATION

 

The Company's machinery under a capital lease, which is included in machinery and equipment is summarized as follows:

 

Machinery and Equipment   $ 39,583  
Less: Accumulated Depreciation     (20,205 )
    $ 19,378  

 

Future minimum principal and interest payments under the capital lease agreements as of December 31, 2019, are as follows:

 

2020   $ 7,280  
2021     7,280  
2022     7,280  
2023     1,489  
Less: Amount representing interest     (1,737 )
Present value of future minimum lease payments     21,592  
Less: current portion     (6,380 )
    $ 15,212  

 

  F-15  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 6 - LOANS PAYABLE

 

In December of 2012, the Company received $260,000 from Seagrace Partners that accrued interest at 5% annually with no maturity date and no stated terms of repayment. As of December 31, 2019 and 2018, the note had an outstanding principal balance of $0 and $131,336, respectively. Interest expense related to this note for the year ended December 31, 2019 and 2018 was $5,902 and $7,656, respectively. The outstanding principal balance of $132,390 was reclassed to liabilities subject to compromise (note payable- pre-petition). In 2019, the Company entered into a settlement agreement in relation to the Company's Chapter 11 Bankruptcy (as further described in Note 10 of the financial statements) with the note holder where the Company would pay $80,000 over the next 90 days, in four equal installments of $20,000. The entire $80,000 was repaid prior to December 31, 2019. In addition, the Company will provide the third party lender 8,000 shares of common stock in the Company (subject to certain transfer restrictions), in an amount which will have a public trading value within 24 months of at least $85,000. If the value of the stock does not reach $85,000 at the end of 24 months, the shareholders of the Company will provide the third party lender make-up stock to reach the value of $85,000 with a maximum amount of shares to be issued of 17,000 shares. This repayment would constitute as full and final payment of any and all obligations to the lender. On the date of the settlement, the Company recorded a loss on extinguishments in the amount of $34,610.

 

In June of 2018 and June of 2016, the Company received advances from On Deck Capital in the amounts of $150,000 and $100,000, respectively. The June 2016 note matured in one year from the date of issuance and required 52 weekly payments of $2,346. As of December 31, 2019 and 2018, the balance of this note was $0 and interest expense of $3,981 was recorded during the year ended December 31, 2018. The June 2018 note matured in one year from the date of issuance and required 52 weekly payments of $3,605. As of December 31, 2018, the company made no repayments on this note and has an outstanding principal balance of $150,000. As part of the Chapter 11 Bankruptcy, the outstanding principal balance of $150,000 was reclassed to liabilities subject to compromise (note payable- pre-petition) as further described in Note 10 of the financial statements. Accrued interest on this note as of December 31, 2018 was $17,360 and an additional $20,140 was accrued for based on the proof of claim submitted by the note holder. These amounts were also reclassed to liabilities subject to compromise (accounts payable and accrued expenses- pre-petition) as further described in Note 10 of the financial statements. In 2019, the Company paid $18,750, which was 10% of the allowed proof of claim in the Chapter 11 Bankruptcy of $187,500. In addition, the Company was required to pay $157,500 in a five payments in the amount of $30,000 per year, with an additional $7,500 in year two. The Company recognized a gain on extinguishments of $11,250 in relation to the settlement in the year ended December 31, 2019. As of December 31, 2019, the company has an outstanding balance of $157,500.

 

Minimum obligations under this loan agreement is as follows:

 

For the year Ending December 31,        
2020   $ 37,500  
2021     30,000  
2022     30,000  
2023     30,000  
2024     30,000  
    $ 157,500  

 

  F-16  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 6 - LOANS PAYABLE (continued)

 

In October of 2017, June of 2017, and September of 2016, the Company received advances from LG Funding, LLC in the amounts of $150,971, $150,990, and $125,990, respectively, in exchange for notes in the amounts of $182,679, $187,228, and $156,228, respectively. On the initial date of the note, the Company accounted for the notes at face value less a discount for the difference between the face value and advances received. The discounts were amortized to interest expense in proportion to the repayments over the total amount loaned. For the years ended December 31, 2019 and 2018, the Company recorded $0 and $48,837 in interest expense in relation to these notes. As of December 31, 2019 and 2018, the loans from this third party consisted of the following:

 

    December 31,  
    2019     2018  
October 2017 Note   $ -     $ 87,828  
June 2017 Note     -       39,628  
September 2016 Note     -       -  
Less: Unamortized Discount     -       (22,914 )
Current Portion of Long-Term Debt     -       104,542  
Less: Notes payable- pre-petition (Liabilities Subject to Compromise)*     -       (104,542 )
Current Portion of Long-Term Debt   $ -     $ -  

 

The Company recognized a gain of $81,000 in 2019 as a result of the Chapter 11 Bankruptcy Case and all remaining outstanding balances were settled in full.

 

NOTE 7 - STOCKHOLDERS' EQUITY

 

Series A Preferred Stock

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of shares of Series A Preferred Stock shall not be entitled to any liquidation preference.

 

Voting

On any matters presented to the stockholders of the corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to vote in an amount equal to 1,000 votes per share. Series A Preferred Stock shall vote as a single class and such voting rights shall be identical in all respects.

 

Conversion

The holders of the shares of Series A Preferred Stock shall not have any rights hereunder to convert such shares into, or exchange such shares for, shares of any other series or class of capital stock of the Corporation or of any other person.

 

Common stock

The holders of our common stock are entitled to the following rights:

 

Voting

Each share of our common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors.

 

  F-17  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 7 - STOCKHOLDERS' EQUITY (continued)

 

Common stock (continued)

Dividend

Subject to limitations under Delaware law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our Board out of funds legally available.

 

Liquidation

In the event of the liquidation, dissolution, or winding up of our business, the holders of our common stock are entitled to share ratably in the assets available for distribution after the payment of all of our debts and other liabilities, subject to the prior rights of the holders of our preferred stock.

 

Other Matters

The holders of our common stock have no subscription, redemption, or conversion privileges. Our common stock does not entitle its holders to preemptive rights. All of the outstanding shares of our common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.

 

NOTE 8 - RELATED PARTY

 

In February of 2019, the Company engaged Carmel, Milazzo & Feil LLP (the "Firm") to represent and assist the company with all general corporate legal matters including the preparation and filing with the Securities and Exchange Commission of a registration statement on Form S-1 through the Company's intended initial public offering. Ross Carmel, a former board member of Applied UV, is a partner at the firm. The firm will perform services in exchange for three percent of the outstanding shares of the Company's common stock, issued as follows: 1.) One percent due upon execution of the agreement 2.) One percent due up the filing of the Form S-1; and 3.) One percent due upon the SEC declaring the Form S-1 effective. As of December 31, 2019, the company was liable to issue 102,066 shares of common stock to the firm. These shares have not been issued to date and have been recorded as a liability to be settled in stock for an amount of $507,805. Because these legal fees are directly related to the initial public offering, the amount has been capitalized and is included in other assets.

 

NOTE 9 - LEASING ARRANGEMENTS

 

The Company adopted ASU 2016-02 prospectively as of January 1, 2019, the date of initial application, and therefore prior comparative periods were not adjusted. As part of the adoption, the Company elected the “package of expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification and initial direct costs. The Company did not elect the use-of hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company has lease arrangements which are classified as short-term in nature. The Company has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize Right of Use ("ROU") assets or lease liabilities.

 

The Company determines whether an arrangement is a lease at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years. The Company considered these options to extend in determining the lease term used to establish the Company’s right-of use assets and lease liabilities once reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

  F-18  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

  

NOTE 9 - LEASING ARRANGEMENTS (continued)

 

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate of 5% based on the information available at commencement date in determining the present value of lease payments. On the date of adoption the company recorded a ROU asset and a corresponding lease liability in the amount of $710,075.

 

On February 7, 2014, the Company entered into a lease agreement in Mount Vernon, New York on a month to month basis. The monthly rent under this arrangement from January 1, 2018 through November 30, 2018 was $10,000 per month, from December 2018 through February 2019 was $11,150 per month. The Company then amended the lease for a term that commenced on April 1, 2019 and expire on the 31st day of March 2024 at a monthly rate of $13,400. Rent expense for the year ended December 31, 2019 and 2018 was $156,300 and $121,150, respectively. The lease can be cancelled by either party with 150 days of written notice.

 

Schedule maturities of operating lease liabilities outstanding as of December 31, 2019 are as follows:

 

2020   $ 160,800  
2021     160,800  
2022     160,800  
2023     160,800  
2024     40,200  
Total lease payments     683,400  
Less: Imputed Interest     (68,878 )
Present value of future minimum lease payments   $ 614,522  

 

Consistent with ASC 842-20-50-4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate.

 

  F-19  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 10 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

 

Costs and estimated earnings on contracts in progress, net of progress billings, are as follows as of December 31, 2019 and 2018:

 

Costs incurred on contracts in progress   $ 240,732     $ 255,870  
Estimated net earnings thereon     42,403       300,402  
Total costs and estimated earnings     283,135       556,272  
                 
Billings to date     (1,232,925 )     (1,070,552 )
Net overbilled   $ (949,790 )   $ (514,280 )
                 
Contract Assets   $ -     $ -  
Contract Liabilities (Deferred Revenue)     (949,790 )     (514,280 )
    $ (949,790 )   $ (514,280 )

 

Contract assets represent amounts earned under contracts in progress but not yet billed under the terms of those contracts. These amounts become billable according to the contract terms, which usually consider passage of time, achievement of certain milestones or completion of the project. Substantially all costs and estimated earnings in excess of billings on contracts in progress are expected to be billed and collected in the following year.

 

Contract liabilities represent billings to customers in excess of costs and earnings on contracts in progress. Substantially all such amounts are expected to be earned in the following year.

 

NOTE 11 - SHARE EXCHANGE

 

On March 26, 2019, March 27, 2019 and July 31, 2019, we and the shareholder of SteriLumen, Inc. and the sole member of Munn Works, LLC, completed the transactions contemplated by three Share Exchange Agreements. Pursuant to the applicable Share Exchange Agreements, SteriLumen, Inc. and Munn Works, LLC transferred to us all assets and liabilities. The shareholders of SteriLumen, Inc. exchanged all of their shares in SteriLumen for 10,000 preferred and 2,001,250 common shares of Applied UV, Inc. The sole member of Munn Works, LLC exchanged all of its membership interest in Munn Works, LLC for 3,000,000 common shares of Applied UV, Inc. As the Share Exchanges were transactions between entities that are under common control, accounting rules require that our Consolidated Financial Statements include the results of the Transferred Businesses for all periods presented, including periods prior to the completion of the Share Exchanges.

 

NOTE 12 - LEGAL

 

APF Management filed and served a complaint in 2013 New York state court against Munn Works, LLC, Max Munn and various other parties seeking recovery of damages and was awarded various damages on behalf of APF.

 

On June 25, 2018, Munn Works, LLC. entered Chapter 11 bankruptcy in order to facilitate an appeal and a resolution to this matter. As part of the Chapter 11 bankruptcy, APF management filed a claim in the amount of $1,474,505. All of the parties agreed to resolve the disputes whereby, APF would receive $400,000 payable by the Company. The amount was settled and paid in full in 2019.

 

  F-20  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 12 - LEGAL (continued)

 

Administration of Chapter 11 Case

In June of 2018, Munn Works, LLC received Bankruptcy court approval of certain "first-day" motions, which preserved the Company's ability to continue operations without interruption in Chapter 11. As part of the "first-day" motions, the Company received approval to pay or otherwise honor certain pre-petition obligations generally designed to support the Company's operations. Additionally, the Bankruptcy Court confirmed the Company's authority to pay for goods and services received post-petition in the ordinary course of business.

 

As part of the chapter 11 case, the Company has retained, pursuant to Bankruptcy Court authorization, legal and other professionals to advise the Company in connection with the administration of its chapter 11 case and its litigation with APF management, and certain other professionals to provide services and advice in the ordinary course business. As a result of the chapter 11 filing, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, under the Bankruptcy Code, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Company authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. Among other things, the Bankruptcy Court has authorized the Company to pay certain pre-petition claims relating to employees and critical vendors.

 

On June 25, 2018. the Company filed schedules of assets and liabilities and statement of financial affairs (the "Schedules") with the Bankruptcy Court. The Bankruptcy Court has entered an order setting October 26, 2018 as the deadline for filing proofs of claim (the "Bar Date"). The Bar Date is the date by which claims against the Company relating to the period prior to the commencement of the Company's chapter 11 case must be filed if such claims are not listed in liquidated, non-contingent and undisputed amounts in the Schedules, or if the claimant disagrees with the amount, characterization or classification of its claim as reflected in the Schedules. Claims that are subject to the Bar Date and which are not filed on or prior to the Bar Date, may be barred from participating in any distribution that may be made under a plan of reorganization in the Company's chapter 11 case.

 

The Company applied Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 852, Reorganizations, which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of key financial statement line items. It requires that the financial statements for periods subsequent to the chapter 11 filing distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the consolidated statements of operations. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be subject to a plan of reorganization must be reported at the amounts expected to be allowed in the Company's chapter 11 case, even if they may be settled for lesser amounts as a result of the plan of reorganization or negotiations with creditors. In addition, cash used by reorganization items are disclosed separately in the consolidated statements of cash flow.

 

Liabilities Subject to Compromise

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed in the Company's chapter 11 case, even if they may be settled for lesser amounts. The amounts classified as Liabilities Subject to Compromise as of December 31, 2018 may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, if any, the value of any collateral securing such claims, or other events. The Company cannot reasonably estimate the value of the claims that will ultimately be allowed in its chapter 11 case until its evaluation, investigation and reconciliation of all filed claims has been completed.

 

  F-21  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 12 - LEGAL (continued)

 

Liabilities Subject to Compromise (Continued)

The amount of liabilities subject to compromise represents the Company's estimate, where an estimate is determinable, of known or potential pre-petition claims to be addressed in connection with its chapter 11 case. Such liabilities are reported at the Company's current estimate, where an estimate is determinable, of the allowed claim amount, even though they may be settled for lesser amounts. These claims remain subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, if any, the value of any collateral securing such claims, or other events.

 

As of December 31, 2018, Liabilities subject to Compromise consist of the following (note: all liabilities were settled in 2019, therefore no balances remain as of December 31, 2019):

 

    2018  
Accounts payable and accrued expenses- pre-petition   $ 492,014  
Notes payable- pre-petition     370,390  
Expectation damages accrual- APF Management     1,474,505  
Total   $ 2,336,909  

 

Pursuant to Bankruptcy Court Order dated May 31, 2019, the Debtor’s Second Amended Chapter 11 Plan dated April 29, 2019 (the “Plan”) was approved and confirmed. The Plan provided treatment for five (5) classes of claims, with the general unsecured claims composing Class 4 Claimants. Under the Plan, Class 4 Claimants, would receive 10% of their Allowed Claim on the Effective Date. As a result of the bankruptcy claim, APF received and settled for $400,000 where a gain on settlement of $1,074,505 was recorded. As described in Note 6 of the financial statements, the Company recorded a total net gain from settlement of debt and gains from its Chapter 11 Bankruptcy case in the amount of $57,640. Other various pre-petition creditors received and settled for a total of $103,761, resulting in a gain on settlement in the amount of $388,253. The entire amount was escrowed on or before May 23, 2019 and paid within 15 days of the effective date of the stipulation. As a result of the transaction, the Company recorded a total gain on settlement of $1,520,398.

 

NOTE 13 - INCOME TAXES

 

The provision for federal and state income taxes for the years ended is as follows:

 

    2019     2018  
Current provision:                
Federal   $ 113,786     $ -  
State     5,671       -  
Deferred provision (benefit):                
Federal   $ (12,110 )   $ -  
State     (486 )     -  
Total Deferred     (12,596 )     -  
Total provision for income taxes   $ 106,861     $ -  

 

  F-22  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 13 - INCOME TAXES (continued)

 

The income tax provision differs from the expense that would result from applying federal statutory rates to income before income taxes because the Company is subject to state income taxes, deferred income taxes are based on average tax rates and a portion of gifts and meals and entertainment are not tax deductible. A valuation allowance has been provided to reduce deferred tax assets to an amount that is more likely than not to be realized.

 

On December 22, 2017, the U.S. federal government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act makes broad and complex changes to the U.S. federal tax code, including, but not limited to reducing the U.S. federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018.

 

Prior to the share exchange, Munn Works, LLC was taxed as a single member Limited Liability Company for federal and state income tax purposes. As such, the Company will not pay income taxes for earnings prior to the share exchange, as any income or loss will be included in the tax returns of the individual member. Accordingly, no provision is made for income taxes in the financial statements prior to the share exchange.

 

Effective tax rates differ from the federal statutory rate of 21% applied to income before provision for income taxes due to the following:

 

    2019     2018  
             
Federal statutory rate times financial statement income   $ 610,746     $ 151,251  
Less: Tax Rate applied to pre share exchange earnings     (501,233 )     (151,251 )
Permanent tax basis differences     (7,838 )     -  
State taxable income     5,186       -  
                 
Total provision for income taxes   $ 106,861     $ -  

 

NOTE 14 - SEGMENT REPORTING

 

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities (disinfectant mirror segment) and the manufacture of fine mirrors specifically for the hospitality industry (hospitality segment). The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

 

An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.

 

All net sales, cost of goods sold, and other income (expense) was generated or incurred from the hospitality segment of our business. For the years ended December 31, 2019 and 2018, the hospitality segment of our business incurred $1,860,422 and $1,857,240, respectively, of selling, general and administrative expenses. For the years ended December 31, 2019 and 2018, the disinfectant mirror segment of our business incurred $55,963 and $55,861, respectively, of selling, general and administrative expenses.

 

  F-23  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 14 - SEGMENT REPORTING (continued)

 

As of December 31, 2019 and 2018, total assets from the hospitality segment of our business amounted to $4,706,535and $3,090,548, respectively. As of December 31, 2019 and 2018, total assets from the disinfectant mirror segment of our business amounted to $62,852 and $21,434, respectively.

 

As of December 31, 2019 and 2018, total liabilities from the hospitality segment of our business amounted to $3,347,120 and $4,471,181, respectively. As of December 31, 2019 and 2018, total liabilities from the disinfectant mirror segment of our business amounted to $37,477 and $57,417, respectively.

 

NOTE 15 - SUBSEQUENT EVENT

 

Management has evaluated subsequent events through June 23, 2020, the date the financial statements were available to be issued. As a result of the spread of the COVID-19 Coronavirus and the resulting stay-at-home orders issued by the state and local municipalities in which the Company operates, the Company is experiencing reduced sales. The duration of the reduction in sales may be only temporary. However, the related financial impact and duration cannot be reasonably estimated at this time. On April 3, 2020, the Company submitted a Paycheck Protection Program application to Chase Bank for a loan amount equal to $296,287. The amount was approved and the Company has received the funds. The amount will be used to cover payroll costs, rent, and utilities. Employee and compensation levels are expected to be maintained, however, it is not certain at this time whether or not the loan will be forgiven.

 

On April 20, 2020 SteriLumen entered into the Mount Sinai Agreement pursuant to which Mount Sinai has agreed to conduct a study of the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms at Mount Sinai St. Luke’s Hospital in New York, NY. SteriLumen will be responsible for funding the direct and indirect costs of Mount Sinai’s research in the amount of $160,000 plus all of the cost of microbiological testing. To the extent any intellectual property resulting from the research is conceived by Mount Sinai it will be the intellectual property of Mount Sinai and to the extent it is conceived by SteriLumen it will be the intellectual property of SteriLumen. SteriLumen has a 60-day exclusive option to negotiate a license for Mount Sinai’s resulting patent rights if such patent was obtained at SteriLumen’s request and SteriLumen has paid for all the costs in obtaining the patent. If the results of the study contained in Mount Sinai’s final report are used by SteriLumen in a successful regulatory filing or a successful fundraising effort, the Sponsor will be obligated to pay Mount Sinai a fee of $30,000.

 

Max Munn, Chief Executive Officer of the Company is entitled to a five-year warrant to purchase 80,000 shares of the Company’s common stock at an exercise price equal to the greater of $5.00 per share and the per share market value of the Company's common stock at the date of the grant in lieu of cash salary. The issuance of the warrants is contingent upon an initial public offering.

 

In May of 2020, we adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”), which is effective as of March 31, 2020. Under the Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 600,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant.

 

  F-24  

 

 

Applied UV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

NOTE 15 - SUBSEQUENT EVENT (continued)

 

On February 18, 2020 the Board approved the grant to each member of the Board, on a quarterly basis, of options to purchase 500 shares of the Company’s common stock at an exercise price of equal to the greater of $2.50 per share and the per share market value of the Company's common stock on the date of the grant. On April 1, 2020, we issued options to purchase 2,000 shares of Company common stock to the Board, of which 1,250 have been cancelled. The options are subject to equal quarterly vesting over a one-year period.

 

In June of 2020, we effected a 5:1 reverse stock split (the “Reverse Stock Split”) by filing an amendment to the Company’s Amended and Restated Certificate Incorporation with the Delaware Secretary of State. The Reverse Stock Split combined every five shares of Common Stock issued and outstanding immediately prior to effecting the Reverse Stock Split into one share of Common Stock. As a result, the number of issued and outstanding shares of Common Stock was retroactively adjusted in the consolidated financial statements.

 

  F-25  

 

 

Applied UV, Inc. and Subsidiaries

 

Consolidated Financial Statements

 

March 31, 2020 and 2019

 

  F-26  

 

 

Applied UV, Inc. and Subsidiaries

Index to the Consolidated Financial Statements

March 31, 2020 and 2019

 

  Page
Financial Statements  
   
Condensed Consolidated Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019 F-28
   
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited) F-29
   
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019 (unaudited) F-30
   
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited) F-31
   
Notes to the Unaudited Interim Condensed Consolidated Financial Statements F-32 - F-47

 

  F-27  

 

 

Applied UV, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

   

March 31,

2020

   

December 31,

2019

 
    (Unaudited)  
Assets                
                 
Current Assets                
Cash   $ 1,712,387     $ 1,029,936  
Vendor deposit     230,867       104,517  
Accounts receivable, net of allowance for doubtful accounts     1,261,909       2,227,792  
Inventory     120,995       99,543  
Loan to shareholder     36,959       4,225  
Prepaid expense and other current assets     74,100       30,639  
Total Current Assets     3,437,217       3,496,652  
                 
Machinery and equipment, net of accumulated depreciation     130,442       34,371  
Right of use asset     583,067       614,522  
Other assets     632,732       623,842  
                 
Total Assets   $ 4,783,458     $ 4,769,387  
                 
                 
Liabilities and Stockholders' Equity (Deficit)                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 1,160,719     $ 1,238,822  
Income tax payable     106,861       106,861  
Capital lease obligations-current portion     6,380       6,380  
Lease liability-current     134,706       133,097  
Notes payable     37,500       37,500  
Deferred revenue     1,390,540       1,245,300  
Total Current Liabilities     2,836,706       2,767,960  
Long-term Liabilities                
Capital lease obligations - less current portion     15,212       15,212  
Note payable-less current portion     120,000       120,000  
Lease liability-less current portion     448,361       481,425  
                 
Total Long-Term Liabilities     583,573       616,637  
                 
Total Liabilities     3,420,279       3,384,597  
                 
Stockholders' Equity                
Common stock $.0001 par value, 150,000,000 shares authorized; 5,001,250 shares issued and outstanding, respectively     500       500  
Series A voting preferred stock $.0001 par value, 1,000,000 shares authorized; 2,000 shares issued and outstanding     1       1  
Retained earnings     1,362,678       1,384,289  
                 
Total Stockholders' Equity     1,363,179       1,384,790  
                 
Total Liabilities and Stockholders' Equity   $ 4,783,458     $ 4,769,387  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  F-28  

 

 

Applied UV, Inc. and Subsidiaries

Condensed Interim Consolidated Statements of Operations

(Unaudited)

 

    Three Months Ended
March 31,
 
      2020       2019  
Net Sales   $ 1,528,400     $ 1,460,737  
                 
Cost of Goods Sold     1,161,813       1,138,252  
                 
Gross Profit     366,587       322,485  
                 
Selling. General and Administrative Expenses     388,198       327,879  
                 
Operating Loss     (21,611 )     (5,394 )
                 
Other Income (Expense)                
Other Income     -       465  
Total Other Income (Expense)     -       465  
                 
Loss Before Provision for Income Taxes     (21,611 )     (4,929 )
                 
Provision for Income Taxes     -       -  
                 
Net Loss     (21,611 )     (4,929 )
                 
Basic and Diluted Earnings Per Common Share   $ -     $ -  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  F-29  

 

 

Applied UV, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)

(Unaudited)

 

    Preferred Stock     Common Stock           Total  
    Series A Voting                 Retained     Stockholders  
    Shares     Amount     Shares     Amount     Earnings     Equity  
                                     
Balance, January 1, 2019     2,000     $          1       5,001,250     $ 500     $ (1,417,117 )   $ (1,416,616 )
                                                 
                                                 
Net loss     -       -       -       -       (4,929 )     (4,929 )
                                                 
Balance, March 31, 2019     2,000      $ 1       5,001,250     $ 500     $ (1,422,046 )   $ (1,421,545 )
                                                 

Balance, January 1, 2020

    2,000     $ 1       5,001,250     $ 500     $ 1,384,289     $ 1,384,790  
                                                 
Net loss     -       -       -       -       (21,611 )     (21,611 )
                                                 
Balance, March 31, 2020     2,000     $ 1       5,001,250     $ 500     $ 1,362,678     $ 1,363,179  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  F-30  

 

 

Applied UV, Inc. and Subsidiaries

Consolidated Interim Consolidated Statements of Cash Flows

(Unaudited)

 

    For the Three Months Ended
March 31,
 
    2020     2019  
Cash flows from Operating Activities                
Net Loss   $ (21,611 )   $ (4,929 )
Adjustments to Reconcile Net Loss to Net Cash                
Provided by Operating Activities                
Depreciation and amortization     2,173       2,173  
Changes in Assets and Liabilities                
Decrease (Increase) in accounts receivable     965,883       (662,476 )
(Increase) in inventories     (21,452 )     (532 )
(Increase) in vendor deposits     (126,350 )     (417,957 )
(Increase) in prepaid expenses     (52,351 )     (11,055 )
(Decrease) increase in accounts payable and accrued expenses     (78,103 )     118,061  
Increase in deferred revenue     145,240       1,400,623  
Total Adjustments     835,040       428,837  
Net Cash Provided by Operating Activities     813,429       423,908  
                 
Cash Flows From Investing Activities                
Purchase of machinery and equipment     (98,244 )     -  
Net Cash Used in Investing Activities     (98,244 )     -  
                 
Cash Flows From Financing Activities                
Loan from (to) officer     (32,734 )     -  
Net Cash Used In Financing Activities     (32,734 )     -  
                 
Net Increase in Cash and equivalents     682,451       423,908  
Cash and equivalents at January 1,     1,029,936       793,766  
Cash and equivalents at March 31,   $ 1,712,387     $ 1,217,674  
                 
Supplemental Disclosures of Cash Flow Information:                
Cash paid during the period for:                
Interest   $ -     $ 4,573  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  F-31  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

 

In March 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munn Works, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munn Works, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munn Works, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Company"). The combination met the criteria outlined in ASC 850 to be accounted for as a transaction between entities under common control and therefore the financial statements are being presented as if the transfer happened at the beginning of the period and prior year financial information has been retrospectively adjusted to furnish comparative information.

 

SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. The Company was incorporated in the State of New York in November of 2012 and is headquartered in Mount Vernon, New York. Munn Works, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, 2019. The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements as of and for the year then ended. The consolidated financial statements include the accounts of Applied UV, Inc., Munn Works, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

 

  F-32  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition

 

On January 1, 2018, the Company adopted accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments using the modified retrospective method for all customer contracts not yet completed as of the adoption date. The adoption of ASC 606 did not have a significant impact on our Consolidated Financial Statements.

 

  F-33  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition (continued)

 

The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration we expect to receive in exchange for those services. To achieve this core principal, the Company applies the following five steps:

 

1) Identify the contract with a customer

 

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

2) Identify the performance obligations in the contract

 

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation. The Company promises to design, manufacture and sell custom mirrors through contractual arrangements. It was determined that most services within a contract are substantially the same and have the same pattern of transfer to the customer over the term of the agreement and are therefore highly interdependent upon each other. As such, the Company determined that the services within a contract are not separately identifiable in the context of the contract and should therefore be bundled into a single performance obligation.

 

3) Determine the transaction price

 

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. We evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less. The Company establishes pricing for contracts with customers based on a fixed price for a fixed fee. Contracts do not provide for a discount or refund to customers and historically, no discounts or refunds have been given.

 

  F-34  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition (continued)

 

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price based on management's judgment. The identified promises are considered to be bundled in arriving at the overall promise within the contract. This promise therefore results in one performance obligation, to design, manufacture and sell custom mirrors to our customer, therefore, allocation of the transaction price is not necessary.

 

5) Recognize revenue when or as the Company satisfies a performance obligation

Revenue is comprised of projects that are completed within our own facility or from a third-party vendor (direct sales). For projects that are completed within our own facility, the Company satisfies performance obligations at over time. For projects that are completed from a third-party vendor, the performance obligation is recognized at a point in time.

 

As of March 31, 2020 and December 31, 2019, total deferred revenue was $1,390,540 and $1,245,300. As of March 31, 2020, deferred revenue was comprised of work generated from our own Mount Vernon facility of $558,973 and work performed at the third-party manufacturer of $831,568. At January 1, 2020, deferred revenue was $1,245,300 which $1,000,177 was recognized as revenue during the three months ended March 31, 2020. As of December 31, 2019, deferred revenue was comprised of work generated from our own Mount Vernon facility of $844,331, work performed at the third-party manufacturer of $363,942 and billings made upfront of $37,029. At January 1, 2019, deferred revenue consisted of $1,180,159 which $1,098,337 was recognized as revenue during the three months ended March 31, 2019. Each component of deferred revenue is further explained below.

 

For projects, that are completed within our own facility, we design, manufacture and sell custom mirrors for hotels and hospitals through contractual agreements. These sales require us to deliver our products within three to six months from commencement of order acceptance. We recognize revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred Revenue represents amounts billed in excess of revenues and profits recognized. Total deferred revenue from the input method of accounting was $558,973 and $844,331 as of March 31, 2020 and December 31, 2019, respectively. Revenues and profits recognized in excess of amounts billed typically does not occur as we will not perform any work in excess of the amount we bill to our customers.

 

Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. We report direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as Cost of Sales. We are the principal of direct sales because we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. We typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Vendor payments are capitalized until completion of the project and are recorded as vendor deposits. As of Mrch 31, 2020 and December 31, 2019, the vendor deposit balance was $230,867 and $104,517, respectively.

 

  F-35  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue and Cost Recognition (continued)

5) Recognize revenue when or as the Company satisfies a performance obligation (continued)

Losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Deferred revenue from these projects as of March 31, 2020 and December 31, 2019 was $831,568 and $363,942, respectively. At March 31, 2020 and December 31, 2019, there were no losses charged to expense.

 

There are times that we bill upfront where no work is performed until 30 to 60 days after the deposit is received from our customer. Accordingly, no revenue is recognized and the amounts are deferred. As of March 31, 2020 and December 31, 2019, deferred revenue balances related to these invoices were $- and $37,029, respectively.

 

For the three months ended March 31, 2020, the Company generated revenues of $892,236 at a point in time and $636,164 over time. For the three months ended March 31, 2019, the Company generated revenues of $542,812 at a point in time and $917,925 over time.

 

  F-36  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements

 

Recently Adopted

In February 2016, the Financial Accounting Standards Board, or the FASB, issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize right-of-use, or ROU, assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all our lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on our statements of income or cash flows.

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation — Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for our company on January 1, 2019. The adoption of this standard did not have a material impact on our financial statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The adoption of this standard did not have a material impact on our financial statements.

 

  F-37  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020
(Unaudited)

 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements (Continued)

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology for financial assets with a methodology that reflects expected credit losses. The new credit losses model must be applied to loans, accounts receivable, and other financial assets. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The adoption of this standard did not have a material impact on our financial statements.

 

We currently believe that all other issued and not yet effective accounting standards are not relevant to our financial statements.

 

NOTE 2 – INVENTORY

 

Inventory consists of raw materials of $120,995 and $99,543 at March 31, 2020 and December 31, 2019, respectively.

 

NOTE 3 – PROPERTY AND EQUIPMENT

 

Property and equipment are summarized by major classifications as follows:

 

    March 31,     December 31,  
    2020     2019  
Machinery and Equipment   $ 61,083     $ 39,583  
Furniture and Fixtures     33,385       16,864  
Leasehold improvements     60,223       -  
      154,691       56,447  
Less: Accumulated Depreciation     (24,249 )     (22,076 )
    $ 130,442     $ 34,371  

 

Depreciation expense, including amortization of assets under capital leases, for the three months ended March 31, 2020 and 2019 was $2,173 and $2,173, respectively.

 

NOTE 4 – DUE TO AND FROM SHAREHOLDER

 

As of March 31, 2020 and December 31, 2019 the Company loaned its majority shareholder noninterest-bearing advances, which are due upon demand. As of March 31, 2020 and December 31, 2019, amounts owed from the Company's majority shareholder was $36,959 and $4,225, respectively.

 

  F-38  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020
(Unaudited)

 

NOTE 5 – CAPITAL LEASE OBLIGATION

 

The Company's machinery under a capital lease, which is included in machinery and equipment is summarized as follows:

 

Machinery and Equipment   $ 61,083  
Less: Accumulated Depreciation     (21,775 )
    $ 39,308  

 

Future minimum principal and interest payments under the capital lease agreements as of March 31, 2020, are as follows:

 

2020   $ 7,280  
2021     7,280  
2022     7,280  
2023     1,489  
Less: Amount representing interest     (1,737 )
Present value of future minimum lease payments     21,592  
Less: current portion     (6,380 )
    $ 15,212  

 

NOTE 6 – LOANS PAYABLE

 

In December of 2012, the Company received $260,000 from Seagrace Partners that accrued interest at 5% annually with no maturity date and no stated terms of repayment. As of December 31, 2019 and 2018, the note had an outstanding principal balance of $0 and $131,336, respectively. Interest expense related to this note for the year ended December 31, 2019 and 2018 was $5,902 and $7,656, respectively. The outstanding principal balance of $132,390 was reclassed to liabilities subject to compromise (note payable- pre-petition). In 2019, the Company entered into a settlement agreement in relation to the Company's Chapter 11 Bankruptcy (as further described in Note 10 of the financial statements) with the note holder where the Company would pay $80,000 over the next 90 days, in four equal installments of $20,000. The entire $80,000 was repaid prior to December 31, 2019. In addition, the Company will provide the third party lender 8,000 shares of common stock in the Company (subject to certain transfer restrictions), in an amount which will have a public trading value within 24 months of at least $85,000. If the value of the stock does not reach $85,000 at the end of 24 months, the shareholders of the Company will provide the third party lender make-up stock to reach the value of $85,000 with a maximum amount of shares to be issued of 17,000 shares. This repayment would constitute as full and final payment of any and all obligations to the lender. On the date of the settlement, the Company recorded a loss on extinguishments in the amount of $34,610.

 

In June of 2018 and June of 2016, the Company received advances from On Deck Capital in the amounts of $150,000 and $100,000, respectively. The June 2016 note matured in one year from the date of issuance and required 52 weekly payments of $2,346. As of December 31, 2019 and 2018, the balance of this note was $0 and interest expense of $3,981 was recorded during the year ended December 31, 2018. The June 2018 note matured in one year from the date of issuance and required 52 weekly payments of $3,605. As of December 31, 2018, the company made no repayments on this note and has an outstanding principal balance of $150,000. As part of the Chapter 11 Bankruptcy, the outstanding principal balance of $150,000 was reclassed to liabilities subject to compromise (note payable- pre-petition) as further described in Note 10 of the financial statements. Accrued interest on this note as of December 31, 2018 was $17,360 and an additional $20,140 was accrued for based on the proof of claim submitted by the note holder. These amounts were also reclassed to liabilities subject to compromise (accounts payable and accrued expenses- pre-petition) as further described in Note 10 of the financial statements. In 2019, the Company paid $18,750, which was 10% of the allowed proof of claim in the Chapter 11 Bankruptcy of $187,500. In addition, the Company was required to pay $157,500 in a five payments in the amount of $30,000 per year, with an additional $7,500 in year two. The Company recognized a gain on extinguishments of $11,250 in relation to the settlement in the year ended December 31, 2019. As of March 31, 2020 and December 31, 2019, the company had an outstanding balance of $157,500.

 

  F-39  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 6 – LOANS PAYABLE (continued) 

 

Minimum obligations under this loan agreement is as follows:

 

For the year Ending December 31,      
2020   $ 37,500  
2021     30,000  
2022     30,000  
2023     30,000  
2024     30,000  
    $ 157,500  

 

In October of 2017, June of 2017, and September of 2016, the Company received advances from LG Funding, LLC in the amounts of $150,971, $150,990, and $125,990, respectively, in exchange for notes in the amounts of $182,679, $187,228, and $156,228, respectively. On the initial date of the note, the Company accounted for the notes at face value less a discount for the difference between the face value and advances received. The discounts were amortized to interest expense in proportion to the repayments over the total amount loaned. For the years ended three months ended March 31, 2020 and 2019, the Company recorded $0 in interest expense in relation to these notes.

 

The Company recognized a gain of $81,000 in 2019 as a result of the Chapter 11 Bankruptcy Case and all remaining outstanding balances were settled in full. There were no outstanding balances on this note as of March 31, 2020 and December 31, 2019.

 

NOTE 7 – STOCKHOLDERS' EQUITY

 

Series A Preferred Stock

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of shares of Series A Preferred Stock shall not be entitled to any liquidation preference.

 

Voting

On any matters presented to the stockholders of the corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to vote in an amount equal to 200 votes per share. Series A Preferred Stock shall vote as a single class and such voting rights shall be identical in all respects.

 

Conversion

The holders of the shares of Series A Preferred Stock shall not have any rights hereunder to convert such shares into, or exchange such shares for, shares of any other series or class of capital stock of the Corporation or of any other person.

 

Common stock

The holders of our common stock are entitled to the following rights:

 

Voting

Each share of our common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors.

 

  F-40  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

 

(Unaudited)

 

NOTE 7 – STOCKHOLDERS' EQUITY (continued)

 

Common stock (continued)

Dividend

Subject to limitations under Delaware law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our Board out of funds legally available.

 

Liquidation

In the event of the liquidation, dissolution, or winding up of our business, the holders of our common stock are entitled to share ratably in the assets available for distribution after the payment of all of our debts and other liabilities, subject to the prior rights of the holders of our preferred stock.

 

Other Matters

The holders of our common stock have no subscription, redemption, or conversion privileges. Our common stock does not entitle its holders to preemptive rights. All of the outstanding shares of our common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.

 

NOTE 8 – RELATED PARTY

 

In February of 2019, the Company engaged Carmel, Milazzo & Feil LLP (the "Firm") to represent and assist the company with all general corporate legal matters including the preparation and filing with the Securities and Exchange Commission of a registration statement on Form S-1 through the Company's intended initial public offering. Ross Carmel, a former board member of Applied UV, is a partner at the firm. The firm will perform services in exchange for three percent of the outstanding shares of the Company's common stock, issued as follows: 1.) One percent due upon execution of the agreement 2.) One percent due up the filing of the Form S-1; and 3.) One percent due upon the SEC declaring the Form S-1 effective. As of March 31, 2020 and December 31, 2019, the company was liable to issue 102,066 shares of common stock to the firm. These shares have not been issued to date and have been recorded as a liability to be settled in stock for an amount of $507,805 as of March 31, 2020 and December 31, 2019. Because these legal fees are directly related to the initial public offering, the amount has been capitalized and is included in other assets.

 

NOTE 9 – LEASING ARRANGEMENTS

 

The Company adopted ASU 2016-02 prospectively as of January 1, 2019, the date of initial application, and therefore prior comparative periods were not adjusted. As part of the adoption, the Company elected the “package of expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification and initial direct costs. The Company did not elect the use-of hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company has lease arrangements which are classified as short-term in nature. The Company has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize Right of Use ("ROU") assets or lease liabilities.

 

  F-41  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 9 – LEASING ARRANGEMENTS (continued)

 

The Company determines whether an arrangement is a lease at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years. The Company considered these options to extend in determining the lease term used to establish the Company’s right-of use assets and lease liabilities once reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate of 5% based on the information available at commencement date in determining the present value of lease payments.

 

On February 7, 2014, the Company entered into a lease agreement in Mount Vernon, New York on a month to month basis. The monthly rent under this arrangement from January 1, 2018 through November 30, 2018 was $10,000 per month, from December 2018 through February 2019 was $11,150 per month. The company did not record an ROU asset or corresponding liabiltiy as the lease arrangement was month to month. The Company then amended the lease for a term that commenced on April 1, 2019 and expire on the 31st day of March 2024 at a monthly rate of $13,400. On April 1, 2019 the company recorded an ROU asset and a corresponding lease liability in the amount of $710,075. Rent expense for the three months ended March 31, 2020 and 2019 was $39,000 and $34,500, respectively. As of March 31, 2020 and December 31, 2019, the balance of the ROU asset was $583,067 and $614,522, respectively. The lease can be cancelled by either party with 150 days of written notice.

 

Schedule maturities of operating lease liabilities outstanding as of March 31, 2020 are as follows:

 

2020   $ 160,800  
2021     160,800  
2022     160,800  
2023     160,800  
2024     1,200  
Total lease payments     644,400  
Less: Imputed Interest     (61,333 )
Present value of future minimum lease payments   $ 583,067  

 

Consistent with ASC 842-20-50-4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate.

 

  F-42  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

 

(Unaudited)

 

NOTE 10 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

 

Costs and estimated earnings on contracts in progress, net of progress billings, are as follows as of March 31, 2020 and December 31, 2019:

 

Costs incurred on contracts in progress   $ 161,030     $ 240,732  
Estimated net earnings thereon     597,156       42,403  
Total costs and estimated earnings     758,186       283,135  
                 
Billings to date     (1,230,758 )     (1,232,925 )
Net overbilled   $ (472,572 )   $ (949,790 )
                 
Contract Assets   $ -     $ -  
Contract Liabilities (Deferred Revenue)     (472,572 )     (949,790 )
    $ (472,572 )   $ (949,790 )

 

Contract assets represent amounts earned under contracts in progress but not yet billed under the terms of those contracts. These amounts become billable according to the contract terms, which usually consider passage of time, achievement of certain milestones or completion of the project. Substantially all costs and estimated earnings in excess of billings on contracts in progress are expected to be billed and collected in the following year.

 

Contract liabilities represent billings to customers in excess of costs and earnings on contracts in progress. Substantially all such amounts are expected to be earned in the following year.

 

NOTE 11 - SHARE EXCHANGE

 

On March 26, 2019, March 27, 2019 and July 31, 2019, we and the shareholder of SteriLumen, Inc. and the sole member of Munn Works, LLC, completed the transactions contemplated by three Share Exchange Agreements. Pursuant to the applicable Share Exchange Agreements, SteriLumen, Inc. and Munn Works, LLC transferred to us all assets and liabilities. The shareholders of SteriLumen, Inc. exchanged all of their shares in SteriLumen for 2,000 preferred and 2,001,250 common shares of Applied UV, Inc. The sole member of Munn Works, LLC exchanged all of its membership interest in Munn Works, LLC for 3,000,000 common shares of Applied UV, Inc. As the Share Exchanges were transactions between entities that are under common control, accounting rules require that our Consolidated Financial Statements include the results of the Transferred Businesses for all periods presented, including periods prior to the completion of the Share Exchanges.

 

NOTE 12 - LEGAL

 

APF Management filed and served a complaint in 2013 New York state court against Munn Works, LLC, Max Munn and various other parties seeking recovery of damages and was awarded various damages on behalf of APF.

 

On June 25, 2018, Munn Works, LLC. entered Chapter 11 bankruptcy in order to facilitate an appeal and a resolution to this matter. As part of the Chapter 11 bankruptcy, APF management filed a claim in the amount of $1,474,505. All of the parties agreed to resolve the disputes whereby, APF would receive $400,000 payable by the Company. The amount was settled and paid in full in 2019.

 

  F-43  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 12 - LEGAL (continued)

 

Administration of Chapter 11 Case

 

In June of 2018, Munn Works, LLC received Bankruptcy court approval of certain "first-day" motions, which preserved the Company's ability to continue operations without interruption in Chapter 11. As part of the "first-day" motions, the Company received approval to pay or otherwise honor certain pre-petition obligations generally designed to support the Company's operations. Additionally, the Bankruptcy Court confirmed the Company's authority to pay for goods and services received post-petition in the ordinary course of business.

 

As part of the chapter 11 case, the Company has retained, pursuant to Bankruptcy Court authorization, legal and other professionals to advise the Company in connection with the administration of its chapter 11 case and its litigation with APF management, and certain other professionals to provide services and advice in the ordinary course business. As a result of the chapter 11 filing, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, under the Bankruptcy Code, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Company authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. Among other things, the Bankruptcy Court has authorized the Company to pay certain pre-petition claims relating to employees and critical vendors. 

 

On June 25, 2018. the Company filed schedules of assets and liabilities and statement of financial affairs (the "Schedules") with the Bankruptcy Court. The Bankruptcy Court has entered an order setting October 26, 2018 as the deadline for filing proofs of claim (the "Bar Date"). The Bar Date is the date by which claims against the Company relating to the period prior to the commencement of the Company's chapter 11 case must be filed if such claims are not listed in liquidated, non-contingent and undisputed amounts in the Schedules, or if the claimant disagrees with the amount, characterization or classification of its claim as reflected in the Schedules. Claims that are subject to the Bar Date and which are not filed on or prior to the Bar Date, may be barred from participating in any distribution that may be made under a plan of reorganization in the Company's chapter 11 case.

 

The Company applied Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 852, Reorganizations, which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of key financial statement line items. It requires that the financial statements for periods subsequent to the chapter 11 filing distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the consolidated statements of operations. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be subject to a plan of reorganization must be reported at the amounts expected to be allowed in the Company's chapter 11 case, even if they may be settled for lesser amounts as a result of the plan of reorganization or negotiations with creditors. In addition, cash used by reorganization items are disclosed separately in the consolidated statements of cash flow.

 

  F-44  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 12 - LEGAL (continued)

 

Liabilities Subject to Compromise

 

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed in the Company's chapter 11 case, even if they may be settled for lesser amounts. The amounts classified as Liabilities Subject to Compromise as of December 31, 2018 may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, if any, the value of any collateral securing such claims, or other events. The Company cannot reasonably estimate the value of the claims that will ultimately be allowed in its chapter 11 case until its evaluation, investigation and reconciliation of all filed claims has been completed. The amount of liabilities subject to compromise represents the Company's estimate, where an estimate is determinable, of known or potential pre-petition claims to be addressed in connection with its chapter 11 case. Such liabilities are reported at the Company's current estimate, where an estimate is determinable, of the allowed claim amount, even though they may be settled for lesser amounts. These claims remain subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, if any, the value of any collateral securing such claims, or other events.

 

As of December 31, 2018, Liabilities subject to Compromise consist of the following (note: all liabilities were settled in 2019, therefore no balances remain as of December 31, 2019):

 

    2018  
Accounts payable and accrued expenses- pre-petition   $ 492,014  
Notes payable- pre-petition     370,390  
Expectation damages accrual- APF Management     1,474,505  
Total   $ 2,336,909  

 

Pursuant to Bankruptcy Court Order dated May 31, 2019, the Debtor’s Second Amended Chapter 11 Plan dated April 29, 2019 (the “Plan”) was approved and confirmed. The Plan provided treatment for five (5) classes of claims, with the general unsecured claims composing Class 4 Claimants. Under the Plan, Class 4 Claimants, would receive 10% of their Allowed Claim on the Effective Date. As a result of the bankruptcy claim, APF received and settled for $400,000 where a gain on settlement of $1,074,505 was recorded. As described in Note 6 of the financial statements, the Company recorded a total net gain from settlement of debt and gains from its Chapter 11 Bankruptcy case in the amount of $57,640. Other various pre-petition creditors received and settled for a total of $103,761, resulting in a gain on settlement in the amount of $388,253. The entire amount was escrowed on or before May 23, 2019 and paid within 15 days of the effective date of the stipulation. As a result of the transaction, the Company recorded a total gain on settlement of $1,520,398.

 

NOTE 13 - SEGMENT REPORTING

 

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities (disinfectant mirror segment) and the manufacture of fine mirrors specifically for the hospitality industry (hospitality segment). The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

 

  F-45  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

 NOTE 13 - SEGMENT REPORTING (Continued)

 

An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.

 

All net sales, cost of goods sold, and other income (expense) was generated or incurred from the hospitality segment of our business. For the three months ended March 31, 2020 and 2019, the hospitality segment of our business incurred $316,416 and $316,111, respectively, of selling, general and administrative expenses. For the three months ended March 31, 2020 and 2019, the disinfectant mirror segment of our business incurred $12,231 and $11,767, respectively, of selling, general and administrative expenses.

 

As of March 31, 2020 and Deember 31, 2019 assets from the hospitality segment of our business amounted to $4,720,210 and $4,706,535, respectively. As of March 31, 2020 and December 31, 2019, total assets from the disinfectant mirror segment of our business amounted to $63,248 and $62,852, respectively.

 

As of March 31, 2020 and December 31, 2019, total liabilities from the hospitality segment of our business amounted to $3,400,204 and $3,347,120, respectively. As of March 31, 2020 and December 31, 2019, total liabilities from the disinfectant mirror segment of our business amounted to $20,075 and $37,477, respectively.

 

NOTE 14 - SUBSEQUENT EVENT

 

Management has evaluated subsequent events through June 24, 2020, the date the financial statements were available to be issued. As a result of the spread of the COVID-19 Coronavirus and the resulting stay-at-home orders issued by the state and local municipalities in which the Company operates, the Company is experiencing reduced sales. The duration of the reduction in sales may be only temporary. However, the related financial impact and duration cannot be reasonably estimated at this time. On April 3, 2020, the Company submitted a Paycheck Protection Program application to Chase Bank for a loan amount equal to $296,287. The amount was approved and the Company has received the funds. The amount will be used to cover payroll costs, rent, and utilities. Employee and compensation levels are expected to be maintained, however, it is not certain at this time whether or not the loan will be forgiven.

 

On April 20, 2020 SteriLumen entered into the Mount Sinai Agreement pursuant to which Mount Sinai has agreed to conduct a study of the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms at Mount Sinai St. Luke’s Hospital in New York, NY. SteriLumen will be responsible for funding the direct and indirect costs of Mount Sinai’s research in the amount of $160,000 plus all of the cost of microbiological testing. To the extent any intellectual property resulting from the research is conceived by Mount Sinai it will be the intellectual property of Mount Sinai and to the extent it is conceived by SteriLumen it will be the intellectual property of SteriLumen. SteriLumen has a 60-day exclusive option to negotiate a license for Mount Sinai’s resulting patent rights if such patent was obtained at SteriLumen’s request and SteriLumen has paid for all the costs in obtaining the patent. If the results of the study contained in Mount Sinai’s final report are used by SteriLumen in a successful regulatory filing or a successful fundraising effort, the Sponsor will be obligated to pay Mount Sinai a fee of $30,000.

 

Max Munn, Chief Executive Officer of the Company is entitled to a five-year warrant to purchase 80,000 shares of the Company’s common stock at an exercise price equal to the greater of $1.00 per share and the per share market value of the Company's common stock at the date of the grant in lieu of cash salary. The issuance of the warrants is contingent upon an initial public offering.

 

In May of 2020, we adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”), which is effective as of March 31, 2020. Under the Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 600,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant.

 

  F-46  

 

 

Applied UV, Inc. and Subsidiaries

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 14 - SUBSEQUENT EVENT (continued)

 

On February 18, 2020 the Board approved the grant to each member of the Board, on a quarterly basis, of options to purchase 500 shares of the Company’s common stock at an exercise price of equal to the greater of $2.50 per share and the per share market value of the Company's common stock on the date of the grant. On April 1, 2020, we issued options to purchase 2,000 shares of Company common stock to the Board, of which 1,250 have been cancelled. The options are subject to equal quarterly vesting over a one-year period.

 

  F-47  

 

 

Through and including , 2020, (the 25th day after the date of this prospectus), all dealers effecting transactions in the Common Stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

1,000,000 Shares

 

 

 

Applied UV, Inc.

 

 

 

PROSPECTUS

 

 

 

N E T W O R K 1 F I N A N C I A L

S E C U R I T I E S, I N C.

 

 

                , 2020

 

 66

 

 

Part II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution.

 

The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee and the Financial Industry Regulatory Authority, Inc., or FINRA filing.

 

    Amount  
Securities and Exchange Commission registration fee   $ 800  
FINRA filing fee     1,438  
NASDAQ listing fee     75,000  
Accountants’ fees and expenses     133,000  
Legal fees and expenses     60,000  
Printing and engraving expenses     15,000  
Miscellaneous     4,762  
Total expenses   $ 290,000  

 

Item 14. Indemnification of Directors and Officers.

 

Section 102 of the General Company Law of the State of Delaware (“DGCL”) permits a Company to eliminate the personal liability of directors of a Company to the Company or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation provides that no director of the Company shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

 

Section 145 of the DGCL provides that a Company has the power to indemnify a director, officer, employee, or agent of the Company, or a person serving at the request of the Company for another Company, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the Company, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

 

Our amended and restated certificate of incorporation provides that we will indemnify to the fullest extent permitted from time to time by the DGCL or any other applicable laws as presently or hereafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Company, by reason of his acting as a director or officer of the Company or any of its subsidiaries (and the Company, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the Company or any of its subsidiaries or is or was serving at the request of the Company in any other capacity for or on behalf of the Company) against any liability or expense actually and reasonably incurred by such person in respect thereof; provided, however, the Company shall be required to indemnify an officer or director in connection with an action, suit or proceeding (or part thereof) initiated by such person only if (i) such action, suit or proceeding (or part thereof) was authorized by the Board of Directors and (ii) the indemnification does not relate to any liability arising under Section 16(b) of the Exchange Act, as amended, or any rules or regulations promulgated thereunder. Such indemnification is not exclusive of any other right to indemnification provided by law or otherwise.

 

  II-1  

 

 

If a claim is not paid in full by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where any undertaking required by the By-laws of the Company has been tendered to the Company) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Company (including its Board of Directors, legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Indemnification shall include payment by the Company of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification.

 

In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, or the Securities Act, against certain liabilities.

 

Item 15. Recent Sales of Unregistered Securities.*

 

Set forth below is information regarding shares of common stock issued by us since the Company’s inception on February 26, 2019.

 

(a) Issuance of Capital Stock.

  

On March 26, 2019 the Company issued 201,250 shares to accredited investors in exchange for 100% of the issued and outstanding common stock of SteriLumen, Inc.

 

On March 27, 2019 the Company issued 1,800,000 shares of common stock and 2,000 shares of Series A Preferred Stock to an accredited investor in exchange for 100% of the issued and outstanding Series A preferred stock of SteriLumen, Inc.

 

On July 1, 2019, the Company issued 3,000,000 shares of common stock to an accredited investor in exchange for all 100% of the equity interest in Munn Works, LLC.

 

On May 12, 2020, the Company issued 50,518 shares of common stock to Carmel, Milazzo & Feil LLP as part of compensation for legal services.

 

On June 10, 2020, the Company issued 51,548 shares of common stock to Carmel, Milazzo & Feil LLP as part of compensation for legal services.

 

Only July 9, 2020, the Company issued 10,000 unvested shares of common stock to each to four newly elected directors. In each case, the shares will evenly vest on an annual basis over a period of four (4) years, with the first vesting to occur on January 1, 2021.

 

On July 9, 2020, the Company issued 37,500 shares of unvested common stock to its non-employee directors, which vest on January 1, 2021.

 

On July 9, 2020, the Company issued 10,000 unvested shares of common stock to the Chairman of the Board. The shares will vest on January 1, 2021.

 

On July 9, 2020, Company issued 5,000 unvested shares of common stock to each of the Chairman of the Audit Committee and the Chairman the Compensation Committee. The shares will vest on January 1, 2021.

 

The issuance of the capital stock listed above was deemed exempt from registration under Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance of securities were made to an accredited investor and did not involve a public offering. The recipient of such securities represented its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

 

  II-2  

 

 

(b) Warrants.

 

On April 1, 2020, the Company issued to Max Munn a warrant to purchase 80,000 shares of the Company’s common stock at a per share exercise price equal to $5.00 and the per share market value of the Company’s common stock on March 31, 2020.

 

The issuance of the warrant listed above was deemed exempt from registration under Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance of securities were made to an accredited investor and did not involve a public offering. The recipient of such securities represented its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

 

July 1, 2020, the Company issued two warrants to purchase 5,000 shares in aggregate, each at a $5.00 per share exercise price.

 

(c) Option Grants.

 

On April 1, 2020, the Company issued 2,000 options (of which 1,250 have been cancelled) to its Board of Directors at an exercise price equal to the greater of $2.50 per share and the per share market value of the Company’s common stock on the date of the grant. The options are subject to equal quarterly vesting over a one-year period. On July 1, 2020 we issued an additional 1,000 options to certain Board members. To date 375 of these options have vested. On July 9, 2020, the Board cancelled any further issuance of these quarterly options.

 

On July 9, 2020, the Company issued options to purchase in aggregate 10,000 shares of restricted Common Stock to the members of the Medical Advisory Board that vest quarterly over a period of one year at an exercise price of $5.00 per share. None of the options are vested.

 

The option described above were deemed exempt from registration in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance of securities were made to an accredited investor and did not involve a public offering. The recipients of such securities represented its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

 

(d) Issuance of Notes.

 

The Company has not issued any notes.

 

* All common stock share numbers have been adjusted to reflect a 1 for 5 reverse stock split effected by the Company on June 17, 2020.

 

Item 16. Exhibits and Financial Statement Schedules.

 

(a) Exhibits: Reference is made to the Exhibit Index following the signature pages hereto, which Exhibit Index is hereby incorporated into this Item.

 

(b) Financial Statement Schedules: All schedules are omitted because the required information is inapplicable or the information is presented in the financial statements and the related notes.

 

Item 17. Undertakings.

 

The undersigned registrant hereby undertakes:

 

The undersigned registrant hereby undertakes:

 

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

 

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

  II-3  

 

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4) That, for the purpose of determining liability under the Securities Act to any purchaser:

 

(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(B) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(5) That for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to any charter provision, by law or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

The undersigned registrant hereby undertakes that:

 

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

  II-4  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of New York, State of New York, on July 16, 2020.

 

  APPLIED UV, INC.
   
  By:   /s/ Keyoumars Saeed
    Keyoumars Saeed
    Chief Executive Officer (Principal Executive Officer)

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Keyoumars Saeed and Max Munn his true and lawful attorney-in-fact, with full power of substitution and re-substitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments including pre- and post-effective amendments to this registration statement, any subsequent registration statement for the same offering which may be filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.

 

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Name   Position   Date
         
/s/ Keyoumars Saeed   Chief Executive Officer and Director   July 16, 2020
Keyoumars Saeed   (Principal Executive Officer and Principal Financial and Accounting Officer)    
         
/s/ Max Munn   President and Director   July 16, 2020
Max Munn        
         
/s/ Joseph N. Himy   Chief Financial Officer   July 16, 2020
Joseph N. Himy   (principal Financial and Accounting Officer)    
         
/s/ Joel Kanter   Chairman of the Board   July 16, 2020
Joel Kantar        
         
/s/ Dr. Eugen Bauer   Director   July 16, 2020
Dr. Eugene Bauer        
         
/s/ Dr. Alastair Clemow   Director   July 16, 2020
Dr. Alastair Clemow        
         
/s/ Dr. Dallas Hack   Director   July 16, 2020
Dr. Dallas Hack        
         
/s/ Eugene Burleson   Director   July 16, 2020
Eugene Burelson        

 

  II-5  

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
1.1*   Form of Underwriting Agreement.
     
3.1   Certificate of Incorporation of the Registrant.
     
3.2   Amended and Restated Certificate of Incorporation of the Registrant.
     
3.3   Bylaws of The Registrant.
     
3.4   Certificate of Designation, Preferences and Rights of Series A Preferred Stock.
     
3.5   Certificate of Amendment of Certificate of Incorporation filed on June 17, 2020
     
3.6   Certificate of Amendment of Certificate of Incorporation filed on June 23, 2020
     
3.7   Certificate of Amendment of Certificate of Incorporation filed July 14, 2020
     
4.1*   Form of Underwriter Warrant.
     
5.1*   Opinion of Counsel to Registrant.
     
10.1   Exchange Agreement, dated March 26, 2019 among the Registrant, SteriLumen, Inc. and each of the stockholders of SteriLumen, Inc.
     
10.2   Exchange Agreement, dated March 27, 2019 among the Registrant, SteriLumen, Inc. and Laurie Munn.
     
10.3   Exchange Agreement, dated July 1, 2019 among the Registrant, Munn Works, LLC and Laurie Munn
     
10.4   Warrant, dated April 1, 2020 issued to Max Munn.
     
10.5   the Registrant’s 2020 Omnibus Incentive Plan.
     
10.6   Form of Option Agreement and Grant issued under February 18, 2020 Board Approval
     
10.7   Agreement, dated April 20, 2020 between Icahn School of Medicine at Mount Sinai and SteriLumen, Inc
     
10.8   Employment Agreement dated June 30, 2020 between the Registrant and Keyoumars Saeed
     
10.9   Employment Agreement dated June 30, 2020 between the Registrant and James L. Doyle III
     
10.10   Common Stock Purchase Warrant, dated July 1, 2020
     
10.11   Common Stock Purchase Warrant, dated July 1, 2020
     
10.12   Form of Option issued to Medical Advisory Board members
     
10.13   CFO Consulting Agreement dated July 15, 2020 between the Registrant and Joseph Himy
     
21.1   List of Subsidiaries of the Registrant.
     
23.1   Consent of Adeptus Partners LLC, dated July 14, 2020.
     
23.2*   Consent of Counsel to Registrant (included in Exhibit 5.1).
     
23.3   Consent of ResInnova Laboratories, dated June 15, 2020
     
24.1   Power of Attorney.
     
99.1   Letter from the U.S. Food & Drug Administration, dated December 19, 2019.
     
99.2   Report of ResInnova Laboratories, dated September 8, 2017.
     
99.3   Report of ResInnova Laboratories, dated May 8, 2020 which updates their Report dated September 8, 2017.
     
99.4   Letters from ResInnova Laboratories, dated May 11, 2020 and June 8, 2020.
     
99.5   Report of ResInnova Laboratories, dated June 30, 2020

   

*To be filed by an amendment to this registration statement.

 

   

 

 

Exhibit 3.1

 

 

CERTIFICATE OF INCORPORATION

OF

APPLIED UV, INC.

 

ARTICLE I

 

The name of this corporation is Applied UV, Inc.

 

ARTICLE II

 

The address of the registered office of the Corporation in the State of Delaware is 1013 Centre Road, Suite 403-B, Wilmington DE 19805, County of New Castle. The registered agent of the corporation in the State of Delaware at such address is Vcorp Services, LLC.

 

ARTICLE III

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

 

ARTICLE IV

 

Section 1. Number of Authorized Shares. The total number of shares of stock which the Corporation shall have the authority to issue shall be forty-five million (45,000,000) shares of Common Stock, with par value of $0.0001 per share.

 

Section 2. Issuance of Shares. The Board of Directors of the Corporation may authorize the issuance of shares of Common Stock from time to time. The Corporation may reissue shares of Common Stock that are redeemed, purchased, or otherwise acquired by the Corporation unless otherwise provided by law.

 

Section 3. Dividends and Distributions. The holders of shares of Common Stock shall be entitled to receive such dividends, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefore.

 

Section 4. Voting Rights. Each share of Common Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Corporation.

 

ARTICLE V

 

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of directors or in the Bylaws of the Corporation.

 

ARTICLE VI

 

The number of directors of the Corporation shall be fixed from time to time by or in the manner provided in the Bylaws of the Corporation or amendment thereof duly adopted by the Board of Directors or by the stockholders of the Corporation. Newly created dictatorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by the Board of Directors, acting by not less than a majority of the Directors then in office, although less than a quorum. Any director so chosen shall hold office until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director.  Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

 

 

  

ARTICLE VII

 

No action, which has not been previously approved by the Board of Directors, shall be taken by the stockholders except at an annual meeting or a special meeting of the stockholders. Any action required to be taken at any annual or special meeting of the stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.

 

ARTICLE VIII

 

In furtherance of, and not in limitation of, the powers conferred by statute, the board of directors is expressly authorized to adopt, amend or repeal the By-laws or adopt new By-laws without any action on the part of the stockholders; provided that any By-law adopted or amended by the board of directors, and any powers thereby conferred, may be amended, altered or repealed by the stockholders.

 

ARTICLE IX

 

No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize the further elimination or limitation of the liability of a director, then the liability of the directors shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this Article IX by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

 

ARTICLE X

 

The Corporation shall indemnify, advance expenses, and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and reasonably incurred by such Covered Person.  The right to indemnification conferred by this Article X shall include the right to be paid by the Corporation the reasonable expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition, except where the Covered Person pleads guilty or nolo contendere in a criminal proceeding (excluding traffic violations and other minor offenses), upon receipt by the Corporation of an undertaking by or on behalf of the Covered Person receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under this Article X.  Notwithstanding the preceding sentence, except for claims for indemnification (following the final disposition of such Proceeding) or advancement of expenses not paid in full, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation. Any amendment, repeal or modification of this paragraph 8 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

 

 

 

 

ARTICLE XI

 

Unless the Corporation (through approval of the Board of Directors) consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the By-laws or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

 

ARTICLE XII

 

The Corporation shall have the right, subject to any express provisions or restrictions contained in this Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) or the By-laws, from time to time, to amend this Certificate of Incorporation or any provision thereof in any manner now or hereafter provided by law, and all rights and powers of any kind conferred upon a director or stockholder of the Corporation by this Certificate of Incorporation or any amendment thereof are conferred subject to such right.

 

ARTICLE XIII

 

The name and mailing address of the incorporator is Max Munn, 150 N. Macquesten Parkway, Mount Vernon, NY 10550.

 

* * * * * * * *

 

 

I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a corporation pursuant to the DGCL, do make this Certificate of Incorporation, hereby acknowledging, declaring, and certifying that the foregoing Certificate of Incorporation is my act and deed and that the facts herein stated are true, and have accordingly hereunto set my hand this 26th day of February 2018.

 

 

  /s/ Max Munn
  Max Munn, Incorporator

 

 

 

 

 

 

Exhibit 3.2

 

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF 

APPLIED UV, INC.

  

Applied UV, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), certifies that:

  

A. The name of the Corporation is Applied UV, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on February 26, 2019.

 

B. The Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation, and written notice was duly given or will be given pursuant to Section 228 to those stockholders who did not approve the Amended and Restated Certificate of Incorporation by written consent.

 

C. The text of the Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:

 

ARTICLE I

 

The name of this corporation is Applied UV, Inc.

 

ARTICLE II

 

The address of the registered office of the Corporation in the State of Delaware is 1013 Centre Road, Suite 403-B, Wilmington DE 19805, County of New Castle. The registered agent of the corporation in the State of Delaware at such address is Vcorp Services, LLC.

 

ARTICLE III

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

 

ARTICLE IV

 

Section 1. Number of Authorized Shares. The total number of shares of stock which the Corporation shall have the authority to issue shall be One Hundred Fifty One Million (151,000,000) shares. The Corporation shall be authorized to issue two classes of shares of stock, designated as “Common Stock” and “Preferred Stock.” The Corporation shall be authorized to issue One Hundred Fifty Million (150,000,000) shares of Common Stock, each share to have a par value of $0.0001 per share, and One Million (1,000,000) of Preferred Stock, each share to have a par value of $0.0001 per share.

 

Section 2. Common Stock. The Board of Directors of the Corporation may authorize the issuance of shares of Common Stock from time to time. The Corporation may reissue shares of Common Stock that are redeemed, purchased, or otherwise acquired by the Corporation unless otherwise provided by law.

 

 

 

 

Section 3. Preferred Stock. The Board of Directors of the Corporation may by resolution authorize the issuance of shares of Preferred Stock from time to time in one or more series. The Corporation may reissue shares of Preferred Stock that are redeemed, purchased, or otherwise acquired by the Corporation unless otherwise provided by law. The Board of Directors is hereby authorized to fix or alter the designations, powers and preferences, and relative, participating, optional or other rights, if any, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series as may be permitted by the DGCL, including, without limitation, dividend rights (and whether dividends are cumulative) conversion rights, if any, voting rights (including the number of votes, if any, per share, as well as the number of members, if any, of the Board of Directors or the percentage of members, if any, of the Board of Directors each class or series of Preferred Stock may be entitled to elect), rights and terms of redemption (including sinking fund provisions, if any), redemption price and liquidation preferences of any wholly unissued series of Preferred Stock, the number of shares constituting any such series and the designation thereof, and to increase or decrease the number of shares of any such series subsequent to the issuance of shares of such series, but not below the number of shares of such series then outstanding and other powers, preferences and relative, participating, optional or other special rights of each series of Preferred Stock, and any qualifications, limitations or restrictions of such shares as are permitted by law, all as may be stated in such resolution.

 

Section 4. Dividends and Distributions. Subject to the preferences applicable to Preferred Stock outstanding at any time, the holders of shares of Common Stock shall be entitled to receive such dividends, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefore.

 

Section 5. Voting Rights. Each share of Common Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Corporation.

  

ARTICLE V

 

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of directors or in the Bylaws of the Corporation.

  

ARTICLE VI

 

The number of directors of the Corporation shall be fixed from time to time by or in the manner provided in the Bylaws of the Corporation or amendment thereof duly adopted by the Board of Directors or by the stockholders of the Corporation. Newly created dictatorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by the Board of Directors, acting by not less than a majority of the Directors then in office, although less than a quorum.

 

 

 

 

Any director so chosen shall hold office until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

ARTICLE VII

 

No action, which has not been previously approved by the Board of Directors, shall be taken by the stockholders except at an annual meeting or a special meeting of the stockholders. Any action required to be taken at any annual or special meeting of the stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.

 

ARTICLE VIII

 

In furtherance of, and not in limitation of, the powers conferred by statute, the board of directors is expressly authorized to adopt, amend or repeal the By-laws or adopt new By-laws without any action on the part of the stockholders; provided that any By-law adopted or amended by the board of directors, and any powers thereby conferred, may be amended, altered or repealed by the stockholders.

 

ARTICLE IX

 

No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize the further elimination or limitation of the liability of a director, then the liability of the directors shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this Article IX by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

 

 

 

 

ARTICLE X

 

The Corporation shall indemnify, advance expenses, and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and reasonably incurred by such Covered Person. The right to indemnification conferred by this Article X shall include the right to be paid by the Corporation the reasonable expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition, except where the Covered Person pleads guilty or nolo contendere in a criminal proceeding (excluding traffic violations and other minor offenses), upon receipt by the Corporation of an undertaking by or on behalf of the Covered Person receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under this Article X. Notwithstanding the preceding sentence, except for claims for indemnification (following the final disposition of such Proceeding) or advancement of expenses not paid in full, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation. Any amendment, repeal or modification of this paragraph 8 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

 

ARTICLE XI

 

Unless the Corporation (through approval of the Board of Directors) consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of incorporation or the By-laws or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

 

ARTICLE XII

 

The Corporation shall have the right, subject to any express provisions or restrictions contained in this Certificate of incorporation of the Corporation (the “Certificate of Incorporation”) or the By-laws, from time to time, to amend this Certificate of Incorporation or any provision thereof in any manner now or hereafter provided by law, and all rights and powers of any kind conferred upon a director or stockholder of the Corporation by this Certificate of Incorporation or any amendment thereof are conferred subject to such right.

 

ARTICLE XIII

 

The name and mailing address of the incorporator is Max Munn, 150 N. Macquesten Parkway, Mount Vernon, NY 10550.

 

 

 

  

IN WITNESS WHEREOF, Applied UV, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by a duly authorized officer of the Corporation on this 1st day of May 2020.

 

 

/s/ Max Munn                                       

Max Munn, President

 

 

 

 

 

 

 

 

 

 

Exhibit 3.3

  

BYLAWS
OF
Applied UV, INC.

(A Delaware Corporation)

 

ARTICLE I
OFFICES

 

Section 1.                  Registered Office. The registered office of the Corporation in the State of Delaware is 1013 Centre Road, Suite 403-B, Wilmington DE 19805, County of New Castle or in such other location as the Board of Directors may from time to time determine or the business of the corporation may require.

 

Section 2.                  Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II
Corporate Seal

 

The Board of Directors may adopt a corporate seal. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

ARTICLE III
Stockholders’ Meetings

 

Section 1.                  Place of Meetings.

 

(a)                Meetings of the stockholders of the corporation may be held at such place, either within or outside of the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (the “DGCL”).

 

(b)               The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors. A special meeting shall be held on the date and at the time fixed by the directors.

 

(c)                Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware. The Board of Directors may also, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the DGCL. If a meeting by remote communication is authorized by the Board of Directors in its sole discretion, and subject to guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication participate in a meeting of stockholders and be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (a) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (b) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (c) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.

 

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Section 2.                  Annual Meeting.

 

(a)                The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section.

 

(b)               At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this Section, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under the DGCL and applicable law, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this paragraph), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

 

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(c)                Notwithstanding anything in the second sentence of paragraph (b) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation.

 

(d)               Only such persons who are nominated in accordance with the procedures set forth in this Section (or elected or appointed pursuant to Article IV of these Bylaws) shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

 

(e)                Notwithstanding the foregoing provisions of this Section, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.

 

(f)                 For purposes of this Section, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13, 14 or 15(d) of the 1934 Act.

 

Section 3.                  Special Meetings.

 

(a)                Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors pursuant to a resolution adopted by directors representing a quorum of the Board of Directors or (iv) by the holders of shares entitled to cast not less than 50% of the votes at the meeting, and shall be held at such place, on such date, and at such time as the Board of Directors shall fix.

 

(b)               If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Article III, Section 4 of these Bylaws. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

 

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Section 4.                  Notice of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his or her attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

Section 5.                  Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by a vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

 

Section 6.                  Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business, which might have been transacted at the original meeting pursuant to the Certificate of Incorporation, these Bylaws or applicable law. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

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Section 7.                  Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Article III, Section 9 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote or execute consents shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

 

Section 8.                  Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting (including giving consent pursuant to Article III, Section 10) shall have the following effect: (a) if only one (1) votes, his or her act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the Court.. If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 9.                  List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list shall be open to the examination of any stockholder during the time of the meeting as provided by law.

 

Section 10.              Action Without Meeting.

 

(a)                Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, or by electronic transmission setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

(b)               Every written consent or electronic transmission shall bear the date of signature of each stockholder who signs the consent, and no written consent or electronic transmission shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner herein required, written consents or electronic transmissions signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

 

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(c)                Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take action were delivered to the corporation as provided in Section 228(e) of the DGCL.

 

(d)               An electronic mail, facsimile or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Section, provided that any such electronic mail, facsimile or other electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the electronic mail, facsimile or other electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic mail, facsimile or electronic transmission. The date on which such electronic mail, facsimile or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by electronic mail, facsimile or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office in the state of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by electronic mail, facsimile or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

 

Section 11.              Organization.

 

(a)                At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Chief Executive Officer, or, if the Chief Executive Officer is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his or her absence, an Assistant Secretary directed to do so by the Chief Executive Officer, shall act as secretary of the meeting.

 

(b)               The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

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ARTICLE IV
Directors

 

Section 1.                  Number and Term of Office. The authorized number of directors of the corporation shall be fixed by the Board of Directors from time to time. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient.

 

Section 2.                  Powers. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

 

Section 3.                  Term of Directors.

 

(a)                Directors shall be elected at each annual meeting of stockholders to serve until the next annual meeting of stockholders and his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

(b)               No person entitled to vote at an election for directors may cumulate votes to which such person is entitled.

 

Section 4.                  Vacancies.

 

(a)                Unless otherwise provided in the Certificate of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director; provided, however, that whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

 

Section 5.                  Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.

 

Section 6.                  Removal. Subject to any limitations imposed by applicable law, the Board of Directors or any director may be removed from office at any time (i) with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to elect such director.

 

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Section 7.                  Meetings

 

(a)                Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, including a voice-messaging system or other system designated to record and communicate messages, facsimile, or by electronic mail or other electronic means. No further notice shall be required for a regular meeting of the Board of Directors.

 

(b)               Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the Chief Executive Officer (if a director), the President (if a director) or any director.

 

(c)                Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(d)               Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, postage prepaid at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

(e)                Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 8.                  Quorum and Voting.

 

(a)                Unless the Certificate of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the total number of directors then serving; provided, however, that such number shall never be less than one-third (1/3) of the total number of directors except that when one director is authorized, then one director shall constitute a quorum. At any meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. If the Certificate of Incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in this Section to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.

 

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(b)               At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

 

Section 9.                  Action without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 10.              Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 11.              Committees.

 

(a)                Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

 

(b)               Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

 

(c)                Term. The Board of Directors, subject to the provisions of paragraphs (a) or (b) of this Section may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his or her death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

(d)               Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

 

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Section 12.              Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Chief Executive Officer (if a director), or if the Chief Executive Officer is not a director or is absent, the President (if a director), or if the President is not a director or is absent, the most senior Vice President (if a director) or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his or her absence, any Assistant Secretary directed to do so by the Chief Executive Officer or President, shall act as secretary of the meeting.

 

ARTICLE V
Officers

 

Section 1.                  Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties, as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers, as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

 

Section 2.                  Tenure and Duties of Officers.

 

(a)                General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors, or by the Chief Executive Officer or other officer if so authorized by the Board of Directors.

 

(b)               Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. If there is no Chief Executive Officer and no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section.

 

(c)                Duties of Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the stockholders and (if a director) at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The Chief Executive Officer shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

 

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(d)               Duties of President. In the absence or disability of the Chief Executive Officer or if the office of Chief Executive Officer is vacant, the President shall preside at all meetings of the stockholders and (if a director) at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. If the office of Chief Executive Officer is vacant, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

 

(e)                Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(f)                 Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Chief Executive Officer may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.

 

(g)                Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the Chief Executive Officer. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to his or her office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time. The Chief Executive Officer may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.

 

Section 3.                  Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 4.                  Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board of Directors or to the Chief Executive Officer or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

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Section 5.                  Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written or electronic consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.

 

ARTICLE VI
Execution Of Corporate Instruments And Voting
Of Securities Owned By The Corporation

 

Section 1.                  Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation. All checks and drafts drawn on banks or other depositaries of funds to the credit of the corporation or on special accounts of the corporation shall be signed by such person or persons, as the Board of Directors shall authorize so to do. Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

Section 2.                  Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

ARTICLE VII
Shares Of Stock

 

Section 1.                    Form and Execution of Certificates. The shares of the corporation shall be represented by certificates, or shall be uncertificated. Certificates for the shares of stock, if any, of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of shares of stock in the corporation represented by certificate shall be entitled to have a certificate signed by or in the name of the corporation by any two authorized officers, including but not limited to the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him or her in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.

 

Section 2.                  Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

 

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Section 3.                  Restrictions on Transfer.

 

(a)                The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the sale, transfer, assignment, pledge, or other disposal of or encumbering of any of the shares of stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise (each, a “Transfer”) of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

(b)               Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by a certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(c)                If the stockholder desires to sell or otherwise Transfer any of his or her shares of stock, then the stockholder shall first give written notice thereof to the corporation. The notice shall name the proposed transferee and state the number of shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed Transfer.

 

Section 4.                  Fixing Record Dates.

 

(a)                In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day immediately preceding the day on which notice is given, or if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

(b)               In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date, on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

 

(c)                In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

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Section 5.                  Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

ARTICLE VIII
Fiscal Year

 

The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

ARTICLE IX 

indemnification

 

Section 1.                    Indemnification of Directors, Executive Officers, Employees, and Other Agents.

 

(a)                Directors and Executive Officers. The corporation shall indemnify its directors and executive officers (for the purposes of this Article, “executive officers” shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under paragraph (d) of this Section.

 

(b)               Other Officers, Employees and Other Agents. The corporation shall have power to indemnify its other officers, employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person except executive officers to such officers or other persons as the Board of Directors shall determine.

 

(c)                Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or executive officer of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer in connection with such proceeding; provided, however, that, if the DGCL requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.

 

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Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Section, no advance shall be made by the corporation to an executive officer of the corporation (except by reason of the fact that such executive officer is or was a director of the corporation, in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of a quorum consisting of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

(d)               Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive officers under this Section shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by this Section to a director or executive officer or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise as a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his or her conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.

 

(e)                Non-Exclusivity of Rights. The rights conferred on any person by this Section shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL or any other applicable law.

 

(f)                 Survival of Rights. The rights conferred on any person by this Section shall continue as to a person who has ceased to be a director or executive officer and shall inure to the benefit of the heirs, executors, and administrators of such a person.

 

(g)                Insurance. To the fullest extent permitted by the DGCL, or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section.

 

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(h)               Amendments. Any repeal or modification of this Section shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

(i)                 Saving Clause. If this Section or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and executive officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law. If this Section shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and executive officer to the full extent under applicable law.

 

(j)                 Certain Definitions. For the purposes of this Section, the following definitions shall apply:

 

(1)               The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(2)               The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

(3)               The term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

(4)               References to a “director,” “executive officer,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

(5)               References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Section.

 

ARTICLE X
Notices

 

Section 1.                  Notices.

 

(a)                Notice to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Article III, Section 4 of these Bylaws. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

 

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(b)               Notice to Directors. Any notice required to be given to any director may be given by the method stated in paragraph (a) of this Section, of these Bylaws. If such notice is not delivered personally, it shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

 

(c)                Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d)               Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

(e)                Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

(f)                 Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, any notice given under the provisions of the DGCL, the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the corporation within 60 days of having been given notice by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the corporation.

 

ARTICLE XI
Amendments

 

The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.

  

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SECRETARY'S CERTIFICATE

 

OF

 

ADOPTION OF

 

BYLAWS OF

 

Applied UV, Inc.,

(a Delaware corporation)

 

I, the undersigned, do hereby certify:

 

 

1.             That I am the duly elected and acting Secretary of Applied UV, Inc., a Delaware corporation.

 

2.             That the foregoing Bylaws constitute the Bylaws of said Corporation as adopted by Action of Sole Incorporator dated as of March 20, 2019.

 

IN WITNESS WHEREOF, I have hereunto subscribed my name as of March 20, 2019.

 

 

 

By:_____________________________

      Ross Carmel, Secretary

 

 

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Exhibit 3.4

 

APPLIED UV, INC.

 

CERTIFICATE OF DESIGNATION OF

SERIES A PREFERRED STOCK, SETTING FORTH THE POWERS,

PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND

RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK

 

Pursuant to Section 151 of the Delaware General Corporation Law, Applied UV, Inc., a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY:

 

The Certificate of Incorporation of the Corporation as amended on March 21, 2019 (the “Charter”) confers upon the Board of Directors of the Corporation (the “Board of Directors”) the authority to provide for the issuance of shares of preferred stock in series and to establish the number of shares to be included in each such series and to fix or alter the designations, powers and preferences, and relative, participating, optional or other rights, if any, and qualifications, limitations or restrictions thereof. On March 21, 2019, the Board of Directors duly adopted a resolution creating a series of preferred stock having the designation and number of shares and the powers, preferences and rights of the shares of such series, and the qualifications, limitations and restrictions thereof as set forth below:

 

Section 1. Designation and Number. Of such 1,000,000 shares of Preferred Stock authorized, 10,000 shares are designated as "Series A Preferred Stock (the "Series A Preferred Stock").

 

Section 2. Dividends. The holders of the Series A Preferred Stock shall not be entitled to receive dividends paid on the Corporation's Common Stock.

 

Section 3. Liquidation Preference. The holders of the Series A Preferred Stock shall not be entitled to any liquidation preference.

 

Section 4. Voting. The holders of the Series A Preferred Stock will have the shareholder voting rights as described in this Section 4 or as required by law. For so long as any shares of the Series A Preferred Stock remain issued and outstanding, the holders thereof shall have the right to vote in an amount equal to 1,000 votes per share of Series A Preferred Stock. Except as otherwise required by law or the Certificate of Incorporation, in respect of all matters concerning the voting of shares of capital stock of the Corporation, the Common Stock (and any other class or series of capital stock of the Corporation entitled to vote generally with the Common Stock) and the Series A Preferred Stock shall vote as a single class and such voting rights shall be identical in all respects.

 

Section 5. Conversion Rights. The holders of the shares of Series A Preferred Stock shall not have any rights hereunder to convert such shares into, or exchange such shares for, shares of any other series or class of capital stock of the Corporation or of any other person.

 

Section 6. Redemption Rights. The shares of the Series A Preferred Stock shall be not be subject to redemption.

 

Section 7. Notices. Any notice required hereby to be given to the holders of shares of the Series A Preferred Stock shall be deemed if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his, her or its address appearing on the books of the Corporation.

 

 

 

 

IN WITNESS WHEREOF, Applied UV, Inc. has caused this Certificate of Designation to be duly executed in its corporate name on this 26th day of March, 2019.

 

       
  APPLIED UV, INC.
     
  By:    
      Name: Max Munn
      Title: President

 

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Exhibit 3.5

 

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF CERTIFICATE OF INCORPORATION

 

(Pursuant to Sections 242 and 245

of the General Corporation Law of the State of Delaware)

 

Applied UV, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

 

FIRST: That at a meeting of the Board of Directors of Applied UV, Inc. resolutions were duly adopted setting forth a proposed amendment of the certificate of incorporation of said corporation (the “Certificate of Incorporation”), declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that the Certificate of Incorporation of this corporation be amended by adding the following paragraph to Article 4 of the Certificate of Incorporation:

 

“Upon the filing and effectiveness (the “Effective Time”) pursuant to the Delaware General Corporation Law of this Certificate of Amendment to the Certificate of Incorporation of the Corporation, each five (5) shares of Common Stock issued and outstanding immediately prior to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”). No fractional shares shall be issued in connection with the Reverse Stock Split but shall be rounded up to the nearest whole number. Each record that immediately prior to the Effective Time represented shares of Common Stock (“Old Records”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Records shall have been combined, subject to the elimination of fractional share interests as described above. The Reverse Stock Split shall have no effect on the authorized amount or par value of the Common Stock.”

 

SECOND: That thereafter, the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a stockholders meeting at which all shares entitled to vote thereon were present and voted, approved of the Reverse Split Stock by written consent in lieu of a meeting pursuant to Section 228(a) of the General Corporation Law of the State of Delaware.

 

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed on June 17, 2020.

 

 

  By:   /s/ Max Munn  
  Name:   Max Munn  
  Title:   President  

 

 

 

Exhibit 3.6

 

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF CERTIFICATE OF INCORPORATION

 

(Pursuant to Sections 242 and 245
of the General Corporation Law of the State of Delaware)

 

Applied UV, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

 

FIRST: That at a meeting of the Board of Directors of Applied UV, Inc. resolutions were duly adopted setting forth a proposed amendment of the certificate of incorporation of said corporation (the “Certificate of Incorporation”), declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that the Certificate of Incorporation of this corporation be amended by adding the following paragraph to Article 4 of the Certificate of Incorporation:

 

“Upon the filing and effectiveness (the “Effective Time”) pursuant to the Delaware General Corporation Law of this Certificate of Amendment to the Certificate of Incorporation of the Corporation, each five (5) shares of Preferred stock issued and outstanding immediately prior to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Preferred stock (the “Reverse Stock Split”). No fractional shares shall be issued in connection with the Reverse Stock Split but shall be rounded up to the nearest whole number. Each record that immediately prior to the Effective Time represented shares of Preferred stock (“Old Records”), shall thereafter represent that number of shares of Preferred stock into which the shares of Preferred stock represented by the Old Records shall have been combined, subject to the elimination of fractional share interests as described above. The Reverse Stock Split shall have no effect on the authorized amount or par value of the Preferred stock.”

 

SECOND: That thereafter, the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a stockholders meeting at which all shares entitled to vote thereon were present and voted, approved of the Reverse Stock Split by written consent in lieu of a meeting pursuant to Section 228(a) of the General Corporation Law of the State of Delaware.

 

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed on June 23, 2020.

 

 

  By:   /s/ Max Munn  
  Name:   Max Munn   
  Title:   President  

 

 

Exhibit 3.7

 

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT 

OF CERTIFICATE OF INCORPORATION

 

(Pursuant to Sections 242 and 245
of the General Corporation Law of the State of Delaware)

 

Applied UV, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

 

FIRST: That at a meeting of the Board of Directors of Applied UV, Inc. resolutions were duly adopted setting forth a proposed amendment of the certificate of incorporation of said corporation (the “Certificate of Incorporation”), declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that the Certificate of Incorporation of this corporation be amended by adding the following sentence to the end of Article 11 of the Certificate of Incorporation:

 

“This provision shall not apply to any actions arising under the Securities Act of 1933, as amended or Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction or for which the federal and state courts have concurrent jurisdiction in accordance with applicable law.”

 

SECOND: That thereafter, the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a stockholders meeting at which all shares entitled to vote thereon were present and voted, approved of the proposed amendment by written consent in lieu of a meeting pursuant to Section 228(a) of the General Corporation Law of the State of Delaware.

 

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed on July 9, 2020.

 

  By: /s/ Max Munn
  Name: Max Munn 
  Title: President

 

 

 

Exhibit 10.1

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “Agreement”) is made and entered into on March 26, 2019 (the “Effective Date”) by and between Applied UV, Inc., a Delaware corporation (the “Parent”), SteriLumen, Inc., a New York corporation (“SLI”), and the shareholders of common stock representing 100% the ownership of SLI (each a “SLI Shareholder” and collectively, the “SLI Shareholders”). The Parent, SLI and each SLI Shareholder are each a “Party” and collectively the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, the SLI Shareholders desire to sell to Parent, and Parent desires to purchase from the SLI Shareholders, all of the issued and outstanding shares of SLI’s common stock, all of which is owned by the SLI Shareholders (the “SLI Common Stock”) in exchange for shares of Parent’s common stock, par value $0.0001 per share (the “Parent Common Stock”), on the terms and conditions set forth herein (the “Exchange”).

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the Parties hereto agree as follows:

 

ARTICLE I.
THE EXCHANGE

 

Section 1.01 Exchange. Upon the terms and subject to the conditions of this Agreement, the SLI Shareholders individually, do hereby sell to Parent all of their shares of SLI Common Stock in exchange for their pro rata portion, based on each SLI Shareholder’s ownership percentage of SLI, of 1,006,250 shares of Parent Common Stock (the “Exchange Shares”). On the Closing Date (as defined below), (i) the Parent shall issue certificates representing the Exchange Shares, dated the Closing Date, and deliver such certificates to SLI Shareholders, and (ii) SLI Shareholders shall deliver to Parent certificates, if any, evidencing the sale of the SLI Common Stock to Parent. Subject to and upon the terms and conditions of this Agreement, SLI shall become, as a result of the Exchange, a direct wholly-owned subsidiary of Parent.

 

Section 1.02 Closing. Unless this Agreement shall have been terminated pursuant to Section 8.01, the closing of the Exchange (the “Closing”) will take place on a date to be specified by the Parent and a SLI Shareholder (the “Closing Date”). The Closing shall be held at such location as is agreed to by the Parties hereto. By agreement of the Parties, the Closing may take place by delivery of documents required to be delivered hereby by electronic transmission, including by email attachment.

 

Section 1.03 Compensation to Shareholders of SLI. Each SLI Shareholder shall receive the applicable number of shares of Parent Common Stock in consideration for the applicable number of shares of SLI Common Stock, in each case, as set forth in the table contained in Exhibit A.

 

ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SLI

 

Except as set forth in a disclosure schedule or otherwise herein, SLI represents and warrants to Parent:

 

Section 2.01 Organization and Standing. SLI is a corporation duly organized and existing in good standing under the laws of the State of New York. SLI has heretofore delivered to Parent complete and correct copies of its organizational documents as now in effect. SLI has full corporate power and authority to carry on its respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets.

 

Section 2.02 Capital Structure of SLI. The authorized equity of SLI consists of 10,000,000 authorized shares of common stock, of which 1,006,250 are issued and outstanding and 1,000,000 authorized shares of preferred stock, 20,000 shares of which are issued and outstanding. All issued and outstanding shares of SLI Common Stock are duly authorized, validly issued, fully paid and non-assessable. SLI has no outstanding options, warrants, agreements, rights or commitments to issue any SLI Common Stock, and there are no outstanding securities convertible or exercisable into or exchangeable for SLI Common Stock.

 

 

 

 

Section 2.03 Corporate Acts and Proceedings. SLI has all requisite corporate power and authority to enter into this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein has been duly authorized by all necessary corporate action on the part of SLI and no other corporate proceedings on the part of SLI are necessary to authorize the execution and delivery of this Agreement and the other transactions contemplated hereby and this Agreement constitutes a valid and binding agreement of SLI.

 

Section 2.04 Governmental Consents. All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of SLI required in connection with the consummation of the Exchange shall have been obtained prior to, and be effective as of, the Closing.

 

Section 2.05 Compliance with Laws. There is no judgment, injunction, order or decree binging upon SLI which has or would reasonably be expected to have the effect of prohibiting or materially impairing SLI’s business or its ability to consummate the transactions contemplated herein.

 

Section 2.06 No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

 

(a) violate any provision of the Certificate of Incorporation, Bylaws or other charter or organizational document of SLI;

 

(b) violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which SLI is a party or by or to which either of its assets or properties, may be bound or subject;

 

(c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon SLI or upon the securities, assets or business of SLI;

 

(d) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to SLI or to the securities, properties or business of SLI; or

 

(e) result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by SLI.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF EACH SLI SHAREHOLDER

 

As an inducement to the Parent to enter into this Agreement and to consummate the transactions contemplated herein, each SLI Shareholder individually represents and warrants to the Parent as follows:

 

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Section 3.01 Authority. The SLI Shareholder has the right, power, authority and capacity to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligations of the SLI Shareholder, enforceable against the SLI Shareholder, in accordance with the terms hereof.

 

Section 3.02 No Consent. No consent, approval, authorization or order of, or any filing or declaration with any governmental authority or any other Person is required for the consummation by the SLI Shareholder of any of the transactions on its part contemplated under this Agreement.

 

Section 3.03 No Conflict. None of the execution, delivery, or performance of this Agreement, and the consummation of the transactions contemplated hereby, conflicts or will conflict with, or (with or without notice or lapse of time, or both) result in a termination, breach or violation of (i) any instrument, contract or agreement to which the SLI Shareholder is a Party or by which the SLI Shareholder is bound; or (ii) any federal, state, local or foreign law, ordinance, judgment, decree, order, statute, or regulation, or that of any other governmental body or authority, applicable to the SLI Shareholder.

 

Section 3.04 Potential Loss of Investment. The SLI Shareholder understands that an investment in the shares of Parent Common Stock is a speculative investment which involves a high degree of risk and the potential loss of the SLI Shareholder’s entire investment.

 

Section 3.05 Receipt of Information. The SLI Shareholder has received all documents, records, books and other information pertaining to his investment that has been requested by the SLI Shareholder.

 

Section 3.06 Investment Experience. The SLI Shareholder (either alone or with its advisors) is (i) experienced in making investments of the kind described in this Agreement, (ii) able, by reason of the SLI Shareholder’s business and financial experience to protect the SLI Shareholder’s own interests in connection with the transactions described in this Agreement, and (iii) able to afford the entire loss of investment in the shares of the Parent Common Stock. The SLI Shareholder further individually, represents and warrants to Parent that the SLI Shareholder understands that an investment in the Parent includes a high degree of risk and is in a financial position to hold its portion of the Exchange Shares for an indefinite period of time and is able to bear the economic risk of, and withstand a complete loss of such investment in its portion of the Exchange Shares.

 

Section 3.07 No Public Market. The SLI Shareholder understands that no public market now exists for the shares of the Parent Common Stock and that the Parent has made no assurances that a public market will ever exist for the shares of the Parent Common Stock.

 

Section 3.08 Further Assistance. The SLI Shareholder agrees to execute and deliver such other documents and to perform such other acts as shall be necessary to effectuate the purposes of this Agreement.

 

Section 3.09 No Litigation. There are no actions, suits, proceedings, judgments, claims or investigations pending or threatened by or against the SLI Shareholder or affecting the SLI Shareholder or their properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. The SLI Shareholder has no knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality or any circumstance which would result in the discovery of such default.

 

Section 3.10 Opportunity for Legal and Financial Advice. The SLI Shareholder has had enough time and a full opportunity to discuss this Agreement and all associated financial documents and disclosures with his or her legal, tax and financial counsel and fully understands his rights and obligations under this Agreement, the nature of consideration under this Agreement, as well as any rights or obligations which are being waived in consideration for the terms set forth herein.

 

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Section 3.11 Investment Representations. The SLI Shareholder is an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended.

  

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT

 

Except as set forth in a disclosure schedule, Parent represents and warrants to SLI and each SLI Shareholder as follows:

 

Section 4.01 Organization and Standing. Parent is a corporation duly organized and existing in good standing under the laws of the State of Delaware. Parent has heretofore delivered to SLI complete and correct copies of its organizational documents as now in effect. Parent has full corporate power and authority to carry on its respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets.

 

Section 4.02 Capital Structure of Parent. The authorized capital stock of Parent consists of 45,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred stock, in each case, none of which is issued and outstanding. All issued and outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid and non-assessable. Parent currently has no outstanding options, warrants, agreements, rights or commitments to issue additional shares of Parent Common Stock, and none of the Parent’s outstanding securities or instruments are convertible into shares of Parent Common Stock.

 

Section 4.03 Corporate Acts and Proceedings. Parent has all requisite corporate power and authority to enter into this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein has been duly authorized by all necessary corporate action on the part of Parent and no other corporate proceedings on the part of Parent are necessary to authorize the execution and delivery of this Agreement and the other transactions contemplated hereby and this Agreement constitutes a valid and binding agreement of Parent.

 

Section 4.04 Governmental Consents. All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of Parent required in connection with the consummation of the Exchange shall have been obtained prior to, and be effective as of, the Closing.

 

Section 4.05 Compliance with Laws and Instruments. There is no judgment, injunction, order or decree binging upon Parent which has or would reasonably be expected to have the effect of prohibiting or materially impairing Parent’s business or its ability to consummate the transactions contemplated herein.

 

Section 4.06 No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

 

(a) violate any provision of the Certificate of Incorporation, Bylaws or other charter or organizational document of Parent;

 

(b) violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which Parent is a party or by or to which either of its assets or properties, may be bound or subject;

 

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(c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon Parent or upon the securities, assets or business of Parent;

 

(d) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to Parent or to the securities, properties or business of Parent; or

 

(e) result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by Parent.

 

ARTICLE V.
CONDITIONS TO PARTIES’ OBLIGATIONS

 

Section 5.01 Conditions to Parent Obligations.  The obligations of Parent under this Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part by Parent:

 

(a) The representations and warranties of SLI under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects unless otherwise indicated elsewhere.

 

(b) SLI shall have performed and complied in all material respects with all material agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.

 

(c) No action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Transaction Documents or the carrying out of the transactions contemplated by the Transaction Documents.

 

(d) Parent shall have received the following:

 

(i) certificates representing SLI Common Stock, if any; and

 

(ii) such additional supporting documentation and other information with respect to the transactions contemplated hereby as Parent may reasonably request.

 

Section 5.02 Conditions to Each SLI Shareholder’s Obligations.  The obligations of each SLI Shareholder under the Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part by the SLI Shareholder.

 

(a)  The representations and warranties of Parent under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.

 

(b) Parent shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them on or before the Closing Date.

 

(c)  No action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Transaction Documents or the carrying out of the transactions contemplated by the Transaction Documents.

 

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(d) Each SLI Shareholder shall have received the following:

 

(i) certificates representing the SLI Shareholder’s Parent Common Stock; and

 

(ii) such additional supporting documentation and other information with respect to the transactions contemplated hereby as each SLI Shareholder may reasonably request.

 

ARTICLE VIII.
MISCELLANEOUS

 

Section 6.01 Notices.  Any notice, request or other communication hereunder shall be given in writing and shall be served either personally, by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:

 

If to Parent:

Applied UV, Inc.

150 N. Macquesten Pkwy.

Mount Vernon, NY 10550

Attention: Max Munn

 

If to SLI:

SteriLumen, Inc.

150 N. Macquesten Pkwy
Mount Vernon, NY 10550

Attention: Laurie Munn

 

 

If to a SLI Shareholder, the address listed on the SLI Signature Page below.

 

Notices shall be deemed received at the earlier of actual receipt or three Business Days following mailing. Counsel for a Party (or any authorized representative) shall have authority to accept delivery of any notice on behalf of such Party.

 

Section 6.02 Entire Agreement.  This Agreement, including the schedules and exhibits attached hereto and other documents referred to herein including all instruments, agreements and disclosure schedules, contains the entire understanding of the Parties hereto with respect to the subject matter hereof. This Agreement supersedes all prior agreements and undertakings between the Parties with respect to such subject matter written and oral. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties.

 

Section 6.03 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns and heirs; provided, however, that neither Party shall directly or indirectly transfer or assign any of its rights hereunder in whole or in part without the written consent of the others, which may be withheld in its sole discretion, and any such transfer or assignment without said consent shall be void.

 

Section 6.04 Counterparts.  This Agreement may be executed in one or more counterparts, with the same effect as if all Parties had signed the same document. Each such counterpart shall be an original, but all such counterparts together shall constitute a single agreement.

 

Section 6.05 Governing Law.  This Agreement and the terms and conditions set forth herein, shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The Parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the Parties hereto covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York, New York. The Parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the Party prevailing therein shall be entitled to payment from the other parties hereto of all of its reasonable counsel fees and disbursements.

 

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Section 6.06 Definitions. For purposes of this Agreement:

 

(a) Business Day” means a day other than a Saturday, Sunday or other day on which banks located in New York, New York are authorized or required by government authorities to close.

 

(b) “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

 

(c) Transaction Documents” means this Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

Section 8.09 Entire Agreement; No Third-Party Beneficiaries.  This Agreement constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter of this Agreement. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the Parties in accordance with the terms of this Agreement without notice or liability to any other Person. The representations and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties and may have been qualified by certain disclosures not reflected in the text of this Agreement. Accordingly, Persons other than the Parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

 

Section 8.10 Assignment.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties hereto without the prior written consent of the other Party. Any attempted or purported assignment in violation of the preceding sentence shall be null and void and of no effect whatsoever. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

 

Section 8.11  Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable legal requirements in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

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 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be binding and effective as of the day and year first above written.

 

 

  ApPLIED UV, INC.
   
   
  By:  ______________________
  Name: Max Munn
  Title:   President
   
   
   
  STERILUMEN, Inc.
   
   
  By:  ______________________
  Name: Laurie Munn
  Title:   Chairman of the Board

 

 

8 

 

 

 

[SIGNATURE PAGE OF STERILUMEN SHAREHOLDER]

 

 

 

 

(If shareholder is an individual)

 

Signature: _____________________________________

 

Printed Name: _________________________________

 

(If shareholder is an entity)

 

Signature: _____________________________________

 

Printed Name of Entity: __________________________

 

Printed Name of Signatory: _______________________

 

Title of Signatory: ______________________________

 

_____________________________________________

Street Address

 

_____________________________________________

City                                 State                             Zip

 

E-Mail Address:

 

Number of Shares Owned:

  

 

9 

 

 

Exhibit A

 

 

 

SLI Shareholder Shares of SLI Common Stock Shares of Parent Common Stock
Laurie Munn 1,000,000 1,000,000
Forte Securities LLC        2,501        2,501
Averell W. Satloff        2,500        2,500
Troy Lindstrom           625           625
Richard Sandow           312           312
Burt Stangarone           312           312
Total 1,006,250   1,006,250

 

 

10 

 

 

Exhibit 10.2

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “Agreement”) is made and entered into on March 27, 2019 (the “Effective Date”) by and between Applied UV, Inc., a Delaware corporation (the “Company”), SteriLumen, Inc., a New York corporation and wholly-owned subsidiary of Applied UV (“SLI”), and Laurie Munn, a shareholder of the Company (the “Shareholder”). Applied UV, SLI and the Shareholder are each a “Party” and collectively the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, the Shareholder desires to sell to Applied UV, and Applied UV desires to purchase from the Shareholder, all of the issued and outstanding shares of SLI’s Series A Preferred Stock, all of which is owned by the Shareholder (the “SLI Preferred Stock”) in exchange for shares of the Company’s common stock, par value $0.0001 per share (the “Company Common Stock”) and shares of Series A Preferred Stock, par value $0.0001 per share (the “Company Preferred Stock”) on the terms and conditions set forth herein (the “Exchange”).

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the Parties hereto agree as follows:

 

ARTICLE I.
THE EXCHANGE

 

Section 1.01   Exchange. The Shareholder hereby sells to the Company all of its shares of SLI Preferred Stock in exchange for 9,000,000 shares of Company Common Stock and 10,000 shares of Company Preferred Stock (collectively, the “Exchange Shares”). On or before the Closing Date, the Company shall take the necessary corporate actions to issue the shares in the name of the Shareholder and reflect such ownership on the books and records of the Company.

 

Section 1.02  Closing. Unless this Agreement shall have been terminated pursuant to Section 8.01, the closing of the Exchange (the “Closing”) will take place on a date to be specified by the Company and the Shareholder (the “Closing Date”). The Closing shall be held at such location as is agreed to by the Parties hereto. By agreement of the Parties, the Closing may take place by delivery of documents required to be delivered hereby by electronic transmission, including by email attachment.

 

ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SLI

 

Except as set forth in a disclosure schedule or otherwise herein, SLI represents and warrants to the Company:

 

Section 2.01   Organization and Standing. SLI is a corporation duly organized and existing in good standing under the laws of the State of New York. SLI has heretofore delivered to the Company complete and correct copies of its organizational documents as now in effect. SLI has full corporate power and authority to carry on its respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets.

 

Section 2.02   Capital Structure of SLI. The authorized equity of SLI consists of 10,000,000 authorized shares of common stock, of which 1,006,250 are issued and outstanding and 1,000,000 authorized shares of preferred stock, 20,000 of which are issued and outstanding. All issued and outstanding shares of SLI Common Stock are duly authorized, validly issued, fully paid and non-assessable.

 

Section 2.03   Corporate Acts and Proceedings. SLI has all requisite corporate power and authority to enter into this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein has been duly authorized by all necessary corporate action on the part of SLI and no other corporate proceedings on the part of SLI are necessary to authorize the execution and delivery of this Agreement and the other transactions contemplated hereby and this Agreement constitutes a valid and binding agreement of SLI.

 

 

 

 

Section 2.04   Governmental Consents. All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of SLI required in connection with the consummation of the Exchange shall have been obtained prior to, and be effective as of, the Closing.

 

Section 2.05   Compliance with Laws. There is no judgment, injunction, order or decree binging upon SLI which has or would reasonably be expected to have the effect of prohibiting or materially impairing SLI’s business or its ability to consummate the transactions contemplated herein.

 

Section 2.06  No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

 

(a)  violate any provision of the Certificate of Incorporation, Bylaws or other charter or organizational document of SLI;

 

(b)  violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which SLI is a party or by or to which either of its assets or properties, may be bound or subject;

 

(c)  violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon SLI or upon the securities, assets or business of SLI;

 

(d)  violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to SLI or to the securities, properties or business of SLI; or

 

(e)  result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by SLI.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER

 

As an inducement to the Company to enter into this Agreement and to consummate the transactions contemplated herein, the Shareholder individually represents and warrants to the Company as follows:

 

Section 3.01   Potential Loss of Investment. The Shareholder understands that an investment in the shares of Company Common Stock is a speculative investment which involves a high degree of risk and the potential loss of the Shareholder’s entire investment.

 

Section 3.05  Receipt of Information. The Shareholder has received all documents, records, books and other information pertaining to his investment that has been requested by the Shareholder.

 

Section 3.06  No Public Market. The Shareholder understands that no public market now exists for the shares of the Company Common Stock and that the Company has made no assurances that a public market will ever exist for the shares of the Company Common Stock.

 

2 

 

 

Section 3.07  Further Assistance. The Shareholder agrees to execute and deliver such other documents and to perform such other acts as shall be necessary to effectuate the purposes of this Agreement.

 

Section 3.08  Opportunity for Legal and Financial Advice. The Shareholder has had enough time and a full opportunity to discuss this Agreement and all associated financial documents and disclosures with his or her legal, tax and financial counsel and fully understands his rights and obligations under this Agreement, the nature of consideration under this Agreement, as well as any rights or obligations which are being waived in consideration for the terms set forth herein.

 

Section 3.09  Investment Representations. The Shareholder is an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended.

  

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY

 

The Company represents and warrants to SLI and the Shareholder as follows:

 

Section 4.01   Organization and Standing. The Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware. The Company has heretofore delivered to SLI complete and correct copies of its organizational documents as now in effect. The Company has full corporate power and authority to carry on its respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets.

 

Section 4.02   Capital Structure of the Company. The authorized capital stock of the Company consists of 45,000,000 shares of Company Common Stock, 1,006,250 shares of which are issued and outstanding and 1,000,000 shares of Company Preferred Stock, none of which are outstanding. All issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable.

 

Section 4.03   Corporate Acts and Proceedings. The Company has all requisite corporate power and authority to enter into this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein has been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement and the other transactions contemplated hereby and this Agreement constitutes a valid and binding agreement of the Company.

 

Section 4.04   Governmental Consents. All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of the Company required in connection with the consummation of the Exchange shall have been obtained prior to, and be effective as of, the Closing.

 

Section 4.05   Compliance with Laws and Instruments. There is no judgment, injunction, order or decree binging upon the Company which has or would reasonably be expected to have the effect of prohibiting or materially impairing the Company’s business or its ability to consummate the transactions contemplated herein.

 

Section 4.06  No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

 

(a)  violate any provision of the Certificate of Incorporation, Bylaws or other charter or organizational document of the Company;

 

3 

 

 

(b)  violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which the Company is a party or by or to which either of its assets or properties, may be bound or subject;

 

(c)  violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon the Company or upon the securities, assets or business of the Company;

 

(d)  violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to the Company or to the securities, properties or business of the Company; or

 

(e)  result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by the Company.

ARTICLE VIII.
MISCELLANEOUS

 

Section 5.01   Entire Agreement.  This Agreement, including the schedules and exhibits attached hereto and other documents referred to herein including all instruments, agreements and disclosure schedules, contains the entire understanding of the Parties hereto with respect to the subject matter hereof. This Agreement supersedes all prior agreements and undertakings between the Parties with respect to such subject matter written and oral. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties.

 

Section 5.02    Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns and heirs; provided, however, that neither Party shall directly or indirectly transfer or assign any of its rights hereunder in whole or in part without the written consent of the others, which may be withheld in its sole discretion, and any such transfer or assignment without said consent shall be void.

 

Section 5.03   Counterparts.  This Agreement may be executed in one or more counterparts, with the same effect as if all Parties had signed the same document. Each such counterpart shall be an original, but all such counterparts together shall constitute a single agreement.

 

Section 5.04   Governing Law.  This Agreement and the terms and conditions set forth herein, shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The Parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the Parties hereto covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York, New York. The Parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the Party prevailing therein shall be entitled to payment from the other parties hereto of all of its reasonable counsel fees and disbursements.

 

4 

 

 

Section 5.05   Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable legal requirements in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

5 

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be binding and effective as of the day and year first above written.

 

 

  ApPLIED UV, INC.
   
   
  By:  ______________________
  Name: Max Munn
  Title:   President
   
   
  STERILUMEN, Inc.
   
   
  By:  ______________________
  Name: Max Munn
  Title:   President
   
   
           ______________________
           Laurie Munn

 

6 

 

Exhibit 10.3

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “Agreement”) is made and entered into on July 1, 2019 (the “Effective Date”) by and between Applied UV, Inc., a Delaware corporation (the “Parent”), Munn Works, LLC, a New York limited liability company (“Munn Works”), and Laurie Munn, as sole member representing 100% the ownership of Munn Works (“Munn”). The Parent, Munn Works and Munn are each a “Party” and collectively the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, the Member desires to sell to Parent, and Parent desires to purchase from Munn, 100% of its equity interest in Munn Works (the “Equity Interest”) in exchange for shares of Parent’s common stock, par value $0.0001 per share (the “Parent Common Stock”), on the terms and conditions set forth herein (the “Exchange”).

 

  NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the Parties hereto agree as follows:

 

ARTICLE I.
THE EXCHANGE

 

Section 1.01   Exchange. Upon the terms and subject to the conditions of this Agreement, Munn does hereby sell to Parent all of its Equity Interest in exchange for 15,000,000 shares of Parent Common Stock (the “Exchange Shares”). On the Closing Date (as defined below), (i) the Parent shall issue certificates representing the Exchange Shares, dated the Closing Date, and deliver such certificates to Munn, and (ii) Munn shall execute an amendment to the Operating Agreement of Munn Works that evidences the Parent being the sole Member of Munn Works (the “Amendment”). Subject to and upon the terms and conditions of this Agreement, Munn Works shall become, as a result of the Exchange and the execution of the Amendment by Munn and the Parent, a direct wholly-owned subsidiary of Parent.

 

Section 1.02  Closing. Unless this Agreement shall have been terminated pursuant to Section 8.01, the closing of the Exchange (the “Closing”) will take place on a date to be specified by the Parent and a Munn Works Shareholder (the “Closing Date”). The Closing shall be held at such location as is agreed to by the Parties hereto. By agreement of the Parties, the Closing may take place by delivery of documents required to be delivered hereby by electronic transmission, including by email attachment.

 

ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF Munn Works

 

Except as set forth in a disclosure schedule or otherwise herein, Munn Works represents and warrants to Parent:

 

Section 2.01   Organization and Standing. Munn Works is a limited liability company duly organized and existing in good standing under the laws of the State of New York. Munn Works has heretofore delivered to Parent complete and correct copies of its organizational documents as now in effect. Munn Works has full corporate power and authority to carry on its respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets.

 

Section 2.02   Capital Structure of Munn Works. The authorized and issued equity of Munn Works consists of Munn’s Equity Interest. There are no outstanding options, warrants, agreements, rights or commitments to issue any equity interests in Munn Works.

 

Section 2.03   Corporate Acts and Proceedings. Munn Works has all requisite company power and authority to enter into this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein has been duly authorized by all necessary company action on the part of Munn Works and no other company proceedings on the part of Munn Works are necessary to authorize the execution and delivery of this Agreement and the other transactions contemplated hereby and this Agreement constitutes a valid and binding agreement of Munn Works.

 

  

 

 

Section 2.04   Governmental Consents. All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of Munn Works required in connection with the consummation of the Exchange shall have been obtained prior to, and be effective as of, the Closing.

 

Section 2.05   Compliance with Laws. There is no judgment, injunction, order or decree binging upon Munn Works which has or would reasonably be expected to have the effect of prohibiting or materially impairing Munn Works’ business or its ability to consummate the transactions contemplated herein.

 

Section 2.06  No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

 

(a)  violate any provision of the Articles of Organization, Operating Agreement or other organizational document of Munn Works;

 

(b)  violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which Munn Works is a party or by or to which either of its assets or properties, may be bound or subject;

 

(c)  violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon Munn Works or upon the securities, assets or business of Munn Works;

 

(d)  violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to Munn Works or to the securities, properties or business of Munn Works; or

 

(e)  result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by Munn Works.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF MUNN

 

As an inducement to the Parent to enter into this Agreement and to consummate the transactions contemplated herein, each Munn Works Shareholder individually represents and warrants to the Parent as follows:

 

Section 3.01   Authority. Munn has the right, power, authority and capacity to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligations of Munn, enforceable against Munn, in accordance with the terms hereof.

 

2

 

 

Section 3.02   No Consent. No consent, approval, authorization or order of, or any filing or declaration with any governmental authority or any other Person is required for the consummation by Munn of any of the transactions on its part contemplated under this Agreement.

 

Section 3.03  No Conflict. None of the execution, delivery, or performance of this Agreement, and the consummation of the transactions contemplated hereby, conflicts or will conflict with, or (with or without notice or lapse of time, or both) result in a termination, breach or violation of (i) any instrument, contract or agreement to which Munn is a Party or by which Munn is bound; or (ii) any federal, state, local or foreign law, ordinance, judgment, decree, order, statute, or regulation, or that of any other governmental body or authority, applicable to Munn.

 

Section 3.04  Potential Loss of Investment. Munn understands that an investment in the shares of Parent Common Stock is a speculative investment which involves a high degree of risk and the potential loss of the Munn’s entire investment.

 

Section 3.05  Receipt of Information. Munn has received all documents, records, books and other information pertaining to his investment that has been requested by Munn.

 

Section 3.06  Investment Experience. Munn (either alone or with her advisors) is (i) experienced in making investments of the kind described in this Agreement, (ii) able, by reason of Munn’s business and financial experience to protect Munn’s own interests in connection with the transactions described in this Agreement, and (iii) able to afford the entire loss of investment in the shares of the Parent Common Stock. Munn further individually, represents and warrants to Parent that Munn understands that an investment in the Parent includes a high degree of risk and is in a financial position to hold its portion of the Exchange Shares for an indefinite period of time and is able to bear the economic risk of, and withstand a complete loss of such investment in its portion of the Exchange Shares.

 

Section 3.07  No Public Market. Munn understands that no public market now exists for the shares of the Parent Common Stock and that the Parent has made no assurances that a public market will ever exist for the shares of the Parent Common Stock.

 

Section 3.08  Further Assistance. Munn agrees to execute and deliver such other documents and to perform such other acts as shall be necessary to effectuate the purposes of this Agreement.

 

Section 3.09  No Litigation. There are no actions, suits, proceedings, judgments, claims or investigations pending or threatened by or against Munn or affecting Munn or her properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. Munn has no knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality or any circumstance which would result in the discovery of such default.

 

Section 3.10  Opportunity for Legal and Financial Advice. Munn has had enough time and a full opportunity to discuss this Agreement and all associated financial documents and disclosures with his or her legal, tax and financial counsel and fully understands his rights and obligations under this Agreement, the nature of consideration under this Agreement, as well as any rights or obligations which are being waived in consideration for the terms set forth herein.

 

Section 3.11  Investment Representations. Munn is an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT

 

Except as set forth in a disclosure schedule, Parent represents and warrants to Munn Works and each Munn Works Shareholder as follows:

 

Section 4.01   Organization and Standing. Parent is a corporation duly organized and existing in good standing under the laws of the State of Delaware. Parent has heretofore delivered to Munn Works complete and correct copies of its organizational documents as now in effect. Parent has full corporate power and authority to carry on its respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets.

 

Section 4.02   Capital Structure of Parent. The authorized capital stock of Parent consists of 45,000,000 shares of Parent Common Stock, of which 10,006,250 are issued and outstanding and 1,000,000 shares of preferred stock, of which 10,000 shares of Series A Preferred Stock are issued and outstanding. All issued and outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid and non-assessable. Parent currently has no outstanding options, warrants, agreements, rights or commitments to issue additional shares of Parent Common Stock, and none of the Parent’s outstanding securities or instruments are convertible into shares of Parent Common Stock.

 

Section 4.03   Corporate Acts and Proceedings. Parent has all requisite corporate power and authority to enter into this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein has been duly authorized by all necessary corporate action on the part of Parent and no other corporate proceedings on the part of Parent are necessary to authorize the execution and delivery of this Agreement and the other transactions contemplated hereby and this Agreement constitutes a valid and binding agreement of Parent.

 

Section 4.04   Governmental Consents. All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of Parent required in connection with the consummation of the Exchange shall have been obtained prior to, and be effective as of, the Closing.

 

Section 4.05   Compliance with Laws and Instruments. There is no judgment, injunction, order or decree binging upon Parent which has or would reasonably be expected to have the effect of prohibiting or materially impairing Parent’s business or its ability to consummate the transactions contemplated herein.

 

Section 4.06  No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

 

(a)  violate any provision of the Certificate of Incorporation, Bylaws or other charter or organizational document of Parent;

 

(b)  violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which Parent is a party or by or to which either of its assets or properties, may be bound or subject;

 

(c)  violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon Parent or upon the securities, assets or business of Parent;

 

4

 

 

(d)  violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to Parent or to the securities, properties or business of Parent; or

 

(e)  result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by Parent.

 

ARTICLE V.
CONDITIONS TO PARTIES’ OBLIGATIONS

 

Section 5.01   Conditions to Parent Obligations.  The obligations of Parent under this Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part by Parent:

 

(a)   The representations and warranties of Munn Works under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects unless otherwise indicated elsewhere.

 

(b)   Munn Works shall have performed and complied in all material respects with all material agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.

 

(c)   No action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Transaction Documents or the carrying out of the transactions contemplated by the Transaction Documents.

 

(d)   Parent shall have received the following:

 

(i)   the Amendment, executed by Munn and Munn Works; and

 

(ii)   such additional supporting documentation and other information with respect to the transactions contemplated hereby as Parent may reasonably request.

 

Section 5.02   Conditions to Munn’s Obligations.  The obligations of Munn under the Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part by Munn.

 

(a)   The representations and warranties of Parent under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.

 

(b)   Parent shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them on or before the Closing Date.

 

(c)  No action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Transaction Documents or the carrying out of the transactions contemplated by the Transaction Documents.

 

(d)   Munn shall have received the following:

 

(i)   certificates representing the Exchange Shares; and

 

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(ii)   such additional supporting documentation and other information with respect to the transactions contemplated hereby as Munn may reasonably request.

 

ARTICLE VIII.
MISCELLANEOUS

 

Section 6.01   Notices.  Any notice, request or other communication hereunder shall be given in writing and shall be served either personally, by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:

 

If to Parent:

Applied UV, Inc.

150 N. Macquesten Pkwy.

Mount Vernon, NY 10550

Attention: Max Munn

 

If to Munn Works:

Munn Works, LLC.

150 N. Macquesten Pkwy
Mount Vernon, NY 10550

Attention: Laurie Munn

 

 

If to Munn, the address listed on the Munn Works Signature Page below.

 

Notices shall be deemed received at the earlier of actual receipt or three Business Days following mailing. Counsel for a Party (or any authorized representative) shall have authority to accept delivery of any notice on behalf of such Party.

 

Section 6.02   Entire Agreement.  This Agreement, including the schedules and exhibits attached hereto and other documents referred to herein including all instruments, agreements and disclosure schedules, contains the entire understanding of the Parties hereto with respect to the subject matter hereof. This Agreement supersedes all prior agreements and undertakings between the Parties with respect to such subject matter written and oral. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties.

 

Section 6.03    Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns and heirs; provided, however, that neither Party shall directly or indirectly transfer or assign any of its rights hereunder in whole or in part without the written consent of the others, which may be withheld in its sole discretion, and any such transfer or assignment without said consent shall be void.

 

Section 6.04   Counterparts.  This Agreement may be executed in one or more counterparts, with the same effect as if all Parties had signed the same document. Each such counterpart shall be an original, but all such counterparts together shall constitute a single agreement.

 

Section 6.05   Governing Law.  This Agreement and the terms and conditions set forth herein, shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The Parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the Parties hereto covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York, New York. The Parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the Party prevailing therein shall be entitled to payment from the other parties hereto of all of its reasonable counsel fees and disbursements.

 

6

 

 

Section 6.06  Definitions. For purposes of this Agreement:

 

(a)  Business Day” means a day other than a Saturday, Sunday or other day on which banks located in New York, New York are authorized or required by government authorities to close.

 

(b)  “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

 

(c)  Transaction Documents” means this Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

Section 8.09  Entire Agreement; No Third-Party Beneficiaries.  This Agreement constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter of this Agreement. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the Parties in accordance with the terms of this Agreement without notice or liability to any other Person. The representations and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties and may have been qualified by certain disclosures not reflected in the text of this Agreement. Accordingly, Persons other than the Parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

 

Section 8.10  Assignment.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties hereto without the prior written consent of the other Party. Any attempted or purported assignment in violation of the preceding sentence shall be null and void and of no effect whatsoever. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

 

Section 8.11   Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable legal requirements in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

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 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be binding and effective as of the day and year first above written.

 

 

  ApPLIED UV, INC.
   
   
  By:  ______________________
  Name: Max Munn
  Title:   President
   
   
   
  MUNN WORKS, LLC
   
   
  By:  ______________________
  Name: Max Munn
  Title:   President

 

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[SIGNATURE PAGE OF MUNN WORKS MEMBER]

 

 

 

 

(If Member is an individual)

 

Signature: ____________________________________

 

Printed Name: Laurie Munn_________________

 

(If shareholder is an entity)

 

Signature: ____________________________________

 

Printed Name of Entity: __________________________

 

Printed Name of Signatory: _______________________

 

Title of Signatory: ______________________________

 

____________________________________________

Street Address

 

____________________________________________

City                                 State                  Zip

 

E-Mail Address:

 

Percent Equity Owned: 100%

 

 

 

 

 

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Exhibit 10.4

 

These securities have not been registered with the United States Securities and Exchange Commission or the Securities Commission of any state pursuant to an exemption from registration under regulation d promulgated under the securities act of 1933, as amended (the “act”). this warrant shall not constitute an offer to sell nor a solicitation of an offer to buy the securities in any jurisdiction in which such offer or solicitation would be unlawful. the securities are “restricted” and may not be resold or transferred except as permitted under the act pursuant to registration or exemption there from.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase Shares of $0.0001 Par Value Common Stock (“Common Stock”) of

 

Applied UV, Inc.

 

April 1, 2020

 

THIS CERTIFIES that, for value received, Max Munn (the “Holder”) is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof (the “Issuance Date”) and on or prior to the date that is the fifth anniversary date of the date hereof (the “Expiration Date”), but not thereafter, to subscribe for and purchase from Applied UV, Inc., a Delaware corporation (the “Company”) 400,000 shares of the Common Stock (the “Warrant Shares”) at an exercise price equal to the greater of (x) $1.00 per share and (y) the Market Value of the Common Stock on the Issuance Date (the “Exercise Price”).

 

Market Value on the Issuance Date” means the per share market value of the Common Stock as set forth in a valuation prepared by an independent valuation company engaged by the Company that is reasonable under Regulation 409A-1(b)(5)(iv)(B) of the Internal Revenue Service Code as a valuation for the Common Stock as of the Issuance Date; provided however, if on the date hereof the Common Stock is listed on a national exchange or quoted on an established quotation system, then “Market Value on the Issuance Date” shall mean the closing price of the Common Stock on such national exchange or quotation system on the Trading Day (as defined in Section 1(b)) immediately prior to the Issuance Date.

 

1. Exercise of Warrant.

 

a. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the date hereof and on or before the Expiration Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto. Within the earlier of (i) three (3) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 1(b)) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 1(b) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. 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. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

 

 

 

b. In lieu of paying the aggregate Exercise Price as set forth in Section 1(a), the Holder may elect to receive Warrant Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (x) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (y) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day;

 

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(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended, the Warrant Shares shall take on any registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 1(b).

 

Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

 

Standard Settlement Period” means (i) the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise; or if the Common Stock is not publicly traded (ii) three Trading Days.

 

Trading Day” means (i) a day on which the principal Trading Market is open for trading or, if the Common Stock is not quoted or listed in any market or exchange, (ii) any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).

 

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VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

 

Notwithstanding anything herein to the contrary, on the Expiration Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 1(b).

 

c. In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, if requested by Holder and at its expense, shall within five (5) Trading Days issue and deliver to the Holder a new Warrant of like tenor in the name of the Holder or as the Holder (upon payment by Holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares. Notwithstanding anything to the contrary set forth herein, upon exercise of any portion of this Warrant in accordance with the terms hereof, the Holder shall not be required to physically surrender this Warrant to the Company unless such Holder is purchasing the full amount of Warrant Shares represented by this Warrant. The Holder and the Company shall maintain records showing the number of Warrant Shares so purchased hereunder and the dates of such purchases or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Warrant upon each such exercise. The Holder, by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by reason of the provisions of this Section, following exercise of any portion of this Warrant, the number of Warrant Shares which may be purchased upon exercise of this Warrant may be less than the number of Warrant Shares set forth on the face hereof. Certificates for shares of Common Stock (or a statement from the Company’s transfer agent reflecting shares of Common Stock) purchased hereunder shall be delivered to the Holder hereof within five (5) Business Days after the date on which this Warrant shall have been exercised as aforesaid. The Holder may withdraw its Notice of Exercise at any time if the Company fails to timely deliver the relevant certificates or statement to the Holder as provided in this Agreement. A Notice of Exercise shall be deemed sent on the date of delivery if delivered before 8:00 p.m. New York Time on such date, or the day following such date if delivered after 8:00 p.m. New York Time; provided that the Company is only obligated to deliver Warrant Shares against delivery of the Exercise Price from the holder hereof (other than with respect to a cashless exercise) and, if the Holder is purchasing the full amount of Warrant Shares represented by this Warrant, surrender of this Warrant (or appropriate affidavit and/or indemnity in lieu thereof).

 

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2. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of issuance of a fractional share upon any exercise hereunder, the Company will either round up to nearest whole number of shares or pay the cash value of that fractional share, which cash value shall be calculated on the basis of the average closing price of the Common Stock during the five (5) Trading Days immediately preceding the date of exercise.

 

3. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder of this Warrant or in such name or names as may be directed by the Holder of this Warrant.

 

4. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant.

 

5. No Rights as Shareholder until Exercise. The Holder shall not be entitled to vote or receive dividends or be deemed the holder of Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Warrant pursuant to Section 1 hereof, the Warrant Shares so purchased hereunder shall be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised.

 

6. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company represents, warrants and covenants that (a) upon receipt by the Company of evidence and/or indemnity reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate representing the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and (b) upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate, without any charge there for. This Warrant is exchangeable at any time for an equal aggregate number of Warrants of different denominations, as requested by the holder surrendering the same, or in such denominations as may be requested by the Holder following determination of the Exercise Price. No service charge will be made for such registration or transfer, exchange or reissuance.

 

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7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

 

8. Effect of Certain Events. If at any time while this Warrant or any portion thereof is outstanding and unexpired there shall be a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a “Sale or Merger Transaction”), the Holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 9.

 

9. Adjustments of Exercise Price and Number of Warrant Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 9.

 

a. Subdivisions, Combinations, Stock Dividends and other Issuances. If the Company shall, at any time while this Warrant is outstanding, (i) pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding Common Stock into a smaller number of shares, then the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 9(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. The number of shares which may be purchased hereunder shall be increased proportionately to any reduction in Exercise Price pursuant to this paragraph 9(a), so that after such adjustments the aggregate Exercise Price payable hereunder for the increased number of shares shall be the same as the aggregate Exercise Price in effect just prior to such adjustments.

 

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b. Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, and upon payment of the Exercise Price then in effect, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant been exercised just prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be. The Company will not merge or consolidate with or into any other corporation, or sell or otherwise transfer its property, assets and business substantially as an entirety to another corporation, unless the corporation resulting from such merger or consolidation (if not the Company), or such transferee corporation, as the case may be, shall expressly assume in writing the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company.

 

d. Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant at such time been exercised.

Simultaneously with any adjustment to the Exercise Price pursuant to this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

10. Voluntary Adjustment by the Company. The Company may at its option, at any time during the term of this Warrant, reduce but not increase the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

11. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, the Company, at its expense, shall promptly mail to the Holder of this Warrant a notice setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment and setting forth the computation of such adjustment and a brief statement of the facts requiring such adjustment.

 

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12. Authorized Shares. The Company covenants that during the period the Warrant is outstanding and exercisable, it will reserve and keep available from its authorized and unissued Common Stock a sufficient number of shares to provide solely for the issuance of the Warrant Shares upon the exercise of any and all purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law, regulation, or rule of any applicable market or exchange.

 

13. Compliance with Securities Laws. The Holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Warrant Shares issued to the Holder upon exercise (if not registered, for resale or otherwise, or if no exemption from registration exists) will bear substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT 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, AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF 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.

 

14. Miscellaneous.

 

a. Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this Warrant shall be construed and shall be given effect in all respects as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant will be construed and enforced in accordance with and governed by the laws of the State of New York, except for matters arising under the Act, without reference to principles of conflicts of law. Each of the parties consents to the exclusive jurisdiction of the Federal and State Courts sitting in the County of New York in the State of New York in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens or venue, to the bringing of any such proceeding in such jurisdiction.

 

b. Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Holder, each future holder of this Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

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c. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing by facsimile, mail or personal delivery and shall be effective upon actual receipt of such notice. The addresses for such communications shall be to the addresses as shown on the books of the Company. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 14(c).

 

d. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

e. Specific Enforcement. The Company and the Holder acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Warrant and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either of them may be entitled by law or equity.

 

f. Counterparts/Execution. This Warrant may be executed by facsimile and in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. Execution and delivery of this Warrant by facsimile transmission (including delivery of documents in Adobe PDF format) shall constitute execution and delivery of this Warrant for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

  

[SIGNATURE PAGE TO FOLLOW]

 

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IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officers thereunto duly authorized.

 

  Applied UV, Inc.
   
   
  By:  ______________________
  Name: Max Munn
  Title:   President
   
   
  By:  ______________________
  Name: Ross Carmel
  Title: Secretary

 

 

 

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NOTICE OF EXERCISE

 

To: Applied UV, Inc.

 

(1)       The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the aggregate Exercise Price in full, together with all applicable transfer taxes, if any.

 

(2)       Payment shall take the form of (check applicable box):

 

[   ] in lawful money of the United States; or

 

[   ] if cashless exercise, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 1(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 1(b).

 

(3)       Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

_______________________________
(Name)
_______________________________
(Address)
 
_______________________________

 

(3)       Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

 

  ___________________________________
  (Name)
   
____________________ ___________________________________
(Date) (Signature)
   
  ___________________________________
  (Address)
Dated:  
   
______________________________  
Signature  

  

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ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name: _______________________________________________
  (Please Print)
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Dated: _______________ __, ______  
Holder’s Signature: ________________________  
Holder’s Address: _________________________

 

 

12

 

 

Exhibit 10.5

 

APPLIED UV, INC.

 

2020 OMNIBUS INCENTIVE PLAN

 

ARTICLE 1

 

ESTABLISHMENT, OBJECTIVES, AND DURATION

 

1.1  Establishment of the Plan. Applied UV, Inc., hereby establishes an incentive compensation plan to be known as the “Applied UV, Inc. 2020 Omnibus Incentive Plan” (hereinafter referred to as the “Plan”). The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Awards.

 

The Plan will become effective March 31, 2020 (the “Effective Date”) if it is approved by the Company’s stockholders at the Company’s 2020 annual stockholders meeting. The Plan shall remain in effect as provided in Section 1.3 hereof.

 

1.2  Objectives of the Plan. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders.

 

The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make or are expected to make significant contributions to the Company’s success and to allow Participants to share in the success of the Company.

 

1.3  Duration of the Plan. No Award may be granted under the Plan after the day immediately preceding the tenth anniversary of the Effective Date, or such earlier date as the Board shall determine. The Plan will remain in effect with respect to outstanding Awards until no Awards remain outstanding.

 

ARTICLE 2

 

DEFINITIONS

 

The following terms, when capitalized, shall have the meanings set forth below:

 

2.1  “Award” means, individually or collectively, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, and Other Awards granted under the Plan.

 

2.2  “Award Agreement” means an agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award.

 

2.3  “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

2.4  “Board” means the Board of Directors of the Company.

 

2.5  “Cause” means the engaging by a Participant in illegal conduct that, in the sole discretion of the Committee, is materially and demonstrably injurious to the Company, unless otherwise defined in an agreement between the Participant and the Company.

 

2.6  “Change in Control” means that the conditions set forth in any one of the following subsections shall have been satisfied:

 

(a) an acquisition immediately after which any Person possesses direct or indirect Beneficial Ownership of 25% or more of either the then outstanding shares of Company common stock (the “Outstanding Company Common Stock”) or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided that the following acquisitions shall be excluded: (i) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or a Subsidiary, or (iv) any acquisition pursuant to a transaction that complies with paragraphs (i), (ii) and (iii) of subsection (c) of this Section 2.6; or

 

 

 

 

(b) during any period of two consecutive years, the individuals who, as of the beginning of such period, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided that for purposes of this Section 2.6, any individual who becomes a member of the Board subsequent to the beginning of such period and whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

 

(c) consummation of a reorganization, merger, share exchange, consolidation or sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding, however, such a Corporate Transaction pursuant to which:

 

(i) all or substantially all of the individuals and entities who have Beneficial Ownership, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will have Beneficial Ownership, directly or indirectly, of more than 50% of, respectively, the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, the Company or a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Resulting Corporation”) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be;

 

(ii) no Person (other than (1) the Company, (2) an employee benefit plan (or related trust) sponsored or maintained by the Company or Resulting Corporation, or (3) any entity controlled by the Company or Resulting Corporation) will have Beneficial Ownership, directly or indirectly, of 25% or more of, respectively, the outstanding shares of common stock of the Resulting Corporation or the combined voting power of the outstanding voting securities of the Resulting Corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the Corporate Transaction; and

 

(iii) individuals who were members of the Incumbent Board will continue to constitute at least a majority of the members of the board of directors of the Resulting Corporation; or

 

(d) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

2.7   “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

2.8  “Committee” means the entity, as specified in Section 3.1, authorized to administer the Plan.

 

2.9  “Company” means Applied UV, Inc., and any successor thereto.

 

2.10  “Consultant” means any natural person that is a consultant or advisor to the Company or a Subsidiary.

 

 

 

 

2.11  “Director” means any individual who is a member of the Board of Directors of the Company or a Subsidiary.

 

2.12  “Disability” means an individual: (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 or directors of the Company. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering Employees or Directors of the Company provided that the definition of “disability” applied under such disability insurance program complies with the requirements of the preceding sentence. Upon the request of the plan administrator, the Participant must submit proof to the plan administrator of the Social Security Administration’s or the provider’s determination.

 

2.13  “Dividend Equivalent” means, with respect to Shares subject to an Award, a right to be paid an amount equal to the dividends declared and paid on an equal number of outstanding Shares.

 

2.14  “Effective Date” shall have the meaning ascribed to such term in Section 1.1 hereof.

 

2.15  “Employee” means any employee of the Company or a Subsidiary.

 

2.16  “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

2.17  “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

 

2.18  “Fair Market Value” means the fair market value of a Share as determined in good faith by the Committee or pursuant to a procedure specified in good faith by the Committee; provided, however, that if the Committee has not specified otherwise, Fair Market Value shall mean (a), if the Company’s shares are listed on the NASDAQ Stock Market, the closing price of a Share as reported on the NASDAQ Stock Market or (b) if the Company’s shares are not listed on the NASDAQ Stock Market, but are listed on a different national securities exchange or are quoted on the OTC Markets, the closing price of a Share as reported on such other national securities exchange or the OTC Markets, as applicable.

 

2.19  “Freestanding SAR” means an SAR that is granted independently of any Options, as described in

Article 7 herein.

 

2.20  “Incentive Stock Option” or “ISO” means an Option that is intended to meet the requirements of

Code Section 422.

 

2.21  “Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422.

 

2.22  “Option” means an Incentive Stock Option or a Nonqualified Stock Option granted under the Plan, as described in Article 6 herein.

 

2.23  “Other Award” means a cash, Share-based or Share-related Award (other than an Award described in Article 6, 7, 8, 9 or 10 of the Plan) that is granted pursuant to Article 11 herein.

 

 

 

 

2.24  “Participant” means a current of former Employee, Director or Consultant who has rights relating to an outstanding Award.

 

2.25  “Performance-Based Exception” means the performance-based exception from the tax deductibility limitations of Code Section 162(m).

 

2.26  “Performance Period” means the period during which a performance measure must be met.

 

2.27  “Performance Share” means an Award granted to a Participant, as described in Article 9 herein.

 

2.28  “Performance Unit” means an Award granted to a Participant, as described in Article 10 herein.

 

2.29  “Period of Restriction” means the period Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture and are not transferable, as provided in Articles 8 and 9 herein.

 

2.30  “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and14(d) thereof.

 

2.31  “Replacement Awards” means Awards issued in substitution of awards granted under equity-based incentive plans sponsored or maintained by an entity with which the Company engages in a merger, acquisition or other business transaction, pursuant to which awards relating to interests in such entity (or a related entity) are outstanding immediately prior to such merger, acquisition or other business transaction. For all purposes hereunder, Replacement Awards shall be deemed Awards.

 

2.32  Restricted Stock” means an Award granted to a Participant, as described in Article 8 herein.

 

2.33  “Restricted Stock Unit” means an Award granted to a Participant, as described in Article 9 herein.

 

2.34  “Share” means a share common stock of the Company, par value $0.001 per share, subject to adjustment pursuant to Section 4.3 hereof.

 

2.35  “Stock Appreciation Right” or “SAR” means an Award granted to a Participant, either alone or in connection with a related Option, as described in Article 7 herein.

 

2.36  “Subsidiary” means any corporation in which the Company owns, directly or indirectly, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns, directly or indirectly, at least fifty percent (50%) of the combined equity thereof. Notwithstanding the foregoing, for purposes of determining whether any individual may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” shall have the meaning ascribed to such term in Code Section 424(f).

 

2.37  “Tandem SAR” means an SAR that is granted in connection with a related Option, as described in Article 7 herein.

 

ARTICLE 3

 

ADMINISTRATION

 

3.1  The Committee. The Plan shall be administered by the Compensation Committee of the Board or such other committee as the Board shall select (the “Committee”).

 

3.2  Authority of the Committee. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions herein, the Committee shall have full power to select the Employees, Directors and Consultants who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any Award Agreement or other agreement or instrument entered into in connection with the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and, subject to the provisions of Section 19.3 herein, amend the terms and conditions of any outstanding Award and Award Agreement. Further, the Committee shall make all other determinations that may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority as identified herein.

 

 

 

 

3.3  Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Board shall be final, conclusive and binding on all Persons, including the Company, its Subsidiaries, its stockholders, Directors, Employees, Consultants and their estates and beneficiaries and any transferee of an Award.

 

ARTICLE 4

 

SHARES SUBJECT TO THE PLAN; INDIVIDUAL LIMITS; AND ANTI-DILUTION ADJUSTMENTS

 

4.1  Number of Shares Available for Grants.

 

(a)  Subject to adjustment as provided in Section 4.3 herein, the maximum number of Shares that may be delivered pursuant to Awards under the Plan shall be three million (3,000,000) Shares; provided that:

 

(i)  Shares that are potentially deliverable under an Award granted under the Plan that is canceled, forfeited, settled in cash, expires or is otherwise terminated without delivery of such Shares shall not be counted as having been delivered under the Plan.

 

(ii)  Shares that have been issued in connection with an Award of Restricted Stock that is canceled or forfeited prior to vesting or settled in cash, causing the Shares to be returned to the Company, shall not be counted as having been delivered under the Plan.

 

If Shares are returned to the Company in satisfaction of taxes relating to Restricted Stock, in connection with a cash out of Restricted Stock (but excluding upon forfeiture of Restricted Stock) or in connection with the tendering of Shares by a Participant in satisfaction of the Exercise Price or taxes relating to an Award, such issued Shares shall not become available again under the Plan. Each SAR issued under the Plan will be counted as one share issued under the Plan without regard to the number of Shares issued to the Participant upon exercise of such SAR.

 

Shares delivered pursuant to the Plan may be authorized but unissued Shares, treasury Shares or Shares purchased on the open market.

 

(b)  Subject to adjustment as provided in Section 4.3 herein, three million (3,000,000) Shares may be delivered in connection with “full value Awards,” meaning Awards other than Options, SARs, or Other Awards for which the Participant pays the grant date intrinsic value.

 

(c)  Notwithstanding the foregoing, for purposes of determining the number of Shares available for grant as Incentive Stock Options, only Shares that are subject to an Award that expires or is cancelled, forfeited or settled in cash shall be treated as not having been issued under the Plan.

 

4.2  Individual Limits. Subject to adjustment as provided in Section 4.3 herein, the following rules shall apply with respect to Awards and any related dividends or Dividend Equivalents intended to qualify for the Performance-Based Exception:

 

(a)  Options: The maximum aggregate number of Shares with respect to which Options may be granted in any one fiscal year to any one Participant shall be three hundred thousand (300,000) Shares.

 

(b)  SARs: The maximum aggregate number of Shares with respect to which Stock Appreciation Rights may be granted in any one fiscal year to any one Participant shall be three hundred thousand (300,000) Shares.

 

(c)  Restricted Stock: The maximum aggregate number of Shares of Restricted Stock that may be granted in any one fiscal year to any one Participant shall be three hundred thousand (300,000) Shares.

 

(d)  Restricted Stock Units: The maximum aggregate number of Shares with respect to which Restricted Stock Units may be granted in any one fiscal year to any one Participant shall be three hundred thousand (300,000) Shares.

 

 

 

 

(e)  Performance Shares: The maximum aggregate number of Shares with respect to which Performance Shares may be granted in any one fiscal year to any one Participant shall be three hundred thousand (300,000) Shares.

 

(f)  Performance Units: The maximum aggregate compensation that can be paid pursuant to Performance Units awarded in any one fiscal year to any one Participant shall be $1,000,000 or a number of Shares having an aggregate Fair Market Value not in excess of such amount.

 

(g)  Other Awards: The maximum aggregate compensation that can be paid pursuant to Other Awards awarded in any one fiscal year to any one Participant shall be $1,000,000 or a number of Shares having an aggregate Fair Market Value not in excess of such amount.

 

(h)  Dividends and Dividend Equivalents: The maximum dividend or Dividend Equivalent that may be paid in any one fiscal year to any one Participant shall be $1,000,000.

 

4.3  Adjustments in Authorized Shares and Awards. In the event of any equity restructuring (within the meaning of Financial Accounting Standards No. 123R), such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, the Committee shall cause an equitable adjustment to be made (i) in the number and kind of Shares that may be delivered under the Plan under Section 4.1 hereof, (ii) in the individual limitations set forth in Section 4.2 hereof and (iii) with respect to outstanding Awards, in the number and kind of Shares subject to outstanding Awards, the Exercise Price, grant price or other price of Shares subject to outstanding Awards, any performance conditions relating to Shares, the market price of Shares, or per-Share results, and other terms and conditions of outstanding Awards, in the case of (i), (ii) and (iii) to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Committee may, in its sole discretion, cause an equitable adjustment as described in the foregoing sentence to be made, to prevent dilution or enlargement of rights. The number of Shares subject to any Award shall always be rounded down to a whole number when adjustments are made pursuant to this Section 4.3. Adjustments made by the Committee pursuant to this Section 4.3 shall be final, binding and conclusive.

 

ARTICLE 5

 

ELIGIBILITY AND PARTICIPATION

 

5.1  Eligibility. Persons eligible to participate in the Plan include all Employees, Directors and Consultants.

 

5.2  Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, Directors and Consultants, those to whom Awards shall be granted and shall determine the nature and amount of each Award.

 

ARTICLE 6

 

OPTIONS

 

6.1  Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such amounts, upon such terms, and at such times as the Committee shall determine.

 

6.2  Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Exercise Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO. Options that are intended to be ISOs shall be subject to the limitations set forth in Code Section 422.

 

6.3  Exercise Price. The Exercise Price for each grant of an Option under the Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted; provided, however, that this restriction shall not apply to Replacement Awards or Awards that are adjusted pursuant to Section 4.3 herein. No ISO granted to a Participant who, at the time the ISO is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Subsidiary shall have an Exercise Price that is less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date the ISO is granted.

 

 

 

 

6.4  Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. No ISO granted to a Participant who, at the time the ISO is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Subsidiary shall be exercisable later than the fifth (5th) anniversary of the date of its grant.

 

6.5  Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as set forth in the Award Agreement and as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.

 

6.6  Payment. Options granted under this Article 6 shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised and specifying the method of payment of the Exercise Price.

 

The Exercise Price of an Option shall be payable to the Company in full: (a) in cash or its equivalent, (b) by tendering Shares or directing the Company to withhold Shares from the Option having an aggregate Fair Market Value at the time of exercise equal to the Exercise Price, (c) by broker-assisted cashless exercise, (d) in any other manner then permitted by the Committee, or (e) by a combination of any of the permitted methods of payment. The Committee may limit any method of payment, other than that specified under (a), for administrative convenience, to comply with applicable law, or for any other reason.

 

6.7  Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.

 

6.8  Dividend Equivalents. At the discretion of the Committee, an Award of Options may provide the Participant with the right to receive Dividend Equivalents, which may be paid currently or credited to an account for the Participant, and may be settled in cash and/or Shares, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish.

 

6.9  Termination of Employment or Service. Each Participant’s Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and/or a Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options, and may reflect distinctions based on the reasons for termination of employment or service.

 

6.10  Nontransferability of Options.

 

(a)  Incentive Stock Options. ISOs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and shall be exercisable during a Participant’s lifetime only by such Participant.

 

(b)  Nonqualified Stock Options. NQSOs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and shall be exercisable during a Participant’s lifetime only by such Participant. NQSOs may not be transferred for value or consideration.

 

 

 

 

ARTICLE 7

 

STOCK APPRECIATION RIGHTS

 

7.1  Grant of SARs. Subject to the terms and provisions of the Plan, SARs may be granted to Participants in such amounts, upon such terms, and at such times as the Committee shall determine. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR.

 

The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.

 

The grant price of a Freestanding SAR shall at least equal the Fair Market Value of a Share on the date of grant of the SAR, and the grant price of a Tandem SAR shall equal the Exercise Price of the related Option; provided, however, that this restriction shall not apply to Replacement Awards or Awards that are adjusted pursuant to Section 4.3 herein.

 

7.2  Exercise of Tandem SARs. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. To the extent exercisable, Tandem SARs may be exercised for all or part of the Shares subject to the related Option. The exercise of all or part of a Tandem SAR shall result in the forfeiture of the right to purchase a number of Shares under the related Option equal to the number of Shares with respect to which the SAR is exercised. Conversely, upon exercise of all or part of an Option with respect to which a Tandem SAR has been granted, an equivalent portion of the Tandem SAR shall similarly be forfeited.

 

Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Exercise Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Exercise Price of the ISO.

 

7.3  Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them and sets forth in the Award Agreement.

 

7.4  Award Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.

 

7.5  Term of SARs. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.

 

7.6  Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

 

(a)  the difference between the Fair Market Value of a Share on the date of exercise over the grant price; by

 

(b)  the number of Shares with respect to which the SAR is exercised.

 

At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

 

7.7  Dividend Equivalents. At the discretion of the Committee, an Award of SARs may provide the Participant with the right to receive Dividend Equivalents, which may be paid currently or credited to an account for the Participant, and may be settled in cash and/or Shares, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish.

 

7.8  Termination of Employment or Service. Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and/or a Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all SARs, and may reflect distinctions based on the reasons for termination of employment or service.

 

 

 

 

7.9  Nontransferability of SARs. SARs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and shall be exercisable during a Participant’s lifetime only by such Participant. SARs may not be transferred for value or consideration.

 

ARTICLE 8

 

RESTRICTED STOCK

 

8.1  Grant of Restricted Stock. Subject to the terms and provisions of the Plan, Restricted Stock may be granted to Participants in such amounts, upon such terms, and at such times as the Committee shall determine.

 

8.2  Award Agreement. Each Restricted Stock grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction and, if applicable, Performance Period(s), the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine.

 

8.3  Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, a requirement that the issuance of Shares of Restricted Stock be delayed, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock. The Company may retain in its custody any certificate evidencing the Shares of Restricted Stock and place thereon a legend and institute stop-transfer orders on such Shares, and the Participant shall be obligated to sign any stock power requested by the Company relating to the Shares to give effect to the forfeiture provisions of the Restricted Stock.

 

8.4  Removal of Restrictions. Subject to applicable laws, Restricted Stock shall become freely transferable by the Participant after the last day of the Period of Restriction applicable thereto. Once Restricted Stock is released from the restrictions, the Participant shall be entitled to receive a certificate evidencing the Shares.

 

8.5  Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares during the Period of Restriction.

 

8.6  Dividends and Other Distributions. Except as otherwise provided in a Participant’s Award Agreement, during the Period of Restriction, Participants holding Shares of Restricted Stock shall receive all regular cash dividends paid with respect to all Shares while they are so held, and, except as otherwise determined by the Committee, all other distributions paid with respect to such Restricted Stock shall be credited to Participants subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid and paid at such time following full vesting as are paid the Shares of Restricted Stock with respect to which such distributions were made.

 

8.7  Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain unvested Restricted Stock following termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and/or a Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Awards of Restricted Stock, and may reflect distinctions based on the reasons for termination of employment or service.

 

8.8  Nontransferability of Restricted Stock. Except as otherwise determined by the Committee, during the applicable Period of Restriction, a Participant’s Restricted Stock and rights relating thereto shall be available during the Participant’s lifetime only to such Participant, and such Restricted Stock and related rights may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated other than by will or by the laws of descent and distribution.

 

 

 

 

ARTICLE 9

 

RESTRICTED STOCK UNITS AND PERFORMANCE SHARES

 

9.1  Grant of Restricted Stock Units/Performance Shares. Subject to the terms and provisions of the Plan, Restricted Stock Units and Performance Shares may be granted to Participants in such amounts, upon such terms, and at such times as the Committee shall determine.

 

9.2  Award Agreement. Each grant of Restricted Stock Units or Performance Shares shall be evidenced by an Award Agreement that shall specify the applicable Period(s) of Restriction and/or Performance Period(s) (as the case may be), the number of Restricted Stock Units or Performance Shares granted, and such other provisions as the Committee shall determine. The initial value of a Restricted Stock Unit or Performance Share shall be at least equal to the Fair Market Value of a Share on the date of grant; provided, however, that this restriction shall not apply to Replacement Awards or Awards that are adjusted pursuant to Section 4.3 herein.

 

9.3  Form and Timing of Payment. Except as otherwise provided in Article 17 herein or a Participant’s Award Agreement, payment of Restricted Stock Units or Performance Shares shall be made at a specified settlement date that shall not be earlier than the last day of the Period of Restriction or Performance Period, as the case may be. The Committee, in its sole discretion, may pay earned Restricted Stock Units and Performance Shares by delivery of Shares or by payment in cash of an amount equal to the Fair Market Value of such Shares (or a combination thereof). The Committee may provide that settlement of Restricted Stock Units or Performance Shares shall be deferred, on a mandatory basis or at the election of the Participant.

 

9.4  Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units or Performance Shares granted hereunder; provided, however, that the Committee may deposit Shares potentially deliverable in connection with Restricted Stock Units or Performance Shares in a rabbi trust, in which case the Committee may provide for pass through voting rights with respect to such deposited Shares.

 

9.5  Dividend Equivalents. At the discretion of the Committee, an Award of Restricted Stock Units or Performance Shares may provide the Participant with the right to receive Dividend Equivalents, which may be paid currently or credited to an account for the Participant, and may be settled in cash and/or Shares, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish.

 

9.6  Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive a payout with respect to an Award of Restricted Stock Units or Performance Shares following termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and/or a Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Restricted Stock Units or Performance Shares, and may reflect distinctions based on the reasons for termination of employment or service.

 

9.7  Nontransferability. Except as otherwise determined by the Committee, Restricted Stock Units and Performance Shares and rights relating thereto may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

ARTICLE 10

 

PERFORMANCE UNITS

 

10.1  Grant of Performance Units. Subject to the terms and conditions of the Plan, Performance Units may be granted to Participants in such amounts, upon such terms, and at such times as the Committee shall determine.

 

 

 

 

10.2  Award Agreement. Each grant of Performance Units shall be evidenced by an Award Agreement that shall specify the number of Performance Units granted, the Performance Period(s), the performance goals and such other provisions as the Committee shall determine.

 

10.3  Value of Performance Units. The Committee shall set performance goals in its discretion that, depending on the extent to which they are met, will determine the number and/or value of Performance Units that will be paid out to the Participants.

 

10.4  Form and Timing of Payment. Except as otherwise provided in Article 17 herein or a Participant’s Award Agreement, payment of earned Performance Units shall be made following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units in cash or in Shares that have an aggregate Fair Market Value equal to the value of the earned Performance Units (or a combination thereof). The Committee may provide that settlement of Performance Units shall be deferred, on a mandatory basis or at the election of the Participant.

 

10.5  Dividend Equivalents. At the discretion of the Committee, an Award of Performance Units may provide the Participant with the right to receive Dividend Equivalents, which may be paid currently or credited to an account for the Participant, and may be settled in cash and/or Shares, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish.

 

10.6  Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive a payout with respect to an Award of Performance Units following termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and/or a Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Performance Units and may reflect distinctions based on reasons for termination of employment or service.

 

10.7  Nontransferability. Except as otherwise determined by the Committee, Performance Units and rights relating thereto may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

ARTICLE 11

 

OTHER AWARDS

 

11.1  Grant of Other Awards. Subject to the terms and conditions of the Plan, Other Awards may be granted to Participants in such amounts, upon such terms, and at such times as the Committee shall determine. Types of Other Awards that may be granted pursuant to this Article 11 include, without limitation, the payment of cash or Shares based on attainment of performance goals established by the Committee, the payment of Shares as a bonus or in lieu of cash based on attainment of performance goals established by the Committee, and the payment of Shares in lieu of cash under other Company incentive or bonus programs.

 

11.2  Payment of Other Awards. Payment under or settlement of any such Awards shall be made in such manner and at such times as the Committee may determine.

 

11.3  Termination of Employment or Service. The Committee shall determine the extent to which the Participant shall have the right to receive Other Awards following termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and/or a Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, may be included in an agreement entered into with each Participant, but need not be uniform among all Other Awards, and may reflect distinctions based on the reasons for termination of employment or service.

 

11.4  Nontransferability. Except as otherwise determined by the Committee, Other Awards and rights relating thereto may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

 

 

 

ARTICLE 12

 

REPLACEMENT AWARDS

 

Each Replacement Award shall have substantially the same terms and conditions (as determined by the Committee) as the award it replaces; provided, however, that the number of Shares subject to Replacement Awards, the Exercise Price, grant price or other price of Shares subject to Replacement Awards, any performance conditions relating to Shares underlying Replacement Awards, or the market price of Shares underlying Replacement Awards or per-Share results may differ from the awards they replace to the extent such differences are determined to be appropriate and equitable by the Committee, in its sole discretion.

 

ARTICLE 13

 

PERFORMANCE MEASURES

 

The Committee may specify that the attainment of one or more of the performance measures set forth in this Article 13 shall determine the degree of granting, vesting and/or payout with respect to Awards (including any related dividends or Dividend Equivalents) that the Committee intends will qualify for the Performance-Based Exception. The performance goals to be used for such Awards shall be chosen from among the following performance measure(s): earnings per share, economic value created, market share (actual or targeted growth), net income (before or after taxes), operating income, earnings before interest, taxes, depreciation and/or amortization, core earnings, core earnings per share, return on assets (actual or targeted growth), return on capital (actual or targeted growth), return on equity (actual or targeted growth), return on investment (actual or targeted growth), revenue (actual or targeted growth), cash flow (including operating cash flow and free cash flow), operating margin, share price, share price growth, total stockholder return, economic value added, and strategic business criteria consisting of one or more objectives based on meeting specified market penetration goals, market share, productivity measures, geographic business expansion goals, expense management, expense targets (including SG&A or other allocated or indirect costs), operating efficiency ratios (including days sales outstanding, accounts payable to sales, inventory turns, and working capital as a percentage of sale), customer satisfaction or employee satisfaction goals, goals relating to merger synergies, management of employment practices and employee benefits, or supervision of litigation and information technology, and goals relating to acquisitions or divestitures of Subsidiaries and/or other affiliates or joint ventures. The targeted level or levels of performance with respect to such performance measures may be established at such levels and on such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. Awards (including any related dividends or Dividend Equivalents) that are not intended to qualify for the Performance-Based Exception may be based on these or such other performance measures as the Committee may determine.

 

Achievement of performance goals in respect of Awards intended to qualify under the Performance-Based Exception shall be measured over a Performance Period, and the goals shall be established not later than ninety (90) days after the beginning of the Performance Period or, if less than (90) days, the number of days that is equal to twenty-five percent (25%) of the relevant Performance Period applicable to the Award. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards that are designed to qualify for the Performance-Based Exception may not be adjusted upward (the Committee may, in its discretion, adjust such Awards downward).

 

ARTICLE 14

 

BENEFICIARY DESIGNATION

 

Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing during the Participant’s lifetime with the Committee. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

 

 

 

 

ARTICLE 15

 

DEFERRALS

 

If permitted by the Committee, a Participant may defer receipt of amounts that would otherwise be provided to such Participant with respect to an Award, including Shares deliverable upon exercise of an Option or SAR or upon payout of any other Award. If permitted, such deferral (and the required deferral election) shall be made in accordance with, and shall be subject to, the terms and conditions of the applicable nonqualified deferred compensation plan, agreement or arrangement under which such deferral is made and such other terms and conditions as the Committee may prescribe.

 

ARTICLE 16

 

RIGHTS OF PARTICIPANTS

 

16.1  Continued Service. Nothing in the Plan shall:

 

(a) interfere with or limit in any way the right of the Company or a Subsidiary to terminate any Participant’s employment or service at any time,

 

(b) confer upon any Participant any right to continue in the employ or service of the Company or a Subsidiary, nor

 

(c) confer on any Director any right to continue to serve on the Board of Directors of the Company or a Subsidiary.

 

16.2  Participation. No Employee, Director or Consultant shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive future Awards.

 

ARTICLE 17

 

CHANGE IN CONTROL

 

Except as otherwise provided in a Participant’s Award Agreement, upon the termination of a Participant’s employment for any reason other than Cause, Disability or death within 12 months following a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges:

 

(a) any and all outstanding Options and SARs granted hereunder shall become immediately exercisable; provided, however, that the Committee may instead provide that such Awards shall be automatically cashed out;

 

(b) any Period of Restriction or other restriction imposed on Restricted Stock, Restricted Stock Units and Other Awards shall lapse; and

 

(c) any and all Performance Shares, Performance Units and other Awards (if performance-based) shall be deemed earned at the target level (or if no target level is specified, the maximum level) with respect to all open Performance Periods.

 

ARTICLE 18

 

ADDITIONAL FORFEITURE PROVISIONS

 

The Committee may condition a Participant’s right to receive a grant of an Award, to vest in the Award, to exercise the Award, to retain cash, Shares, other Awards, or other property acquired in connection with the Award, or to retain the profit or gain realized by the Participant in connection with the Award, including cash or other proceeds received upon sale of Shares acquired in connection with an Award, upon compliance by the Participant with specified conditions relating to non-competition, confidentiality of information relating to or possessed by the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its officers, directors and affiliates, and other restrictions upon or covenants of the Participant, including during specified periods following termination of employment with or service for the Company and/or a Subsidiary.

 

 

 

 

ARTICLE 19

 

AMENDMENT, MODIFICATION AND TERMINATION

 

19.1  Amendment, Modification and Termination. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment that requires stockholder approval (a) in order for the Plan to continue to comply with Section 162(m) requirements, (b) pursuant to the requirements of any national securities exchange upon which any of the Company’s securities are listed for trading, or (c) pursuant to any rule promulgated by the United States Securities and Exchange Commission shall be effective unless such amendment shall be approved by the requisite vote of stockholders of the Company entitled to vote thereon within the time period required under such applicable listing standard or rule.

 

19.2  Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided, however, that (except as provided in Section 4.3 hereof) the Committee does not have the power to amend the terms of previously granted options to reduce the exercise price per share subject to such options, or to cancel such options and grant substitute options with a lower exercise price per share than the cancelled options. The Company is not permitted to purchase for cash previously granted options with an exercise price that is greater than the Company’s trading price on the proposed date of purchase. With respect to any Awards intended to comply with the Performance-Based Exception, any such exception shall be specified at such times and in such manner as will not cause such Awards to fail to qualify under the Performance-Based Exception.

 

19.3  Awards Previously Granted. No termination, amendment or modification of the Plan or of any Award shall adversely affect in any material way any Award previously granted under the Plan without the written consent of the Participant holding such Award, unless such termination, modification or amendment is required by applicable law and except as otherwise provided herein.

 

19.4  Compliance with the Performance-Based Exception. If it is intended that an Award (and/or any dividends or Dividend Equivalents relating to such Award) comply with the requirements of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate such that the Awards (and/or dividends or Dividend Equivalents) maintain eligibility for the Performance-Based Exception. If changes are made to Code Section 162(m) or regulations promulgated thereunder to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee may, subject to this Article 19, make any adjustments to the Plan and/or Award Agreements it deems appropriate.

 

ARTICLE 20

 

WITHHOLDING

 

20.1  Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan.

 

20.2  Use of Shares to Satisfy Withholding Obligation. With respect to withholding required upon the exercise of Options or SARs, upon the vesting or settlement of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, or upon any other taxable event arising as a result of Awards granted hereunder, the Committee may require or may permit Participants to elect that the withholding requirement be satisfied, in whole or in part, by having the Company withhold, or by tendering to the Company, Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes) that could be imposed on the transaction and, in any case in which it would not result in additional accounting expense to the Company, taxes in excess of the minimum statutory withholding amounts. Any such elections by a Participant shall be irrevocable, made in writing and signed by the Participant.

 

 

 

 

ARTICLE 21

 

INDEMNIFICATION

 

Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company to the fullest extent permitted by the laws of the State of incorporation of the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her 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 involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give 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 is subject to the person having been successful in the legal proceedings or having acted in good faith and what is reasonably believed to be a lawful manner in the Company’s best interests. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate 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.

 

ARTICLE 22

 

SUCCESSORS

 

All obligations of the Company under the Plan and with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or substantially all of the business and/or assets of the Company.

 

ARTICLE 23

 

LEGAL CONSTRUCTION

 

23.1  Gender, Number and References. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. Any reference in the Plan to an act or code or to any section thereof or rule or regulation thereunder shall be deemed to refer to such act, code, section, rule or regulation, as may be amended from time to time, or to any successor act, code, section, rule or regulation.

 

23.2  Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

23.3  Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

23.4  Governing Law. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws Delaware without giving effect to conflicts or choice of law principles.

 

 

 

 

23.5  Non-Exclusive Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable, including other incentive arrangements and awards that do or do not qualify under the Performance-Based Exception.

 

23.6  Code Section 409A Compliance. To the extent applicable, it is intended that this Plan and any Awards granted under the Plan comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service (collectively “Section 409A”). Any provision that would cause the Plan or any Award granted under the Plan to fail to satisfy Section 409A shall have no force or effect until amended to comply with Section 409A, which amendment may be retroactive to the extent permitted by Section 409A.

 

 

 

 

Exhibit 10.6

 

FORM OF

 

APPLIED UV, INC.

Notice of Non-Qualified Stock Option Grant

 

You (the “Optionee”) have been granted the following option (the “Option”) to purchase Common Stock of Applied UV, Inc. (the “Company”), par value $0.0001 per share (“Share”):

 

Name of Optionee: Max Munn.
   
Total Number of Shares  
Subject to Option: [2500] [500].
   
Type of Option: Non-Qualified Stock Options (NQSOs).
   
Exercise Price Per Share: The greater of (x) $[0.50] [2.50] and (y) Market Value on the Effective Date of Grant.
   
  “Market Value on the Effective Date of Grant” means the per share market value of the Shares as set forth in a valuation prepared by an independent valuation company engaged by the Company that is reasonable under Regulation 409A-1(b)(5)(iv)(B) of the Internal Revenue Service Code as of the Effective Date of Grant; provided however, if on the Effective Date of Grant the Shares are listed on a national exchange or quoted on an established quotation system, then “Market Value on the Effective Date of Grant” shall mean the closing price of the Shares listed on such national exchange or quoted on such quotation system on the Trading Day immediately prior to the Effective Date of Grant.
   
  “Trading Day” means a day on which the principal Trading Market is open for trading.
   
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
   
Effective Date of Grant:

[April 1, 2020] [July 1].

   
Vesting Schedule: Options for the purchase of [625] [125]shares of Common Stock shall vest quarterly for a period of one year, beginning on the last day of the quarter following the Effective Date of Grant.
   
Expiration Date: Upon the Optionee no longer being a member of the Board of Directors of the Company for any reason, any unvested options (as determined using the Vesting Schedule) shall expire and no longer be exercisable. The options shall not be exercisable later than the tenth (10th) anniversary date of the Effective Date of Grant.

 

 

 

 

This grant is subject to all of the terms and conditions set forth in the Non-Qualified Stock Option Agreement (the “Agreement”), attached hereto as Exhibit A. This grant is made and granted as a stand-alone award and is not granted under or pursuant to the Company’s 2020 Omnibus Incentive Plan (the “Plan”). However, unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.

 

By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this Option is governed by the terms and conditions of the attached Non-Qualified Stock Option Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Non-Qualified Stock Option Agreement.

 

 

 

Optionee: APPLIED UV, INC.
   
   
By: __________________ By: __________________
Name: [          ] Name:
  Title:
 

 

 

[By: __________________

  Name:
  Title:]

 

 

 

  

Exhibit A

 

APPLIED UV, INC.

Non-Qualified Stock Option Agreement

 

Section 1. Grant of Option.

 

(a) Option. On the terms and conditions set forth in the Notice of Non-Qualified Stock Option Grant (the “Grant Notice”) and this Non-Qualified Stock Option Agreement (the “Agreement”), the Company grants to the Optionee on the Effective Date of Grant the option (the “Option”) to purchase at the Exercise Price the number of Shares set forth in the Grant Notice.

 

(b) Plan and Defined Terms. The Option granted by this Agreement is granted as a stand-alone grant, separate and apart from, and outside of, the Plan, and shall not constitute an award granted under or pursuant to the Plan. Notwithstanding the foregoing, the terms, conditions, and definitions set forth in the Plan shall apply to the Option as though the Option had been granted under the Plan, and the Option shall be subject to such terms, conditions, and definitions, which are hereby incorporated into this Agreement by reference; provided that, for the avoidance of doubt, the Option granted by this Agreement shall not reduce and shall have no impact on the number of shares available for grant under the Plan. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of this Agreement will govern. All capitalized terms that are used in the Grant Notice or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.

 

Section 2. Right to Exercise.

 

The Option hereby granted shall be exercised by written notice to the Committee, specifying the number of Shares the Optionee desires to purchase together with provision for payment of the Exercise Price. Subject to such limitations as the Committee may impose (including prohibition of one more of the following payment methods), payment of the Exercise Price may be made by check payable to the order of the Company, for an amount in United States dollars equal to the aggregate Exercise Price of such Shares, (b) by tendering to the Company Shares having an aggregate Fair Market Value equal to such Exercise Price, (c) by broker-assisted exercise, or (d) by a combination of such methods, or (e) by a cashless exercise. The Company may require the Optionee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, as amended, the Exchange Act, applicable state or non-U.S. securities laws or any other law.

 

Section 3. Term and Expiration.

 

(a) Basic Term. Subject to earlier termination pursuant to the terms here, the Option shall expire on the expiration date set forth in the Grant Notice.

 

(b) Termination of Employment or Service. If the Optionee’s employment or service as a Director or Consultant, as the case may be, is terminated, the Option shall expire on the earliest of the following occasions:

 

(i) The expiration date set forth in the Grant Notice;

 

 

 

 

(ii) Three months following the termination of the Optionee’s employment or service for any reason other than Cause, death, or Disability;

 

(iii) One year following the termination of the Optionee’s employment or service due to death or Disability; or

 

(iv) The date of termination of the Optionee’s employment or service for Cause.

 

The Optionee may exercise all or part of this Option at any time before its expiration under the preceding sentence, but, subject to the following sentence, only to the extent that the Option had become vested before the Optionee’s employment or service terminated. When the Optionee’s employment or service terminates, this Option shall expire immediately with respect to the number of Shares for which the Option is not yet vested. If the Optionee dies after termination of employment or service, but before the expiration of the Option, all or part of this Option may be exercised (prior to expiration) by the personal representative of the Optionee or by any person who has acquired this Option directly from the Optionee by will, bequest or inheritance, but only to the extent that the Option was vested and exercisable upon termination of the Optionee’s employment or service.

 

(c) Definition of “Cause.” The term “Cause” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Cause,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Cause” shall mean (i) the willful engaging by the Optionee in misconduct that is demonstrably injurious to the Company or any Parent or Subsidiary (monetarily or otherwise), (ii) the Optionee’s conviction of, or pleading guilty or nolo contendere to, a felony involving moral turpitude, or (iii) the Optionee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Optionee is subject.

 

(d) Definition of “Disability.” The term “Disability” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Disability,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Disability” shall mean the Optionee’s entitlement to long-term disability benefits pursuant to the long-term disability plan maintained by the Company or in which the Company’s employees participate.

 

Section 4. Transferability of Option.

 

The Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the Option shall be exercisable during the Optionee’s lifetime only by the Optionee or on his or her behalf by the Optionee’s guardian or legal representative.

 

Section 5. Investment Intent; Restrictions on Transfer.

 

Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon such exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions hereof) shall furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the foregoing investment representation and agreement and shall not be required to furnish the Company with the foregoing written statement.

 

 

 

 

Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

 

Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

 

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company’s transfer agent.

 

Section 6. Miscellaneous Provisions.

 

(a) Acknowledgements.

 

(i) The Optionee hereby acknowledges that he or she has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their respective terms and conditions. The Optionee acknowledges that there may be tax consequences upon the exercise or transfer of the Option and that the Optionee should consult an independent tax advisor prior to any exercise of the Option.

 

(b) Tax Withholding. Pursuant to Article 20 of the Plan, the Company shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy federal, state and local tax purposes, as applicable, including payroll taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

(c) Notice Concerning Disqualifying Dispositions. If the Option is an Incentive Stock Option, the Optionee shall notify the Committee of any disposition of Shares issued pursuant to the exercise of the Option if the disposition constitutes a “disqualifying disposition” within the meaning of Sections 421 and 422 of the Code (or any successor provision of the Code then in effect relating to disqualifying dispositions). Such notice shall be provided by the Optionee to the Committee in writing within 10 days of any such disqualifying disposition.

 

 

 

 

(d) Rights as a Stockholder. Neither the Optionee nor the Optionee’s transferee or representative shall have any rights as a stockholder with respect to any Shares subject to this Option until the Option has been exercised and Share certificates have been issued to the Optionee, transferee or representative, as the case may be.

 

(e) Ratification of Actions. By accepting this Agreement, the Optionee and each person claiming under or through the Optionee shall be conclusively deemed to have indicated the Optionee’s acceptance and ratification of, and consent to, any action taken under this Agreement and Grant Notice by the Company, the Board, or the Committee.

 

(f) Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided in writing to the Company.

 

(g) Choice of Law. This Agreement and the Grant Notice shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause this Agreement or the Grant Notice to be governed by or construed in accordance with the substantive law of another jurisdiction.

 

(h) Arbitration. Any dispute or claim arising out of or relating to this Agreement or the Grant Notice shall be settled by binding arbitration before a single arbitrator in New York and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of this Agreement and the Grant Notice, provided that all substantive questions of law shall be determined in accordance with the state and Federal laws applicable in the state in which the Company is incorporated, without regard to internal principles relating to conflict of laws.

 

(i) Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to Article 4.3 of the Plan may be made without such written agreement.

 

(j) Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.

 

(k) References to Plan. All references to the Plan shall be deemed references to the Plan as may be amended from time to time.

 

(l) Section 409A Compliance. To the extent applicable, it is intended that this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Agreement and the Grant Notice shall be interpreted accordingly.

 

 

 

 

Exhibit 10.7

 

AGR-I9631

 

SPONSORED RESEARCH AGREEMENT

 

This Sponsored Research Agreement (“Agreement”) is made by and between Icahn School of Medicine at Mount Sinai, a not-for-profit education corporation organized and existing under the laws of the State of New York, having a principal place of business at One Gustave L. Levy Place, New York, New York 10029 (“Mount Sinai”), and SteriLumen, LLC, a limited liability company organized and existing under the laws of the State of New York, having a principal place of business at 150 North Macquesten Pkwy, Mount Vernon, NY 10550 (“Sponsor”). Mount Sinai and the Sponsor are each referred to herein as a “Party” and collectively as the “Parties”.

 

This Agreement is effective as of April 20, 2020 (“Effective Date”).

 

RECITALS

 

WHEREAS, Sponsor desires to fund the Sponsored Research (as defined below), such research to be conducted by Mount Sinai substantially in accordance with the terms and conditions of this Agreement; and

 

WHEREAS, the Sponsored Research is of mutual interest to Sponsor and Mount Sinai and furthers the scholarly, educational, and research objectives of Mount Sinai for the improvement of the public health, as a nonprofit, tax-exempt educational institution, and may potentially benefit both Sponsor and Mount Sinai through, inter alia, the creation or discovery of new inventions or the improvement of existing technologies.

 

NOW, THEREFORE, in consideration of the mutual benefits to be derived hereunder, and intending to be legally bound, the Parties agree as follows:

 

1          DEFINITIONS

 

1.1       “Conceived” means conceived as defined by U.S. patent law.

 

1.2        “Patent Rights” means: (i) United States and foreign patents and/or patent applications; (ii) any and all patents issuing from the foregoing; (iii) any and all claims of continuation-in-part applications that claim priority to such United States patent applications, but only where such claims are directed to inventions disclosed in the manner provided in the first paragraph of 35 U.S.C. § 112 in such United States patent applications, and such claims in any patents issuing from such continuation-in-part applications; (iv) any and all foreign patent applications, foreign patents, or related foreign patent documents that claim priority to such patents and/or patent applications; and (v) any and all divisionals, continuations, reissues, re-examinations, renewals, substitutions, and extensions of the foregoing.

 

1.3       “Principal Investigator” means Richard Vincent, who has agreed to serve as Principal Investigator for the Sponsored Research and will be responsible for the administration and supervision of the Sponsored Research, or any successor named by Mount Sinai in accordance with Section 2.2.

 

1.4       “Sponsored Research,” means the research program described in Attachment A to this Agreement, as may be amended from time to time upon mutual written agreement of the Parties.

 

1.5       “Sponsored Research Intellectual Property” means all technical information, inventions, developments, discoveries, copyrights and copyrightable works (including computer programs) and registrations and applications therefor, know-how, methods, techniques, formulae, processes, and all other forms of intellectual property, including waivable or assignable rights of publicity or moral rights, and any right to bring suit or collect damages for the infringement, misappropriation or violation of the foregoing, whether or not patentable, that are first Conceived and reduced to practice (or in the event of copyrightable matter, when first fixed in tangible form) in the conduct of the Sponsored Research during the Term by the Principal Investigator and/or those working under his/her direction, or other inventors owing a duty to assign to Mount Sinai, and all Patent Rights, or other intellectual property rights therein.

 

 

 

 

1.6       “Term” has the meaning assigned in Section 3.1.

 

2          SPONSORED RESEARCH

 

2.1       Mount Sinai shall commence the Sponsored Research promptly after the Effective Date, provided that any payments and materials due from Sponsor have been received by Mount Sinai. Mount Sinai shall use reasonable best efforts to conduct such Sponsored Research substantially in accordance with the terms and conditions of this Agreement. Sponsor acknowledges that Mount Sinai will have the freedom to conduct and supervise the Sponsored Research in a manner consistent with Mount Sinai’s educational and research missions. Mount Sinai does not guarantee that any Patent Rights shall result from the Sponsored Research, that the scope of any Patent Rights that may result shall cover Sponsor’s commercial interest, or that any such Patent Rights shall be free of dominance by other patents, including patents based upon inventions developed by inventors at Mount Sinai independently of the Sponsored Research. Furthermore, Mount Sinai makes no representations as to the commercial or scientific value of any results achieved through the Sponsored Research.

 

2.2       If the Principal Investigator becomes unavailable to fulfill his/her role with respect to the Sponsored Research for any reason, Mount Sinai will be entitled to designate another member of its faculty who is acceptable to both Parties to serve as the Principal Investigator of the Sponsored Research. If an acceptable substitute Principal Investigator has not been designated within sixty (60) days after the original Principal Investigator ceases his or her activities under this Agreement, either Party may terminate this Agreement upon written notice thereof to the other Party, subject to the provisions of Article 10. Termination of this Agreement in such event shall not be considered a termination for breach.

 

3          TERM OF AGREEMENT

 

3.1       The term of this Agreement (the “Term”) will begin on the Effective Date of this Agreement and will end on April 30,2021, unless terminated earlier pursuant to Section 10.1. The Term may be extended only by mutual written agreement signed by the Parties.

 

4          PAYMENT OF COSTS

 

4.1       Sponsor shall pay for all direct and indirect costs incurred in the conduct of the Sponsored Research in an amount totaling One Hundred Sixty Thousand US Dollars ($160,000 USD), inclusive of all indirect costs. The budget is attached hereto as Attachment B, which is incorporated herein by reference and made a part of this Agreement. Additionally, Sponsor agrees to cover all the cost of microbiological testing necessary to the conduct of the Study. Further, Sponsor agrees to provide at no cost to Mount Sinai l7 sink and drain Sterilumen disinfection units for use in the Study, as well as the cost of installation and cost if necessary for removal after completion of the study, should Mount Sinai request removal.

 

4.2       Sponsor acknowledges that the total amount set forth in Section 4.1 is a good faith estimate only and not a guarantee of the cost to conduct the Sponsored Research. If after using reasonable efforts, at any time Mount Sinai determines that it will require additional funds to conduct the Sponsored Research, Mount Sinai will notify Sponsor and provide a reasonable explanation of the additional funds required with an estimate of such additional amount. Sponsor will not be liable for any costs in excess of the amount set forth in Attachment B unless it has agreed in writing to provide additional funds. However, Mount Sinai will not be required to conduct any Sponsored Research covered by such additional funds until Sponsor so agrees.

 

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4.3       Sponsor shall make all payments under this Agreement in advance to Mount Sinai in accordance with the payment schedule set forth in Attachment B. Sponsor shall make all such payments to Mount Sinai by wire transfer to the following account:

 

Bank Name: JPMorgan Chase Manhattan Bank

Account #: 20000011127650

Account Name: Icahn School of Medicine at Mount Sinai

ABA # (routing): 021000021

IBAN #: CHASUS33 (For International Transfers)

Bank Contact Person: Elaine Martinez

Telephone: 718-242-0173

Fax: 866-426-9083

Address: 4 New York Plaza, 15th Floor, New York, NY 10004

 

4.4       Title to any equipment, laboratory animals, or any other materials made or acquired with funds provided under this Agreement shall vest in Mount Sinai, and such equipment, laboratory animals, or materials shall remain the property of Mount Sinai following the expiration or termination of this Agreement.

 

5          RECORDS, REPORTS, AND SUCCESS FEE

 

5.1       Principal Investigator will maintain records of the results of the Sponsored Research and will provide Sponsor with reports of the progress and results of the Sponsored Research periodically as results become available to the Principal lnvestigator. Sponsor shall maintain and protect as Confidential Information in accordance with Article 8 such reports and any other Sponsored Research data and results disclosed to Sponsor (whether oral or written), including the final report delivered to Sponsor upon the conclusion of the Sponsored Research even if such delivery occurs after the expiration of the Term (collectively such reports and all of such data and information referenced in this Section 5.1 is referred to as, “Results”), and shall be entitled to use the Results nonexclusively for any lawful purposes, provided the Results are accorded confidential treatment pursuant to Article 8 herein. Once Principal Investigator has published the results of the Sponsored Research in accordance with Article 9, the Results to the extent disclosed in such publication shall no longer be subject to confidentiality obligations.

 

5.2       In the event the Results are used by Sponsor in a (a) successful regulatory filing or (b) for the purposes of fund raising where such fund raising effort is successful (each of (a) and (b), a “Success Event”), then Sponsor agrees to pay to Mount Sinai a one-time fee of Thirty Thousand Dollars ($30,000 USD) due within forty-five (45) days of such Success Event.

 

6          INTELLECTUAL PROPERTY

 

6.1       lnventorship of Sponsored Research lntellectual Property shall be determined in accordance with inventorship principles of U.S. patent law, and ownership will follow inventorship. Therefore, Sponsored Research Intellectual Property Conceived solely by Mount Sinai will belong solely to Mount Sinai; Sponsored Research Intellectual Property Conceived solely by Sponsor will belong solely to Sponsor; Sponsored Research Intellectual Property Conceived jointly by Sponsor and Mount Sinai shall be owned jointly by Sponsor and Mount Sinai.

 

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6.2       Mount Sinai’s technology and business development office, Mount Sinai Innovation Partners (“MSIP”), will provide Sponsor a confidential written disclosure of any Sponsored Research Intellectual Property it develops or jointly develops that may be reasonably considered patentable (“Invention Notice”), after MSIP’s receipt of such disclosure from the Principal Investigator. No later than forty-five (45) days after receipt of any Invention Notice, Sponsor shall notify Mount Sinai in writing if it requests Mount Sinai to file and prosecute patent applications claiming any Sponsored Research Intellectual Property disclosed in the Invention Notice. If, within said forty-five (45) day period, Mount Sinai has not received from Sponsor a request to file and prosecute patent applications with respect to any Sponsored Research Intellectual Property, Mount Sinai may proceed with the filing and prosecution of patent applications covering such Sponsored Research Intellectual Property at its own cost and expense, and the resulting Patent Rights will be excluded from Sponsor’s option under Article 7. For clarity, an Invention Notice shall be separate and distinct from reports provided under Section 5.1. Each Invention Notice shall be deemed Confidential Information subject to Article 8.

 

6.3       Mount Sinai will control the preparation, prosecution, and maintenance, and registration of all Patent Rights that cover Institution rights in Sponsored Research Intellectual Property. Sponsor will reimburse Mount Sinai within sixty (60) days of receipt of invoice for all documented expenses incurred in connection with the preparation, prosecution, and maintenance of the Patent Rights that Sponsor has requested Mount Sinai to prosecute under Section 6.2 (such expenses, the “Patent Expenses”).

 

6.4       Mount Sinai represents and agrees that unless otherwise agreed in writing by the other party, it will not allow any officer, director, employee, consultant, member of its faculty or scientific staff, student, consultant, contractor, scientific advisory board member, or other person to work on the Sponsored Research on its behalf unless such person has agreed to assign to Mount Sinai any inventions, discoveries, or other intellectual property that such person may generate in connection with such work.

 

7          OPTION

 

7.1       In consideration of Sponsor’s payment for Patent Expenses as provided in Article 6, Mount Sinai hereby grants to Sponsor the exclusive option to negotiate a fee, milestone, and royalty bearing license to practice Mount Sinai’s rights in solely and jointly owned Sponsored Research Intellectual Property including the right to make, use, sell, offer for sale, and import any inventions claimed or otherwise included therein, but only with respect to Patent Rights: (a) prepared and prosecuted at Sponsor’s request under Section 6.2; (b) in the jurisdictions for which Sponsor requests such filings under Section 6.2; and (c) for which Sponsor has agreed to pay Patent Expenses under Section 6.3. Sponsor will have sixty (60) days from receipt of the Invention Notice to exercise such option right (“Option Period”). If Sponsor exercises its option within the Option Period then Mount Sinai and Sponsor will negotiate in good faith to determine the terms of a license agreement with respect to such Patent Rights for one hundred twenty (120) days (“Negotiation Period”). The Negotiation Period may be extended upon mutual written consent. If (i) Sponsor fails to exercise the option within the Option Period or (ii) Sponsor and Mount Sinai fail to execute a license agreement within the Negotiation Period or (iii) Sponsor fails to make timely payment for Patent Expenses in accordance with Section 6.3, then Mount Sinai will be free to license the relevant Patent Rights to any third party upon terms that Mount Sinai deems appropriate without any further obligation to Sponsor. The Parties hereby agree that the royalty rate to be payable to Mount Sinai on “net sales” (net sales to be defined in the exclusive license agreement) of products or services commercialized under such exclusive license agreement, shall be within the range of from three percent (3%) to six percent (6%).

 

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7.2       Any license granted to Sponsor pursuant to Section 7.1 will be subject to: (a) Sponsor’s obligation to pay related Patent Expenses directly to the responsible law firm under a client and billing agreement to be executed prior to or contemporaneously with such license; (b) the retained rights of Mount Sinai to practice such Patent Rights for academic research, teaching, and patient care purposes; and (c) as applicable, to the rights of the United States government including as reserved under Public Laws 96-517,97-256, and 98-620, codified at 35 U.S.C. § 200-212, and any regulations issued thereunder.

 

8          CONFIDENTIAL INFORMATION

 

8.1        “Confidential Information” means any and all information disclosed during the Term in connection with the Sponsored Research or this Agreement by either Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) that (a) if disclosed in tangible form, is marked as “confidential” upon disclosure or (b) if disclosed in intangible form, is summarized in a writing marked “confidential” that is transmitted to the Receiving Party within thirty (30) days of such intangible disclosure, provided however that the confidential status of Confidential Information not so marked or summarized will not be affected if a reasonable person would recognize the same as confidential, based upon the content and/or context of such disclosure. Notwithstanding the foregoing, Confidential Information shall not include information that the Receiving Party demonstrates by written or electronic records: (a) was already in the Receiving Party’s possession-prior to disclosure by the Disclosing Party; (b) is or later becomes a matter of public knowledge through no act or omission of the Receiving Party; (c) is disclosed to the Receiving Party by a third party who had an apparent bona fide legal right to so disclose and who does so without imposing a confidential obligation with respect thereto; or (d) is developed independently by the Receiving Party without use of the disclosure by the Disclosing Party.

 

8.2       Receiving Party will protect Disclosing Party’s Confidential Information from disclosure to all unauthorized persons and entities, using the same degree of care it uses to protect its own confidential information from disclosure and unauthorized use, but in no event with less than a reasonable degree of care. Receiving Party may disclose Disclosing Party’s Confidential Information only to those of Receiving Party’s employees, faculty, officers, directors, and agents (collectively, “Authorized Representatives”) who reasonably require access for the purpose of undertaking Receiving Party’s obligations hereunder, and shall allow such access only during the Term. Receiving Party will inform all of its Authorized Representatives of the confidentiality obligations and use restrictions herein in advance of disclosure of such Confidential Information to such Authorized Representatives and will require them to uphold such obligations. Each Receiving Party will be fully responsible to the Disclosing Party for any non-compliance with, or breach of, this Agreement by any of its Authorized Representatives. Receiving Party further agrees that it will use the Confidential Information only for the Purpose during the Term, and will not, directly or indirectly, make use of or aid any other unauthorized third Party to make use of such Confidential Information without Disclosing Party’s prior written consent.

 

8.3       For clarity, permitted uses of the Disclosing Party’s Confidential Information expressly exclude any use of Disclosing Parfy’s Confidential Information for regulatory or patent filing purposes, or for initiation or pursuit of any proceeding to challenge the patentability, validity, or enforceability of any patent application or issued patent (or any portion thereof) that is owned or controlled by Disclosing Party (including e.g. via pre-issuance submissions, post grant review, or inter partes review). Any such excluded use is hereby deemed a material breach of this Agreement and in such event, notwithstanding anything to the contrary herein, in addition to any other relief granted to the non-breaching Party, the breaching Party shall pay to the non-breaching Party all costs such non-breaching Party incurs in such proceeding including in defense of such patent application or patent. Any such payment shall be made within thirty (30) days of written demand.

 

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8.4       Each Receiving Party shall use each Disclosing Pafty’s Confidential Information solely for the purposes of this Agreement during the Term as expressly set forth herein and not for any commercial or other purposes. Each Receiving Party shall protect the confidentiality of such Confidential Information and guard it from disclosure to third parties with at least the same degree of care it uses to protect the confidentiality of its own Confidential Information, but in no event less than a reasonable degree of care. Notwithstanding the foregoing, the Receiving Party shall also be permitted to disclose Confidential Information to the extent required by law, court order, or other governmental authority with jurisdiction provided that the Receiving Party promptly provides the Disclosing Party, to the extent legally permissible, with written notice of such requirement and cooperates, at the Disclosing Party’s written request and expense, with the Disclosing Party’s legal efforts to prevent or limit the scope of such required disclosure.

 

8.5       During the Term of this Agreement and for three (3) years thereafter, the Receiving Party shall treat Confidential Information in accordance with the provisions of this Article 8.

 

9          PUBLICATION, USE OF NAME

 

9.1       Mount Sinai and Sponsor recognize the traditional freedom of all scientists to publish and present promptly the results of the Sponsored Research. Mount Sinai and Sponsor also recognize that Patent Rights can be jeopardized by public disclosure prior to the filing of appropriate patent applications. Therefore, Mount Sinai agrees that each proposed publication or other public disclosure of the results of the Sponsored Research (“Manuscript”), prior to submission to a publisher or other public disclosure, will be submitted to Sponsor for review. Sponsor will have thirty (30) days from the date submitted in which to review such Manuscript. If within said thirty (30) day period, Sponsor notifies the Principal Investigator in writing that the Manuscript includes Sponsor’s Confidential Information, specifically pointing out where such Confidential Information appears in the Manuscript then the Principal Investigator will remove such Confidential Information from the Manuscript prior to submission for publication or making any other public disclosure of the Manuscript. If within said same thirty (30) day period, Sponsor requests in writing a delay of publication to allow for patent application filing, then the Principal Investigator will delay submission for publication or other public disclosure until the sooner of (a) ninety (90) days from the date of the initial submission of the Manuscript to Sponsor, or (b) the filing of such patent application. When requested by the Principal Investigator in advance, Sponsor, at its discretion, may allow for simultaneous submission of the Manuscript to the publisher and Sponsor.

 

9.2       Mount Sinai will not use Sponsor’s name without Sponsor’s prior written consent except that, without such consent, Mount Sinai or Principal Investigator may acknowledge Sponsor in scientific publications as appropriate per scientific custom and in listings of sponsored research projects. Sponsor shall not use Mount Sinai’s logo, name or the name of any Mount Sinai trustee, officer, faculty member, student, or employee, or any adaptation thereof without Mount Sinai’s prior written consent. In cases where Mount Sinai has given such consent, Sponsor agrees to cooperate with Mount Sinai with respect to any conditions or limitations imposed upon such name usage. For Mount Sinai, such consent may only be granted with prior, written approval by Mount Sinai Innovation Partners. Notwithstanding the foregoing, Sponsor may use Mount Sinai’s name (but not its logo) in a purely factual manner in the context of disclosing that the Sponsored Research was conducted by and at Mount Sinai.

 

10          TERMINATION

 

10.1       In addition to the termination right set forth in Section 2.2, either Party may terminate this Agreement effective upon written notice to the other Party, if the other Party breaches any of the material terms or conditions of this Agreement and fails to cure such breach within thirty (30) days after receiving written notice thereof. For clarity, Sponsor’s failure to timely make any payments to Mount Sinai in accordance with this Agreement constitutes a material breach.

 

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10.2       Solely in the event of early termination of this Agreement due to the Sponsor’s breach, or for any other reason whatsoever, Mount Sinai will be entitled to retain from the payments made by Sponsor prior to termination Mount Sinai’s reasonable costs of concluding the work in progress. In such event, Sponsor shall be obligated to fulfill all payment obligations that accrued prior to the effective date of such termination and to pay any remainder of such reasonable costs not covered by Sponsor’s prior payments. Additionally, Sponsor shall pay Mount Sinai, without limitation, all costs of non-cancellable commitments incurred prior to the receipt, or issuance, by Mount Sinai of the notice of termination, and the full cost of each student and faculty member supported hereunder through the end of such commitments. In the event of termination, Mount Sinai will submit a confidential final report of all costs incurred and all funds received under this Agreement within sixty (60) days after the effective termination date. In case of a deficit of funds, Sponsor will promptly, upon receipt of invoice, pay Mount Sinai the amount needed to cover costs and allowable commitments incurred by Mount Sinai under this Agreement.

 

10.3       Termination of this Agreement will not affect the rights and obligations of the Parties accrued prior to termination hereof. The provisions of ARTICLE 4, entitled PAYMENT OF COSTS; of ARTICLE 5, entitled RECORDS AND REPORTS; of ARTICLE 6, entitled INTELLECTUAL PROPERTY; of ARTICLE 7, entitled OPTION; of ARTICLE, 8, entitled CONFIDENTIAL INFORMATION; of ARTICLE 9, entitled PUBLICATION, USE OF NAME; of ARTICLE, 10, entitled TERMINATION; of ARTICLE, I l, entitled DISCLAIMER OF WARRANTIES, INDEMNIFICATION; and of ARTICLE 12, entitled ADDITIONAL PROVISIONS, shall survive termination of this Agreement, as well as the DEFINITIONS insofar as required to interpret such provisions.

 

11         DISCLAIMER OF WARRANTIES, INDEMNIFICATION

 

11.1       MOUNT SINAI MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO THE CONDUCT, COMPLETION, SUCCESS, OR PARTICULAR RESULTS OF THE SPONSORED RESEARCH, OR THE CONDITION, OWNERSHIP, MERCHANTABII,ITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE SPONSORED RESEARCH, ANY RESEARCH RESULTS OR DATA, SPONSORED RESE,ARCH INTELLECTUAL PROPERTY, OR ANY INFORMATION OR MATERIALS PROVIDED TO SPONSOR BY MOUNT SINAI PURSUANT TO THIS AGREEMENT.

 

NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES OR LOST PROFITS SUFFERED BY THE OTHER PARTY OR BY ANY LICENSEE OR ANY OTHERS RESULTING FROM THIS AGREEMENT.

 

11.2       Indemnification.

 

11.2.1       Indemnification by Sponsor. Sponsor shall indemnify, defend, and hold harmless Mount Sinai, its present and former officers, directors, governing board members, employees, agents, and students (“Mount Sinai Indemnitees”) from any claim, loss, cost, expense, or liability of any kind including reasonable attorney’s fees and expenses arising out of or connected with this Agreement or the Sponsored Research, except to the extent such claim is due to the gross negligence or intentional misconduct of Sinai Indemnitees. Mount Sinai shall promptly notify Sponsor of any such claim and shall cooperate with Sponsor and its insurance carrier in the defense of the claim. Sponsor agrees to consult with Mount Sinai regarding the defense of such claim and to submit any proposed settlement to Mount Sinai in advance of its approval.

 

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11.2.2       Indemnification by Mount Sinai. Mount Sinai shall indemnify, defend, and hold harmless Sponsor and its directors, officers, professional staff, employees, agents, successors, heirs and assigns (“Sponsor Indemnitees”) from any and all third-party liabilities, claims, suits, losses, damages, expenses, costs, fees, actions, suits, demands, investigations, and penalties (including reasonable attorneys’ fees and costs of litigation) to the extent caused by Mount Sinai’s use of Sponsored Research Intellectual Property or the material breach of this Agreement by Mount Sinai, except to the extent such claim is due to the gross negligence or intentional misconduct of Sponsor Indemnitees..

 

11.2.3       Indemnification Procedures. The indemnified party (“Indemnitee”) shall give the party from whom indemnification is sought under this Agreement (in this capacity “Indemnitor”) reasonable notice of any claims asserted against such Indemnity. Failure to give such notice will not abrogate or diminish Indemnitor’s indemnity obligation if such failure does not prejudice Indemnitor’s ability to defend the claim. In any litigation, administrative proceeding, negotiation or arbitration pertaining to any claim for which indemnification is sought under this Agreement, Indemnitor will select competent legal counsel to represent the Indemnitees. Indemnitor will control such litigation, proceedings, negotiations, and arbitration. The Indemnitees will at all times have the right to fully participate in the defense at their own expense. If Indemnitor, within thirty (30) days after notice, fails to assume the defense of such action, then the Indemnitees shall have the right, but not the obligation, to undertake the defense, compromise or settlement of such claim on behalf of, for the account of and at the risk of the Indemnitor.

 

11.3       No settlement by Indemnitor on behalf of any Indemnitee shall acknowledge or implicate any liability, fault, or wrongdoing on the part of any Indemnitee without the prior written consent of Indemnitee. Indemnitor shall not settle or compromise any claim or action giving rise to liabilities in a manner that imposes any restrictions or obligations on any Indemnitee or grants any rights to the Sponsored Research Intellectual Property, or in any other manner, without the prior written consent of Indemnitee.

 

11.4       The indemnification rights of the Indemnified Parties under this Article 11 are in addition to all other rights that any Indemnified Party may have at law, in equity, or otherwise.

 

12         ADDITIONAL PROVISIONS

 

12.1       Representations of Sponsor. Sponsor represents that it is duly organized, validly existing, and in good standing under the laws of the state of New York. Sponsor has been granted all requisite power and authority to carry on its business and to own and operate its properties and assets. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Sponsor. There is no pending or, to Sponsor’s knowledge, threatened litigation involving Sponsor that would impair this Agreement or Sponsor’s ability to perform its obligations hereunder. There is no indenture, contract, or other encumbrance to which Sponsor is a party or otherwise bound that prohibits or may interfere with the execution, delivery, or performance by Sponsor of this Agreement or any provision hereof.

 

12.2       Representations of Mount Sinai. Mount Sinai represents that it is a not-for-profit education corporation duly organized, validly existing, and in good standing under the laws of the State of New York. Mount Sinai has been granted all requisite power and authority to carry on its business and to own and operate its properties and assets. There is no pending or, to Mount Sinai’s knowledge, threatened litigation involving Mount Sinai that would affect this Agreement or Mount Sinai’s ability to perform its obligations hereunder. There is no indenture, contract, or other encumbrance to which Mount Sinai is a party or otherwise bound that prohibits or may interfere with the execution, delivery, or performance by Mount Sinai of this Agreement or any provision hereof.

 

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12.3       Assignment. This Agreement may not be assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or transferred, by Sponsor, directly or by merger or other operation of law, without the express prior written consent of the non-assigning Party,, provided, however, that either Party may assign this Agreement without prior written consent to a successor in connection with the merger, consolidation, or sale of all or substantially all of its assets or that portion of its business to which this Agreement relates. Any prohibited assignment of this Agreement or any rights or obligations hereunder will be null and void. Any permitted assignment will be valid only if the assignee delivers to the non-assigning Party a written agreement to be legally bound to the non-assigning Party by this Agreement. No permitted assignment will relieve the assigning Party of responsibility for the performance of any obligations that accrued prior to such assignment.

 

12.4       Waiver. A waiver by either Party of a breach or violation of any provision of this Agreement will not constitute or be construed as a waiver of any different or subsequent breach or violation of that provision or as a waiver of any breach or violation of any other provision of this Agreement.

 

12.5       Independent Contractors. The Parties are independent contractors. Nothing herein will be deemed to establish a relationship of principal and agent between Mount Sinai and Sponsor, nor any of their agents or employees, and neither Party shall have the power to act for or incur obligations for the other, nor will this Agreement be construed as creating any form of legal association or arrangement that would impose liability upon one Party for the act or failure to act of the other Party. Nothing in this Agreement, express or implied, is intended to confer on any person other than the Parties hereto or their permitted assigns, any benefits, rights, or remedies.

 

12.6       Notices. Except as otherwise expressly set forth herein, any notice under this Agreement shall be in writing and delivered by certified mail, internationally recognized overnight courier service, charges prepaid. Notices shall be deemed to have been received at such time referenced in the courier’s tracking information. Notices shall be addressed as follows:

 

If to Mount Sinai:

 

Icahn School of Medicine at Mount Sinai

Mount Sinai Innovation Partners

One Gustave L. Levy Place, Box 1675

New York, NY 10029

Attention: Executive Vice President

 

with a copy for legal notices only to:

 

Icahn School of Medicine at Mount Sinai

One Gustave L. Levy Place, Box 1099

New York, NY 10029

Attention: Office of General Counsel

 

If to Sponsor:

 

SteriLumen, LLC

150 North Macquesten Pkwy,

Mount Vernon, NY 10550

E-mail: m.munn@sterilumen.com

 

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with a copy for legal notices only to:

 

Ross David Carmel, Esq.

Carmel, Milazzo & DiChiara LLP

55 West 39th Street, 18th Floor

New York, NY 10018

E-mail: rcarmel@cmdllp.com

 

12.7       Governing Law; Jurisdiction; Venue. This Agreement shall be construed and governed in accordance with the laws of the State of New York, without giving effect to conflicts of law provisions. The Parties hereby irrevocably submit to the exclusive jurisdiction of and venue in any state or federal courts located within New York County in the State of New York with respect to any and all disputes concerning or otherwise arising under this Agreement.

 

12.8       Force Majeure. Neither Party will be liable for any failure to perform as required by this Agreement to the extent such failure to perform is due to circumstances reasonably beyond such Party’s control, including, without limitation, labor disturbances or labor disputes of any kind, accidents, failure of any governmental approval required for full performance, war (whether or not declared), terrorism, civil disorders or commotions, acts of aggression, acts of God, energy or other conservation measures imposed by law or regulation, explosions, failure of utilities, mechanical breakdowns, material shortages, disease, or other such occurrences.

 

12.9       Compliance with Laws. The Parties comply with all laws, regulations, and other legal requirements applicable to it in connection with this Agreement, including but not limited to any legal requirements applicable to use of the results of the Sponsored Research or any Sponsored Research Intellectual Property and laws controlling the export of technical data, computer software, laboratory prototypes, and all other export-controlled commodities.

 

12.10       Export-Controlled Information. Sponsor will not knowingly disclose, and will use commercially reasonable efforts, but in no event efforts less than adequate to comply with laws and regulations, to prevent disclosure, to Mount Sinai of any information that is subject to ITAR controls, that is in the Commerce Control List (EAR Part 774 and Supplements), or that constitutes “restricted data” or “sensitive nuclear technology” under l0 CFR Part 810. If, for purposes of the Sponsored Research, Sponsor intends to disclose export-controlled information to Mount Sinai, Sponsor will not disclose such information to Mount Sinai unless and until a plan for transfer, use, dissemination, and control of the information has been approved in writing by Mount Sinai.

 

12.11       Integration; Precedence; Modification. This Agreement, together with its Attachments, embodies the entire understanding between the Parties relating to the subject matter hereof and supersedes all prior understandings and agreements, whether written or oral with respect to such subject matter. In the event of any inconsistency between this Agreement and its exhibits or attachments, the terms of this Agreement shall be given precedence. This Agreement may not be amended except by a written agreement signed by duly authorized representatives of both Parties.

 

12.12       Headings; Counterparts; Electronic Signatures. The headings included in this Agreement are inserted for convenience only and are not intended to affect the meaning or interpretation of this Agreement. This Agreement may be executed in counterparts and exchanged by electronic delivery in .pdf format. Each counterpart so exchanged shall be deemed to be an original for all purposes, and all of which counterparts, taken together, shall constitute one and the same instrument.

 

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12.13       Severability. If any provision(s) of this Agreement are or become invalid, are ruled illegal by any court of competent jurisdiction, or are deemed unenforceable under then-current applicable law from time to time in effect during the Term, it is the intention of the Parties that the remainder of this Agreement shall not be affected thereby. It is further the intention of the Parties that, in lieu of each such invalid, illegal, or unenforceable provision, there be substituted or added as part of this Agreement a provision which shall be as similar as possible to such provision with respect to the economic and business objectives intended by the Parties, but which shall be valid, legal, and enforceable.

 

12.14       Survival. The following sections of this Agreement (together with any defined terms required to interpret such sections) shall survive the termination or expiration of this Agreement for any reason: Sections 4 – 11, 12.3, 12.6, and 12.7.

 

 

[Signature page follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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AGR-I9631

 

 

IN WITNESS WHEREOF, the duly authorized representatives of the Parties hereby execute this Agreement as of the Effective Date.

 

  

 

Icahn School Medicine at Mount Sinai   Sponsor
     
By: /s/ Sybil Lombillo                               By: /s/ Max Munn                                
Name: Sybil Lombillo   Name: Max Munn
Title: Managing Director   Title: President CEO

 

4/14/2020 | 4:08 PM EDT

 

 

I have read and understand the responsibilities under this Agreement:

 

By: /s/ Richard Vincent                            

Name: Richard Vincent

4/14/2020 | 4:40 PM EDT

 

 

 

 

 

 

[Signature page to Sponsored Research Agreement]

 

 

 

 

AGR-19631

  

Attachment A

Sponsored Research

 

The Efficacy of UVC LED (270 nm) for Disinfecting Bathroom Surfaces and Sink Drains

 

Research Protect Description:

 

This study is designed to evaluate the effectiveness of Sterilumen disinfection technology in the reduction of bacteria on surfaces within typical healthcare settings and other environments. The study will be conducted at two sites--Mount Sinai St. Luke’s Hospital (MSSL) in New York, NY. Baseline data on ambient organisms found in patient bathrooms will be collected to inform our proposed study. Through an in-kind contribution from Sterilumen, the UV devices will be installed in every bathroom in selected intervention bathrooms. One of each of these units will first be installed in a simulated bathroom at the ResInnova Laboratory for a series of test challenges in unoccupied bathroom for testing. A suggested range of organisms to be tested will be based on data of ambient organisms collected on sinks and in drains in a series of 32 rooms at MSSL. The additional Sterilumen sink and drain units will then be installed into l7 patient rooms at MSSL. The second portion of the study consists of a pre and post-application-analysis of viable bacterial colony forming units (CFU) on sinks, in sink and drains. The study is non-human based using a combination of high contact surfaces within patient areas pre and post technology application. All microbiology costs, supplies, mailing, processing will be provided by ResInnova Laboratory through a separate contract with Sterilumen. All installation costs in accordance with MSSL’s requirements and removal at the end of the study if requested by MSSL will be provided at no cost to MSSL by Sterilumen. All installation and removals of the UV devices will be performed by Sterilumen under the supervision of MSSL If MSSL determines that Sterilumen’s presence on MSSL premises shall expose Sterilumen to confidential information of MSSL, Sterilumen agrees to execute a confidentiality agreement in advance.

 

Tasks:

 

Task 1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021
  J F M A M J J A S O N D J F M A M J
1. IRB XX X        
2. Site visits     X      
3. Hire/Technician   X        
4. ResInnova Lab Studies   XXX XXX      
5. Pre-intervention Lab Studies Base-line Study     XX      
6. Post Intervention Study     XXX      
7. Progress Reports   X*   X    
8. Analysis of Data   X   XXX    
9. Submit Abstract for Submission to ID Week       XX    
10. Presentation at ID Week           XX
11. Prepare Manuscript for review by Sterilumen       X X  
12. Submit Manuscript for Publication         X  
13. Submit Final Report           X

 

* The first Progress Report will include confirmation that installation of the UV devices has commenced or will commence within (thirty) 30 days.

 

 

 

 

 

Attachment B

Budget

 

Total Budget: S160,000 USD

 

Schedule of Payments:

 

$10,000 USD within thirty (30) days of execution of the Agreement.

 

$50,000 USD within thirty (30) days of submission of the first Progress Report (as set forth in the “Tasks” table of Attachment A).

 

$50,000 USD within thirty (30) days of submission of the second Progress Report (as set forth in the “Tasks” table of Attachment A).

 

$50,000 USD within thirty (30) days of submission of the Final Report (as set forth in the “Tasks” table of Attachment A).

 

Separate Costs and In-Kind Materials to be provided by Sterilumen.

All reasonable costs of the microbiological cultures, supplies and processing required for the conduct of this study will be provided through Sterilumen’s direct contract with ResInnova Laboratory. Sterilumen will be responsible for all direct costs of supplying test units for seventeen (17) patient room sinks, installation according to MSSL requirements, testing the units are functional and removal at the end of the study if requested by MSSL.

 

 

Exhibit 10.8

 

EMPLOYMENT AGREEMENT

 

 

AGREEMENT, dated as of June 30, 2020 by and between Applied UV, Inc. a Delaware (the "Company"), and Keyoumars Saeed, (the "Executive").

 

WHEREAS, the Company desires to establish its right to the services of Executive, in the capacity described below, on the terms and conditions hereinafter set forth, and Executive is willing to accept such employment on such terms and conditions.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth below, the parties hereby agree as follows:

 

1. Employment. The Company hereby agrees to employ the Executive as the President and Chief Executive Officer (“CEO”) of the Company, all wholly owned subsidiaries and controlling interest Affiliates, and a seat on the Board of Directors and the Executive hereby accepts such employment, on the terms and conditions set forth below.

 

2. Effective Date, Position and Duties.

 

Effective Date” The closing date of at least $5,000,000.00 in Company’s Initial Public Offering funding. During the period from the date of this Agreement until the end of the Term (the “Employment Period”), the Executive shall serve as the Chief Executive Officer of the Company and report to the Company’s Board of Directors. The duties will be as assigned by the Board of Directors of the Company (the "Board"), with such duties, authority and responsibilities as are normally associated with and appropriate for such positions. The Executive shall report directly to the Board. The Executive shall devote substantially all of his working time, attention and energies during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company and give his best efforts to the success of the Company. Notwithstanding the above, the Executive shall be permitted, to the extent such activities do not substantially interfere with his performance of his duties and responsibilities hereunder or violate Sections 7 or 8 of this Agreement, to (i) manage his personal, financial and legal affairs, (ii) serve on civic or charitable boards or committees (it being expressly understood and agreed that the Executive's continuing to serve on any such board and/or committees on which he is serving, or with which he is otherwise associated, as of the Effective Date, shall be deemed not to interfere with his performance of his duties and responsibilities under this Agreement), (iii) serve on boards of other companies and (iv) make personal appearances and lectures, and the Executive shall be entitled to receive and retain all remuneration received by him from the items listed in clauses (i) through (iv) of this paragraph.

 

3. Place of Performance.

 

During the Employment Period, the Executive will reside in the area of metro Denver, Colorado and the Executive shall not be required to relocate to any other location. The Executive agrees to be judicious in spending time between the Company’s other physical locations and in operations and New York office and all lab and office facilities, and all travel required to grow business, develop, acquire and visit vendors, partners, customers and suppliers.

 

4. Compensation and Related Matters.

 

(a) Base Salary. During the Term, the Company shall pay the Executive a base salary ("Base Salary") at the rate of not less than $350,000 per year ($29,166.67 per month)). The Executive's Base Salary shall be paid in approximately equal installments in accordance with the Company's customary payroll practices.

  

Q Saeed - Employment Agreement  1 Initials _____ / _____

 

 

(b) Annual Cash Bonus (“ACB”). For each full fiscal year of the Company that begins and ends during the Term, the Executive shall be eligible to earn an annual cash bonus in such amount as shall be determined by the Compensation Committee of the Board (the "Compensation Committee") (the "Annual Bonus") based on the achievement by the Company of reasonable performance goals established by the Compensation Committee and agreed to by Executive for each such fiscal year; provided, that the Annual Bonus shall be no greater than 150% of Base Salary. ACB, will have to be approved by the Audit and Compensation Committees of the Board.

 

(c) Stock Options, Restricted Stock Grant, and Long- Term Incentive Programs. The Company agrees that Executive shall be granted89,308 (representing 1.75% of the shares outstanding) shares of restricted stock at the $0.0001 par value to begin vesting quarterly, as of the date of this Agreement (the first vesting date being September 30, 2020). A new grant for the same amount shall be made by the company if this Agreement is automatically renewed. Executive may also to participate in future grants of restricted stock, grants of stock options, and long-term incentive compensation programs of the Company in a manner comparable to similar Company executives who are on a similar bonus program. Upon the termination of the Executive pursuant to Sections 5(a), (d) and (g), any unvested stock granted pursuant to this Section 4(c) shall revert back to the Company.

 

(d) Business, Travel and Entertainment Expenses. The Company shall promptly reimburse the Executive for all reasonable and documented business, travel and entertainment expenses related to the conduct of the Company’s business and consistent with the Executive's titles and the practices of the Company including but not limited to home office expenses, mobile office expenses and other technology expenses.

 

(e) Vacation. During the Term, the Executive shall be entitled to four (4) weeks of paid vacation per year. Vacation time and not taken during the applicable fiscal year shall be carried over to and owed the next or following fiscal year.

 

(f) Welfare, Pension and Incentive Benefit Plans. During the Term, the Executive (and his eligible spouse and dependents) shall be entitled to participate in all the welfare benefit plans and programs maintained by the Company from time to time for the benefit of its senior executives including, without limitation, all medical, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, the Executive shall be eligible to participate in all pensions, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company for the benefit of its senior executives, other than any annual cash incentive plan.

 

(g) Dues. During the Term, the Company shall pay or promptly reimburse the Executive for annual dues for membership in industry non-profit organizations, and professional organizations including any reasonable expenses for continuing education that does not affect the Executive’s time and commitments to the Company, each as approved by the Board of the Company.

 

5. Term & Termination.

 

The term of this Agreement is for Eighteen (18) months from Effective Date (the “Term”) then auto renewed for one-year periods or until a new mutually acceptable agreement is reached; provided; however, the Executive's employment hereunder may be terminated during the Term and the Term will end under the following circumstances:

  

Q Saeed - Employment Agreement  2 Initials _____ / _____

 

 

(a) Termination for Cause. The Executive’s employment may be terminated by the Company upon simple notice in writing transmitted to the Executive, without the Company (or any of its subsidiaries) being bound to pay any compensation whatsoever or accelerate vesting of options if termination is for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment only upon the Executive's:

 

(i) conviction of or entering of a plea of guilty or nolo contendere to a felony

 

(ii) gross misconduct that results in material and demonstrable damage to the business or reputation of the Company;

 

(iii) material breach of Section 7 of this Agreement; or

 

(iv) gross neglect in the performance of his duties hereunder (other than such failure resulting from the Executive's incapacity due to physical or mental illness or after the issuance of a Notice of Termination by the Executive for Good Reason).

 

Cause shall not exist unless and until the Company has delivered to the Executive a copy of a resolution duly adopted by a majority of the Board (excluding the Executive for purposes of determining such majority) at a meeting of the Board called and held for such purpose which finds that in the good faith opinion of the Board that "Cause" exists, and specifying the particulars thereof in detail. Provided, however, no reason set forth in this Section 5(a)(i) through (iv) shall constitute Cause unless (1) the Executive upon notice is given a reasonable period to effect a cure or a correction; and (2) the reason is not curable or correctible as reasonably determined by the Board. For purposes of this Section 5(a), a reasonable cure period shall not exceed 30 days.

 

(b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness as determined by a physician selected by the Executive, and on selected by the Company and reasonably acceptable to the Company, (i) the Executive shall have been substantially unable to perform his duties hereunder for six consecutive months, or for an aggregate of 180 days during any period of twelve consecutive months and (ii) within thirty days after written Notice of Termination is given to the Executive after such six- or twelve- month period, the Executive shall not have returned to the substantial performance of his duties on a full-time basis, the Company shall have the right to terminate the Executive's employment hereunder for "Disability". During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to Pandemic related physical or mental illness, the Executive shall continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to this Section 5(b). In the event the Executive's employment is terminated for Disability pursuant to this Section 5(b), the Company shall provide the Executive with the excess, if any, of his full Base Salary over the amount of any long-term disability benefits that he receives under the Company's welfare benefit plans and programs, payable in accordance with the normal payroll practices of the Company, for the remainder of the Employment Period and shall have no further obligations to the Executive hereunder. In addition, all stock options held by Executive shall immediately vest and all reacquisition rights or restrictions to other securities held by Executive shall be released or terminated.

 

(c) Termination by Death. In the event of the Executive’s death during his period of employment, the Company’s obligation to make payments under this Agreement shall terminate on the date of death, except the Company shall pay the Executive’s estate or surviving designated beneficiary or beneficiaries, as appropriate, Severance Pay (as defined in Section 5(e)).

 

(d) Voluntary Termination. In the event Executive wishes to resign for any reason, the Executive shall give at least thirty (30) days prior written notice of such resignation to the Board of Directors. Any such notice shall not relieve either the Executive or the Company of their mutual obligations to perform under this Agreement or to relieve the Company to compensate the Executive during such notice period for any earned but unpaid salary and bonus and reimburse business expenses incurred but not reimbursed as of his date of termination.

  

Q Saeed - Employment Agreement  3 Initials _____ / _____

 

 

(e) Termination Without Cause. In the event that the Company terminates the Executive’s employment without Cause at a date that is following the Effective Date, (1) Executive’s options for one year after such termination shall vest immediately; (2) the Company shall immediately pay to Executive or estate $200,000 in one lump sum payment (less applicable tax withholdings; and (3) the Company shall immediately pay the Executive for all accrued and untaken vacation time that has not expired (the vesting of options and the compensation paid to Executive set forth in clauses 1 through 3 of this Section 5(e) shall be referred to herein as “Severance Pay”).

 

(f) Good Reason. Executive may terminate his employment for Good Reason so long as Executive tenders his resignation to the Company within 45 days after the occurrence of the event which forms the basis for his resignation for Good Reason. Executive shall provide written notice to the Company describing the nature of the event which forms the basis for Executive’s resignation for Good Reason, and the Company shall thereafter have ten (10) days to cure such event. Good Reason shall mean the occurrence of any of the following without the written consent of the Executive or his approval in his capacity as the Chief Executive Officer:

 

(i) Any material diminution of Executive positions, duties, responsibilities hereunder, the assignment of his duties that are inconsistent with his current position; a change in his reporting relationship; or a change in his titles and authority;

 

(ii) The requirement of the Executive to relocate to locations other than those provided in Section 4 hereof; or

 

(iii) Any material breach of this Agreement by the Company.

 

In the event that the Executive terminates this Agreement for Good Reason at a date that is following the Effective Date, the Company shall pay to Executive Severance Pay. The Executive's right to terminate his employment hereunder for Good Reason shall not be affected by his incapacity due to physical or mental illness.

 

(g) Financing. If the Effective Date does not occur prior to September 30, 2020, this Agreement and the Executives employment hereunder will terminate; provided, however, upon such termination, the Executive shall be paid 5% of gross revenues from sales of products to buyers introduced to the Company by the Executive that occur from the beginning of the Employment Period to the one year anniversary thereof.

 

(h) Mitigation. The Executive shall not be required to mitigate damages with respect to the termination of his employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due the Executive under this Agreement on account of subsequent employment except as specifically provided in this Section 5. Additionally, amounts owed to the Executive under this Agreement shall not be offset by any claims the Company may have against the Executive, and the Company's obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

  

Q Saeed - Employment Agreement  4 Initials _____ / _____

 

 

6. Change of Control Matters.

 

If as a result of a Change in Control, the Executive is required to pay an excise tax on "excess parachute payments" (as defined in Section 280G(b) of the Code) under Section 4999 of the Code solely as a result of an acceleration of the vesting of options/restricted stock, the Company shall reimburse the Executive for the amount of such taxes paid. In addition, the Company shall pay the Executive such additional amounts as are necessary to place the Executive in the same financial position that he would have been in if he had not incurred any tax liability under Section 4999 of the Code as a result of such change in control; provided, however, that the Company shall in no event pay the Executive any amounts with respect to any penalties or interest due under any provision of the Code. The determination of the amount, if any, of any "excess parachute payments" and any tax liability under Section 4999 of the Code shall be made by a nationally-recognized independent accounting firm selected by the Executive. The fees and expenses of such accounting firm shall be paid by the Company. The determination of such accounting firm shall be final and binding on the parties. The Company agrees to pay to the Executive any amounts to be paid or reimbursed under this Paragraph 6 within three (3) days after receipt by the Company of written notice from the accounting firm which sets forth such accounting firm's determination.

 

(c) For the purposes of this Agreement, "Change in Control" shall occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 12(d) and 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Executive is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total outstanding voting stock, units or ownership of the Company; (b) the Company consolidates with, or merges with or into another or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any , or any consolidates with or merges with or into the Company, in any such event, pursuant to a transaction in which the outstanding voting stock of the Company is converted into or exchanged for cash, securities or other property; (c) individuals who are members of the Company’s Board of Directors at Closing of the initial seed round of funding or a Series A Preferred Stock financing cease for any reason to at least constitute a majority thereof; or (d) the Company is liquidated or dissolved or a special resolution is passed by the stockholders of the Company approving the plan of liquidation or dissolution.

 

7. Confidential Information.

 

The Executive acknowledges that he has received and will receive or conceive, in carrying on or in the course of his work during his employment with the Company, confidential information pertaining to the activities, the technologies, the operations and the business, past, present and future, of the Company or its officers, directors, shareholders, agents or related or associated companies collectively (“Affiliates”), which information is not in the public domain. The Executive acknowledges that such confidential information belongs to the Company and/or its Affiliates and that its disclosure or unauthorized use could be damaging or prejudicial to the Company and/or its Affiliates and contrary to their best interests. Accordingly, the Executive agrees to respect the confidentiality of such information and not to make use of or disclose it to, or to discuss it with, any person, other than in the ordinary course of his duties with the Company and its Affiliates, or as required under applicable law. This undertaking to respect the confidentiality of such information and not to make use of or disclose or discuss it to or with any person shall survive and continue to have full effect notwithstanding the termination of the Executive’s employment with the Company, so long as such confidential information does not become public as a result of an act by the Company or a third party, which act does not involve the fault of one of its executives. Nothing in this Agreement prohibits Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the U.S. Department of Justice, the Securities and Exchange Commission, the U.S. Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that I have made such reports or disclosures.

  

Q Saeed - Employment Agreement  5 Initials _____ / _____

 

 

8. Non-Solicitation

 

(a) Except as otherwise prohibited in the State of New York, the Executive shall not compete with the Company in the businesses that its subsidiaries are engaged in. Executive shall not participate in any capacity whatsoever in a business that would directly or indirectly compete with the Company or with any of its subsidiaries, including, without limitation, as an executive, director, officer, employer or principal, unless such participation is fully disclosed to the Board and approved in writing in advance. In addition, the Executive shall not have any interest whatsoever in such an enterprise, including, without limitation, as owner, shareholder, partner, limited partner, lender or silent partner that is in competition with the business of the Company or any of its subsidiaries. This noncompetition covenant is limited as follows:

 

(1)       As to the time period, to the duration of the Executive’s employment and for a period of 18 months following the date of termination of his employment;

(2)       As to the geographical area, the territory in which the Company and/or its subsidiaries operated during the two years preceding the employment termination date.

 

(b) The Executive also undertakes, for the same period and in respect of the same territory referred to hereinabove in subsections 8(a)(1) and (2), not to solicit clients for sales of products that are competitive with products that are sold by any of the Company’s subsidiaries or do anything whatsoever to induce or to lead any person to end, in whole or in part, business relations with the Company or any of its subsidiaries.

 

(c) The Executive also undertakes, for the same period and in respect of the same territory referred to hereinabove in subsections 8(a)(1) and (2), not to induce, attempt to induce or otherwise interfere in the relations which the Company or which any of its subsidiaries has with their distributors, suppliers, representatives, agents and other parties with whom the Company or any of its subsidiaries deals.

 

(d) The Executive also undertakes, for the same period and in respect of the same territory referred to in subsections 8(a)(1) and (2), not to induce, attempt to induce or otherwise solicit the personnel of the Company to leave their employment with the Company or any of its subsidiaries nor to hire the personnel of the Company or any of its subsidiaries for any enterprise in which the Executive has an interest.

 

(e) The Executive acknowledges that the provisions of this Section 8 are limited as to the time period, the geographic area and the nature of the activities to what the parties deem necessary to protect the legitimate interests of the Company and its subsidiaries, while allowing the Executive to earn his living.

 

(f) Nothing in this Section 8 shall operate to reduce or extinguish the obligations of the Executive arising at law or under this contract which survive at the termination of this Agreement in reason of their nature and, in particular, without limiting the foregoing, the Executive’s duty of loyalty and obligation to act faithfully, honestly and ethically.

  

Q Saeed - Employment Agreement  6 Initials _____ / _____

 

 

9. Indemnification.

 

(a) General. The Company agrees that, beginning on the earlier of (x) the date on which Director & Officer Liability Insurance is procured by the Company and (y) the Effective Date, it will maintain industry standard Director & Officer Liability Insurance and that if the Executive is made a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that the Executive is or was a trustee, director or officer of the Company, or any of their Affiliates or is or was serving at the request of the Company, or any of their Affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by Delaware law and as otherwise allowed by law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by the Executive in connection therewith unless such Expenses are the result of the Executive’s gross negligence or willful misconduct, and such indemnification shall continue as to the Executive even if the Executive has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators. The Company shall not provide indemnification for any Expenses paid for under the terms of the Company’s Director & Officer Liability Insurance.

 

(b) Expenses. As used in this Agreement, the term "Expenses" shall include, without limitation, damages, losses, judgments, liabilities, fines, penalties, excise taxes, settlements, and costs, attorneys' fees, accountants' fees, and disbursements and costs of attachment or similar bonds, investigations, and any expenses of establishing a right to indemnification under this Agreement.

 

(c) Enforcement. If a claim or request under this Section 9 is not paid by the Company or on its behalf, within thirty (30) days after a written claim or request has been received by the Company, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Delaware law.

 

(d) Partial Indemnification. If the Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Executive for the portion of such Expenses to which the Executive is entitled.

 

(e) Notice of Claim. The Executive shall give to the Company notice of any claim made against his for which indemnification will or could be sought under this Agreement. In addition, the Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within the Executive's power and at such times and places as are convenient for the Executive.

 

(f) Defense of Claim. With respect to any Proceeding as to which the Executive notifies the Company of the commencement thereof:

 

(i) The Company will be entitled to participate therein at its own expense;
(ii) Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Executive, which in the Company's sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. The Executive also shall have the right to employ his own counsel in such action, suit or proceeding if he reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Executive, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify the Executive under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty that would not be paid directly or indirectly by the Company or limitation on the Executive without the Executive's written consent. Neither the Company nor the Executive will unreasonably withhold or delay their consent to any proposed settlement.

  

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(g) Non-Exclusivity. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 9 shall not be exclusive of any other right which the Executive may have or hereafter may acquire under any statute or certificate of incorporation or by-laws of the Company or any subsidiary, agreement, vote of shareholders or disinterested directors or trustees or otherwise.

 

10. Legal Fees and Expenses.

 

If any contest or dispute shall arise between the Company and the Executive regarding any provision of this Agreement, the Company shall reimburse the Executive for all legal fees and expenses reasonably incurred by the Executive in connection with such contest or dispute, but only if the Executive prevails to a substantial extent with respect to the Executive's claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives reasonable written evidence of such fees and expenses.

 

11. Successors; Binding Agreement.

 

(a) Company's Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred, except that the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall include any successor to its business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 13 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

(b) Executive's Successors. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Executive's death, this Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's beneficiary or beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to the Executive's interests under this Agreement. If the Executive should die following his Date of Termination while any amounts would still be payable to Executive hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by the Executive, or otherwise to his legal representatives or estate.

  

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12. Governing Law.

 

This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed therein.

 

13. Arbitration.

 

Any controversy arising out of or relating to this Agreement or any termination thereof shall be submitted to and settled by the American Arbitration Association and pursuant to the Commercial Arbitration Rules. The venue for any arbitration shall be New York, New York. The parties hereto and all who may claim under them shall be conclusively bound by the determination of such arbitration. The parties hereby submit to the in personam jurisdiction of the courts of the State of New York and the Federal courts located therein (and expressly waive any defenses to personal jurisdiction by such courts) for the purpose of confirming, vacating or modifying any award pursuant to such arbitration and entering judgment thereon.

 

14. Notice.

 

For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the Executive at his residence address most recently filed with the Company.

 

15. Miscellaneous.

 

No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by the Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The respective rights and obligations of the parties hereunder of this Agreement shall survive the Executive's termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations.

 

16. Validity.

 

The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

17. Counterparts.

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

  

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18. Entire Agreement.

 

This Agreement set forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter. Any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

 

19. Withholding.

 

All payments hereunder shall be subject to any required withholding of Federal, state and local taxes pursuant to any applicable law or regulation.

 

20. Section Headings.

 

The section headings in this Employment Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

APPLIED UV, INC.

 

 

   
Max Munn, President  

 

 

EXECUTIVE

 

 

   
By: Keyoumars Saeed  

 

  

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Exhibit 10.9

 

EMPLOYMENT AGREEMENT

 

AGREEMENT, dated as of June 30, 2020 by and between Applied UV, Inc. a Delaware (the "Company"), and James L. Doyle III (the "Executive").

 

WHEREAS, the Company desires to establish its right to the services of Executive, in the capacity described below, on the terms and conditions hereinafter set forth, and Executive is willing to accept such employment on such terms and conditions.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth below, the parties hereby agree as follows:

 

1. Employment. The Company hereby agrees to employ the Executive as an Executive Vice-President and Chief Operations Officer (“COO”) of the Company, all wholly owned subsidiaries and controlling interest Affiliates, and the Executive hereby accepts such employment, on the terms and conditions set forth below.

 

2. Effective Date, Position and Duties.

 

Effective Date” The closing date of at least $5,000,000.00 in Company’s Initial Public Offering funding. During the period from the date of this Agreement until the end of the Term (the “Employment Period”), the Executive shall serve as the Chief Operations Officer of the Company and report to the Company’s Board of Directors. The duties will be as assigned by the Chief Executive Officer, with such duties, authority and responsibilities as are normally associated with and appropriate for such positions. The Executive shall report directly to the Chief Executive Officer. The Executive shall devote substantially all of his working time, attention and energies during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company and give his best efforts to the success of the Company. Notwithstanding the above, the Executive shall be permitted, to the extent such activities do not substantially interfere with his performance of his duties and responsibilities hereunder or violate Sections 7 or 8 of this Agreement, to (i) manage his personal, financial and legal affairs, (ii) serve on civic or charitable boards or committees (it being expressly understood and agreed that the Executive's continuing to serve on any such board and/or committees on which he is serving, or with which he is otherwise associated, as of the Effective Date, shall be deemed not to interfere with his performance of his duties and responsibilities under this Agreement), (iii) serve on boards of other companies and (iv) make personal appearances and lectures, and the Executive shall be entitled to receive and retain all remuneration received by him from the items listed in clauses (i) through (iv) of this paragraph.

 

3. Place of Performance.

 

During the Employment Period, the Executive will reside in the area of metro Denver, Colorado and the Executive shall not be required to relocate to any other location. The Executive agrees to be judicious in spending time between the Company’s other physical locations and in operations and New York office and all lab and office facilities, and all travel required to grow business, develop, acquire and visit vendors, partners, customers and suppliers.

 

4. Compensation and Related Matters.

 

(a) Base Salary. During the Term, the Company shall pay the Executive a base salary ("Base Salary") at the rate of not less than $275,000 per year ($22,916.67 per month). The Executive's Base Salary shall be paid in approximately equal installments in accordance with the Company's customary payroll practices.

 

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(b) Annual Cash Bonus (“ACB”). For each full fiscal year of the Company that begins and ends during the Term, the Executive shall be eligible to earn an annual cash bonus in such amount as shall be determined by the Compensation Committee of the Board (the "Compensation Committee") (the "Annual Bonus") based on the achievement by the Company of reasonable performance goals established by the Compensation Committee and agreed to by Executive for each such fiscal year; provided, that the Annual Bonus shall be no greater than 150% of Base Salary. ACB, will have to be approved by the Audit and Compensation Committees of the Board.

 

(c) Stock Options, Restricted Stock Grant, and Long-Term Incentive Programs. The Company agrees that Executive shall be granted 38,275 (representing 0.75% of the shares outstanding) shares of restricted stock at the $0.0001 par value to begin vesting quarterly, as of the date of this Agreement (the first vesting date being September 30, 2020). A new grant for the same amount shall be made by the company if this Agreement is automatically renewed. Executive may also to participate in future grants of restricted stock, grants of stock options, and long-term incentive compensation programs of the Company in a manner comparable to similar Company executives who are on a similar bonus program. Upon the termination of the Executive pursuant to Sections 5(a), (d) and (g), any unvested stock granted pursuant to this Section 4(c) shall revert back to the Company.

 

(d) Business, Travel and Entertainment Expenses. The Company shall promptly reimburse the Executive for all reasonable and documented business, travel and entertainment expenses related to the conduct of the Company’s business and consistent with the Executive's titles and the practices of the Company including but not limited to home office expenses, mobile office expenses and other technology expenses.

 

(e) Vacation. During the Term, the Executive shall be entitled to four (4) weeks of paid vacation per year. Vacation time and not taken during the applicable fiscal year shall be carried over to and owed the next or following fiscal year.

 

(f) Welfare, Pension and Incentive Benefit Plans. During the Term, the Executive (and his eligible spouse and dependents) shall be entitled to participate in all the welfare benefit plans and programs maintained by the Company from time to time for the benefit of its senior executives including, without limitation, all medical, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, the Executive shall be eligible to participate in all pensions, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company for the benefit of its senior executives, other than any annual cash incentive plan.

 

(g) Dues. During the Term, the Company shall pay or promptly reimburse the Executive for annual dues for membership in industry non-profit organizations, and professional organizations including any reasonable expenses for continuing education that does not affect the Executive’s time and commitments to the Company, each as approved by the Board of the Company.

 

5. Term & Termination.

 

The term of this Agreement is for Eighteen (18) months from Effective Date (the “Term”) then auto renewed for one-year periods or until a new mutually acceptable agreement is reached; provided; however, the Executive's employment hereunder may be terminated during the Term and the Term will end, under the following circumstances:

 

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(a) Termination for Cause. The Executive’s employment may be terminated by the Company upon simple notice in writing transmitted to the Executive, without the Company (or any of its subsidiaries) being bound to pay any compensation whatsoever or accelerate vesting of options if termination is for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment only upon the Executive's:

 

(i) conviction of or entering of a plea of guilty or nolo contendere to a felony

 

(ii)gross misconduct that results in material and demonstrable damage to the business or reputation of the Company;

 

(iii) material breach of Section 7 of this Agreement; or

 

(iv) gross neglect in the performance of his duties hereunder (other than such failure resulting from the Executive's incapacity due to physical or mental illness or after the issuance of a Notice of Termination by the Executive for Good Reason).

 

Cause shall not exist unless and until the Company has delivered to the Executive a copy of a resolution duly adopted by a majority of the Board (excluding the Executive for purposes of determining such majority) at a meeting of the Board called and held for such purpose which finds that in the good faith opinion of the Board that "Cause" exists, and specifying the particulars thereof in detail. Provided, however, no reason set forth in this Section 5(a)(i) through (iv) shall constitute Cause unless (1) the Executive upon notice is given a reasonable period to effect a cure or a correction; and (2) the reason is not curable or correctible as reasonably determined by the Board. For purposes of this Section 5(a), a reasonable cure period shall not exceed 30 days.

 

(b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness as determined by a physician selected by the Executive, and on selected by the Company and reasonably acceptable to the Company, (i) the Executive shall have been substantially unable to perform his duties hereunder for six consecutive months, or for an aggregate of 180 days during any period of twelve consecutive months and (ii) within thirty days after written Notice of Termination is given to the Executive after such six- or twelve- month period, the Executive shall not have returned to the substantial performance of his duties on a full-time basis, the Company shall have the right to terminate the Executive's employment hereunder for "Disability". During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to Pandemic related physical or mental illness, the Executive shall continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to this Section 5(b). In the event the Executive's employment is terminated for Disability pursuant to this Section 5(b), the Company shall provide the Executive with the excess, if any, of his full Base Salary over the amount of any long-term disability benefits that he receives under the Company's welfare benefit plans and programs, payable in accordance with the normal payroll practices of the Company, for the remainder of the Employment Period and shall have no further obligations to the Executive hereunder. In addition, all stock options held by Executive shall immediately vest and all reacquisition rights or restrictions to other securities held by Executive shall be released or terminated.

 

(c) Termination by Death. In the event of the Executive’s death during his period of employment, the Company’s obligation to make payments under this Agreement shall terminate on the date of death, except the Company shall pay the Executive’s estate or surviving designated beneficiary or beneficiaries, as appropriate, Severance Pay (as defined in Section 5(e)).

 

(d) Voluntary Termination. In the event Executive wishes to resign for any reason, the Executive shall give at least thirty (30) days prior written notice of such resignation to the Board of Directors. Any such notice shall not relieve either the Executive or the Company of their mutual obligations to perform under this Agreement or to relieve the Company to compensate the Executive during such notice period for any earned but unpaid salary and bonus and reimburse business expenses incurred but not reimbursed as of his date of termination.

 

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(e) Termination Without Cause. In the event that the Company terminates the Executive’s employment without Cause at a date that is following the Effective Date, (1) Executive’s options for one year after such termination shall vest immediately; (2) the Company shall immediately pay to Executive or estate $100,000 in one lump sum payment (less applicable tax withholdings; and (3) the Company shall immediately pay the Executive for all accrued and untaken vacation time that has not expired (the vesting of options and the compensation paid to Executive set forth in clauses 1 through 3 of this Section 5(e) shall be referred to herein as “Severance Pay”).

 

(f) Good Reason. Executive may terminate his employment for Good Reason so long as Executive tenders his resignation to the Company within 45 days after the occurrence of the event which forms the basis for his resignation for Good Reason. Executive shall provide written notice to the Company describing the nature of the event which forms the basis for Executive’s resignation for Good Reason, and the Company shall thereafter have ten (10) days to cure such event. Good Reason shall mean the occurrence of any of the following without the written consent of the Executive or his approval in his capacity as the Chief Operations Officer:

 

(i) Any material diminution of Executive positions, duties, responsibilities hereunder, the assignment of his duties that are inconsistent with his current position; a change in his reporting relationship; or a change in his titles and authority;

 

(ii) The requirement of the Executive to relocate to locations other than those provided in Section 4 hereof; or

 

(iii) Any material breach of this Agreement by the Company.

 

In the event that the Executive terminates this Agreement for Good Reason at a date that is following the Effective Date, the Company shall pay to Executive Severance Pay. The Executive's right to terminate his employment hereunder for Good Reason shall not be affected by his incapacity due to physical or mental illness.

 

(g) Financing. If the Effective Date does not occur prior to September 30, 2020, this Agreement and the Executives employment hereunder will terminate; provided, however, upon such termination, the Executive shall be paid 5% of gross revenues from sales of products to buyers introduced to the Company by the Executive that occur from the beginning of the Employment Period to the one year anniversary thereof.

 

(h) Mitigation. The Executive shall not be required to mitigate damages with respect to the termination of his employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due the Executive under this Agreement on account of subsequent employment except as specifically provided in this Section 5. Additionally, amounts owed to the Executive under this Agreement shall not be offset by any claims the Company may have against the Executive, and the Company's obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

 

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6. Change of Control Matters.

 

If as a result of a Change in Control, the Executive is required to pay an excise tax on "excess parachute payments" (as defined in Section 280G(b) of the Code) under Section 4999 of the Code solely as a result of an acceleration of the vesting of options/restricted stock, the Company shall reimburse the Executive for the amount of such taxes paid. In addition, the Company shall pay the Executive such additional amounts as are necessary to place the Executive in the same financial position that he would have been in if he had not incurred any tax liability under Section 4999 of the Code as a result of such change in control; provided, however, that the Company shall in no event pay the Executive any amounts with respect to any penalties or interest due under any provision of the Code. The determination of the amount, if any, of any "excess parachute payments" and any tax liability under Section 4999 of the Code shall be made by a nationally-recognized independent accounting firm selected by the Executive. The fees and expenses of such accounting firm shall be paid by the Company. The determination of such accounting firm shall be final and binding on the parties. The Company agrees to pay to the Executive any amounts to be paid or reimbursed under this Paragraph 6 within three (3) days after receipt by the Company of written notice from the accounting firm which sets forth such accounting firm's determination.

 

(c) For the purposes of this Agreement, "Change in Control" shall occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 12(d) and 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Executive is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total outstanding voting stock, units or ownership of the Company; (b) the Company consolidates with, or merges with or into another or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any , or any consolidates with or merges with or into the Company, in any such event, pursuant to a transaction in which the outstanding voting stock of the Company is converted into or exchanged for cash, securities or other property; (c) individuals who are members of the Company’s Board of Directors at Closing of the initial seed round of funding or a Series A Preferred Stock financing cease for any reason to at least constitute a majority thereof; or (d) the Company is liquidated or dissolved or a special resolution is passed by the stockholders of the Company approving the plan of liquidation or dissolution.

 

7. Confidential Information.

 

The Executive acknowledges that he has received and will receive or conceive, in carrying on or in the course of his work during his employment with the Company, confidential information pertaining to the activities, the technologies, the operations and the business, past, present and future, of the Company or its officers, directors, shareholders, agents or related or associated companies collectively (“Affiliates”), which information is not in the public domain. The Executive acknowledges that such confidential information belongs to the Company and/or its Affiliates and that its disclosure or unauthorized use could be damaging or prejudicial to the Company and/or its Affiliates and contrary to their best interests. Accordingly, the Executive agrees to respect the confidentiality of such information and not to make use of or disclose it to, or to discuss it with, any person, other than in the ordinary course of his duties with the Company and its Affiliates, or as required under applicable law. This undertaking to respect the confidentiality of such information and not to make use of or disclose or discuss it to or with any person shall survive and continue to have full effect notwithstanding the termination of the Executive’s employment with the Company, so long as such confidential information does not become public as a result of an act by the Company or a third party, which act does not involve the fault of one of its executives. Nothing in this Agreement prohibits Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the U.S. Department of Justice, the Securities and Exchange Commission, the U.S. Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that I have made such reports or disclosures.

 

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8. Non-Solicitation

 

(a) Except as otherwise prohibited in the State of New York, the Executive shall not compete with the Company in the businesses that its subsidiaries are engaged in. Executive shall not participate in any capacity whatsoever in a business that would directly or indirectly compete with the Company or with any of its subsidiaries, including, without limitation, as an executive, director, officer, employer or principal, unless such participation is fully disclosed to the Board and approved in writing in advance. In addition, the Executive shall not have any interest whatsoever in such an enterprise, including, without limitation, as owner, shareholder, partner, limited partner, lender or silent partner that is in competition with the business of the Company or any of its subsidiaries. This noncompetition covenant is limited as follows:

 

(1)            As to the time period, to the duration of the Executive’s employment and for a period of 18 months following the date of termination of his employment;

 

(2)            As to the geographical area, the territory in which the Company and/or its subsidiaries operated during the two years preceding the employment termination date.

 

(b) The Executive also undertakes, for the same period and in respect of the same territory referred to hereinabove in subsections 8(a)(1) and (2), not to solicit clients for sales of products that are competitive with products that are sold by any of the Company’s subsidiaries or do anything whatsoever to induce or to lead any person to end, in whole or in part, business relations with the Company or any of its subsidiaries.

 

(c) The Executive also undertakes, for the same period and in respect of the same territory referred to hereinabove in subsections 8(a)(1) and (2), not to induce, attempt to induce or otherwise interfere in the relations which the Company or which any of its subsidiaries has with their distributors, suppliers, representatives, agents and other parties with whom the Company or any of its subsidiaries deals.

 

(d) The Executive also undertakes, for the same period and in respect of the same territory referred to in subsections 8(a)(1) and (2), not to induce, attempt to induce or otherwise solicit the personnel of the Company to leave their employment with the Company or any of its subsidiaries nor to hire the personnel of the Company or any of its subsidiaries for any enterprise in which the Executive has an interest.

 

(e) The Executive acknowledges that the provisions of this Section 8 are limited as to the time period, the geographic area and the nature of the activities to what the parties deem necessary to protect the legitimate interests of the Company and its subsidiaries, while allowing the Executive to earn his living.

 

(f) Nothing in this Section 8 shall operate to reduce or extinguish the obligations of the Executive arising at law or under this contract which survive at the termination of this Agreement in reason of their nature and, in particular, without limiting the foregoing, the Executive’s duty of loyalty and obligation to act faithfully, honestly and ethically.

 

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9. Indemnification.

 

(a) General. The Company agrees that, beginning on the earlier of (x) the date on which Director & Officer Liability Insurance is procured by the Company and (y) the Effective Date, it will maintain industry standard Director & Officer Liability Insurance and that if the Executive is made a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that the Executive is or was a trustee, director or officer of the Company, or any of their Affiliates or is or was serving at the request of the Company, or any of their Affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by Delaware law and as otherwise allowed by law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by the Executive in connection therewith unless such Expenses are the result of the Executive’s gross negligence or willful misconduct, and such indemnification shall continue as to the Executive even if the Executive has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators. The Company shall not provide indemnification for any Expenses paid for under the terms of the Company’s Director & Officer Liability Insurance.

 

(b) Expenses. As used in this Agreement, the term "Expenses" shall include, without limitation, damages, losses, judgments, liabilities, fines, penalties, excise taxes, settlements, and costs, attorneys' fees, accountants' fees, and disbursements and costs of attachment or similar bonds, investigations, and any expenses of establishing a right to indemnification under this Agreement.

 

(c) Enforcement. If a claim or request under this Section 9 is not paid by the Company or on its behalf, within thirty (30) days after a written claim or request has been received by the Company, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Delaware law.

 

(d) Partial Indemnification. If the Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Executive for the portion of such Expenses to which the Executive is entitled.

 

(e) Notice of Claim. The Executive shall give to the Company notice of any claim made against his for which indemnification will or could be sought under this Agreement. In addition, the Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within the Executive's power and at such times and places as are convenient for the Executive.

 

(f) Defense of Claim. With respect to any Proceeding as to which the Executive notifies the Company of the commencement thereof:

  

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(i) The Company will be entitled to participate therein at its own expense;

 

James Doyle - Employment Agreement Initials _____ / _____

 

(ii) Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Executive, which in the Company's sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. The Executive also shall have the right to employ his own counsel in such action, suit or proceeding if he reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Executive, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company.

 

(iii) The Company shall not be liable to indemnify the Executive under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty that would not be paid directly or indirectly by the Company or limitation on the Executive without the Executive's written consent. Neither the Company nor the Executive will unreasonably withhold or delay their consent to any proposed settlement.

 

(g) Non-Exclusivity. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 9 shall not be exclusive of any other right which the Executive may have or hereafter may acquire under any statute or certificate of incorporation or by-laws of the Company or any subsidiary, agreement, vote of shareholders or disinterested directors or trustees or otherwise.

 

10. Legal Fees and Expenses.

 

If any contest or dispute shall arise between the Company and the Executive regarding any provision of this Agreement, the Company shall reimburse the Executive for all legal fees and expenses reasonably incurred by the Executive in connection with such contest or dispute, but only if the Executive prevails to a substantial extent with respect to the Executive's claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives reasonable written evidence of such fees and expenses.

 

11. Successors; Binding Agreement.

 

(a) Company's Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred, except that the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall include any successor to its business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 13 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

(b) Executive's Successors. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Executive's death, this Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's beneficiary or beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to the Executive's interests under this Agreement. If the Executive should die following his Date of Termination while any amounts would still be payable to Executive hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by the Executive, or otherwise to his legal representatives or estate.

 

James Doyle - Employment Agreement Initials _____ / _____

 

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12. Governing Law.

 

This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed therein.

 

13. Arbitration.

 

Any controversy arising out of or relating to this Agreement or any termination thereof shall be submitted to and settled by the American Arbitration Association and pursuant to the Commercial Arbitration Rules. The venue for any arbitration shall be New York, New York. The parties hereto and all who may claim under them shall be conclusively bound by the determination of such arbitration. The parties hereby submit to the in personam jurisdiction of the courts of the State of New York and the Federal courts located therein (and expressly waive any defenses to personal jurisdiction by such courts) for the purpose of confirming, vacating or modifying any award pursuant to such arbitration and entering judgment thereon.

 

14. Notice.

 

For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the Executive at his residence address most recently filed with the Company.

 

15. Miscellaneous.

 

No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by the Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The respective rights and obligations of the parties hereunder of this Agreement shall survive the Executive's termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations.

 

16. Validity.

 

The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

17. Counterparts.

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

James Doyle - Employment Agreement Initials _____ / _____

 

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18. Entire Agreement.

 

This Agreement set forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter. Any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

 

19. Withholding.

 

All payments hereunder shall be subject to any required withholding of Federal, state and local taxes pursuant to any applicable law or regulation.

 

20. Section Headings.

 

The section headings in this Employment Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.

 

[THE REMAINER OF THIS PAGE IS INTENTIONALLY BLANK]

 

James Doyle - Employment Agreement Initials _____ / _____

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

APPLIED UV, INC.  
   
Max Munn, President  
   
EXECUTIVE  
   
By: James L. Doyle III  

 

James Doyle - Employment Agreement Initials _____ / _____

 

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Exhibit 10.10

 

These securities have not been registered with the United States Securities and Exchange Commission or the Securities Commission of any state pursuant to an exemption from registration under regulation d promulgated under the securities act of 1933, as amended (the “act”). this warrant shall not constitute an offer to sell nor a solicitation of an offer to buy the securities in any jurisdiction in which such offer or solicitation would be unlawful. the securities are “restricted” and may not be resold or transferred except as permitted under the act pursuant to registration or exemption there from.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase Shares of $0.0001 Par Value Common Stock (“Common Stock”) of

 

Applied UV, Inc.

 

July 1, 2020

 

THIS CERTIFIES that, for value received, Primary Capital LLC (the “Holder”) is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof (the “Issuance Date”) and on or prior to the date that is the fifth anniversary date of the date hereof (the “Expiration Date”), but not thereafter, to subscribe for and purchase from Applied UV, Inc., a Delaware corporation (the “Company”) 750 shares of the Common Stock (the “Warrant Shares”) at an exercise price equal to $5.00 per share on the Issuance Date (the “Exercise Price”).

 

1. Exercise of Warrant.

 

a. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the date hereof and on or before the Expiration Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto. Within the earlier of (i) three (3) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 1(b)) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 1(b) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. 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. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

     

 

 

b. In lieu of paying the aggregate Exercise Price as set forth in Section 1(a), the Holder may elect to receive Warrant Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (x) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (y) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day;

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended, the Warrant Shares shall take on any registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 1(b).

 

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Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

 

Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York, New York generally are authorized or obligated by law, regulation or executive order to close.

 

Standard Settlement Period” means (i) the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise; or if the Common Stock is not publicly traded (ii) three Trading Days.

 

Trading Day” means (i) a day on which the principal Trading Market is open for trading or, if the Common Stock is not quoted or listed in any market or exchange, (ii) any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

 

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Notwithstanding anything herein to the contrary, on the Expiration Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 1(b).

 

c. In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, if requested by the Holder and at its expense, shall within five (5) Trading Days issue and deliver to the Holder a new Warrant of like tenor in the name of the Holder or as the Holder (upon payment by Holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares. Notwithstanding anything to the contrary set forth herein, upon exercise of any portion of this Warrant in accordance with the terms hereof, the Holder shall not be required to physically surrender this Warrant to the Company unless such Holder is purchasing the full amount of Warrant Shares represented by this Warrant. The Holder and the Company shall maintain records showing the number of Warrant Shares so purchased hereunder and the dates of such purchases or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Warrant upon each such exercise. The Holder, by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by reason of the provisions of this Section, following exercise of any portion of this Warrant, the number of Warrant Shares which may be purchased upon exercise of this Warrant may be less than the number of Warrant Shares set forth on the face hereof. Certificates for shares of Common Stock (or a statement from the Company’s transfer agent reflecting shares of Common Stock) purchased hereunder shall be delivered to the Holder hereof within five (5) Business Days after the date on which this Warrant shall have been exercised as aforesaid. The Holder may withdraw its Notice of Exercise at any time if the Company fails to timely deliver the relevant certificates or statement to the Holder as provided in this Agreement. A Notice of Exercise shall be deemed sent on the date of delivery if delivered before 8:00 p.m. New York Time on such date, or the day following such date if delivered after 8:00 p.m. New York Time; provided that the Company is only obligated to deliver Warrant Shares against delivery of the Exercise Price from the holder hereof (other than with respect to a cashless exercise) and, if the Holder is purchasing the full amount of Warrant Shares represented by this Warrant, surrender of this Warrant (or appropriate affidavit and/or indemnity in lieu thereof).

 

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2. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of issuance of a fractional share upon any exercise hereunder, the Company will either round up to nearest whole number of shares or pay the cash value of that fractional share, which cash value shall be calculated on the basis of the average closing price of the Common Stock during the five (5) Trading Days immediately preceding the date of exercise.

 

3. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder of this Warrant or in such name or names as may be directed by the Holder of this Warrant.

 

4. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant.

 

5. No Rights as Shareholder until Exercise. The Holder shall not be entitled to vote or receive dividends or be deemed the holder of Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Warrant pursuant to Section 1 hereof, the Warrant Shares so purchased hereunder shall be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised.

 

6. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company represents, warrants and covenants that (a) upon receipt by the Company of evidence and/or indemnity reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate representing the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and (b) upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate, without any charge there for. This Warrant is exchangeable at any time for an equal aggregate number of Warrants of different denominations, as requested by the holder surrendering the same, or in such denominations as may be requested by the Holder following determination of the Exercise Price. No service charge will be made for such registration or transfer, exchange or reissuance.

 

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7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken, or such right may be exercised on the next succeeding day not a legal holiday.

 

8. Effect of Certain Events. If at any time while this Warrant or any portion thereof is outstanding and unexpired there shall be a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a “Sale or Merger Transaction”), the Holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 9.

 

9. Adjustments of Exercise Price and Number of Warrant Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 9.

 

a. Subdivisions, Combinations, Stock Dividends and Other Issuances. If the Company shall, at any time while this Warrant is outstanding, (i) pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, by forward stock split or otherwise, or (iii) combine outstanding Common Stock into a smaller number of shares, by reverse stock split or otherwise, then the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 9(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. The number of shares which may be purchased hereunder shall be increased proportionately to any reduction in Exercise Price pursuant to this paragraph 9(a), so that after such adjustments the aggregate Exercise Price payable hereunder for the increased number of shares shall be the same as the aggregate Exercise Price in effect just prior to such adjustments.

 

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b. Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, and upon payment of the Exercise Price then in effect, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant been exercised just prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be. The Company will not merge or consolidate with or into any other corporation, or sell or otherwise transfer its property, assets and business substantially as an entirety to another corporation, unless the corporation resulting from such merger or consolidation (if not the Company), or such transferee corporation, as the case may be, shall expressly assume in writing the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company.

 

d. Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant at such time been exercised. Simultaneously with any adjustment to the Exercise Price pursuant to this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

10. Voluntary Adjustment by the Company. The Company may at its option, at any time during the term of this Warrant, reduce but not increase the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

11. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, the Company, at its expense, shall promptly mail to the Holder of this Warrant a notice setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment and setting forth the computation of such adjustment and a brief statement of the facts requiring such adjustment.

 

12. Authorized Shares. The Company covenants that during the period the Warrant is outstanding and exercisable, it will reserve and keep available from its authorized and unissued Common Stock a sufficient number of shares to provide solely for the issuance of the Warrant Shares upon the exercise of any and all purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law, regulation, or rule of any applicable market or exchange.

 

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13. Compliance with Securities Laws. The Holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Warrant Shares issued to the Holder upon exercise (if not registered, for resale or otherwise, or if no exemption from registration exists) will bear substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT 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, AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF 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.

 

14. Miscellaneous.

 

a. Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this Warrant shall be construed and shall be given effect in all respects as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant will be construed and enforced in accordance with and governed by the laws of the State of New York, except for matters arising under the Act, without reference to principles of conflicts of law. Each of the parties consents to the exclusive jurisdiction of the Federal and State Courts sitting in the County of New York in the State of New York in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens or venue, to the bringing of any such proceeding in such jurisdiction.

 

b. Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Holder, each future holder of this Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

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c. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing by facsimile, mail or personal delivery and shall be effective upon actual receipt of such notice. The addresses for such communications shall be to the addresses as shown on the books of the Company. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 14(c).

 

d. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

e. Specific Enforcement. The Company and the Holder acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Warrant and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either of them may be entitled by law or equity.

 

f. Counterparts/Execution. This Warrant may be executed by facsimile and in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. Execution and delivery of this Warrant by facsimile transmission (including delivery of documents in Adobe PDF format) shall constitute execution and delivery of this Warrant for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

 

[SIGNATURE PAGE TO FOLLOW]

 

  9  

 

 

IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officers thereunto duly authorized.

 

 

  Applied UV, Inc.  
         
  By:   /s/ Max Munn  
  Name: Max Munn  
  Title: President  

 

 

  10  

 

 

NOTICE OF EXERCISE

 

To: Applied UV, Inc.

 

(1)          The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the aggregate Exercise Price in full, together with all applicable transfer taxes, if any.

 

(2)          Payment shall take the form of (check applicable box):

 

¨ in lawful money of the United States; or

 

¨ if cashless exercise, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 1(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 1(b).

 

(3)          Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

_______________________________
(Name)

_______________________________
(Address)

 

_______________________________

 

(3)          Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

 

       
    (Name)  
       
       
(Date)   (Signature)  
       
       
    (Address)  
Dated:      
       
Signature      

 

  11  

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:  
  (Please Print)
   
Address:  
  (Please Print)
   
Phone Number:  
   
Email Address:  
   
Dated: _______________ ___, ______  
   
Holder’s Signature:  _______________  
   
Holder’s Address: _______________  

 

  12  

Exhibit 10.11

 

These securities have not been registered with the United States Securities and Exchange Commission or the Securities Commission of any state pursuant to an exemption from registration under regulation d promulgated under the securities act of 1933, as amended (the “act”). this warrant shall not constitute an offer to sell nor a solicitation of an offer to buy the securities in any jurisdiction in which such offer or solicitation would be unlawful. the securities are “restricted” and may not be resold or transferred except as permitted under the act pursuant to registration or exemption there from.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase Shares of $0.0001 Par Value Common Stock (“Common Stock”) of

 

Applied UV, Inc.

 

July 1, 2020

 

THIS CERTIFIES that, for value received, Robert Nathan (the “Holder”) is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof (the “Issuance Date”) and on or prior to the date that is the fifth anniversary date of the date hereof (the “Expiration Date”), but not thereafter, to subscribe for and purchase from Applied UV, Inc., a Delaware corporation (the “Company”) 4,250 shares of the Common Stock (the “Warrant Shares”) at an exercise price equal to $5.00 per share on the Issuance Date (the “Exercise Price”).

 

1. Exercise of Warrant.

 

a. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the date hereof and on or before the Expiration Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto. Within the earlier of (i) three (3) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 1(b)) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 1(b) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. 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. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

 

 

 

b. In lieu of paying the aggregate Exercise Price as set forth in Section 1(a), the Holder may elect to receive Warrant Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (x) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (y) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day;

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended, the Warrant Shares shall take on any registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 1(b).

 

  2  

 

 

Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

 

Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York, New York generally are authorized or obligated by law, regulation or executive order to close.

 

Standard Settlement Period” means (i) the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise; or if the Common Stock is not publicly traded (ii) three Trading Days.

 

Trading Day” means (i) a day on which the principal Trading Market is open for trading or, if the Common Stock is not quoted or listed in any market or exchange, (ii) any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

 

  3  

 

 

Notwithstanding anything herein to the contrary, on the Expiration Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 1(b).

 

c. In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, if requested by the Holder and at its expense, shall within five (5) Trading Days issue and deliver to the Holder a new Warrant of like tenor in the name of the Holder or as the Holder (upon payment by Holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares. Notwithstanding anything to the contrary set forth herein, upon exercise of any portion of this Warrant in accordance with the terms hereof, the Holder shall not be required to physically surrender this Warrant to the Company unless such Holder is purchasing the full amount of Warrant Shares represented by this Warrant. The Holder and the Company shall maintain records showing the number of Warrant Shares so purchased hereunder and the dates of such purchases or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Warrant upon each such exercise. The Holder, by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by reason of the provisions of this Section, following exercise of any portion of this Warrant, the number of Warrant Shares which may be purchased upon exercise of this Warrant may be less than the number of Warrant Shares set forth on the face hereof. Certificates for shares of Common Stock (or a statement from the Company’s transfer agent reflecting shares of Common Stock) purchased hereunder shall be delivered to the Holder hereof within five (5) Business Days after the date on which this Warrant shall have been exercised as aforesaid. The Holder may withdraw its Notice of Exercise at any time if the Company fails to timely deliver the relevant certificates or statement to the Holder as provided in this Agreement. A Notice of Exercise shall be deemed sent on the date of delivery if delivered before 8:00 p.m. New York Time on such date, or the day following such date if delivered after 8:00 p.m. New York Time; provided that the Company is only obligated to deliver Warrant Shares against delivery of the Exercise Price from the holder hereof (other than with respect to a cashless exercise) and, if the Holder is purchasing the full amount of Warrant Shares represented by this Warrant, surrender of this Warrant (or appropriate affidavit and/or indemnity in lieu thereof).

 

  4  

 

 

2. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of issuance of a fractional share upon any exercise hereunder, the Company will either round up to nearest whole number of shares or pay the cash value of that fractional share, which cash value shall be calculated on the basis of the average closing price of the Common Stock during the five (5) Trading Days immediately preceding the date of exercise.

 

3. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder of this Warrant or in such name or names as may be directed by the Holder of this Warrant.

 

4. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant.

 

5. No Rights as Shareholder until Exercise. The Holder shall not be entitled to vote or receive dividends or be deemed the holder of Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Warrant pursuant to Section 1 hereof, the Warrant Shares so purchased hereunder shall be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised.

 

6. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company represents, warrants and covenants that (a) upon receipt by the Company of evidence and/or indemnity reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate representing the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and (b) upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate, without any charge there for. This Warrant is exchangeable at any time for an equal aggregate number of Warrants of different denominations, as requested by the holder surrendering the same, or in such denominations as may be requested by the Holder following determination of the Exercise Price. No service charge will be made for such registration or transfer, exchange or reissuance.

 

  5  

 

 

7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken, or such right may be exercised on the next succeeding day not a legal holiday.

 

8. Effect of Certain Events. If at any time while this Warrant or any portion thereof is outstanding and unexpired there shall be a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a “Sale or Merger Transaction”), the Holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 9.

 

9. Adjustments of Exercise Price and Number of Warrant Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 9.

 

a. Subdivisions, Combinations, Stock Dividends and Other Issuances. If the Company shall, at any time while this Warrant is outstanding, (i) pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, by forward stock split or otherwise, or (iii) combine outstanding Common Stock into a smaller number of shares, by reverse stock split or otherwise, then the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 9(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. The number of shares which may be purchased hereunder shall be increased proportionately to any reduction in Exercise Price pursuant to this paragraph 9(a), so that after such adjustments the aggregate Exercise Price payable hereunder for the increased number of shares shall be the same as the aggregate Exercise Price in effect just prior to such adjustments.

 

  6  

 

 

b. Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, and upon payment of the Exercise Price then in effect, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant been exercised just prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be. The Company will not merge or consolidate with or into any other corporation, or sell or otherwise transfer its property, assets and business substantially as an entirety to another corporation, unless the corporation resulting from such merger or consolidation (if not the Company), or such transferee corporation, as the case may be, shall expressly assume in writing the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company.

 

d. Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant at such time been exercised. Simultaneously with any adjustment to the Exercise Price pursuant to this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

10. Voluntary Adjustment by the Company. The Company may at its option, at any time during the term of this Warrant, reduce but not increase the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

11. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, the Company, at its expense, shall promptly mail to the Holder of this Warrant a notice setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment and setting forth the computation of such adjustment and a brief statement of the facts requiring such adjustment.

 

12. Authorized Shares. The Company covenants that during the period the Warrant is outstanding and exercisable, it will reserve and keep available from its authorized and unissued Common Stock a sufficient number of shares to provide solely for the issuance of the Warrant Shares upon the exercise of any and all purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law, regulation, or rule of any applicable market or exchange.

 

  7  

 

 

13. Compliance with Securities Laws. The Holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Warrant Shares issued to the Holder upon exercise (if not registered, for resale or otherwise, or if no exemption from registration exists) will bear substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT 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, AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF 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.

 

14. Miscellaneous.

 

a. Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this Warrant shall be construed and shall be given effect in all respects as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant will be construed and enforced in accordance with and governed by the laws of the State of New York, except for matters arising under the Act, without reference to principles of conflicts of law. Each of the parties consents to the exclusive jurisdiction of the Federal and State Courts sitting in the County of New York in the State of New York in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens or venue, to the bringing of any such proceeding in such jurisdiction.

 

b. Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Holder, each future holder of this Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

  8  

 

 

c. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing by facsimile, mail or personal delivery and shall be effective upon actual receipt of such notice. The addresses for such communications shall be to the addresses as shown on the books of the Company. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 14(c).

 

d. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

e. Specific Enforcement. The Company and the Holder acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Warrant and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either of them may be entitled by law or equity.

 

f. Counterparts/Execution. This Warrant may be executed by facsimile and in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. Execution and delivery of this Warrant by facsimile transmission (including delivery of documents in Adobe PDF format) shall constitute execution and delivery of this Warrant for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

 

[SIGNATURE PAGE TO FOLLOW]

 

  9  

 

 

IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officers thereunto duly authorized.

 

 

  Applied UV, Inc.  
         
  By:   /s/ Max Munn  
  Name: Max Munn  
  Title: President  

 

  10  

 

 

NOTICE OF EXERCISE

 

To: Applied UV, Inc.

 

(1)          The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the aggregate Exercise Price in full, together with all applicable transfer taxes, if any.

 

(2)          Payment shall take the form of (check applicable box):

 

¨ in lawful money of the United States; or

 

¨ if cashless exercise, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 1(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 1(b).

 

(3)          Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

_______________________________
(Name)

_______________________________
(Address)

 

_______________________________

 

(3)          Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

       
    (Name)  
       
       
(Date)   (Signature)  
       
       
    (Address)  
Dated:      
       
Signature      

 

  11  

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:  
  (Please Print)
   
Address:  
  (Please Print)
   
Phone Number:  
   
Email Address:  
   
Dated: _______________ ___, ______  
   
Holder’s Signature:  _______________  
   
Holder’s Address: _______________  

 

  12  

Exhibit 10.12

 

APPLIED UV, INC.

Notice of Non-Qualified Stock Option Grant

 

You (the “Optionee”) have been granted the following option (the “Option”) to purchase Common Stock of Applied UV, Inc. (the “Company”), par value $0.0001 per share (“Share”):

 

  Name of Optionee: Adam Auerbach.
     
 

Total Number of Shares

Subject to Option:

[5,000] [10,000].
     
  Type of Option: Non-Qualified Stock Options (NQSOs).
     
  Exercise Price Per Share: $5.00
     
  Effective Date of Grant: [_________].
     
  Vesting Schedule: Vests in full on then next January 1 following the date of the grant.
     
  Expiration Date: Upon the Optionee no longer being a member of the Board of Directors of the Company for any reason, any unvested options shall expire and no longer be exercisable. The options shall not be exercisable later than the tenth (10th) anniversary date of the Effective Date of Grant.

 

 

 

 

This grant is subject to all of the terms and conditions set forth in the Non-Qualified Stock Option Agreement (the “Agreement”), attached hereto as Exhibit A. This grant is made and granted as a stand-alone award and is not granted under or pursuant to the Company’s 2020 Omnibus Incentive Plan (the “Plan”). However, unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.

 

By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this Option is governed by the terms and conditions of the attached Non-Qualified Stock Option Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Non-Qualified Stock Option Agreement.

 

 

Optionee:   APPLIED UV, INC.  
       
       
By:                    By:                   
Name   Name:  
    Title:  
       

 

 

 

 

Exhibit A

 

APPLIED UV, INC.

Non-Qualified Stock Option Agreement

 

Section 1. Grant of Option.

 

(a) Option. On the terms and conditions set forth in the Notice of Non-Qualified Stock Option Grant (the “Grant Notice”) and this Non-Qualified Stock Option Agreement (the “Agreement”), the Company grants to the Optionee on the Effective Date of Grant the option (the “Option”) to purchase at the Exercise Price the number of Shares set forth in the Grant Notice.

 

(b) Plan and Defined Terms. The Option granted by this Agreement is granted as a stand-alone grant, separate and apart from, and outside of, the Plan, and shall not constitute an award granted under or pursuant to the Plan. Notwithstanding the foregoing, the terms, conditions, and definitions set forth in the Plan shall apply to the Option as though the Option had been granted under the Plan, and the Option shall be subject to such terms, conditions, and definitions, which are hereby incorporated into this Agreement by reference; provided that, for the avoidance of doubt, the Option granted by this Agreement shall not reduce and shall have no impact on the number of shares available for grant under the Plan. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of this Agreement will govern. All capitalized terms that are used in the Grant Notice or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.

 

Section 2. Right to Exercise.

 

The Option hereby granted shall be exercised by written notice to the Committee, specifying the number of Shares the Optionee desires to purchase together with provision for payment of the Exercise Price. Subject to such limitations as the Committee may impose (including prohibition of one more of the following payment methods), payment of the Exercise Price may be made by check payable to the order of the Company, for an amount in United States dollars equal to the aggregate Exercise Price of such Shares, (b) by tendering to the Company Shares having an aggregate Fair Market Value equal to such Exercise Price, (c) by broker-assisted exercise, or (d) by a combination of such methods, or (e) by a cashless exercise. The Company may require the Optionee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, as amended, the Exchange Act, applicable state or non-U.S. securities laws or any other law.

 

Section 3. Term and Expiration.

 

(a) Basic Term. Subject to earlier termination pursuant to the terms here, the Option shall expire on the expiration date set forth in the Grant Notice.

 

(b) Termination of Employment or Service. If the Optionee’s employment or service as a Director or Consultant, as the case may be, is terminated, the Option shall expire on the earliest of the following occasions:

 

(i) The expiration date set forth in the Grant Notice;

 

 

 

 

(ii) Three months following the termination of the Optionee’s employment or service for any reason other than Cause, death, or Disability;

 

(iii) One year following the termination of the Optionee’s employment or service due to death or Disability; or

 

(iv) The date of termination of the Optionee’s employment or service for Cause.

 

The Optionee may exercise all or part of this Option at any time before its expiration under the preceding sentence, but, subject to the following sentence, only to the extent that the Option had become vested before the Optionee’s employment or service terminated. When the Optionee’s employment or service terminates, this Option shall expire immediately with respect to the number of Shares for which the Option is not yet vested. If the Optionee dies after termination of employment or service, but before the expiration of the Option, all or part of this Option may be exercised (prior to expiration) by the personal representative of the Optionee or by any person who has acquired this Option directly from the Optionee by will, bequest or inheritance, but only to the extent that the Option was vested and exercisable upon termination of the Optionee’s employment or service.

 

(c) Definition of “Cause.” The term “Cause” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Cause,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Cause” shall mean (i) the willful engaging by the Optionee in misconduct that is demonstrably injurious to the Company or any Parent or Subsidiary (monetarily or otherwise), (ii) the Optionee’s conviction of, or pleading guilty or nolo contendere to, a felony involving moral turpitude, or (iii) the Optionee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Optionee is subject.

 

(d) Definition of “Disability.” The term “Disability” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Disability,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Disability” shall mean the Optionee’s entitlement to long-term disability benefits pursuant to the long-term disability plan maintained by the Company or in which the Company’s employees participate.

 

Section 4. Transferability of Option.

 

The Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the Option shall be exercisable during the Optionee’s lifetime only by the Optionee or on his or her behalf by the Optionee’s guardian or legal representative.

 

Section 5. Investment Intent; Restrictions on Transfer.

 

Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon such exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions hereof) shall furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the foregoing investment representation and agreement and shall not be required to furnish the Company with the foregoing written statement.

 

 

 

 

Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

 

Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

 

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company’s transfer agent.

 

Section 6. Miscellaneous Provisions.

 

(a) Acknowledgements.

 

(i) The Optionee hereby acknowledges that he or she has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their respective terms and conditions. The Optionee acknowledges that there may be tax consequences upon the exercise or transfer of the Option and that the Optionee should consult an independent tax advisor prior to any exercise of the Option.

 

(b) Tax Withholding. Pursuant to Article 20 of the Plan, the Company shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy federal, state and local tax purposes, as applicable, including payroll taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

(c) Notice Concerning Disqualifying Dispositions. If the Option is an Incentive Stock Option, the Optionee shall notify the Committee of any disposition of Shares issued pursuant to the exercise of the Option if the disposition constitutes a “disqualifying disposition” within the meaning of Sections 421 and 422 of the Code (or any successor provision of the Code then in effect relating to disqualifying dispositions). Such notice shall be provided by the Optionee to the Committee in writing within 10 days of any such disqualifying disposition.

 

 

 

 

(d) Rights as a Stockholder. Neither the Optionee nor the Optionee’s transferee or representative shall have any rights as a stockholder with respect to any Shares subject to this Option until the Option has been exercised and Share certificates have been issued to the Optionee, transferee or representative, as the case may be.

 

(e) Ratification of Actions. By accepting this Agreement, the Optionee and each person claiming under or through the Optionee shall be conclusively deemed to have indicated the Optionee’s acceptance and ratification of, and consent to, any action taken under this Agreement and Grant Notice by the Company, the Board, or the Committee.

 

(f) Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided in writing to the Company.

 

(g) Choice of Law. This Agreement and the Grant Notice shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause this Agreement or the Grant Notice to be governed by or construed in accordance with the substantive law of another jurisdiction.

 

(h) Arbitration. Any dispute or claim arising out of or relating to this Agreement or the Grant Notice shall be settled by binding arbitration before a single arbitrator in New York and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of this Agreement and the Grant Notice, provided that all substantive questions of law shall be determined in accordance with the state and Federal laws applicable in the state in which the Company is incorporated, without regard to internal principles relating to conflict of laws.

 

(i) Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to Article 4.3 of the Plan may be made without such written agreement.

 

(j) Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.

 

(k) References to Plan. All references to the Plan shall be deemed references to the Plan as may be amended from time to time.

 

(l) Section 409A Compliance. To the extent applicable, it is intended that this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Agreement and the Grant Notice shall be interpreted accordingly.

 

 

 

Exhibit 10.13

 

CFO CONSULTING AGREEMENT

 

CFO CONSULTING AGREEMENT dated as of July 15, 2020 (this “Agreement”), between Applied UV, Inc., a Delaware Corporation, (the “Company”), and Joseph Himy (the “Consultant”).

 

WHEREAS, the Board of Directors of the Company desires to engage Consultant to provide consulting services, upon the terms and subject to the conditions hereinafter set forth; and

 

WHEREAS, the Consultant has agreed to provide such consulting services, upon the terms and subject to the conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

 

1. Independent Consultant. The Company, through the action of its Board of Directors (the “Board”), hereby engages the Consultant, and the Consultant will serve the Company, as a consultant. During the term of this Agreement, the Consultant will serve as the non-employee chief financial officer (“CFO”) of the Company on a part-time basis. The Company confirms that the Consultant has been duly appointed as the CFO of the Company and will remain as an executive officer of the Company during the term of this Agreement.

 

2. Duties, Term, and Compensation. The Consultant’s duties, term of engagement, compensation and provisions for payment thereof are detailed in the attached Exhibit A, which may be amended in writing from time to time by the Consultant and agreed to by the Company, and which collectively are hereby incorporated by reference.

 

3. Expenses. During the term of this Agreement, the Consultant shall bill and the Company shall reimburse the Consultant for all reasonable and approved out-of-pocket expenses which are incurred in connection with the performance of the duties hereunder.

 

4. Confidentiality. The Consultant acknowledges that during the engagement he will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the Company and/or used by the Company in connection with the operation of its business including, without limitation, the Company’s business and product processes, methods, customer lists, accounts and procedures. The Consultant agrees that he will not disclose any of the aforesaid, directly or indirectly, or use any of them in any manner, either during the term of this Agreement or at any time thereafter, except as required in the course of this engagement with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork/creative, notebooks, and similar items relating to the business of the Company, whether prepared by the Consultant or otherwise coming into his possession, shall remain the exclusive property of the Company. The Consultant shall not retain any copies of the foregoing without the Company’s prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, the Consultant shall immediately deliver to the Company all such files, records, documents, specifications, information, and other items in his possession or under his control.

 

5. Conflicts of Interest; Non-hire Provision. The Consultant represents that he is free to enter into this Agreement, and that this engagement does not violate the terms of any agreement between the Consultant and any third party. Further, the Consultant, in rendering his duties shall not utilize any invention, discovery, development, improvement, innovation, or trade secret in which he does not have a proprietary interest. During the term of this agreement, the Consultant shall devote as much of his productive time, energy and abilities to the performance of his duties hereunder as is necessary to perform the required duties in a timely and productive manner. The Company acknowledges that this Agreement only obligates the Consultant to serve a limited percent of his working time with the Company, that the Consultant has numerous other commitments.

 

1 | Page

 

 

Applied UV, Inc. and Joseph Himy Consulting Agreement – July 15_, 2020

 

6. Indemnification and D&O Insurance: The Company agrees to defend, indemnify (including, without limitation, by providing for the advancement of expenses and reasonable attorneys’ fees) and hold harmless the Consultant for any and all acts taken or omitted to be taken by the Consultant hereunder (except for bad faith, gross negligence or willful misconduct) as if the Consultant was an officer of the Company as provided in the charter and bylaws of the Company in accordance with the same terms, conditions, limitations, standards, duties, rights and obligations as an officer. The provisions of this Section shall survive any termination of this Agreement. In addition, until the five (5) year anniversary of the termination or expiration of this Agreement, the Company shall obtain as soon as possible, but no later than three (3) months from the execution of this Agreement, and maintain in effect D&O liability insurance coverage for the Consultant (as an insured person) with respect to his service under this Agreement, on the same or more favorable terms and conditions (from the perspective of the Consultant) as under the liability insurance policies of the Company in effect as of the date of this Agreement.

 

7. Merger. This Agreement shall automatically terminate upon the merger or consolidation of the Company into or with any other entity.

 

8. Termination. Either party may terminate this Agreement at any time by thirty (30) days written notice by either party, but shall automatically terminate after thirty (30) days if for any reason the Company has terminated its Pre-Audit Accounting Service Agreement.

 

9. Independent Consultant. This Agreement shall not render the Consultant an employee, partner, agent of, or joint venturer with the Company for any purpose. The Consultant is and will remain an independent Consultant in his relationship to the Company. The Company shall not be responsible for withholding taxes with respect to the Consultant’s compensation hereunder. The Consultant shall have no claim against the Company hereunder or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind.

 

10. Successors and Assigns. All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, if any, successors, and assigns.

 

11. Choice of Law. The laws of the state of New York shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto.

 

12. Arbitration. Any controversies arising out of the terms of this Agreement or its interpretation shall be settled in New York, New York in accordance with the rules of the American Arbitration Association, and the judgment upon award may be entered in any court having jurisdiction thereof.

 

13. Headings. Section headings are not to be considered a part of this Agreement and are not intended to be a full and accurate description of the contents hereof.

 

14. Waiver. Waiver by one party hereto of breach of any provision of this Agreement by the other shall not operate or be construed as a continuing waiver.

 

15. Assignment. The Consultant shall not assign any of his rights under this Agreement, or delegate the performance of any of his duties hereunder, without the prior written consent of the Company.

 

16. Notices. Any and all notices, demands, or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly given or made to another party if personally served, or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice or demand is served personally, notice shall be deemed constructively made at the time of such personal service. If such notice, demand or other communication is given by mail, such notice shall be conclusively deemed given five days after deposit thereof in the United States mail addressed to the party to whom such notice, demand or other communication is to be given as follows:

 

If to the Consultant: Joseph Himy
  46 Main Street – Suite 119
  Monsey NY 10952
  Jhimy@cfosquad.com

 

 

 

Applied UV, Inc. and Joseph Himy Consulting Agreement – July 15_, 2020

 

With a courtesy copy to: 

 

If to the Company: Max Munn
  m.munn@sterilumen.com>

 

With a courtesy copy to: Jeff Wofford
  jwofford@cmfllp.com

 

Any party hereto may change its address for purposes of this paragraph by written notice given in the manner provided above.

 

17. Modification or Amendment. No amendment, change or modification of this Agreement shall be valid unless in writing signed by the parties hereto.

 

18. Entire Understanding. This document and any exhibit attached constitute the entire understanding and agreement of the parties, and any and all prior agreements, understandings, and representations are hereby terminated and canceled in their entirety and are of no further force and effect.

 

19. Unenforceability of Provisions. If any provision of this Agreement, or any portion thereof, is held to be invalid and unenforceable, then the remainder of this Agreement shall nevertheless remain in full force and effect.

 

IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first written above. The parties hereto agree that facsimile signatures shall be as effective as if originals.

 

Applied UV, Inc.   Joseph N. Himy
     
By:     By:  
  Max Munn, President    
Date:     Date: 7/15/2020

 

 

 

Applied UV, Inc. and Joseph Himy Consulting Agreement – July 15_, 2020 

 

SCHEDULE A

 

DUTIES, TERM, AND COMPENSATION

 

DUTIES: The Consultant will perform all duties typically required of a Chief Financial Officer, including, but not limited to accounting oversight for the preparation of quarterly and annual financial statements to be filed with the SEC, filings required on Forms 8-K, 10-Q and 10-K and such other filings as may be required that are prepared under by the Company’s public accountants with respect to quarterly reviews and annual audits.

 

He will report directly to _Keyoumars Saeed________________________, CEO and to any other party designated by Joel Kanter____________________ in connection with the performance of the duties under this Agreement and shall fulfill any other duties reasonably requested by the Company and agreed to by the Consultant.

 

The Company will accept and maintain all responsibility for its day-to-day accounting and bookkeeping functions an initial preparation of its financial statements as provided under its Pre-Audit Accounting Service Agreement and the Company and its subsidiaries and further warrants that it is in full compliance with any and all its corporate income taxes and/or payroll tax requirement and/or filings and will continue to provide for and will timely make any and all future tax payments required by the Company and/or its subsidiaries.

 

TERM: This engagement shall commence upon execution of this Agreement and shall continue in full force and effect for a period of one (1) year. The agreement may only be extended thereafter by mutual agreement, unless terminated earlier by operation of and in accordance with this Agreement. This Agreement will automatically terminate if for any reason the Pre-Audit Accounting Service Agreement is terminated, or expires without renewal and/or upon termination, lapse or failure to obtain and/or maintain the Company’s D&O insurance policy. This agreement may be cancelled by either party with thirty days (30) written notice.

 

COMPENSATION:

 

As compensation for the services rendered pursuant to this Agreement, Company shall pay Consultant a minimum of Two Thousand Five Hundred dollars per month ($2,500) dollars upon signing (not to be prorated) and for each every per month for up to ten hours _(10) hours per quarter thereafter payable on the first business day of each month provided the Company maintains the a qualified accounting department to prepare quarterly financial statements. Any additional hours in excess of ten (10)  hours during any single quarter, if any, shall be billed separately by the Consultant if incurred during any other time of day or week at the rate of $200.00/hour. All payments will be made out to CFO Squad LLC.

 

 

 

Exhibit 21.1

 

Subsidiaries of the Registrant

 

Listed below are subsidiaries of Applied UV, Inc. as of May 13, 2020.

 

Subsidiary Name State/Jurisdiction of Incorporation or Formation
   
Sterilumen, Inc.

New York

 

Munn Works, LLC New York

 

 

 

Exhibit 23.1

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

We consent to the use, in the registration statement on Form S-1, amendment no. 1, of Applied UV, Inc. and Subsidiaries, of our report dated June 23, 2020 on our audit of the consolidated financial statements of Applied UV, Inc. and Subsidiaries as of December 31, 2019 and 2018, and the related consolidated statements of income, changes in stockholders’ equity (deficit) and cash flows for the years ended December 31, 2019 and 2018, and the reference to us under the caption “Experts.”

 

/s/ Adeptus Partners, LLC

 

Ocean, New Jersey

July 14, 2020

 

Offices:

 

Maryland

New York City

Long Island

New Jersey

 

 

 

 Exhibit 23.3

 

  

July 15, 2020

 

We consent to the inclusion of our Report dated September 8, 2017 to Max Munn, Report dated May 8, 2020 to SteriLumen, Inc. Report dated June 8, 2020 to SteriLumen, Inc., letter dated May 11, 2020 and Report dated June 30, 2020 in the registration statement on Form S-1 of Applied UV, Inc. and the quotation or summarization of portions of such reports and letters in such registration statement.

 

Sincerely,

 

/s/ Matthew Hardwick

 

Matthew Hardwick, PhD

President/CEO

ResInnova Laboratories

8807 Colesville Rd

3rd Floor

Silver Spring, MD 20910 

 

 

 

 

 

Exhibit 99.1

 

 

 

December 19, 2019

 

SteriLumen, Inc

℅ Bryce Whited

VP Medical Devices & Combination Products

The Weinberg Group

1129 20th Street, NW, Suite 600

Washington, DC 20036

 

Re: C190089

Product Name: Disinfecting Mirror

Dated: December 12, 2019

Received: December 12, 2019

 

Dear Bryce Whited:

 

We have reviewed the above referenced request for information, submitted in accordance with Section 513(g) of the Federal Food, Drug, and Cosmetic Act (Act), regarding the regulatory requirements applicable to the Disinfecting Mirror. As described in your submission, we believe that your product is not a "device" as that term is defined in Section 201(h) of the Act. Therefore, you are not required to comply with the requirements of the Act. Please note, if you later revise your indications to add medical claims, you may need a premarket notification [510(k)] submission.

 

For comprehensive regulatory information about medical devices and radiation-emitting products, please see Device Advice (https://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/) and CDRH Learn (http://www.fda.gov/Training/CDRHLearn). Additionally, you may contact the Division of Industry and Consumer Education (DICE) to ask a question about a specific regulatory topic. See the DICE website (http://www.fda.gov/DICE) for more information or contact DICE by email (DICE@fda.hhs.gov) or phone (1-800-638-2041 or 301-796-7100).

 

 

 

 

 

 

U.S. Food & Drug Administration 

10903 New Hampshire Avenue

Silver Spring, MD 20993

www.fda.gov

 

 

 

 

C190089 - Bryce Whited Page  2

 

 

If you have any questions regarding this letter, please contact Elizabeth Claverie, M.S. , Assistant Director, THT4B2, at 301-796-6298.

 

 

 

Sincerely,

  /s/ David Krause
for Binita Ashar, M.D., M.B.A., F.A.C.S.
  Director
  OHT4: Office of Surgical
  and Infection Control Device
  Office of Product Evaluation and Quality
  Center for Devices and Radiological Health

  

 

 

 

Exhibit 99.2

 

 

  

September 8, 2017

 

To: Max Munn Max Munn, LLC

50 N. Macquesten Parkway

Mount Vernon, NY 10550

 

From: Matthew Hardwick, PhD

ResInnova Laboratories

8807 Colesville Rd, 3rd Floor

Silver Spring, MD 20910

 

Dear Mr. Munn,

 

Enclosed you will find the summary analysis report for the recent antimicrobial testing of two UV-emitting mirror prototypes. The wall-mounted mirrors were tested for their ability to kill three healthcare-relevant bacteria: Clostridium difficile spores (C diff), Escherichia coli (E coli), and methicillin-resistant Staphylococcus aureus (MRSA). Testing occurred over several time points and samples were placed in various locations on a vanity/sink.

 

Within this report, you will find the graphs summarizing the data. A great deal of data was generated during the course of this project that did not end up in this report. All data is available for your review should you request it. The conclusions drawn from this project are listed on the last page of this report. Please notify me if you wish additional testing of this material and/or further analysis of the results contained within this report.

 

Sincerely,


/s/ Matthew Hardwick, PhD

 

 

Matthew Hardwick, PhD

President and CEO

 

 

 

 

 

 

 

 

Exhibit A

 

  

Final Report

Purpose

We performed antimicrobial testing of two UV-emitting mirror prototypes. The wall-mounted mirrors were tested for their ability to kill three healthcare-relevant bacteria: Clostridium difficile spores (C diff), Escherichia coli (E coli), and methicillin-resistant Staphylococcus aureus (MRSA). Testing occurred over several time points and samples were placed in various locations on a vanity/sink. The goals of this project were:

1. Determine the antimicrobial efficacy of the mounted UV LEDs against C diff spores, E coli, and MRSA;
2. Determine the optimal operating conditions to kill 4 logs (99.99%) of each bacterium.

 

Materials and Methods

UV-emitting Mirrors (provided by Max Munn)

Prototype 1 with a UV LED strip mounted parallel to the bottom of the mirror and recessed from the bottom of the mirror. A UV LED strip was also mounted inside the mirror.
Prototype 2 with a UV LED strip mounted flush with the bottom of the mirror at an approximate 45° angle facing away from the mirror.

 

Bacteria

Clostridium difficile (C diff) spores (ATCC BAA-1870)
Escherichia coli (E coli) (ATCC 25922)
Methicillin-resistant Staphylococcus aureus (MRSA) (ATCC 33591)

 

Bacterial Sample Preparation:

C diff: Approximately 1 x 106 spores were plated onto magnetic steel discs and allowed to dry.
E coli and MRSA: A thin layer of tryptic soy agar was plated onto magnetic steel discs and allowed to dry. Then, approximately 1 x 106 colony forming units (CFUs) were layered on top of the agar.
o The agar layer was necessary as plating E coli and MRSA directly onto magnetic steel discs resulted in poor bacterial recovery.

 

Sample placement:

Samples were placed on several locations on a vanity/sink. See Figure 1 for placement and overall setup.

 

Bacterial Recovery and Evaluation:

At the indicated time points, discs were recovered into a labeled 15ml tube containing 10ml phosphate-buffered saline (PBS) + 0.1% Trion X-100 and vortexed for 1 minute. 0.1ml of the recovery solution was then transferred either onto agar plates (see below) or into dilution tubes for further dilution. Agar plates were then incubated for 24 to 48 hours. Log reductions were determined by comparing colony numbers from test samples to control samples (samples not exposed to UV).
o C diff: brain heart infusion agar with incubation in an anaerobic chamber at 37°C.
o E coli and MRSA: tryptic soy agar with incubation in a humidified chamber at 37°C.

 

 

 

 

 

 

 

 

Exhibit A

 

 

Figure 1: Testing Setup and Sample Placement

 

 

 

Results

We tested the bacteria killing ability of two Max Munn UV-emitting mirror prototypes. The first prototype we received demonstrated robust reduction of spore viability on backsplash surfaces. The compiled results after testing of both prototypes are presented in Figure 2. After one hour exposure, reductions approached 3 logs (99.9%) and surpassed 4 logs (99.99%) after 2 hours (Figure 2, Backsplash). This first prototype, however, had several deficiencies as it failed to reduced spore viability on faucet handles and on surfaces greater than 7 inches from the light source. It was decided by Max Munn to create a new prototype based on these results and we discontinued testing on the first prototype.

 

The second prototype increased the reach of the UV achieving a 2.94 log reduction of C diff spores on the sink side edges (the rim of the sink approximately 14 inches away from the light source) after 2 hours. The second prototype also improved UV exposure to faucet handles achieving greater than 4 log spore reductions were seen after just 1 hour and 3.5 log reductions were seen at the sink drain after 2 hours of exposure. This prototype also showed a 3.56 log reduction in spores at the sink drain (no reductions were seen in the first prototype). No reductions were seen in the sink at points immediately adjacent to the sink wall proximal to the UV source or on the distal sink edge (data not shown). This prototype also failed to deliver adequate UV to the backsplash (data not shown).

 

We were also able to test the ability of the second prototype to kill both E coli and MRSA. Testing against E coli demonstrated greater than 4 log reductions for both faucet handles and the drain after just 30 min (Figure 3). Regardless of how long we exposed the sinks to UV, the mirror failed to produce greater than a 1.9 log reduction on the edges of the sink (approximately 14 inches from the UV source). For the faucet handles and sink drain, MRSA results were similar to E coli, with greater than 4 log reductions seen within an hour of exposure to UV (Figure 4). On the sink side edges, however, MRSA demonstrated a greater than 4 log reduction after an hour of UV exposure. For neither E coli or MRSA were bacterial reductions seen in the sink at points immediately adjacent to the sink wall proximal to the UV source or on the distal sink edge (data not shown).

 

 

 

 

 

 

 

Exhibit A

 

Figure 2: UV Reduction of C diff Spore Recovery on Vanity/Sink Surfaces

 

Figure 3: UV Reduction of E coli Recovery on Vanity/Sink Surfaces

 

 

 

 

 

 

Exhibit A

  

Figure 4: UV Reduction of MRSA Recovery on Vanity/Sink Surfaces

 

 

Discussion

There were several anomalous results during testing. Several data points seen in Figures 2 and 3 show that longer UV exposures do not improve bacterial reduction outcomes. This phenomenon is particularly true at the drain and sink edges for all three organisms. It should be noted that a major failing of all UV technologies is shadowing. For our simulated sink testing (Figure 1) we used a rotating faucet. It is possible that, for the drain test points, the faucet may have been moved relative to the position of our test sample resulting in a shadow effect that reduced the UV exposure at that test point. The sink we used for testing has beveled edges. Any shifting in the position of the sink edge test samples may have resulted in a dramatic effect on the UV exposure to the sample (another example of shadowing). Shadowing, however, does dramatically limit the utility of this technology on surfaces immediately adjacent to the sink wall proximal to the UV source and to surfaces greater than 22 inches from the UV source (data not shown). Regardless, there is ample evidence that significant bacterial reductions are achieved at critical areas such as the backsplash, faucet handles, drain and sink edges.

 

 

 

 

 

 

 

 

Exhibit A

 

 

Conclusions

The first prototype demonstrated dramatic C diff spore reductions on backsplash samples:
o Backsplash
> 4 logs after 2 hour exposure.
The second prototype demonstrated dramatic reductions with C diff spores, E coli, and MRSA on several critical sink areas:
o Faucet Handles
C diff spores: > 4 logs after 1 hour exposure;
E coli: > 4 logs after 30 minute exposure;
MRSA: > 4 logs after 30 minute exposure.
o Drain
C diff spores: > 3 logs after 2 hour exposure;
E coli: > 4 logs after 30 minute exposure;
MRSA: > 4 logs after 30 minute exposure.
o Side Edges
C diff spores: almost 3 logs after 2 hour exposure;
E coli: almost 2 logs after 1 hour exposure;
MRSA: almost 2 logs after 1 hour exposure.
A 2 hour non-stop operation of the UV-emitting mirror should have a dramatic antimicrobial effect on the bathroom vanity/sink area.
Future prototypes that provide at least 2 UV LED units (1 placed as on prototype 1 and the other placed as on prototype 2) should provide adequate coverage of most areas of the bathroom vanity and sink.
o Exceptions include the sink wall proximal to the UV LED units and areas greater than 22 inches distal to the UV LED units.
More testing is needed to conclusively determine the effect of the UV-emitting mirrors on organisms other than C diff, E coli and MRSA.
o However, it may be reasonably assumed that the mirrors should be effective against other Gram-negative bacteria, such as Legionella pneumophila, and Gram-positive bacteria, such as Streptococcus species.

 

 

 

 

 

 

 


 

 

 

 

Exhibit 99.3

 

 

  

May 8, 2020

 

To: Max Munn

SteriLumen

50 N. Macquesten Parkway

Mount Vernon, NY 10550

 

From: Matthew Hardwick, PhD

ResInnova Laboratories

8807 Colesville Rd, 3rd Floor

Silver Spring, MD 20910

 

 

Dear Mr. Munn,

 

Enclosed you will find the summary analysis report for the recent antimicrobial testing of two UV-emitting mirror prototypes. The wall-mounted mirrors were tested for their ability to kill three healthcare-relevant bacteria: Clostridium difficile spores (C diff), Escherichia coli (E coli), and methicillin-resistant Staphylococcus aureus (MRSA). Testing occurred over several time points and samples were placed in various locations on a vanity/sink.

 

Within this report, you will find the graphs summarizing the data. A great deal of data was generated during the course of this project that did not end up in this report. All data is available for your review should you request it. The conclusions drawn from this project are listed on the last page of this report. Please notify me if you wish additional testing of this material and/or further analysis of the results contained within this report.

 

Sincerely,

 

 

/s/ Matthew Hardwick, PhD

 

 

Matthew Hardwick, PhD

President and CEO

 

 

 

 

 

 

 

 

 

 

 

Final Report

 

Purpose

 

We performed antimicrobial testing of three UV-emitting mirrors. The wall-mounted mirrors were tested for their ability to kill three healthcare-relevant bacteria: Clostridium difficile spores (C diff), Escherichia coli (E coli), and methicillin-resistant Staphylococcus aureus (MRSA). Testing occurred over several time points and samples were placed in various locations on a vanity/sink. The goals of this project were:

1. Determine the antimicrobial efficacy of the mounted UV LEDs against C diff spores, E coli, and MRSA;

2. Determine the optimal operating conditions to kill 4 logs (99.99%) of each bacterium.

 

Materials and Methods

UV-emitting Mirrors (provided by Max Munn)

Prototype 1 with a UV LED strip mounted parallel to the bottom of the mirror and recessed from the bottom of the mirror. A UV LED strip was also mounted inside the mirror.
Prototype 2 with a UV LED strip mounted flush with the bottom of the mirror at an approximate 45° angle facing away from the mirror.

Production unit with two UV LED strips mounted as described in Prototypes 1 and 2.

 

Bacteria

Clostridium difficile (C diff) spores (ATCC BAA-1870)

Escherichia coli (E coli) (ATCC 25922)

Methicillin-resistant Staphylococcus aureus (MRSA) (ATCC 33591)

 

Bacterial Sample Preparation:

C diff: Approximately 1 x 106 spores were plated onto magnetic steel discs and allowed to dry.

E coli and MRSA: A thin layer of tryptic soy agar was plated onto magnetic steel discs and allowed to dry. Then, approximately 1 x 106 colony forming units (CFUs) were layered on top of the agar.

o The agar layer was necessary as plating E coli and MRSA directly onto magnetic steel discs resulted in poor bacterial recovery.

 

Sample placement:

Samples were placed on several locations on a vanity/sink. See Figure 1 for placement and overall setup.

 

Bacterial Recovery and Evaluation:

At the indicated time points, discs were recovered into a labeled 15ml tube containing 10ml phosphate-buffered saline (PBS) + 0.1% Trion X-100 and vortexed for 1 minute. 0.1ml of the recovery solution was then transferred either onto agar plates (see below) or into dilution tubes for further dilution. Agar plates were then incubated for 24 to 48 hours. Log reductions were determined by comparing colony numbers from test samples to control samples (samples not exposed to UV).

o C diff: brain heart infusion agar with incubation in an anaerobic chamber at 37°C.
o E coli and MRSA: tryptic soy agar with incubation in a humidified chamber at 37°C.

 

 

 

  

 

 

 

 

 

Figure 1: Testing Setup and Sample Placement

 

 

Results

 

We tested the bacteria killing ability of three Max Munn UV-emitting mirrors. The first prototype we received demonstrated robust reduction of spore viability on backsplash surfaces. The compiled results after testing of both prototypes are presented in Figure 2. After one hour exposure, reductions approached 3 logs (99.9%) and surpassed 4 logs (99.99%) after 2 hours (Figure 2, Backsplash). This first prototype, however, had several deficiencies as it failed to reduced spore viability on faucet handles and on surfaces greater than 7 inches from the light source. It was decided by Max Munn to create a new prototype based on these results and we discontinued testing on the first prototype.

 

The second prototype increased the reach of the UV achieving a 2.94 log reduction of C diff spores on the sink side edges (the rim of the sink approximately 14 inches away from the light source) after 2 hours. The second prototype also improved UV exposure to faucet handles achieving greater than 4 log spore reductions were seen after just 1 hour and 3.5 log reductions were seen at the sink drain after 2 hours of exposure. This prototype also showed a 3.56 log reduction in spores at the sink drain (no reductions were seen in the first prototype). No reductions were seen in the sink at points immediately adjacent to the sink wall proximal to the UV source or on the distal sink edge (data not shown). This prototype also failed to deliver adequate UV to the backsplash (data not shown).

 

We were also able to test the ability of the second prototype to kill both E coli and MRSA. Testing against E coli demonstrated greater than 4 log reductions for both faucet handles and the drain after just 30 min (Figure 3). Regardless of how long we exposed the sinks to UV, the mirror failed to produce greater than a 1.9 log reduction on the edges of the sink (approximately 14 inches from the UV source). For the faucet handles and sink drain, MRSA results were similar to E coli, with greater than 4 log reductions seen within an hour of exposure to UV (Figure 4). On the sink side edges, however, MRSA demonstrated a greater than 4 log reduction after an hour of UV exposure. For neither E coli or MRSA were bacterial reductions seen in the sink at points immediately adjacent to the sink wall proximal to the UV source or on the distal sink edge (data not shown).

 

We tested the bacteria killing ability of the production unit against MRSA. After 2 hours of exposure, a greater than 4 log reduction was demonstrated on the the drain. A greater than 6 log reduction was demonstrated on the faucet handles, the edges of the sink, as well as the backsplash.

 

 

 

 

 

 

 

 

 

Figure 2: UV Reduction of C diff Spore Recovery on Vanity/Sink Surfaces

 

 

Figure 3: UV Reduction of E coli Recovery on Vanity/Sink Surfaces

   

 

 

 

Figure 4: UV Reduction of MRSA Recovery on Vanity/Sink Surfaces

 

 

Discussion

 

There were several anomalous results during testing. Several data points seen in Figures 2 and 3 show that longer UV exposures do not improve bacterial reduction outcomes. This phenomenon is particularly true at the drain and sink edges for all three organisms. It should be noted that a major failing of all UV technologies is shadowing. For our simulated sink testing (Figure 1) we used a rotating faucet. It is possible that, for the drain test points, the faucet may have been moved relative to the position of our test sample resulting in a shadow effect that reduced the UV exposure at that test point. The sink we used for testing has beveled edges. Any shifting in the position of the sink edge test samples may have resulted in a dramatic effect on the UV exposure to the sample (another example of shadowing). Shadowing, however, does dramatically limit the utility of this technology on surfaces immediately adjacent to the sink wall proximal to the UV source and to surfaces greater than 22 inches from the UV source (data not shown). Regardless, there is ample evidence that significant bacterial reductions are achieved at critical areas such as the backsplash, faucet handles, drain and sink edges.

 

 

 

 

 

 

Conclusions

The first prototype demonstrated dramatic C diff spore reductions on backsplash samples:
o Backsplash
> 4 logs after 2 hour exposure.

 

The second prototype demonstrated dramatic reductions with C diff spores, E coli, and MRSA on several critical sink areas:
o Faucet Handles
C diff spores: > 4 logs after 1 hour exposure;
E coli: > 4 logs after 30 minute exposure;
MRSA: > 4 logs after 30 minute exposure.
o Drain
C diff spores: > 3 logs after 2 hour exposure;
E coli: > 4 logs after 30 minute exposure;
MRSA: > 4 logs after 30 minute exposure.
o Side Edges
C diff spores: almost 3 logs after 2 hour exposure;
E coli: almost 2 logs after 1 hour exposure;
MRSA: almost 2 logs after 1 hour exposure.
The production model demonstrated demonstrated dramatic reductions with MRSA on several critical sink areas
o Faucet Handles

MRSA > 6 logs afer 2 hour exposure
o Drain

MRSA > 4 logs after 2 hour exposure
o Side Edges
MRSA > 6 logs after 2 hour exposure
o Backsplash
MRSA > 6 logs after 2 hour exposure

 

A 2 hour non-stop operation of the UV-emitting mirror has shown a dramatic antimicrobial effect on the bathroom vanity/sink area.
Future prototypes that provide at least 2 UV LED units (1 placed as on prototype 1 and the other placed as on prototype 2) should provide adequate coverage of most areas of the bathroom vanity and sink.

o Exceptions include the sink wall proximal to the UV LED units and areas greater than 22 inches distal to the UV LED units.

More testing is needed to conclusively determine the effect of the UV-emitting mirrors on organisms other than C diff, E coli and MRSA.

o However, it may be reasonably assumed that the mirrors should be effective against other Gram-negative bacteria, such as Legionella pneumophila, and Gram-positive bacteria, such as Streptococcus species.

 

 

 

 

 

 

Exhibit 99.4

 

 

June 8, 2020

 

To: Max Munn

SteriLumen

50 N. Macquesten Parkway

Mount Vernon, NY 10550

 

From: Matthew Hardwick, PhD

ResInnova Laboratories

8807 Colesville Rd, 3rd Floor

Silver Spring, MD 20910

 

 

Dear Mr. Munn,

 

The Sterilumen mirror and drain units are estimated to have sufficient ultraviolet light (UV) intensity for a significant virus kill. Over the course of 2 hours, it is estimated that the mirror unit has a fluence of approximately 300 mJ/cm2. The drain unit has an estimated fluence of 36 mJ/cm2 after a 15 min exposure. Enveloped viruses, such as human coronavirus SARS CoV-2 (the virus that causes COVID19) and H1N1 influenza A, require approximately 4 mJ/cm2 for > 4-log kill1. It is anticipated that both units generate enough UV fluence in order to kill human coronaviruses.

 

Our laboratory tested both the mirror and drain units against H1N1 human influenza A virus. The units demonstrated a greater than 2.91-log (mirror) and a 4.21-log (drain) kill after 2 hours and 15 min, respectively. Please find the corresponding report in the following pages.

 

Testing against human coronavirus 229E, another enveloped RNA virus and a common surrogate for SARS CoV-2, has begun and results are anticipated in the next few weeks.

 

Sincerely,

 

/s/ Matthew Hardwick

 

Matthew Hardwick, PhD

President/CEO

ResInnova Laboratories

 

 

1Darnell, et al. Journal of Virological Methods (2004) 121:85-91

 

 

 

 

2

June 8, 2020

 

Antiviral Evaluation

 

Test Method Details

Test Method Modified ISO 18184
Test Organism H1N1 human influenza A virus
Test Solution Eagles Modified Medium with 2% Fetal Bovine Serum
Test Disks 20mm diameter magnetic stainless steel disk
Inoculum Applied to Test Disk 0.010 mL applied to each disk and spread to within 1mm of edges, then dried at room temperature
Recovery Solution Modified SDLP Buffer
Measuring Method of Number of Viable Viral Particles Dilution Plate Method onto MDCK cells, viral particles were detected by. Presence of viral particles (foci) were determined using an anti-XXX monoclonal antibody. Foci were then counted giving Foci Forming Units (FFU).

 

Results

Modified ASTM E2197: Standard Quantitative Disk Carrier Test Method
Number of Replicate Experiments 1
Average Concentration of Inoculum (FFU/mL) 3.55E+04 = 4.55 log
Average Control Recovery (FFU/mL) 3.72E+04 = 4.56 log

 

Location Average Virus
Recovered (FFU/disk)
Average
Log Recovery
Average
Log Reduction (vs
Control)
Average Percent
Reduction (vs
Control)
Sink Backsplash 5 0.70 4.06 >99.99%
Sink Edge 72.5 1.86 2.91 99.81%
Sink Drain 135 2.13 3.00 99.90%
Drain Pipe 1 2.5 0.40 4.21 >99.99%

 

 

 

 

 

 

Exhibit 99.5

 

 

 

 

June 30, 2020

 

To: Max Munn
  SteriLumen 
  50 N. Macquesten Parkway
  Mount Vernon, NY 10550

 

From: Matthew Hardwick, PhD
  ResInnova Laboratories
  8807 Colesville Rd, 3rd Floor
  Silver Spring, MD 20910

 

Dear Mr. Munn,

 

Our laboratory tested both the mirror and drain units against OC43 human coronavirus. The mirror unit demonstrated a 4.56-log kill after a 2 hour exposure and the drain unit demonstrated a 1.56-log kill after a 15 min exposure. Please find the corresponding report in the following pages. OC43 is a common surrogate for SARS CoV-2, the cause of COVID-19. Moreover, both are beta coronaviruses. Therefore, it is expected that SARS CoV-2, the virus that causes COVID-19, will be killed in a similar manner to OC43.

 

Sincerely,

 

/s/ Matthew Hardwick

Matthew Hardwick, PhD

President/CEO 

ResInnova Laboratories

 

 

 
  2

 

          June 30, 2020
Antiviral Evaluation
Test Method Details          
Test Method      Modified ASTM E2197  
Test Organism     OC43 human coronavirus  
Test Solution Eagles Modified Medium with 2% Fetal Bovine Serum
Test Disks     20mm diameter magnetic stainless steel disk
Inoculum Applied to Test Disk     0.010 mL applied to each disk and spread to within 1 mm of edges, then dried at room temperature
Recovery Solution     Modified SDLP Buffer  
Measuring Method of Number of Viable Viral Particles Dilution Plate Method onto RD cells, viral particles were
      determined using an anti-OC43 monoclonal antibody. Foci
       
      were then counted giving Foci Forming Units (FFU).
Results          
 Modified ASTM E2197: Standard Quantitative Disk Carrier Test Method
Number of Replicate Experiments  
Average Control Recovery ± S.E.M. (FFU/mL)   3.62E+04 ± 0.69E+04 = 4.55 ± 3.84 log
  Average Virus Average Average Average Percent
Location Recovered (FFU/ Log Recovery Log Reduction (vs Reduction (vs
  disk)     Control) Control)
Sink Backsplash 0 NA 4.56 >99.99%
Sink Edge 0 NA 4.56 >99.99%
Sink Drain 0 NA 4.56 >99.99%
Drainpipe 1 1.00E+3 3.00 1.56 97.24%

 

Figure 1: Test Unit Setup

 

 

 

 

 
  3

 

Figure 2: Sample Sites for the Mirror Unit (left) and Drainpipe Unit (right)

 

 

 

Figure 3: Anti-coronavirus (OC43) results for each test location

 

 

ResInnova Laboratories

8807 Colesville Rd, 3rd Floor

Silver Spring, MD 20910