UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020.
OR
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from ____________ to ____________
Commission file
number: 0-22179
GUIDED
THERAPEUTICS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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58-2029543
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(State or other
jurisdiction of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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5835
Peachtree Corners East, Suite B
Norcross,
Georgia
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30092
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(Address of
principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number (including area code):
(770) 242-8723
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Act: Common Stock, $0.001 par
value
(Title
of class)
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
[X ] No [ ]
Indicate by check
mark whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes [X] No [ ]
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. Yes [X ] No [
]
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
|
Large accelerated
filer [
]
|
Accelerated filer
[
]
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Non-accelerated
filer [
]
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Smaller reporting
company [X]
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Emerging growth
company [
]
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|
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
pursuant to Section 13(a) of the Exchange Act [ ]
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes [ ] No [X]
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates was approximately $4,000,000 as of December
31, 2020 (the last business day of the registrant’s most
recently completed fiscal quarter).
As of
April 5, 2021, the registrant had 13,180,417 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
None.
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Overview
We
are a medical technology company focused on developing innovative
medical devices that have the potential to improve healthcare. Our
primary focus is the sales and marketing of our LuViva®
Advanced Cervical Scan non-invasive cervical cancer detection
device. The underlying technology of LuViva primarily relates to
the use of biophotonics for the non-invasive detection of cancers.
LuViva is designed to identify cervical cancers and precancers
painlessly, non-invasively and at the point of care by scanning the
cervix with light, then analyzing the reflected and fluorescent
light.
LuViva
provides a less invasive and painless alternative to conventional
tests for cervical cancer screening and detection. Additionally,
LuViva improves patient well-being not only because it eliminates
pain, but also because it is convenient to use and provides rapid
results at the point of care. We focus on two primary applications
for LuViva: first, as a cancer screening tool in the developing
world, where infrastructure to support traditional cancer-screening
methods is limited or non-existent, and second, as a triage
following traditional screening in the developed world, where a
high number of false positive results cause a high rate of
unnecessary and ultimately costly follow-up tests.
Screening
for cervical cancer represents one of the most significant demands
on the practice of diagnostic medicine. As cervical cancer is
linked to a sexually transmitted disease—the human
papillomavirus (HPV)—every woman essentially becomes
“at risk” for cervical cancer simply after becoming
sexually active. In the developing world, there are approximately
2.0 billion women aged 15 and older who are potentially eligible
for screening with LuViva. Guidelines for screening intervals vary
across the world, but U.S. guidelines call for screening every
three years. Traditionally, the Pap smear screening test, or Pap
test, is the primary cervical cancer screening methodology in the
developed world. However, in developing countries, cancer screening
using Pap tests is expensive and requires infrastructure and skill
not currently existing, and not likely to be developed in the near
future, in these countries.
We
believe LuViva is the answer to the developing world’s
cervical cancer screening needs. Screening for cervical cancer in
the developing world often requires working directly with foreign
governments or non-governmental agencies (NGOs). By partnering with
governments or NGOs, we can provide immediate access to cervical
cancer detection to large segments of a nation’s population
as part of national or regional governmental healthcare programs,
eliminating the need to develop expensive and resource-intensive
infrastructures.
In
the developed world, we believe LuViva offers a more accurate and
ultimately cost-effective triage medical device, to be used once a
traditional Pap test or HPV test indicates the possibility of
cervical cancer. Due to the high number of false positive results
from Pap tests, traditional follow-on tests entail increased
medical treatment costs. We believe these costs can be minimized by
utilizing LuViva as a triage to determine whether and to what
degree follow-on tests are warranted.
We
believe our non-invasive cervical cancer detection technology can
be applied to the early detection of other cancers as well. Early
market analyses of our biophotonic technology indicated that skin
cancer detection was also promising, but currently we are focused
primarily on the large-scale commercialization of
LuViva.
Cancer
Cancer
is a group of many related diseases. All forms of cancer involve
the out-of-control growth and spread of abnormal cells. Normal
cells grow, divide, and die in an orderly fashion. Cancer cells,
however, continue to grow and divide and can spread to other parts
of the body. In America, half of all men and one-third of all women
will develop some form of cancer during their lifetimes. According
to the American Cancer Society, the sooner a cancer is found and
treatment begins, the better a patient’s chances are of being
cured. We began investigating the applications of our biophotonic
technology to cancer detection before 1997, when we initiated a
preliminary market analysis. We concluded that our biophotonic
technology had applications for the detection of a variety of
cancers through the exposure of tissue to light. We selected
detection of cervical cancer and skin cancer from a list of the ten
most promising applications to pursue initially, and ultimately
focused primarily on our LuViva cervical cancer detection
device.
Cervical cancer is
a cancer that begins in the lining of the cervix (which is located
in the lower part of the uterus). Cervical cancer forms over time
and may spread to other parts of the body if left untreated. There
is generally a gradual change from a normal cervix to a cervix with
precancerous cells to cervical cancer. For some women, precancerous
changes may go away without any treatment. While the majority of
precancerous changes in the cervix do not advance to cancer, if
precancers are treated, the risk that they will become cancers can
be greatly reduced.
The Developing World
According to the
most recent data published by the World Health Organization (WHO),
cervical cancer is the fourth most frequent cancer in women
worldwide, with an estimated 570,000 new cases in 2018, an increase
of 40,000 cases from 2012. For women living in less developed
regions, however, cervical cancer is the second most common cancer,
and 9 out of 10 women who die from cervical cancer reside in low-
and middle-income countries. In 2018, GLOBOCAN, the international
cancer tracking agency, estimated that approximately 311,000 women
died from cervical cancer, with 85% to 90% of these deaths
occurring in low- and middle-income countries.
As
noted by the WHO, in developed countries, programs are in place
that enable women to get screened, making most pre-cancerous
lesions identifiable at stages when they can easily be treated.
Early treatment prevents up to 80% of cervical cancers in these
countries. In developing countries, however, limited access to
effective screening means that the disease is often not identified
until it is further advanced and symptoms develop. In addition,
prospects for treatment of such late-stage disease may be poor,
resulting in a higher rate of death from cervical cancer in these
countries.
We
believe that the greatest need and market opportunity for LuViva
lies in screening for cervical cancer in developing countries where
the infrastructure for traditional screening may be limited or
non-existent.
We are
actively working with distributors in the following countries to
implement government-sponsored screening programs: Turkey,
Indonesia, and China. The number of screening candidates in those
countries is approximately 131 million and Indonesia and China
represent 2 of the 10 most populous countries in the
world.
The Developed World
The Pap
test, which involves a sample of cervical tissue being placed on a
slide and observed in a laboratory, is currently the most common
form of cervical cancer screening. Since the introduction of
screening and diagnostic methods, the number of cervical cancer
deaths in the developed world has declined dramatically, due mainly
to the increased use of the Pap test. However, the Pap test has a
wide variation in sensitivity, which is the ability to detect the
disease, and specificity, which is the ability to exclude false
positives. A study by Duke University for the U.S. Agency for
Health Care Policy and Research published in 1999 showed Pap test
performance ranging from a 22%-95% sensitivity and 78%-10%
specificity, although new technologies improving the sensitivity
and specificity of the Pap test have recently been introduced and
are finding acceptance in the marketplace. About 60 million Pap
tests are given annually in the United States, at an average price
of approximately $26 per test.
After a
Pap test returns a positive result for cervical cancer, accepted
protocol calls for a visual examination of the cervix using a
colposcope, usually followed by a biopsy, or tissue sampling, at
one or more locations on the cervix. This method looks for visual
changes attributable to cancer. There are about two million
colposcope examinations annually in the United States and Europe.
In 2003, the average cost of a stand-alone colposcope examination
in the United States was $185 and the average cost of a colposcopy
with biopsy was $277.
Given
this landscape, we believe that there is a material need and market
opportunity for LuViva as a triage device in the developed world
where LuViva represents a more cost-effective method of verifying a
positive Pap test than the alternatives.
The
LuViva Advanced Cervical
Scan
LuViva
is designed to identify cervical cancers and precancers painlessly,
non-invasively and at the point of care by scanning the cervix with
light, then analyzing the light reflected from the cervix. The
information presented by the light would be used to indicate the
likelihood of cervical cancer or precancers. Our product, in
addition to detecting the structural changes attributed to cervical
cancer, is also designed to detect the biochemical changes that
precede the development of visual lesions. In this way, cervical
cancer may be detected earlier in its development, which should
increase the chances of effective treatment. In addition to the
device itself, operation of LuViva requires employment of our
single-use, disposable calibration and alignment cervical
guide.
To
date, thousands of women in multiple international clinical
settings have been tested with LuViva. As a result, more than 25
papers and presentations have been published regarding LuViva in a
clinical setting, including at the International Federation of
Gynecology and Obstetrics Congress in London in 2015 and at the
Indonesian National Obstetrics and Gynecology (POGI) Meeting in
Solo in 2016.
Internationally, we
contract with country-specific or regional distributors. We believe
that the international market will be significantly larger than the
U.S. market due to the international demand for cervical cancer
screening. We have executed formal distribution agreements covering
54 countries and still have active contracts in place for countries
that cover roughly half of the world’s population, including
China and Southeast Asia (including Indonesia), Eastern Europe and
Russia as well as the Middle East (including Turkey). In 2021, in
addition to conducting a new clinical study in the U.S. for FDA
approval, we intend to limit our international focus to to the the
large markets described above, such as China, Russia, and certain
countries within the European Union, India, and certain Latin
American countries, such as Mexico.
We have
previously obtained regulatory approval to sell LuViva in Europe
under our Edition 3 CE Mark. Additionally, LuViva has also obtained
marketing approval from Health Canada, COFEPRIS in Mexico, Ministry
of Health in Kenya, India and the Singapore Health Sciences
Authority. We currently are seeking regulatory approval to market
LuViva in the United States but have not yet received approval from
the U.S. Food and Drug Administration (FDA). As of December 31,
2020, we have sold 140 LuViva devices and approximately 76,980
single-use-disposable cervical guides to international
distributors.
We
believe our non-invasive cervical cancer detection technology can
be applied to the early detection of other cancers as
well.
Manufacturing,
Sales Marketing and Distribution
We
manufacture LuViva at our Norcross, Georgia facility. Most of the
components of LuViva are custom made for us by third-party
manufacturers. We adhere to ISO 13485:2003 quality standards in our
manufacturing processes. Our single-use cervical guides are
manufactured by a vendor that specializes in injection molding of
plastic medical products. On January 22, 2017, we entered into a
license agreement with Shandong Yaohua Medical Instrument
Corporation (“SMI”) pursuant to which we granted SMI an
exclusive global license to manufacture the LuViva device and
related disposables (subject to a carve-out for manufacture in
Turkey). On December 18, 2018, we entered into a co-development
agreement with Newmars Technologies, Inc. (“NTI”),
whereby NTI will perform final assembly of the LuViva device for
its contracted distribution countries in Eastern Europe and Russia
at its ISO 13485 facility in Hungary. This additional carve out has
been agreed to by SMI.
We rely
on distributors to sell our products. Distributors can be country
exclusive or cover multiple countries in a region. We manage these
distributors, provide them marketing materials and train them to
demonstrate and operate LuViva. We seek distributors that have
experience in gynecology and in introducing new technology into
their assigned territories.
We
have only limited experience in the production planning, quality
system management, facility development, and production scaling
that will be needed to bring production to increased sustained
commercial levels. We will likely need to develop additional
expertise in order to successfully manufacture, market, and
distribute any future products.
Research,
Development and Engineering
We have
been engaged primarily in the research, development and testing of
our LuViva non-invasive cervical cancer detection product and our
core biophotonic technology. Since 2013, we have incurred
approximately $8.0 million in research and development expenses,
net of about $927,000 reimbursed through collaborative arrangements
and government grants. Research and development costs were
approximately $0.1 million in 2020 and 2019.
Since
2013, we have focused our research and development and our
engineering resources almost exclusively on development of our
biophotonic technology, with only limited support of other programs
funded through government contracts or third-party funding. Because
our research and clinical development programs for other cancers
are at a very early stage, substantial additional research and
development and clinical trials will be necessary before we can
produce commercial prototypes of other cancer detection
products.
Several
of the components used in LuViva currently are available from only
one supplier, and substitutes for these components could not be
obtained easily or would require substantial modifications to our
products.
Patents
We have
pursued a course of developing and acquiring patents and patent
rights and licensing technology. Our success depends in large part
on our ability to establish and maintain the proprietary nature of
our technology through the patent process and to license from
other’s patents and patent applications necessary to develop
our products. As of December 31, 2020, we have 10 granted U.S.
patents relating to our biophotonic cancer detection technology
that were developed in-house and are owned by the Company.
Currently we do not own third party patents nor do we make any
outside payments for patents.
As of
December 31, 2020, patents 6,400,875, 6,577,391, 6,870,620,
7,006,220 and 8,644,912 had expired.
|
Patent
No.
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Title
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Ctry
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Grant
Date
|
Expiration
Date
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|
6,400,875
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Method for Protecting A Fiber Optic
Probe And The Resulting Fiber Optic Probe
|
US
|
06/04/2002
|
11/01/2019
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6,577,391
|
Apparatus And Method For
Determining Tissue Characteristics
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US
|
06/10/2003
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03/24/2020
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6,590,651
|
Apparatus and Method for
Determining Tissue Characteristics
|
US
|
07/08/2003
|
11/16/2020
|
|
6,792,982
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Vacuum Source For Harvesting
Substances
|
US
|
09/21/2004
|
07/23/2023
|
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6,870,620
|
Apparatus And Method For
Determining Tissue Characteristics
|
US
|
03/22/2005
|
03/24/2020
|
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6,975,889
|
Multi-Modal Optical Cancer
Diagnostic System
|
US
|
12/13/2005
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03/09/2021
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7,006,220
|
Apparatus and Method for
Determining Tissue Characteristics
|
US
|
02/28/2006
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11/16/2020
|
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7,174,927
|
Vacuum Source For Harvesting
Substances
|
US
|
02/13/2007
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09/03/2024
|
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7,301,629
|
Apparatus and Method for
Determining Tissue Characteristics
|
US
|
11/27/2007
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07/03/2023
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7,335,166
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System And Methods For Fluid
Extractions And Monitoring
|
US
|
02/26/2008
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05/22/2023
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8,644,912
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Method and Apparatus For
Determining Tissue Characteristics
|
US
|
02/04/2014
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11/16/2020
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8,781,560
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Method and Apparatus For Rapid
Detection and Diagnosis of Tissue Abnormalities
|
US
|
07/15/2014
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07/14/2031
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9,561,003
|
Method and Apparatus For Rapid
Detection and Diagnosis of Tissue Abnormalities
|
US
|
02/07/2017
|
07/14/2031
|
|
D714453
|
Mobile Cart and Hand Held Unit for
Diagnostics of Measurement
|
US
|
09/30/2014
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09/30/2028
|
|
D724199
|
Medical Diagnostic Stand Off
Tube
|
US
|
03/10/2015
|
03/10/2029
|
|
D746475
|
Mobile Cart and Hand Held Unit for
Diagnostics or Measurement
|
US
|
12/29/2015
|
12/29/2029
|
In addition to the patents listed above, the
Company owns four additional corresponding foreign patents and has
applied for two additional US patents, although there is no
assurance that these patents will be granted. The
Company’s strategy is to continue improving its products and
filing new patents to protect those
improvements.
In
the United States, additional years of patent protection may be
added (on a case by case basis) beyond the standard patent
terms under the 1984 Drug Price Competition and Patent Term
Restoration Act, also known as the Hatch-Waxman Act. The
Hatch-Waxman act includes Section 156, which provides for the
extension of the term of a granted patent (PTE) under certain
circumstances. The intent behind Section 156 is to extend patent
life to compensate patent holders for patent term lost while
developing their product and awaiting FDA approval. The
Company’s patents qualify under Section 156 because LuViva
has not yet been commercialized in the United States and it is
being regulated by FDA as a Class III Medical Device.
Competition
The
medical device industry in general and the markets for cervical
cancer detection in particular, are intensely competitive. If
successful in our product development, we will compete with other
providers of cervical cancer detection and prevention
products.
Current
cervical cancer screening and diagnostic tests, primarily the Pap
test, HPV test, and colposcopy, are well established and pervasive.
Improvements and new technologies for cervical cancer detection and
prevention, such as Thin-Prep from Hologic and HPV testing from
Qiagen, have led to other new competitors. In addition, there are
other companies attempting to develop products using forms of
biophotonic technologies in cervical cancer detection, such as
Spectrascience and Tru-Screen, neither of which currently have U.S.
FDA approval to market their devices for detection of cervical
cancers. The approval limits use of the Spectrascience device only
after a colposcopy, as an adjunct. In addition to the
Spectrascience device, there are other technologies that are
seeking to enter the market as adjuncts to colposcopy, including
devices from Dysis and Zedco. While these technologies are not
direct competitors to LuViva, modifications to them or other new
technologies will require us to develop devices that are more
accurate, easier to use or less costly to administer so that our
products have a competitive advantage.
In
April 2014, the U.S. FDA approved the use of the Roche cobas HPV
test as a primary screener for cervical cancer. Using a sample of
cervical cells, the cobas HPV test detects DNA from 14 high-risk
HPV types. The test specifically identifies HPV 16 and HPV 18,
while concurrently detecting 12 other types of high-risk HPVs. This
could make HPV testing a competitor to the Pap test. However, due
to its lower specificity, we believe that screening with HPV will
increase the number of false positive results if widely
adopted.
In June
2006, the U.S. FDA approved the HPV vaccine Gardasil from drug
maker Merck. Gardasil is a prophylactic HPV vaccine, meaning that
it is designed to prevent the initial establishment of HPV
infections. For maximum efficacy, it is recommended that girls
receive the vaccine prior to becoming sexually active. Since
Gardasil will not block infection with all of the HPV types that
can cause cervical cancer, the vaccine should not be considered a
substitute for routine Pap tests. On October 16, 2009,
GlaxoSmithKline PLC was granted approval in the United States for a
similar preventive HPV vaccine, known as Cervarix. Due to the
limited availability and lack of 100% protection against all
potentially cancer-causing strains of HPV, we believe that the
vaccines will have a limited impact on the cervical cancer
screening and diagnostic market for many years.
Government
Regulation
The
medical devices that we manufacture are subject to regulation by
numerous regulatory bodies, including the CFDA, the U.S. FDA, and
comparable international regulatory agencies. These agencies
require manufacturers of medical devices to comply with applicable
laws and regulations governing the development, testing,
manufacturing, labeling, marketing and distribution of medical
devices. Devices are generally subject to varying levels of
regulatory control, the most comprehensive of which requires that a
clinical evaluation program be conducted before a device receives
approval for commercial distribution.
In the
European Union, medical devices are required to comply with the
Medical Devices Directive and obtain CE Mark certification in order
to market medical devices. The CE Mark certification, granted
following approval from an independent “Notified Body,”
is an international symbol of adherence to quality assurance
standards and compliance with applicable European Medical Devices
Directives. From 2017 through 2020, we were unable to pay the
annual registration fees to maintain our ISO 13485:2003
certification and our CE Mark. Once our financing is completed, we
will make the required payments and reobtain both certifications.
In addition, our December 21, 2018 agreement with Newmars, will
allow final assembly at their ISO 13485:2016 accredited facility.
Once all inspections have been passed for LuViva, this will allow
an alternative path for obtaining the CE Mark.
China
has a regulatory regime similar to that of the European Union, but
due to interaction with the U.S. regulatory regime, the CFDA also
shares some similarities with its U.S. counterpart. Devices are
classified by the CFDA’s Center for Medical Device Evaluation
(CMDE) into three categories based on medical risk, with the level
of regulatory oversight determined by degree of risk and
invasiveness. CMDE’s device classifications and definitions
are as follows:
●
Class I device: The
safety and effectiveness of the device can be ensured through
routine administration.
●
Class II device:
Further control is required to ensure the safety and effectiveness
of the device.
●
Class III device:
The device is implanted into the human body; used for life support
or sustenance; or poses potential risk to the human body, and thus
must be strictly controlled in respect to safety and
effectiveness.
Based
on the above definitions and several discussions with regulatory
consultants and potential partners, we believe that LuViva is most
likely to be classified as a Class II device, however, this is not
certain and the CFDA may determine that LuViva requires a Class III
registration. Class III registrations are granted by the national
CFDA office while Class I and II registrations occur at the
provincial level. Typically, registration granted at the provincial
level allows a medical device to be marketed in all of
China’s provinces.
While
Class I devices usually do not require clinical trial data from
Chinese patients and Class III devices almost always do, Class II
medical devices sometimes do and sometimes do not require Chinese
clinical trials, and this determination may depend on the claim for
the device and quality of clinical trials conducted outside of
China. If clinical trials conducted in China are required, they
usually are less burdensome for Class II devices than Class III
devices.
CFDA
labs also conduct electrical, mechanical and electromagnetic
emission safety testing for medical devices similar to those
required for the CE Mark. As is the case with the U.S. FDA,
manufacturers in China undergo periodic inspections and must comply
with international quality standards such as ISO 13485 for medical
devices. As part of our agreement with SMI, SMI will underwrite the
cost of securing approval of LuViva with the CFDA.
In the
United States, permission to distribute a new device generally can
be met in one of two ways. The first process requires that a
pre-market notification (510(k) Submission) be made to the U.S. FDA
to demonstrate that the device is as safe and effective as, or
substantially equivalent to, a legally marketed device that is not
subject to premarket approval (PMA). A legally marketed device is a
device that (1) was legally marketed prior to May 28, 1976, (2) has
been reclassified from Class III to Class II or I, or (3) has been
found to be substantially equivalent to another legally marketed
device following a 510(k) Submission. The legally marketed device
to which equivalence is drawn is known as the
“predicate” device. Applicants must submit descriptive
data and, when necessary, performance data to establish that the
device is substantially equivalent to a predicate device. In some
instances, data from human clinical studies must also be submitted
in support of a 510(k) Submission. If so, these data must be
collected in a manner that conforms with specific requirements in
accordance with federal regulations. The U.S. FDA must issue an
order finding substantial equivalence before commercial
distribution can occur. Changes to existing devices covered by a
510(k) Submission which do not significantly affect safety or
effectiveness can generally be made by us without additional 510(k)
Submissions.
The
second process requires that an application for premarket approval
(PMA) be made to the U.S. FDA to demonstrate that the device is
safe and effective for its intended use as manufactured. This
approval process applies to most Class III devices, including
LuViva. In this case, two steps of U.S. FDA approval are generally
required before marketing in the United States can begin. First,
investigational device exemption (IDE) regulations must be complied
with in connection with any human clinical investigation of the
device in the United States. Second, the U.S. FDA must review the
PMA application, which contains, among other things, clinical
information acquired under the IDE. The U.S. FDA will approve the
PMA application if it finds that there is a reasonable assurance
that the device is safe and effective for its intended
purpose.
We
completed enrollment in our U.S. FDA pivotal trial of LuViva in
2008 and, after the U.S. FDA requested two-years of follow-up data
for patients enrolled in the study, the U.S. FDA accepted our
completed PMA application on November 18, 2010, effective September
23, 2010, for substantive review. On March 7, 2011, we announced
that the U.S. FDA had inspected two clinical trial sites and
audited our clinical trial data base systems as part of its review
process and raised no formal compliance issues. On January 20,
2012, we announced our intent to seek an independent panel review
of our PMA application after receiving a
“not-approvable” letter from the U.S. FDA. On November
14, 2012 we filed an amended PMA with the U.S. FDA. On September 6,
2013, we received a letter from the U.S. FDA with additional
questions and met with the U.S. FDA on May 8, 2014 to discuss our
response. On July 25, 2014, we announced that we had responded to
the U.S. FDA’s most recent questions.
We
received a “not-approvable” letter from the U.S. FDA on
May 15, 2015. We had a follow up meeting with the U.S. FDA to
discuss a path forward on November 30, 2015, at which we agreed to
submit a detailed clinical protocol for U.S. FDA review so that
additional studies can be completed. We held a follow up
teleconference with FDA on January 28, 2020 and filed a
pre-submission document to the Agency on February 17, 2020 that
summarized the clinical protocol to be submitted for FDA review.
Despite significant delays at FDA due to their emergency evaluation
of Covid-19 related products, we completed our clinical study
protocol with FDA review and comments at the end of 2020. Assuming
adequate funds are available, in 2021 we anticipate conducting this
new clinical trial for FDA approval. We are committed to obtaining
U.S. FDA approval, and at the same time we intend to continue
international growth based on our new CE Mark for the European
Union, progress in gaining regulatory approval in China and in
large markets where we have previously established distribution,
such as Turkey and Indonesia.
The
process of obtaining clearance to market products is costly and
time-consuming in virtually all of the major markets in which we
sell, or expect to sell, our products and may delay the marketing
and sale of our products. Countries around the world have recently
adopted more stringent regulatory requirements, which are expected
to add to the delays and uncertainties associated with new product
releases, as well as the clinical and regulatory costs of
supporting those releases. No assurance can be given that our
products will be approved on a timely basis in any particular
jurisdiction, if at all. In addition, regulations regarding the
development, manufacture and sale of medical devices are subject to
future change. We cannot predict what impact, if any, those changes
might have on our business. Failure to comply with regulatory
requirements could have a material adverse effect on our business,
financial condition and results of operations.
Noncompliance with
applicable requirements can result in import detentions, fines,
civil penalties, injunctions, suspensions or losses of regulatory
approvals or clearances, recall or seizure of products, operating
restrictions, denial of export applications, governmental
prohibitions on entering into supply contracts, and criminal
prosecution. Failure to obtain regulatory approvals or the
restriction, suspension or revocation of regulatory approvals or
clearances, as well as any other failure to comply with regulatory
requirements, would have a material adverse effect on our business,
financial condition and results of operations.
Regulatory
approvals and clearances, if granted, may include significant
labeling limitations and limitations on the indicated uses for
which the product may be marketed. In addition, to obtain
regulatory approvals and clearances, the U.S. FDA and some foreign
regulatory authorities impose numerous other requirements with
which medical device manufacturers must comply. U.S. FDA
enforcement policy strictly prohibits the marketing of approved
medical devices for unapproved uses. Any products we manufacture or
distribute under U.S. FDA clearances or approvals are subject to
pervasive and continuing regulation by the U.S. FDA. The U.S. FDA
also requires us to provide it with information on death and
serious injuries alleged to have been associated with the use of
our products, as well as any malfunctions that would likely cause
or contribute to death or serious injury.
The
U.S. FDA requires us to register as a medical device manufacturer
and list our products. We are also subject to inspections by the
U.S. FDA and state agencies acting under contract with the U.S. FDA
to confirm compliance with good manufacturing practice. These
regulations require that we manufacture our products and maintain
documents in a prescribed manner with respect to manufacturing,
testing, quality assurance and quality control activities. The U.S.
FDA also has promulgated final regulatory changes to these
regulations that require, among other things, design controls and
maintenance of service records. These changes will increase the
cost of complying with good manufacturing practice
requirements.
Distributors of
medical devices may also be required to comply with other foreign
regulatory agencies, and we or our distributors currently have
marketing approval for LuViva from Health Canada, COFEPRIS in
Mexico, the Ministry of Health in Kenya, and the Singapore Health
Sciences Authority. The time required to obtain these foreign
approvals to market our products may be longer or shorter than that
required in China or the United States, and requirements for those
approvals may differ from those required by the CFDA or the U.S.
FDA.
We are
also subject to a variety of other controls that affect our
business. Labeling and promotional activities are subject to
scrutiny by the U.S. FDA and, in some instances, by the U.S.
Federal Trade Commission. The U.S. FDA actively enforces
regulations prohibiting marketing of products for unapproved users.
We are also subject, as are our products, to a variety of state and
local laws and regulations in those states and localities where our
products are or will be marketed. Any applicable state or local
regulations may hinder our ability to market our products in those
regions. Manufacturers are also subject to numerous federal, state
and local laws relating to matters such as safe working conditions,
manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous
substances. We may be required to incur significant costs to comply
with these laws and regulations now or in the future. These laws or
regulations may have a material adverse effect on our ability to do
business.
Although our
marketing and distribution partners around the world assist in the
regulatory approval process, ultimately, we are be responsible for
obtaining and maintaining regulatory approvals for our products.
The inability or failure to comply with the varying regulations or
the imposition of new regulations would materially adversely affect
our business, financial condition and results of
operations.
Employees
and Consultants
As of
December 31, 2020, we had six regular employees and two consultants
to provide services to us on a full- or part-time basis. Of the
eight people employed or engaged by us, two are engaged in
engineering, manufacturing and development, two are engaged in
sales and marketing activities, one is engaged in clinical testing
and regulatory affairs, and three are engaged in administration and
accounting. No employees are covered by collective bargaining
agreements, and we believe we maintain good relations with our
employees.
Our
ability to operate successfully and manage our potential future
growth depends in significant part upon the continued service of
key scientific, technical, managerial and finance personnel, and
our ability to attract and retain additional highly qualified
personnel in these fields. Two of these key employees have an
employment contract with us; none are covered by key person or
similar insurance. In addition, if we are able to successfully
develop and commercialize our products, we likely will need to hire
additional scientific, technical, marketing, managerial and finance
personnel. We face intense competition for qualified personnel in
these areas, many of whom are often subject to competing employment
offers. The loss of key personnel or our inability to hire and
retain additional qualified personnel in the future could have a
material adverse effect on our business, financial condition and
results of operations.
Corporate
History
We are
a Delaware corporation, originally incorporated in 1992 under the
name “SpectRx, Inc.,” and, on February 22, 2008,
changed our name to Guided Therapeutics, Inc. At the same time, we
renamed our wholly owned subsidiary, InterScan, which originally
had been incorporated as “Guided
Therapeutics.”
Our
principal executive and operations facility is located at 5835
Peachtree Corners East, Suite B, Norcross, Georgia 30092, and our
telephone number is (770) 242-8723.
Risk
Factors Summary
The
following is a summary of the principal risks that could adversely
affect our business, operations and financial results. Please refer
to Item 1A “Risk Factors” of this Form 10-K below for
additional discussion of the risks summarized in this Risk Factors
Summary.
An
investment in our securities involves a high degree of risk. The
occurrence of one or more of the events or circumstances described
in the section entitled “Risk Factors,” alone or in
combination with other events or circumstances, may materially
adversely affect our business, financial condition and operating
results. In that event, the trading price of our securities could
decline, and you could lose all or part of your investment. Such
risks include, but are not limited to the following:
Risks
Related to Our Business
●
Although we will be
required to raise additional funds in 2021, there is no assurance
that such funds can be raised on terms that we would find
acceptable, on a timely basis, or at all.
●
If we cannot obtain
additional funds when needed, we will not be able to implement our
business plan.
●
We do not have a
long operating history, especially in the cancer detection field,
which makes it difficult to evaluate our business.
●
We have a history
of losses, and we expect losses to continue.
●
We file federal
taxes that may be subject to audit and adjustments from time to
time.
●
We are currently
delinquent with some of our federal payroll and unemployment taxes
and applicable state payroll and unemployment tax
filings
●
We have received
Paycheck Protection Program (PPP) loans and must retain PPP loan
documentation
●
Our ability to sell
our products is controlled by government regulations, and we may
not be able to obtain any necessary clearances or
approvals.
●
In foreign
countries, including European countries, we are subject to
government regulation, which could delay or prevent our ability to
sell our products in those jurisdictions.
●
In the United
States, we are subject to regulation by the U.S. FDA, which could
prevent us from selling our products domestically.
●
Even if we obtain
clearance or approval to sell our products, we are subject to
ongoing requirements and inspections that could lead to the
restriction, suspension or revocation of our
clearance.
●
We depend on a
limited number of distributors and any reduction, delay or
cancellation of an order from these distributors or the loss of any
of these distributors could cause our revenue to
decline.
●
To successfully
market and sell our products internationally, we must address many
issues with which we have limited experience.
●
Trading in our
common stock is subject to special sales practices and may be
difficult to sell.
●
To market and sell
LuViva internationally, we depend on distributors and they may not
be successful.
●
The coronavirus
outbreak could adversely impact our business.
Risks Related to Our Intellectual Property
●
Our success largely
depends on our ability to maintain and protect the proprietary
information on which we base our products.
●
We may be unable to
commercialize our products if we are unable to protect our
proprietary rights, and we may be liable for significant costs and
damages if we face a claim of intellectual property infringement by
a third party.
●
We may be involved
in lawsuits to protect or enforce our patents, which could be
expensive and time consuming.
●
If we infringe the
rights of third parties, we could be prevented from selling
products, forced to pay damages, and defend against
litigation
Risks
Related to Our Sales Strategy
●
We may not be able
to generate sufficient sales revenues to sustain our growth and
strategy plans.
●
Because our
products, which use different technology or apply technology in
different ways than other medical devices, are or will be new to
the market, we may not be successful in launching our products and
our operations and growth would be adversely affected.
●
If we are unable to
compete effectively in the highly competitive medical device
industry, our future growth and operating results will
suffer.
●
We have limited
manufacturing experience, which could limit our
growth.
●
Since we rely on
sole source suppliers for several of the components used in our
products, any failure of those suppliers to perform would hurt our
operations.
●
Because we operate
in an industry with significant product liability risk, and we have
not specifically insured against this risk, we may be subject to
substantial claims against our products.
●
The availability of
third party reimbursement for our products is uncertain, which may
limit consumer use and the market for our products.
●
We have a
substantial amount of indebtedness, which may adversely affect our
cash flow and our ability to operate our business.
●
We have outstanding
debt that is collateralized by a general security interest in all
of our assets, including our intellectual property. If we were to
fail to repay the debt when due, the holders would have the right
to foreclose on these assets
●
We are subject to
restrictive covenants under the terms of our outstanding secured
debt. If we were to default under the terms of these covenants, the
holders would have the right to foreclose on the assets that secure
the debt.
●
Our success depends
on our ability to attract and retain scientific, technical,
managerial and finance personnel.
●
Certain provisions
of our certificate of incorporation that authorize the issuance of
additional shares of preferred stock may make it more difficult for
a third party to effect a change in control.
Risks
Related to Our Common Stock
●
On March 29, 2019,
a 1:800 reverse stock split of all of our issued and outstanding
common stock was implemented. There are risks associated with a
reverse stock split.
●
The reverse stock
split may decrease the liquidity of the shares of our common
stock.
●
Following the
reverse stock split, the resulting market price of our common stock
may not attract new investors, including institutional investors,
and may not satisfy the investing requirements of those investors.
Consequently, the trading liquidity of our common stock may not
improve.
●
The number of
shares of our common stock issuable upon the conversion of our
outstanding convertible debt and preferred stock or exercise of
outstanding warrants and options is substantial.
●
Adjustments to the
conversion price of our convertible debt and preferred stock, and
the exercise price for certain of our warrants, will dilute the
ownership interests of our existing stockholders.
●
Our stock is thinly
traded, so you may be unable to sell at or near ask prices or at
all.
●
Trading in our
common stock is subject to special sales practices and may be
difficult to
●
Our need to raise
additional capital in the near future or to use our equity
securities for payments could have a dilutive effect on your
investment.
In addition to the other information in this annual report on Form
10-K, the following risk factors should be considered carefully in
evaluating us.
Risks
Related to Our Business
Although we will be required to raise additional funds in 2021,
there is no assurance that such funds can be raised on terms that
we would find acceptable, on a timely basis, or at
all.
Additional debt or
equity financing will be required for us to continue as a going
concern. We may seek to obtain additional funds for the financing
of our cervical cancer detection business through additional debt
or equity financings and/or new collaborative arrangements.
Management believes that additional financing, if obtainable, will
be sufficient to support planned operations only for a limited
period. Management has implemented operating actions to reduce cash
requirements. Any required additional funding may not be available
on terms attractive to us, on a timely basis, or at all. If we
cannot obtain additional funds or achieve profitability, we may not
be able to continue as a going concern.
Because
we must obtain additional funds through financing transactions or
through new collaborative arrangements in order to grow the
revenues of our cervical cancer detection product line, there
exists substantial doubt about our ability to continue as a going
concern. Therefore, it will be necessary to raise additional funds.
There can be no assurance that we will be able to raise these
additional funds. If we do not secure additional funding when
needed, we will be unable to conduct all of our product development
efforts as planned, which may cause us to alter our business plan
in relation to the development of our products. Even if we obtain
additional funding, we will need to achieve profitability
thereafter.
Our
independent registered public accountants’ report on our
consolidated financial statements as of and for the year ended
December 31, 2020, indicated that there was substantial doubt about
our ability to continue as a going concern because we had suffered
recurring losses from operations and had an accumulated deficit of
$140.0 million at December 31, 2020 summarized as
follows:
|
Accumulated
deficit, from inception to 12/31/2018
|
$137.7
million
|
|
Net
Loss for fiscal year 2019, ended 12/31/2019
|
$ 1.9
million
|
|
Accumulated
deficit, from inception to 12/31/2019
|
$139.6
million
|
|
Preferred dividends
for fiscal year 2020
|
$ 0.1
million
|
|
Net
Loss for year to date ended 12/31/2020
|
$ 0.3
million
|
|
Accumulated
deficit, from inception to 12/31/2020
|
$140.0
million
|
Our
management has implemented reductions in operating expenditures and
reductions in some development activities. We have determined to
make cervical cancer detection the focus of our business. We are
managing the development of our other programs only when funds are
made available to us via grants or contracts with government
entities or strategic partners. However, there can be no assurance
that we will be able to successfully implement or continue these
plans.
If we cannot obtain additional funds when needed, we will not be
able to implement our business plan.
We
require substantial additional capital to develop our products,
including completing product testing and clinical trials, obtaining
all required regulatory approvals and clearances, beginning and
scaling up manufacturing, and marketing our products. We have
historically financed our operations though the public and private
sale of debt and equity, funding from collaborative arrangements,
and grants. Any failure to achieve adequate funding in a timely
fashion would delay our development programs and could lead to
abandonment of our business plan. To the extent we cannot obtain
additional funding, our ability to continue to manufacture and sell
our current products, or develop and introduce new products to
market, will be limited. Further, financing our operations through
the public or private sale of debt or equity may involve
restrictive covenants or other provisions that could limit how we
conduct our business or finance our operations. Financing our
operations through collaborative arrangements generally means that
the obligations of the collaborative partner to fund our
expenditures are largely discretionary and depend on a number of
factors, including our ability to meet specified milestones in the
development and testing of the relevant product. We may not be able
to obtain an acceptable collaboration partner, and even if we do,
we may not be able to meet these milestones, or the collaborative
partner may not continue to fund our expenditures.
We do not have a long operating history, especially in the cancer
detection field, which makes it difficult to evaluate our
business.
Although we have
been in existence since 1992, we have only recently begun to
commercialize our cervical cancer detection technology. Because
limited historical information is available on our revenue trends
and manufacturing costs, it is difficult to evaluate our
business. Our prospects must be considered in light of the
substantial risks, expenses, uncertainties and difficulties
encountered by entrants into the medical device industry, which is
characterized by increasing intense competition and a high failure
rate.
We have a history of losses, and we expect losses to
continue.
We have
never been profitable and we have had operating losses since our
inception. We expect our operating losses to continue as we
continue to expend substantial resources to complete
commercialization of our products, obtain regulatory clearances or
approvals; build our marketing, sales, manufacturing and finance
capabilities, and conduct further research and development. The
further development and commercialization of our products will
require substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. We have only generated
limited revenues from product sales. Our accumulated deficit was
approximately $140.0 million at December 31, 2020.
We file federal taxes that may be subject to audit and adjustments
from time to time.
Although we have
been experiencing recurring losses, we are obligated to file tax
returns for compliance with IRS regulations and that of applicable
state jurisdictions. We have filed our 2019 federal and state
corporate tax returns. At December 31, 2020 and 2019, we have
approximately $71.4 and $77.5 million of net operating losses,
respectively. This net operating loss will be eligible to be
carried forward for tax purposes at federal and applicable states
level, but the use of such net operating losses may be subject to
restrictions under applicable tax law. A full valuation allowance
has been recorded related to the deferred tax assets generated from
the net operating losses.
We are currently delinquent with some of our federal payroll and
unemployment taxes and applicable state payroll and unemployment
tax filings
In
prior years we have been delinquent in filing our payroll and
unemployment taxes. We have established payment plans with the IRS
and the State of Georgia. We have been able to abate some of the
penalties associated with the late filings. We will attempt to file
on time and to make payments to federal state agencies on time, but
we cannot guarantee that we will have adequate funds or the
personnel necessary to make these payments and
filings.
We have received Paycheck Protection Program (PPP) loans and must
retain PPP loan documentation
According to the
rules of the SBA, the Company is required to retain PPP Loan
documentation for six years after the date the loan is forgiven or
repaid in full, and permit authorized representatives of the SBA,
including representatives of its Office of Inspector General, to
access such files upon request. Should the SBA conduct such a
review and reject all or some of the Company’s judgments
pertaining to satisfying PPP Loan eligibility or forgiveness
conditions, the Company may be required to adjust previously
reported amounts and disclosures in the financial
statements.
Our ability to sell our products is controlled by government
regulations, and we may not be able to obtain any necessary
clearances or approvals.
The
design, manufacturing, labeling, distribution and marketing of
medical device products are subject to extensive and rigorous
government regulation in most of the markets in which we sell, or
plan to sell, our products, which can be expensive and uncertain
and can cause lengthy delays before we can begin selling our
products in those markets.
In foreign countries, including European countries, we are subject
to government regulation, which could delay or prevent our ability
to sell our products in those jurisdictions.
In
order for us to market our products in Europe and some other
international jurisdictions, we and our distributors and agents
must obtain required regulatory registrations or approvals. We must
also comply with extensive regulations regarding safety, efficacy
and quality in those jurisdictions. We may not be able to obtain
the required regulatory registrations or approvals, or we may be
required to incur significant costs in obtaining or maintaining any
regulatory registrations or approvals we receive. Delays in
obtaining any registrations or approvals required for marketing our
products, failure to receive these registrations or approvals, or
future loss of previously obtained registrations or approvals would
limit our ability to sell our products internationally. For
example, international regulatory bodies have adopted various
regulations governing product standards, packaging requirements,
labeling requirements, import restrictions, tariff regulations,
duties and tax requirements. These regulations vary from country to
country. In 2020, our contract manufacturer, Newmars Medical
Technology, based in Budapest Hungary, successfully underwent and
passed an inspection and re-filing for ISO 13485:2016 and
the obtained the CE Mark for LuViva, which is an international
symbol of quality and compliance with applicable European medical
device directives. The new ISO and CE Mark mean that LuViva can
continue to be sold in the European Union. Failure to maintain ISO
13485:2016 certification or CE mark certification or other
international regulatory approvals would prevent us from selling in
some countries in the European Union.
In the United States, we are subject to regulation by the U.S. FDA,
which could prevent us from selling our products
domestically.
In
order for us to market our products in the United States, we must
obtain clearance or approval from the U.S. Food and Drug
Administration, or U.S. FDA. We cannot be sure that:
●
we, or any
collaborative partner, will make timely filings with the U.S.
FDA;
●
the U.S. FDA will
act favorably or quickly on these submissions;
●
we will not be
required to submit additional information or perform additional
clinical studies; or
●
we will not face
other significant difficulties and costs necessary to obtain U.S.
FDA clearance or approval.
It can
take several years from initial filing of a PMA application and
require the submission of extensive supporting data and clinical
information. The U.S. FDA may impose strict labeling or other
requirements as a condition of its clearance or approval, any of
which could limit our ability to market our products domestically.
Further, if we wish to modify a product after U.S. FDA approval of
a PMA application, including changes in indications or other
modifications that could affect safety and efficacy, additional
clearances or approvals will be required from the U.S. FDA. Any
request by the U.S. FDA for additional data, or any requirement by
the U.S. FDA that we conduct additional clinical studies, could
result in a significant delay in bringing our products to market
domestically and require substantial additional research and other
expenditures. Similarly, any labeling or other conditions or
restrictions imposed by the U.S. FDA could hinder our ability to
effectively market our products domestically. Further, there may be
new U.S. FDA policies or changes in U.S. FDA policies that could be
adverse to us.
Even if we obtain clearance or approval to sell our products, we
are subject to ongoing requirements and inspections that could lead
to the restriction, suspension or revocation of our
clearance.
We, as
well as any potential collaborative partners, will be required to
adhere to applicable regulations in the markets in which we operate
and sell our products, regarding good manufacturing practice, which
include testing, control, and documentation requirements. Ongoing
compliance with good manufacturing practice and other applicable
regulatory requirements will be strictly enforced applicable
regulatory agencies. Failure to comply with these regulatory
requirements could result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, failure to obtain
premarket clearance or premarket approval for devices, withdrawal
of approvals previously obtained, and criminal prosecution. The
restriction, suspension or revocation of regulatory approvals or
any other failure to comply with regulatory requirements would
limit our ability to operate and could increase our
costs.
We depend on a limited number of distributors and any reduction,
delay or cancellation of an order from these distributors or the
loss of any of these distributors could cause our revenue to
decline.
Each
year we have had one or a few distributors that have accounted for
substantially all of our limited revenues. As a result, the
termination of a purchase order with any one of these distributors
may result in the loss of substantially all of our revenues. We are
constantly working to develop new relationships with existing or
new distributors, but despite these efforts we may not be
successful at generating new orders to maintain similar revenues as
current purchase orders are filled. In addition, since a
significant portion of our revenues is derived from a relatively
few distributors, any financial difficulties experienced by any one
of these distributors, or any delay in receiving payments from any
one of these distributors, could have a material adverse effect on
our business, results of operations, financial condition and cash
flows.
To successfully market and sell our products internationally, we
must address many issues with which we have limited
experience.
All of
our sales of LuViva to date have been to distributors outside of
the United States. We expect that substantially all of our business
will continue to come from sales in foreign markets, through
increased penetration in countries where we currently sell LuViva,
combined with expansion into new international markets. However,
international sales are subject to a number of risks,
including:
●
difficulties in staffing and managing international
operations;
●
difficulties in penetrating markets in which our competitors’
products may be more established;
●
reduced or no protection for intellectual property rights in some
countries;
●
export restrictions, trade regulations and foreign tax
laws;
●
fluctuating foreign currency exchange rates;
●
foreign certification and regulatory clearance or approval
requirements;
●
difficulties in developing effective marketing campaigns for
unfamiliar, foreign countries;
●
customs clearance and shipping delays;
●
political and economic instability; and
●
preference for locally produced products.
If one
or more of these risks were realized, it could require us to
dedicate significant resources to remedy the situation, and even if
we are able to find a solution, our revenues may still decline and
expenses increase.
To market and sell LuViva internationally, we depend on
distributors and they may not be successful.
We
currently depend almost exclusively on third-party distributors to
sell and service LuViva internationally and to train our
international distributors, and if these distributors terminate
their relationships with us or under-perform, we may be unable to
maintain or increase our level of international revenue. We will
also need to engage additional international distributors to grow
our business and expand the territories in which we sell LuViva.
Distributors may not commit the necessary resources to market, sell
and service LuViva to the level of our expectations. If current or
future distributors do not perform adequately, or if we are unable
to engage distributors in particular geographic areas, our revenue
from international operations will be adversely
affected.
The coronavirus outbreak could adversely impact our
business.
In
December 2019, it was first reported that there had been an
outbreak of a novel strain of coronavirus, SARS-CoV-2, in China. As
the coronavirus continues to spread outside of China, including
throughout the United States, we may experience disruptions that
could severely impact our business and regulatory filings,
including:
●
impact to the
financial markets;
●
disruption in our
ability to sell our product in foreign markets;
●
disruption on our
ability to source materials;
●
disruption in our
ability to manufacture our devices and disposables;
●
delays or
difficulties in completing our regulatory work;
●
FDA has reduced the
number of staff working on non-Covid 19 related
products;
●
limitations on our
employee resources ability to work, including because of sickness
of employees or their families or the desire of employees to avoid
contact with large groups of people; and
●
additional
repercussions on our ability to operate our business.
The
global outbreak of coronavirus continues to rapidly evolve. The
extent to which the coronavirus impacts our results will depend on
future developments, which are highly uncertain and cannot be
predicted, including new information which may emerge concerning
the severity of the coronavirus, the ultimate geographic spread of
the coronavirus, the duration of the outbreak, travel restrictions
imposed by countries we conduct our business, business closures or
business disruption in the world, a reduction in time spent out of
home and the actions taken throughout the world, including in our
markets, to contain the coronavirus or treat its impact. The future
impact of the outbreak is highly uncertain and cannot be predicted,
and we cannot provide any assurance that the outbreak will not have
a material adverse impact on our operations or future results or
filings with regulatory health authorities. The extent of the
impact to us, if any, will depend on future developments, including
actions taken to contain the coronavirus.
Risks Related to Our Intellectual Property
Our success largely depends on our ability to maintain and protect
the proprietary information on which we base our
products.
Our
success depends in large part upon our ability to maintain and
protect the proprietary nature of our technology through the patent
process, as well as our ability to license from other’s
patents and patent applications necessary to develop our products.
If any of our patents are successfully challenged, invalidated or
circumvented, or our right or ability to manufacture our products
was to be limited, our ability to continue to manufacture and
market our products could be adversely affected. In addition to
patents, we rely on trade secrets and proprietary know-how, which
we seek to protect, in part, through confidentiality and
proprietary information agreements. The other parties to these
agreements may breach these provisions, and we may not have
adequate remedies for any breach. Additionally, our trade secrets
could otherwise become known to or be independently developed by
competitors.
As of
December 31, 2020, we have been issued, or have rights to, 10 U.S.
patents (including those under license). In addition, we have filed
for, or have rights to, two U.S. patents (including those under
license) that are still pending. We also have three granted patents
that apply to our interstitial fluid analysis system as well as
seven international patents that apply to our noninvasive
technologies. There are additional international patents and
pending applications. One or more of the patents we hold directly
or license from third parties, including those for our cervical
cancer detection products, may be successfully challenged,
invalidated or circumvented, or we may otherwise be unable to rely
on these patents. These risks are also present for the process we
use or will use for manufacturing our products. In addition, our
competitors, many of whom have substantial resources and have made
substantial investments in competing technologies, may apply for
and obtain patents that prevent, limit or interfere with our
ability to make, use and sell our products, either in the United
States or in international markets.
The
medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights. In addition, the U.S. Patent and Trademark Office, or
USPTO, may institute interference proceedings. The defense and
prosecution of intellectual property suits, USPTO proceedings and
related legal and administrative proceedings are both costly and
time consuming. Moreover, we may need to litigate to enforce our
patents, to protect our trade secrets or know-how, or to determine
the enforceability, scope and validity of the proprietary rights of
others. Any litigation or interference proceedings involving us may
require us to incur substantial legal and other fees and expenses
and may require some of our employees to devote all or a
substantial portion of their time to the proceedings. An adverse
determination in the proceedings could subject us to significant
liabilities to third parties, require us to seek licenses from
third parties or prevent us from selling our products in some or
all markets. We may not be able to reach a satisfactory settlement
of any dispute by licensing necessary patents or other intellectual
property. Even if we reached a settlement, the settlement process
may be expensive and time consuming, and the terms of the
settlement may require us to pay substantial royalties. An adverse
determination in a judicial or administrative proceeding or the
failure to obtain a necessary license could prevent us from
manufacturing and selling our products.
We may be unable to commercialize our products if we are unable to
protect our proprietary rights, and we may be liable for
significant costs and damages if we face a claim of intellectual
property infringement by a third party.
Our
near and long-term prospects depend in part on our ability to
obtain and maintain patents, protect trade secrets and operate
without infringing upon the proprietary rights of others. In the
absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and
marketing substantially equivalent or superior products and
technology, possibly at lower prices. We could also incur
substantial costs in litigation and suffer diversion of attention
of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by
third parties, with or without merit, or if we are required to
initiate litigation against others to protect or assert our
intellectual property rights. Moreover, any such litigation may not
be resolved in our favor.
Although
we and our licensors have filed various patent applications
covering the uses of our product candidates, patents may not be
issued from the patent applications already filed or from
applications that we might file in the future. Moreover, the patent
position of companies in the pharmaceutical industry generally
involves complex legal and factual questions and has been the
subject of much litigation. Any patents we own or license, now or
in the future, may be challenged, invalidated or circumvented. To
date, no consistent policy has been developed in the U.S. Patent
and Trademark Office (the “PTO”) regarding the breadth
of claims allowed in biotechnology patents.
In
addition, because patent applications in the U.S. are maintained in
secrecy until patent applications publish or patents issue, and
because publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, we cannot be
certain that we and our licensors are the first creators of
inventions covered by any licensed patent applications or patents
or that we or they are the first to file. The PTO may commence
interference proceedings involving patents or patent applications,
in which the question of first inventorship is contested.
Accordingly, the patents owned or licensed to us may not be valid
or may not afford us protection against competitors with similar
technology, and the patent applications licensed to us may not
result in the issuance of patents.
It
is also possible that our owned and licensed technologies may
infringe on patents or other rights owned by others, and licenses
to which may not be available to us. We may be unable to obtain a
license under such patent on terms favorable to us, if at all. We
may have to alter our products or processes, pay licensing fees or
cease activities altogether because of patent rights of third
parties.
In
addition to the products for which we have patents or have filed
patent applications, we rely upon unpatented proprietary technology
and may not be able to meaningfully protect our rights with regard
to that unpatented proprietary technology. Furthermore, to the
extent that consultants, key employees or other third parties apply
technological information developed by them or by others to any of
our proposed projects, disputes may arise as to the proprietary
rights to this information, which may not be resolved in our
favor.
We may be involved in lawsuits to protect or enforce our patents,
which could be expensive and time consuming.
The
pharmaceutical industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights, and companies have employed intellectual property
litigation to gain a competitive advantage. We may become subject
to infringement claims or litigation arising out of patents and
pending applications of our competitors, or additional interference
proceedings declared by the PTO to determine the priority of
inventions. The defense and prosecution of intellectual property
suits, PTO proceedings, and related legal and administrative
proceedings are costly and time-consuming to pursue, and their
outcome is uncertain. Litigation may be necessary to enforce our
issued patents, to protect our trade secrets and know-how, or to
determine the enforceability, scope, and validity of the
proprietary rights of others. An adverse determination in
litigation or interference proceedings to which we may become a
party could subject us to significant liabilities, require us to
obtain licenses from third parties, or restrict or prevent us from
selling our products in certain markets. Although patent and
intellectual property disputes might be settled through licensing
or similar arrangements, the costs associated with such
arrangements may be substantial and could include our paying large
fixed payments and ongoing royalties. Furthermore, the necessary
licenses may not be available on satisfactory terms or at
all.
Competitors
may infringe our patents, and we may file infringement claims to
counter infringement or unauthorized use. This can be expensive,
particularly for a company of our size, and time-consuming. In
addition, in an infringement proceeding, a court may decide that a
patent of ours is not valid or is unenforceable or may refuse to
stop the other party from using the technology at issue on the
grounds that our patents do not cover its technology. An adverse
determination of any litigation or defense proceedings could put
one or more of our patents at risk of being invalidated or
interpreted narrowly.
Also,
a third party may assert that our patents are invalid and/or
unenforceable. There are no unresolved communications, allegations,
complaints or threats of litigation related to the possibility that
our patents are invalid or unenforceable. Any litigation or claims
against us, whether or not merited, may result in substantial
costs, place a significant strain on our financial resources,
divert the attention of management and harm our reputation. An
adverse decision in litigation could result in inadequate
protection for our product candidates and/or reduce the value of
any license agreements we have with third parties.
Interference
proceedings brought before the PTO may be necessary to determine
priority of invention with respect to our patents or patent
applications. During an interference proceeding, it may be
determined that we do not have priority of invention for one or
more aspects in our patents or patent applications and could result
in the invalidation in part or whole of a patent or could put a
patent application at risk of not issuing. Even if successful, an
interference proceeding may result in substantial costs and
distraction to our management.
Furthermore,
because of the substantial amount of discovery required in
connection with intellectual property litigation or interference
proceedings, there is a risk that some of our confidential
information could be compromised by disclosure. In addition, there
could be public announcements of the results of hearings, motions
or other interim proceedings or developments. If investors perceive
these results to be negative, the price of our common stock could
be adversely affected.
If we infringe the rights of third parties, we could be prevented
from selling products, forced to pay damages, and defend against
litigation.
If
our products, methods, processes and other technologies infringe
the proprietary rights of other parties, we could incur substantial
costs and we may have to: obtain licenses, which may not be
available on commercially reasonable terms, if at all; abandon an
infringing product candidate; redesign our products or processes to
avoid infringement; stop using the subject matter claimed in the
patents held by others; pay damages; and/or defend litigation or
administrative proceedings which may be costly whether we win or
lose, and which could result in a substantial diversion of our
financial and management resources.
Risks
Related to Our Sales Strategy
We may not be able to generate sufficient sales revenues to sustain
our growth and strategy plans.
Our
cervical cancer diagnostic activities have been financed to date
through a combination of government grants, strategic partners and
direct investment. Growing revenues for this product are the main
focus of our business. In order to effectively market the cervical
cancer detection product, additional capital will be
needed.
Additional product
lines involve the modification of the cervical cancer detection
technology for use in other cancers. These product lines are only
in the earliest stages of research and development and are
currently not projected to reach market for several years. Our goal
is to receive enough funding from government grants and contracts,
as well as payments from strategic partners, to fund development of
these product lines without diverting funds or other necessary
resources from the cervical cancer program.
Because our products, which use different technology or apply
technology in different ways than other medical devices, are or
will be new to the market, we may not be successful in launching
our products and our operations and growth would be adversely
affected.
Our
products are based on new methods of cancer detection. If our
products do not achieve significant market acceptance, our sales
will be limited and our financial condition may suffer. Physicians
and individuals may not recommend or use our products unless they
determine that these products are an attractive alternative to
current tests that have a long history of safe and effective use.
To date, our products have been used by only a limited number of
people, and few independent studies regarding our products have
been published. The lack of independent studies limits the ability
of doctors or consumers to compare our products to conventional
products.
If we are unable to compete effectively in the highly competitive
medical device industry, our future growth and operating results
will suffer.
The
medical device industry in general and the markets in which we
expect to offer products in particular, are intensely competitive.
Many of our competitors have substantially greater financial,
research, technical, manufacturing, marketing and distribution
resources than we do and have greater name recognition and
lengthier operating histories in the health care industry. We may
not be able to effectively compete against these and other
competitors. A number of competitors are currently marketing
traditional laboratory-based tests for cervical cancer screening
and diagnosis. These tests are widely accepted in the health care
industry and have a long history of accurate and effective use.
Further, if our products are not available at competitive prices,
health care administrators who are subject to increasing pressures
to reduce costs may not elect to purchase them. Also, a number of
companies have announced that they are developing, or have
introduced, products that permit non-invasive and less invasive
cancer detection. Accordingly, competition in this area is expected
to increase.
Furthermore, our
competitors may succeed in developing, either before or after the
development and commercialization of our products, devices and
technologies that permit more efficient, less expensive
non-invasive and less invasive cancer detection. It is also
possible that one or more pharmaceutical or other health care
companies will develop therapeutic drugs, treatments or other
products that will substantially reduce the prevalence of cancers
or otherwise render our products obsolete.
We have limited manufacturing experience, which could limit our
growth.
We do
not have manufacturing experience that would enable us to make
products in the volumes that would be necessary for us to achieve
significant commercial sales, and we rely upon our suppliers. In
addition, we may not be able to establish and maintain reliable,
efficient, full scale manufacturing at commercially reasonable
costs in a timely fashion. Difficulties we encounter in
manufacturing scale-up, or our failure to implement and maintain
our manufacturing facilities in accordance with good manufacturing
practice regulations, international quality standards or other
regulatory requirements, could result in a delay or termination of
production. In the past, we have had substantial difficulties in
establishing and maintaining manufacturing for our products and
those difficulties impacted our ability to increase sales.
Companies often encounter difficulties in scaling up production,
including problems involving production yield, quality control and
assurance, and shortages of qualified personnel.
Since we rely on sole source suppliers for several of the
components used in our products, any failure of those suppliers to
perform would hurt our operations.
Several
of the components used in our products or planned products, are
available from only one supplier, and substitutes for these
components could not be obtained easily or would require
substantial modifications to our products. Any significant problem
experienced by one of our sole source suppliers may result in a
delay or interruption in the supply of components to us until that
supplier cures the problem or an alternative source of the
component is located and qualified. Any delay or interruption would
likely lead to a delay or interruption in our manufacturing
operations. For our products that require premarket approval, the
inclusion of substitute components could require us to qualify the
new supplier with the appropriate government regulatory
authorities. Alternatively, for our products that qualify for
premarket notification, the substitute components must meet our
product specifications.
Because we operate in an industry with significant product
liability risk, and we have not specifically insured against this
risk, we may be subject to substantial claims against our
products.
The
development, manufacture and sale of medical products entail
significant risks of product liability claims. We currently have no
product liability insurance coverage beyond that provided by our
general liability insurance. Accordingly, we may not be adequately
protected from any liabilities, including any adverse judgments or
settlements, we might incur in connection with the development,
clinical testing, manufacture and sale of our products. A
successful product liability claim, or series of claims brought
against us that result in an adverse judgment against or settlement
by us in excess of any insurance coverage could seriously harm our
financial condition or reputation. In addition, product liability
insurance is expensive and may not be available to us on acceptable
terms, if at all.
The availability of third party reimbursement for our products is
uncertain, which may limit consumer use and the market for our
products.
In the
United States and elsewhere, sales of medical products are
dependent, in part, on the ability of consumers of these products
to obtain reimbursement for all or a portion of their cost from
third-party payors, such as government and private insurance plans.
Any inability of patients, hospitals, physicians and other users of
our products to obtain sufficient reimbursement from third-party
payors for our products, or adverse changes in relevant
governmental policies or the policies of private third-party payors
regarding reimbursement for these products, could limit our ability
to sell our products on a competitive basis. We are unable to
predict what changes will be made in the reimbursement methods used
by third-party health care payors. Moreover, third-party payors are
increasingly challenging the prices charged for medical products
and services, and some health care providers are gradually adopting
a managed care system in which the providers contract to provide
comprehensive health care services for a fixed cost per person.
Patients, hospitals and physicians may not be able to justify the
use of our products by the attendant cost savings and clinical
benefits that we believe will be derived from the use of our
products, and therefore may not be able to obtain third-party
reimbursement.
Reimbursement and
health care payment systems in international markets vary
significantly by country and include both government-sponsored
health care and private insurance. We may not be able to obtain
approvals for reimbursement from these international third-party
payors in a timely manner, if at all. Any failure to receive
international reimbursement approvals could have an adverse effect
on market acceptance of our products in the international markets
in which approvals are sought.
We have a substantial amount of indebtedness, which may adversely
affect our cash flow and our ability to operate our
business.
Our
outstanding indebtedness, which is considered notes payable,
accounts payable and accrued liabilities, was $12.2 million at
December 31, 2020.
The
terms of our indebtedness could have negative consequences to us,
such as:
●
we may be unable to
obtain additional financing to fund working capital, operating
losses, capital expenditures or acquisitions on terms acceptable to
us, or at all;
●
the amount of our
interest expense may increase if we are unable to make payments
when due;
●
our assets might be
subject to foreclosure if we default on our secured debt (see
“—We have outstanding
debt that is collateralized by a general security interest in all
of our assets, including our intellectual property. If we were to
fail to repay the debt when due, the holders would have the right
to foreclose on these assets.”);
●
our vendors or
employees may, and some have, instituted proceedings to collect on
amounts owed them;
●
we have to use a
substantial portion of our cash flows from operations to repay our
indebtedness, including ordinary course accounts payable and
accrued payroll liabilities, which reduces the amount of money we
have for future operations, working capital, inventory, expansion,
or general corporate or other business activities; and
●
we may be unable to
refinance our indebtedness on terms acceptable to us, or at
all.
Our
ability to meet our debt obligations will depend on our future
performance, which will be affected by financial, business,
economic, regulatory and other factors. We will be unable to
control many of these factors, such as economic conditions. We
cannot be certain that our earnings will be sufficient to allow us
to pay the principal and interest on our debt and meet any other
obligations. If we do not have enough money to service our debt, we
may be required, but unable, to refinance all or part of our
existing debt, sell assets, borrow money or raise equity on terms
acceptable to us, if at all.
We have outstanding debt that is collateralized by a general
security interest in all of our assets, including our intellectual
property. If we were to fail to repay the debt when due, the
holders would have the right to foreclose on these
assets.
At
April 5, 2021, we had notes outstanding that are collateralized by
a security interest in our current and future inventory and
accounts receivable. We also had a note outstanding that is
collateralized by a security interest in all of our assets,
including our intellectual property. When the debt is repaid, the
holders’ security interests on our assets will be
extinguished. However, if an event of default occurs under the
notes prior to their repayment, the holders may exercise their
rights to foreclose on these secured assets for the payment of
these obligations. Under “cross-default” provisions in
each of the notes, an event of default under one note is
automatically an event of default under the other notes. Any such
default and resulting foreclosure would have a material adverse
effect on our business, financial condition and results of
operations.
We are subject to restrictive covenants under the terms of our
outstanding secured debt. If we were to default under the terms of
these covenants, the holders would have the right to foreclose on
the assets that secure the debt.
The
instruments governing our outstanding secured debt contain
restrictive covenants. For example, our senior secured convertible
note prohibits us from incurring additional indebtedness for
borrowed money, repurchasing any outstanding shares of our common
stock, or paying any dividends on our capital stock, in each case
without the note holder's prior written consent, If we were to
breach any of these covenants, the holder could declare an event of
default on the note, and exercise its rights to foreclose on the
assets securing the note.
Our success depends on our ability to attract and retain
scientific, technical, managerial and finance
personnel.
Our
ability to operate successfully and manage our future growth
depends in significant part upon the continued service of key
scientific, technical, managerial and finance personnel, as well as
our ability to attract and retain additional highly qualified
personnel in these fields. We may not be able to attract and retain
key employees when necessary, which would limit our operations and
growth. In addition, if we are able to successfully develop and
commercialize our products, we will need to hire additional
scientific, technical, marketing, managerial and finance personnel.
We face intense competition for qualified personnel in these areas,
many of whom are often subject to competing employment
offers.
Certain provisions of our certificate of incorporation that
authorize the issuance of additional shares of preferred stock may
make it more difficult for a third party to effect a change in
control.
Our
certificate of incorporation authorizes our board of directors to
issue up to 5.0 million shares of preferred stock. Our undesignated
shares of preferred stock may be issued in one or more series, the
terms of which may be determined by the board without further
stockholder action. These terms may include, among other terms,
voting rights, including the right to vote as a series on
particular matters, preferences as to liquidation and dividends,
repurchase rights, conversion rights, redemption rights and sinking
fund provisions. The issuance of any preferred stock could diminish
the rights of holders of our common stock, and therefore could
reduce the value of our common stock. In addition, specific rights
granted to future holders of preferred stock could be used to
restrict our ability to merge with or sell assets to a third party.
The ability of our board to issue preferred stock could make it
more difficult, delay, discourage, prevent or make it more costly
to acquire or effect a change in control, which in turn could
prevent our stockholders from recognizing a gain in the event that
a favorable offer is extended and could materially and negatively
affect the market price of our common stock.
Risks
Related to Our Common Stock
On March 29, 2019, a 1:800 reverse stock split of all of our issued
and outstanding common stock was implemented. There are risks
associated with a reverse stock split.
On
March 29, 2019, a 1:800 reverse stock
split of all of our issued and outstanding common stock was
implemented. As a result of the reverse stock split, every 800
shares of issued and outstanding common stock were converted into 1
share of common stock. All fractional shares created by the reverse
stock split were rounded to the nearest whole share. The number of
authorized shares of common stock did not
change.
There
are certain risks associated with the reverse stock split,
including the following:
●
We have additional
authorized shares of common stock that the board could issue in
future without stockholder approval, and such additional shares
could be issued, among other purposes, in financing transactions or
to resist or frustrate a third-party transaction that is favored by
a majority of the independent stockholders. This could have an
anti-takeover effect, in that additional shares could be issued,
within the limits imposed by applicable law, in one or more
transactions that could make a change in control or takeover of us
more difficult.
●
There can be no
assurance that the reverse stock split will achieve the benefits
that we hope it will achieve. The total market capitalization of
our common stock after the reverse stock split may be lower than
the total market capitalization before the reverse stock
split.
The reverse stock split may decrease the liquidity of the shares of
our common stock.
The
liquidity of the shares of our common stock may be affected
adversely by the reverse stock split given the reduced number of
shares that were outstanding immediately following the reverse
stock split, especially if the market price of our common stock
does not increase as a result of the reverse stock split. In
addition, the reverse stock split may have increased the number of
stockholders who own odd lots of our common stock, creating the
potential for such stockholders to experience an increase in the
cost of selling their shares and greater difficulty effecting such
sales.
Following the reverse stock split, the resulting market price of
our common stock may not attract new investors, including
institutional investors, and may not satisfy the investing
requirements of those investors. Consequently, the trading
liquidity of our common stock may not improve.
Although we believe
that a higher market price of our common stock may help generate
greater or broader investor interest, there can be no assurance
that the reverse stock split will result in a share price that will
attract new investors, including institutional investors. In
addition, there can be no assurance that the market price of our
common stock will satisfy the investing requirements of those
investors. As a result, the trading liquidity of our common stock
may not necessarily improve.
The number of shares of our common stock issuable upon the
conversion of our outstanding convertible debt and preferred stock
or exercise of outstanding warrants and options is
substantial.
As of
April 5, 2021, our outstanding convertible debt was convertible
into an aggregate of 19,500,000 shares of our common stock, and the
outstanding shares of our Series C, Series C1, Series C2, Series D,
Series E, and Series F preferred stock were convertible into an
aggregate of 39,510,000 shares of common stock. Also, as of that
date we had warrants outstanding that were exercisable for an
aggregate of 28,520,275 shares, contractual obligations to issue
2,132 shares, and outstanding options to purchase 1,800,029 shares.
The shares of common stock issuable upon conversion or exercise of
these securities would have constituted approximately 97.0% of the
total number of shares of common stock then issued and
outstanding.
Further, under the
terms of our convertible debt and preferred stock, as well as
certain of our outstanding warrants, the conversion price or
exercise price, as the case may be, could be adjusted downward,
causing substantial dilution. See “—Adjustments to the conversion price for our
convertible debt and preferred stock, and the exercise price for
certain of our warrants, will dilute the ownership interests of our
existing stockholders.”
Adjustments to the conversion price of our convertible debt and
preferred stock, and the exercise price for certain of our
warrants, will dilute the ownership interests of our existing
stockholders.
Under
the terms of a portion of our convertible debt, the conversion
price fluctuates with the market price of our common stock.
Additionally, under the terms of our Series C preferred stock, any
dividends we choose to pay in shares of our common stock will be
calculated based on the then-current market price of our common
stock. Accordingly, if the market price of our common stock
decreases, the number of shares of our common stock issuable upon
conversion of the convertible debt or upon payment of dividends on
our outstanding Series C preferred stock will increase, and may
result in the issuance of a significant number of additional shares
of our common stock.
Under
the terms of our preferred stock and certain of our convertible
notes and outstanding warrants, the conversion price or exercise
price will be lowered if we issue common stock at a per share price
below the then-conversion price or then-exercise price for those
securities. Reductions in the conversion price or exercise price
would result in the issuance of a significant number of additional
shares of our common stock upon conversion or exercise, which would
result in dilution in the value of the shares of our outstanding
common stock and the voting power represented thereby.
Our stock is thinly traded, so you may be unable to sell at or near
ask prices or at all.
The
shares of our common stock are only quoted in the OTCQB
marketplace. Shares of our common stock are thinly traded, meaning
that the number of persons interested in purchasing our common
shares at or near ask prices at any given time may be relatively
small or non-existent. This situation is attributable to a number
of factors, including:
●
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
●
stock
analysts, stock brokers and institutional investors may be
risk-averse and be reluctant to follow a company such as ours that
faces substantial doubt about its ability to continue as a going
concern or to purchase or recommend the purchase of our shares
until such time as we became more viable.
As a
consequence, our stock price may not reflect an actual or perceived
value. Also, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer that has a large and steady volume of
trading activity that will generally support continuous sales
without an adverse effect on share price. A broader or more active
public trading market for our common shares may not develop or if
developed, may not be sustained. Due to these conditions, you may
not be able to sell your shares at or near ask prices or at all if
you need money or otherwise desire to liquidate your
shares.
Trading in our common stock is subject to special sales practices
and may be difficult to sell.
Our
common stock is subject to the Securities and Exchange
Commission’s “penny stock” rule, which imposes
special sales practice requirements upon broker-dealers who sell
such securities to persons other than established distributors or
accredited investors. Penny stocks are generally defined to be an
equity security that has a market price of less than $5.00 per
share. For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and
receive the purchaser’s written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell our securities and also may affect the
ability of our stockholders to sell their securities in any market
that might develop.
Stockholders should
be aware that, according to Securities and Exchange Commission, the
market for penny stocks has suffered from patterns of fraud and
abuse. Such patterns include:
●
control
of the market for the security by one or a few broker-dealers that
are often related to the promoter or issuer;
●
manipulation
of prices through prearranged matching of purchases and sales and
false and misleading press releases;
●
“boiler
room” practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales
persons;
●
excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
●
the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices
and with consequent investor losses.
Our
management is aware of the abuses that have occurred historically
in the penny stock market. Although we do not expect to be in a
position to dictate the behavior of the market or of broker-dealers
who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns
from being established with respect to our common
stock.
Our need to raise additional capital in the near future or to use
our equity securities for payments could have a dilutive effect on
your investment.
In
order to continue operations, we will need to raise additional
capital. We may attempt to raise capital through the public or
private sale of our common stock or securities convertible into or
exercisable for our common stock. In addition, from time to time we
have issued our common stock or warrants in lieu of cash payments.
If we sell additional shares of our common stock or other equity
securities or issue such securities in respect of other claims or
indebtedness, such sales or issuances will further dilute the
percentage of our equity that you own. Depending upon the price per
share of securities that we sell or issue in the future, if any,
your interest in us could be further diluted by any adjustments to
the number of shares and the applicable exercise price required
pursuant to the terms of the agreements under which we previously
issued convertible securities.
FORWARD LOOKING STATEMENTS
Statements
in this report, which express “belief,”
“anticipation” or “expectation,” as well as
other statements that are not historical facts, are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, or Securities Act, and Section 21E of the Securities
Exchange Act of 1934, or Exchange Act. These forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from historical results or
anticipated results, including those identified in the foregoing
“Risk Factors” and elsewhere in this report. Examples
of these uncertainties and risks include, but are not limited
to:
·
access
to sufficient debt or equity capital to meet our operating and
financial needs;
·
the
effectiveness and ultimate market acceptance of our
products;
·
whether
our products in development will prove safe, feasible and
effective;
·
whether
and when we or any potential strategic partners will obtain
required regulatory approvals in the markets in which we plan to
operate;
·
our
need to achieve manufacturing scale-up in a timely manner, and our
need to provide for the efficient manufacturing of sufficient
quantities of our products;
·
the
lack of immediate alternate sources of supply for some critical
components of our products;
·
our
patent and intellectual property position;
·
the
need to fully develop the marketing, distribution, customer service
and technical support and other functions critical to the success
of our product lines;
·
the
dependence on potential strategic partners or outside investors for
funding, development assistance, clinical trials, distribution and
marketing of some of our products; and
·
other
risks and uncertainties described from time to time in our reports
filed with the SEC.
Forward-looking
statements should not be read as a guarantee of future performance
or results and will not necessarily be accurate indications of the
times at, or by which, such performance or results will be
achieved. Forward-looking information is based on information
available at the time and/or management’s good faith belief
with respect to future events and is subject to risks and
uncertainties that could cause actual performance or results to
differ materially from those expressed in the
statements.
Forward-looking
statements speak only as of the date the statements are made. We
assume no obligation to update forward-looking statements to
reflect actual results, changes in assumptions or changes in other
factors affecting forward-looking information except to the extent
required by applicable securities laws. If we update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect thereto or with respect
to other forward-looking statements.
Item
1B. Unresolved Staff
Comments
Not
applicable.
Our
corporate offices, which also comprise our administrative, research
and development, marketing and production facilities, are located
at 5835 Peachtree Corners East, Suite B, Norcross, Georgia 30092,
where we lease approximately 12,800 square feet under a lease that
expires in March 2021.
Item
3. Legal Proceedings
We are
subject to claims and legal actions that arise in the ordinary
course of business. However, we are not currently subject to any
claims or actions that we believe would have a material adverse
effect on our financial position or results of
operations.
Item
4. Mine Safety
Disclosures
Not
applicable.
Item
5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market
for Common Stock; Holders
Our
common stock is listed on the OTCQB under the ticker symbol
“GTHP.” The number of record holders of our common
stock at April 5, 2021 was 145.
A 1:800
reverse stock split of all of our issued and outstanding common
stock was implemented on March 29, 2019. As a result of the reverse
stock split, every 800 shares of issued and outstanding common
stock were converted into 1 share of common stock. All fractional
shares created by the reverse stock split were rounded to the
nearest whole share. The number of authorized shares of common
stock did not change.
The
high and low common stock share prices for the first quarter of
2021 and calendar years 2020 and 2019, as reported by the OTCBB,
are as set forth in the following table. All share prices set forth
in the table have been retroactively adjusted to reflect the
reverse stock split (as discussed above) for all periods
presented.
|
First
Quarter
|
$0.95
|
$0.23
|
$0.23
|
$0.11
|
$1.45
|
$0.02
|
|
Second
Quarter*
|
$ 0.80
|
$ 0.75
|
$0.56
|
$0.10
|
$0.26
|
$0.10
|
|
Third
Quarter
|
|
|
$0.55
|
$0.23
|
$0.25
|
$0.16
|
|
Fourth
Quarter
|
|
|
$0.51
|
$0.16
|
$0.24
|
$0.10
|
*Through April 5,
2021.
Dividend
Policy
We have
not paid any dividends on our common stock since our inception and
do not intend to pay any dividends in the foreseeable
future.
Securities
Authorized for Issuance Under Equity Compensation
Plans
All the
securities we have provided our employees, directors and
consultants have been issued under our stock option plans, which
are approved by our stockholders. We have issued common stock to
other individuals that are not employees or directors, in lieu of
cash payments, that are not part of any plan approved by our
stockholders.
Securities
authorized for issuance under equity compensation plans as of
December 31, 2020:
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities
remaining
available for future issuance under equity compensation plans
(excluding securities reflected in column(a))
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders
|
47
|
$58,083
|
-
|
|
|
1,800,000
|
$0.49
|
4,709,411
|
|
Equity compensation
plans not approved by security holders
|
-
|
-
|
-
|
|
TOTAL
|
1,800,047
|
$0.50
|
4,709,411
|
Item
6. Selected Financial
Data
Not
applicable.
Item
7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
The
following discussion should be read in conjunction with our
financial statements and notes thereto included elsewhere in this
report.
Overview
We are
a medical technology company focused on developing innovative
medical devices that have the potential to improve healthcare. Our
primary focus is the sales and marketing of our LuViva®
Advanced Cervical Scan non-invasive cervical cancer detection
device. The underlying technology of LuViva primarily relates to
the use of biophotonics for the non-invasive detection of cancers.
LuViva is designed to identify cervical cancers and precancers
painlessly, non-invasively and at the point of care by scanning the
cervix with light, then analyzing the reflected and fluorescent
light.
LuViva
provides a less invasive and painless alternative to conventional
tests for cervical cancer screening and detection. Additionally,
LuViva improves patient well-being not only because it eliminates
pain, but also because it is convenient to use and provides rapid
results at the point of care. We focus on two primary applications
for LuViva: first, as a cancer screening tool in the developing
world, where infrastructure to support traditional cancer-screening
methods is limited or non-existent, and second, as a triage
following traditional screening in the developed world, where a
high number of false positive results cause a high rate of
unnecessary and ultimately costly follow-up tests.
We are
a Delaware corporation, originally incorporated in 1992 under the
name “SpectRx, Inc.,” and, on February 22, 2008,
changed our name to Guided Therapeutics, Inc. At the same time, we
renamed our wholly owned subsidiary, InterScan, which originally
had been incorporated as “Guided
Therapeutics.”
Since
our inception, we have raised capital through the public and
private sale of debt and equity, funding from collaborative
arrangements, and grants.
Our
prospects must be considered in light of the substantial risks,
expenses and difficulties encountered by entrants into the medical
device industry. This
industry is characterized by an increasing number of participants,
intense competition and a high failure rate. We have experienced
operating losses since our inception and, as of December 31, 2020
we have an accumulated deficit of approximately $140.0 million.
To date, we have engaged primarily in research and
development efforts and the early stages of marketing our products.
We do not have significant experience in manufacturing, marketing
or selling our products. We may not be successful in growing sales
for our products. Moreover, required regulatory clearances or
approvals may not be obtained in a timely manner, or at all. Our
products may not ever gain market acceptance and we may not ever
generate significant revenues or achieve profitability. The
development and commercialization of our products requires
substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. We expect our operating
losses to continue for the foreseeable future as we continue to
expend substantial resources to complete commercialization of our
products, obtain regulatory clearances or approvals, build our
marketing, sales, manufacturing and finance capabilities, and
conduct further research and development.
Our
product revenues to date have been limited. In 2020, the majority
of our revenues were from the sale of components of our LuViva
devices and disposables. We expect that the majority of our revenue
in 2021 will be derived from revenue from the sale of LuViva
devices and disposables.
Current
Demand for LuViva
Based
on discussions with our distributors, we currently hold and expect
to generate additional purchase orders for approximately $2.0 to
$3.0 million in LuViva devices and disposables in 2021 and expect
those purchase orders to result in actual sales of $1.0 to $2.0
million in 2021, representing what we view as current demand for
our products. We cannot be assured that we will generate all or any
of these additional purchase orders, or that existing orders will
not be canceled by the distributors or that parts to build product
will be available to meet demand, such that existing orders will
result in actual sales. Because we have a short history of sales of
our products, we cannot confidently predict future sales of our
products beyond this time frame and cannot be assured of any
particular amount of sales. Accordingly, we have not identified any
particular trends with regard to sales of our
products.
Recent
Developments
A 1:800
reverse stock split of all of our issued and outstanding common
stock was implemented on March 29, 2019. As a result of the reverse
stock split, every 800 shares of issued and outstanding common
stock were converted into 1 share of common stock. All fractional
shares created by the reverse stock split were rounded to the
nearest whole share. The number of authorized shares of common
stock did not change.
Critical
Accounting Policies
Our
material accounting policies, which we believe are the most
critical to investors understanding of our financial results and
condition, are discussed below. Because we are still early in our
enterprise development, the number of these policies requiring
explanation is limited. As we begin to generate increased revenue
from different sources, we expect that the number of applicable
policies and complexity of the judgments required will
increase.
Revenue
Recognition: ASC 606
Revenue from Contracts with Customers establishes a single and
comprehensive framework which sets out how much revenue is to be
recognized, and when. The core principle is that a vendor should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the vendor expects to be entitled in exchange for those
goods or services. Revenue will now be recognized by a vendor when
control over the goods or services is transferred to the customer.
In contrast, Revenue based revenue recognition around an analysis
of the transfer of risks and rewards; this now forms one of a
number of criteria that are assessed in determining whether control
has been transferred. The application of the core principle in ASC
606 is carried out in five steps: Step 1 – Identify the
contract with a customer: a contract is defined as an agreement
(including oral and implied), between two or more parties, that
creates enforceable rights and obligations and sets out the
criteria for each of those rights and obligations. The contract
needs to have commercial substance and it is probable that the
entity will collect the consideration to which it will be entitled.
Step 2 – Identify the performance obligations in the
contract: a performance obligation in a contract is a promise
(including implicit) to transfer a good or service to the customer.
Each performance obligation should be capable of being distinct and
is separately identifiable in the contract. Step 3 –
Determine the transaction price: transaction price is the amount of
consideration that the entity can be entitled to, in exchange for
transferring the promised goods and services to a customer,
excluding amounts collected on behalf of third parties. Step 4
– Allocate the transaction price to the performance
obligations in the contract: for a contract that has more than one
performance obligation, the entity will allocate the transaction
price to each performance obligation separately, in exchange for
satisfying each performance obligation. The acceptable methods of
allocating the transaction price include adjusted market assessment
approach, expected cost plus a margin approach, and, the residual
approach in limited circumstances. Discounts given should be
allocated proportionately to all performance obligations unless
certain criteria are met and reallocation of changes in standalone
selling prices after inception is not permitted. Step 5 –
Recognize revenue as and when the entity satisfies a performance
obligation: the entity should recognize revenue at a point in time,
except if it meets any of the three criteria, which will require
recognition of revenue over time: the entity’s performance
creates or enhances an asset controlled by the customer, the
customer simultaneously receives and consumes the benefit of the
entity’s performance as the entity performs, and the entity
does not create an asset that has an alternative use to the entity
and the entity has the right to be paid for performance to
date.
Valuation of Deferred
Taxes: We account for
income taxes in accordance with the liability method. Under the
liability method, we recognize deferred assets and liabilities
based upon anticipated future tax consequences attributable to
differences between financial statement carrying amounts of assets
and liabilities and their respective tax bases. We establish a
valuation allowance to the extent that it is more likely than not
that deferred tax assets will not be utilized against future
taxable income.
Valuation of Equity Instruments
Granted to Employee, Service Providers and
Investors: On the date of
issuance, the instruments are recorded at their fair value as
determined using either the Black-Scholes valuation model or Monte
Carlo Simulation model.
Beneficial Conversion Features of Convertible
Securities: Conversion options that are not bifurcated as a
derivative pursuant to ASC 815 and not accounted for as a separate
equity component under the cash conversion guidance are evaluated
to determine whether they are beneficial to the investor at
inception (a beneficial conversion feature) or may become
beneficial in the future due to potential adjustments. The
beneficial conversion feature guidance in ASC 470-20 applies to
convertible stock as well as convertible debt which are outside the
scope of ASC 815. A beneficial conversion feature is defined as a
nondetachable conversion feature that is in the money at the
commitment date. The beneficial conversion feature guidance
requires recognition of the conversion option’s in-the-money
portion, the intrinsic value of the option, in equity, with an
offsetting reduction to the carrying amount of the instrument. The
resulting discount is amortized as a dividend over either the life
of the instrument, if a stated maturity date exists, or to the
earliest conversion date, if there is no stated maturity date. If
the earliest conversion date is immediately upon issuance, the
dividend must be recognized at inception. When there is a
subsequent change to the conversion ratio based on a future
occurrence, the new conversion price may trigger the recognition of
an additional beneficial conversion feature on
occurrence.
Allowance for Accounts
Receivable: We estimate
losses from the inability of our distributors to make required
payments and periodically review the payment history of each of our
distributors, as well as their financial condition, and revise our
reserves as a result.
Inventory
Valuation: All inventories
are stated at lower of cost or net realizable value, with cost
determined substantially on a “first-in, first-out”
basis. Selling, general, and administrative expenses are not
inventoried, but are charged to expense when
purchased.
Reverse Stock
Split: On March 29, 2019,
the Company implemented a 1:800 reverse stock split of all of our
issued and outstanding common stock. As a result of the reverse
stock split, every 800 shares of issued and outstanding common
stock were converted into 1 share of common stock. All fractional
shares created by the reverse stock split were rounded to the
nearest whole share. The number of authorized shares of common
stock did not change. The reverse stock split decreased the
Company’s issued and outstanding shares of common stock from
2,135,478,405 shares of Common Stock to 2,669,348 shares as of that
date.
Results
of Operations
Comparison
of 2020 and 2019
Sales
Revenue, Cost of Sales and Gross Profit from Devices and
Disposables: Revenues from
the sale of other parts of our LuViva devices for 2020 and 2019 was
approximately $102,000 and $36,000, respectively. Revenues for 2020
was approximately, $66,000 or 183% higher when compared to the same
period in 2019, due to a sale of parts to one customer in 2020.
Related cost of sales recovered was approximately $41,000 for 2020
compared to $70,000 cost of sales for 2019, a decrease of $111,000
or 159%. Cost of sales recovered was a result of the buy-back of
parts from one customer that were then sold and the revaluation of
inventory reserve, the net effect was a cost of goods sold
recovered. This resulted in a gross profit of approximately
$143,000 on the sales of devices and disposables for 2020 compared
with a gross loss of approximately $34,000 for the same period in
2019.
Research
and Development Expenses: Research and development expenses for 2020,
increased to approximately $143,000, from approximately $122,000 to
the same period in 2019. The increase of $21,000, or 17%, was
primarily due to increases in research and development costs and
salaries incurred in 2020.
Sales and
Marketing Expenses: Sales
and marketing expenses for 2020, increased to approximately
$139,000, compared to $87,000 for the same period in 2019. The
increase, of approximately $52,000, or 60% was primarily due to
higher payroll expenses for 2020.
General and
Administrative Expense: General and administrative expenses for 2020,
increased to approximately $913,000, compared to $694,000 for the
same period in 2019. The increase of approximately $219,000, or
32%, was primarily related to higher compensation, stock based
compensation and insurance expenses incurred during the same
period. During 2020, the Company had also reversed a $292,000
reserve taken for a deposit made for inventory parts for its
devices, and the Company recorded stock based compensation expense
of $310,000 for stock options granted in July
2020.
Other
Income: Other income for
2020, increased to approximately $271,000, compared to $48,000 for
the same period in 2019. The increase of approximately $223,000 or
465% was primarily a result of the recovery of employment expenses
and old outstanding payables which had exceeded their statute of
limitations on collectability.
Interest
Expense: Interest expense
for 2020 decreased to approximately $1,056,000, compared to
$1,412,000 for the same period in 2019. The decrease of
approximately $356,000, or 25%, was primarily related to
amortization expense of and interest recorded for the value of the
beneficial conversion feature on convertible debt outstanding and
amortization of debt issuance costs.
Loss from
Extinguishment of Debt: Loss from extinguishment of debt for 2020
increased to approximately $296,000, compared to nil for the same
period in 2019. The increase of approximately $296,000, or 100%,
was primarily related to debt that had been eliminated from debt
exchange agreements and debt reduction through exchanges and
forgiveness.
Fair Value
of Derivative Liability: Fair value of derivatives for 2020, increased to
approximately $25,000 compared to fair value of derivatives expense
of $0 for the same period in 2019. The increase of approximately
$25,000, or 100% was primarily due to changes to the derivative
liability for a short-term convertible note payable in
2020.
Fair Value
of Warrants: Fair value of
warrants recovered for 2020, increased to approximately $1,879,000
compared to fair value of warrants recovered of $380,000 for the
same period in 2019. The increase of approximately $1,499,000, or
394% was primarily due to favorable significant changes in common
stock warrant conversion prices, a reduction in the number of
outstanding warrants and an increase in the warrant conversion
price in 2020.
Net
Loss: Net loss
attributable to common stockholders decreased to approximately
$401,000, or $0.04 per share for 2020, from a net loss of
$1,921,000, or $0.58 per share, for the same period in 2019. The
decrease in the net loss of $1,520,000, or 79% was for reasons
outlined above. As stated previously, our net loss for 2020, would
have been greater if it were not for favorable results from changes
in the fair value of warrants, favorable significant changes in
common stock warrant conversion prices, a reduction in the number
of outstanding warrants and an increase in the warrant conversion
price in 2020.
There
was no income tax benefit recorded for 2020 or 2019, due to
recurring net operating losses.
Liquidity
and Capital Resources
Since
our inception, we have raised capital through the public and
private sale of debt and equity, funding from collaborative
arrangements, and grants. At December 31, 2020, we had cash of
approximately $182,000 and negative working capital of
approximately $8,000,000.
Our
major cash flows for 2020 consisted of cash out-flows of $1.9
million from operations, including approximately $0.4 million of
net loss, (as stated previously, our net loss for 2020, would have
been greater if it were not for favorable results from changes in
the fair value of warrants, favorable significant changes in common
stock warrant conversion prices, a reduction in the number of
outstanding warrants and an increase in the warrant conversion
price), and a net change from financing activities of $1.2 million;
which primarily represented the proceeds received from issuance of
preferred stock, common stock and warrants, loans and payments made
on notes payable.
Capital resources for 2021
During
2021, we received equity investments in the amount of $1,944,000.
These investors received a total of 1,944 Series F preferred stock
(if the Investor elects to convert their Series F preferred stock,
each Series F preferred stock share converts into 4,000 shares of
our common stock shares).
Capital resources for 2020
During
2020, we received equity investments in the amount of $1,735,500.
These investors received a total of 1,735.5 Series E preferred
stock (if the Investor elects to convert their Series E preferred
stock, each Series E preferred stock shares converts into 4,000
shares of our common stock shares).
During
January and April 2020, we received equity investments in the
amount of $128,000. These investors received a total of 256,000
common stock shares and 256,000 warrants issued to purchase common
stock shares at a strike price of $0.25, 256,000 warrants to
purchase common stock shares at a strike price of $0.75 and 128
Series D preferred stock (if the Investor elects to convert their
Series D preferred stock, each Series D preferred stock shares
converts into 3,000 shares of our common stock shares). Of the
amount invested $38,000 was from related parties.
On
January 6, 2020, we entered into an exchange agreement with Jones
Day. Upon making a payment of $175,000, which had not yet occurred,
we will exchange $1,744,768 of debt outstanding for: $175,000, an
unsecured promissory note in the amount of $550,000; due 13 months
form the date of issuance, that may be called at any time prior to
maturity upon a payment of $150,000; and an unsecured promissory
note in the principal amount of $444,768, bearing an annualized
interest rate of 6.0% and due in four equal annual installments
beginning on the second anniversary of the date of
issuance.
On
January 8, 2020, we exchanged $2,064,366 in debt for several equity
instruments (noted below) that were determined to have a total fair
value of $2,065,548, resulting in a loss on extinguishment of debt
of $1,183 which is recorded in other income (expense) on the
accompanying consolidated statements of operations. We also issued
6,957,013 warrants to purchase common stock shares; with exercise
prices of $0.25, $0.75 and $0.20.
On June 3, 2020, we exchanged $328,422 in debt
from Auctus, (summarized in footnote 10: Convertible
Notes), for 500,000 common
stock shares and 700,000 warrants to purchase common stock shares.
The fair value of the common stock shares was $250,000 (based on a
$0.50 fair value for our stock) and of the warrants to purchase
common stock shares was $196,818 (based on a $0.281 black scholes
fair valuation). This resulted in a net loss on extinguishment of
debt of $118,396 ($446,818 fair value less the $328,422 of
exchanged debt).
On
June 30, 2020, we exchanged $125,000 in debt (during June 2020,
$125,000 in payables had been converted into short-term debt) from
Mr. James Clavijo, for 500,000 common stock shares and 250,000
warrants to purchase common stock shares. The fair value of the
common stock shares was $250,000 (based on a $0.50 fair value for
our stock) and of the warrants to purchase common stock shares was
$99,963 (based on a $0.40 black scholes fair valuation). This
resulted in a net loss on extinguishment of debt of $224,963
($349,963 fair value less the $125,000 of exchanged debt). After
the exchange transaction a balance was due Mr. Clavijo of $10,213
which was paid.
On
July 9, 2020, we entered into an exchange agreement with Mr. Bill
Wells (one of its former employees). In lieu of agreeing to dismiss
approximately half of what is owed or $220,000, Mr. Wells will
receive the following: (i) cash payments of $20,000 within 60 days
of the signing of the agreement; cash payments over time in the
amount of $90,000 in the form of an unsecured note to be executed
within 30 days of a new financing(s) totaling at least $3.0
million. The note shall bear interest of 6.0% and mature over 18
months; (iii) 66,000 common share stock options that vest at a rate
of 3,667 per month and have a $0.49 exercise price (if two
consecutive payments in (ii) are not made the stock options will be
canceled and a cash payment will be required; and (iv) the total
amount of forgiveness by creditor of approximately $110,000 shall
be prorated according to amount paid.
The
following table summarizes the debt exchanges:
|
|
Total Debt and
Accrued Interest
|
|
|
|
Warrants
(Exercise $0.25)
|
Warrants
(Exercise $0.75)
|
Warrants
(Exercise $0.20)
|
Warrants
(Exercise $0.15)
|
Warrants
(Exercise $0.50)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$145,544
|
$107,500
|
$38,044
|
291,088
|
145,544
|
145,544
|
—
|
—
|
—
|
|
K2 Medical (Shenghuo)3
|
803,653
|
771,927
|
31,726
|
1,905,270
|
704,334
|
704,334
|
496,602
|
—
|
—
|
|
Mr. Blumberg
|
305,320
|
292,290
|
13,030
|
1,167,630
|
119,656
|
119,656
|
928,318
|
—
|
—
|
|
Mr. Case
|
179,291
|
150,000
|
29,291
|
896,456
|
—
|
—
|
896,456
|
—
|
—
|
|
Mr. Grimm
|
51,050
|
50,000
|
1,050
|
255,548
|
—
|
—
|
255,548
|
—
|
—
|
|
Mr. Gould
|
111,227
|
100,000
|
11,227
|
556,136
|
—
|
—
|
556,136
|
—
|
—
|
|
Mr. Mamula
|
15,577
|
15,000
|
577
|
77,885
|
—
|
—
|
77,885
|
—
|
—
|
|
Dr. Imhoff2
|
400,417
|
363,480
|
36,937
|
1,699,255
|
100,944
|
100,944
|
1,497,367
|
—
|
—
|
|
Ms. Rosenstock1
|
50,000
|
50,000
|
—
|
100,000
|
50,000
|
50,000
|
—
|
—
|
—
|
|
Mr. James2
|
2,286
|
2,000
|
286
|
7,745
|
1,227
|
1,227
|
5,291
|
—
|
—
|
|
Auctus
|
328,422
|
249,119
|
79,303
|
500,000
|
—
|
—
|
—
|
700,000
|
—
|
|
Mr. Clavijo
|
125,000
|
125,000
|
—
|
500,000
|
—
|
—
|
—
|
—
|
500,000
|
|
Mr. Wells4
|
220,000
|
220,000
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
$2,737,787
|
$2,496,316
|
$241,471
|
7,957,013
|
1,121,705
|
1,121,705
|
4,713,603
|
700,000
|
500,000
|
1 Ms.
Rosenstock also forgave $28,986 in debt.
2 Mr.
Imhoff and Mr. James are members of the board of directors and
therefore related parties.
3 Our
COO and director, Mark Faupel, is a shareholder of Shenghuo, and a
former director, Richard Blumberg, is a managing member of
Shenghuo.
4 Mr.
Wells will also receive 66,000 common share stock options; the
details of which are explained above.
On January 16, 2020, we entered into an exchange agreement with
GPB. Under the terms of this exchange agreement, we will exchange
$3,360,811 of debt outstanding as of December 12, 2019 for the
following: (1) a cash payment of $1,500,000, (2) 7,185,000 warrants
to purchase common stock, previously outstanding, would be
exchanged for new warrants to purchase common stock shares at a
strike price of $0.20 and (3) a certain amount of preferred stock
shares for the remaining balance outstanding upon the final
exchange date. On January 8, 2021, we made the final payment of
$750,000 out of the total $1,500,000 as required by this exchange
agreement with GPB. On March 31, 2021, we issued 2,236 series F
preferred stock shares in accordance with the terms of the
agreement.
On
March 31, 2020, we entered into a securities purchase agreement
with Auctus Fund, LLC for the issuance and sale to Auctus of
$112,750 in aggregate principal amount of a 12% convertible
promissory note. On March 31, 2020, we issued the note to Auctus
and issued 250,000 five-year common stock warrants at an exercise
price of $0.16. On April 3, 2020, we received net proceeds of
$100,000. The note matures on January 26, 2021 and accrues interest
at a rate of 12% per year.
On
May 4, 2020, we received a loan from the Small Business
Administration (SBA) pursuant to the Paycheck Protection Program
(PPP) as part of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in the amount of $50,184. The Company has applied
to have the loan forgiven. We provide no assurance that we will
obtain forgiveness of the PPP Loan in whole or in
part.
On
May 20, 2020, the Company received a $70,000 loan from Mr.
Blumberg, which was paid off in June 2020.
On
May 22, 2020, we entered into an exchange agreement with Auctus.
Based on this agreement we exchanged three outstanding notes, in
the amounts of $150,000, $89,250, and $65,000 for a total amount
$304,250 of debt outstanding, as well as any accrued interest and
default penalty, for: $160,000 in cash payments (payable in monthly
payments of $20,000), converted a portion of the notes pursuant to
original terms of the notes into 500,000 restricted common stock
shares (shares were issued on June 3, 2020); and 700,000 warrants
issued to purchase common stock shares with an exercise price of
$0.15. The fair value of the common stock shares was $250,000
(based on a $0.50 fair value for our stock) and of the warrants to
purchase common stock shares was $196,818 (based on a $0.281 black
scholes fair valuation). This resulted in a net loss on
extinguishment of debt of $118,396 ($446,818 fair value less the
$328,422 of exchanged debt). During 2020, we paid $100,000 and
$20,000 of common stock to reduce the outstanding balance. As of
December 31, 2020, a balance of $40,000 remained to be paid for
these exchanged loans.
On
May 27, 2020, we received the second tranche in the amount of
$400,000, from the December 17, 2019, securities purchase agreement
and convertible note with Auctus. The net amount paid to us was
$313,000 This second tranche is part of the convertible note issued
to Auctus for a total of $2.4 million of which $700,000 has already
been provided by Auctus. The notes maturity date is December 17,
2021 and an interest rate of ten percent (10%).
Capital resources for 2019
Auctus Note
On
December 17, 2019, we entered into a securities purchase agreement
and convertible note with Auctus. The convertible note issued to
Auctus will be for a total of $2.4 million. The first tranche of
$700,000 has been received and will have a maturity date of
December 17, 2021 and an interest rate of ten percent
(10%).
Series D Financing
During
December 2019, we received equity investments in the amount of
$635,000. These investors received a total of 1,270,000 common
stock shares and 1,270,000 warrants to purchase common stock shares
at a strike price of $0.25, 1,270,000 warrants to purchase common
stock shares at a strike price of $0.75 and 635 Series D preferred
stock shares (each Series D preferred stock share converts into
3,000 shares of our common stock shares). Of the amount invested
$350,000 was from related parties.
On
February 14, 2019, we entered into a Purchase and Sale Agreement
with Everest Business Funding for the factoring of its accounts
receivable. The transaction provided us with $48,735 after $1,265
in debt issuance costs (bank costs) for a total purchase amount of
$50,000, in which we would have to repay $68,500. At a minimum we
would need to pay $535.16 per day or 20.0% of the future collected
accounts receivable or “receipts.” The effective
interest rate as calculated for this transaction is approximately
132.5%. As of December 31, 2019, $60,105 had been paid, leaving a
balance of $8,016. As of December 31, 2020, the balance of $68,121
had been paid in full.
On
May 15, 2019, we entered into a securities purchase agreement with
Eagle Equities, LLC, providing for the purchase by Eagle of a
convertible redeemable note in the principal amount of $57,750. The
note was fully funded on May 21, 2019, upon which we received
$45,000 of net proceeds (net of a 10% original issue discount and
other expenses). The note bears an interest rate of 8% and is due
and payable on May 15, 2020. The note may be converted by Eagle at
any time after five months from issuance into shares of our common
stock (as determined in the notes) calculated at the time of
conversion. The conversion price of the notes will be equal to 60%
of the average of the two lowest closing bid prices of our common
stock shares as reported on OTC Markets exchange, for the 20 prior
trading days including the day upon which we receive a notice of
conversion. The notes may be prepaid in accordance with the terms
set forth in the notes. The notes also contain certain
representations, warranties, covenants and events of default
including if we are delinquent in our periodic report filings with
the SEC and increases in the amount of the principal and interest
rates under the notes in the event of such defaults. In the event
of default, at Eagle’s option and in its sole discretion,
Eagle may consider the notes immediately due and payable. As of
December 31, 2019, the outstanding note was for $25,651, which
consisted of unamortized balance of $14,438 of a beneficial
conversion feature, unamortized original issue discount of $1,942,
unamortized debt issuance costs of $2,774 and interest of $1,166
included in accrued expenses on the accompanying consolidated
balance sheet. On May 14, 2020, the outstanding note was paid
off.
On
May 15, 2019, we entered into a securities purchase agreement with
Adar Bays, LLC, providing for the purchase by Adar of a convertible
redeemable note in the principal amount of $57,750. The note was
fully funded on May 21, 2019, upon which we received $45,000 of net
proceeds (net of a 10% original issue discount and other expenses).
The note bears an interest rate of 8% and are due and payable on
May 15, 2020. The note may be converted by Adar at any time after
five months from issuance into shares of our common stock (as
determined in the notes) calculated at the time of conversion. The
conversion price of the notes will be equal to 60% of the average
of the two lowest closing bid prices of our common stock shares as
reported on OTC Markets exchange, for the 20 prior trading days
including the day upon which we receive a notice of conversion. The
notes may be prepaid in accordance with the terms set forth in the
notes. The notes also contain certain representations, warranties,
covenants and events of default including if we are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Adar’s
option and in its sole discretion, Adar may consider the notes
immediately due and payable. In addition, we had recorded a $38,500
beneficial conversion feature, $5,250 original issue discount and
$7,500 of debt issuance costs. As of December 31, 2019, the note
outstanding increased to $84,780 as a default penalty of $27,030
was added to the outstanding balance of the note, which consisted
of unamortized balance of $14,438 of a beneficial conversion
feature, unamortized original issue discount of $1,942, unamortized
debt issuance costs of $2,774 and interest of $3,190 included in
accrued expenses on the accompanying consolidated balance sheet. On
May 22, 2020, the outstanding note was paid off.
We
will be required to raise additional funds through public or
private financing, additional collaborative relationships or other
arrangements, as soon as possible. We cannot be certain that our
existing and available capital resources will be sufficient to
satisfy our funding requirements through 2021. We are evaluating
various options to further reduce our cash requirements to operate
at a reduced rate, as well as options to raise additional funds,
including loans.
Generally, substantial capital will be required to
develop our products, including completing product testing and
clinical trials, obtaining all required U.S. and foreign regulatory
approvals and clearances, and commencing and scaling up
manufacturing and marketing our products. Any failure to obtain
capital would have a material adverse effect on our business,
financial condition and results of operations. Based on
discussions with our distributors, we currently hold and expect to
generate additional purchase orders for approximately $2.0 to $3.0
million in LuViva devices and disposables in 2021 and expect those
purchase orders to result in actual sales of $1.0 to $2.0 million
in 2021, representing what we view as current demand for our
products. The primary source for 2021
projected sales revenue is an existing $2.5 million purchase order
from SMI, our distribution and manufacturing partner for China,
Hong Kong, Macau and Taiwan. While we project that a portion of
this purchase order will be paid before the end of 2021, we cannot
be assured that this payment will be not be delayed or canceled,
just as we cannot be assured that we will generate all or any of a
number of other purchase orders, or that existing orders will not
be canceled by the distributors or that parts to build product will
be available to meet demand, such that existing orders will result
in actual sales. Because we have a short history of sales of our
products, we cannot confidently predict future sales of our
products beyond this time frame and cannot be assured of any
particular amount of sales. Accordingly, we have not identified any
particular trends with regard to sales of our
products.
Our
financial statements have been prepared and presented on a basis
assuming we will continue as a going concern. The above factors
raise substantial doubt about our ability to continue as a going
concern, as more fully discussed in Note 1 to the consolidated
financial statements contained herein and in the report of our
independent registered public accounting firm accompanying our
financial statements contained in our annual report on Form 10-K
for the year ended December 31, 2020.
Contingencies
Based
on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen
responsible for COVID-19, which has already had an impact on
financial markets, there could be additional repercussions in our
operating business, including but not limited to, the sourcing of
materials for product candidates, manufacture of supplies for
preclinical and/or clinical studies, delays in clinical operations,
which may include the availability or the continued availability of
patients for trials due to such things as quarantines, conduct of
patient monitoring and clinical trial data retrieval at
investigational study sites.
The
future impact of the outbreak is highly uncertain and cannot be
predicted, and we cannot provide any assurance that the outbreak
will not have a material adverse impact on our operations or future
results or filings with regulatory health authorities. The extent
of the impact, if any, we will depend on future developments,
including actions taken to contain the coronavirus.
Off-Balance
Sheet Arrangements
We have
no material off-balance sheet arrangements, no special purpose
entities, and no activities that include non-exchange-traded
contracts accounted for at fair value.
Item
7A. Quantitative and Qualitative
Disclosures about Market Risk.
Not
applicable.
Item
8. Financial Statements and
Supplementary Data
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UHY
LLP
Certified
Public Accountants
To the
Board of Directors and Stockholders of
Guided
Therapeutics, Inc.
Opinion
on the Financial Statements
We have
audited the accompanying consolidated balance sheets of
Guided Therapeutics, Inc. and
Subsidiary. (the “Company”) as of December 31, 2020 and 2019, and the
related consolidated statements of operations, stockholders’
deficit, and cash flows for the years then ended, and the related
notes (collectively, the “consolidated financial
statements”). In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations
and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America (“US GAAP”).
Substantial
Doubt about the Company’s Ability to Continue as a Going
Concern
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the
Company has recurring losses from operations, limited cash flow,
and an accumulated deficit. These conditions raise substantial
doubt about the Company’s ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 1. The consolidated financial statements do not
include any adjustment that might result from the outcome of this
uncertainty. Our opinion is not modified with respect to this
matter.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated 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 risk of
material misstatement of the consolidated 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
The
critical audit matters communicated below are matters arising from
the current period audit of the consolidated 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 especially
challenging, subjective or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
Fair Value Measurement of Warrants
As
disclosed in Note 3 to the consolidated financial statements, the
Company has issued warrants exercisable for common shares in the
Company that were measured at fair value as of December 31, 2020.
As observable data is not readily available, the valuation of the
warrants is determined to be a level 3 fair value measurement
according to US GAAP. The Company utilizes a binomial option
pricing model in order to determine the fair value of these
instruments. This model involves significant management judgment,
including the assessment of the volatility and discount rates used
in the model.
We have
identified the fair value of warrants as a critical audit matter.
The valuation methodology involved significant judgment by
management when developing the fair value measurement of the
warrants. This in turn led to a high degree of auditor judgment,
subjectivity and effort in performing procedures to evaluate
management’s fair value estimates and significant
assumptions.
How the Critical Audit Matter was Addressed
Our
audit procedures performed to evaluate the reasonableness of
management’s estimates and assumptions included assessing the
methodologies used by the Company and testing the significant
assumptions and underlying data used in the binomial model. We
involved our valuation specialists to assist us in analyzing the
significant assumptions underlying the model, such as the
volatility and discount rates, and determining the appropriateness
and reasonableness of the methodologies employed.
Going Concern Assessment
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
disclosed in Note 1 to the consolidated financial statements, the
Company has suffered recurring losses from operations, negative
operating cash flow, has a net accumulated deficit and expects to
continue to incur losses for at least the next twelve months. This
matter is also described in the “Emphasis of Matter –
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern” section of our report.
We
identified management’s judgments and assumptions used to
assess the Company’s ability to continue as a going concern
as a critical audit matter due to inherent complexities and
uncertainties related to the Company’s projections of
operations. Auditing these judgments and assumptions involved
especially challenging auditor judgment due to the nature and
extent of audit evidence and effort required to address these
matters.
How the Critical Audit Matter was Addressed
The
primary procedures we performed to address this critical audit
matter included the following: (1) evaluating management’s
assessment and assessing the reasonableness of key assumptions
underlying management’s conclusion, (2) evaluating the
probability that the Company will be able to reduce note payable
obligations and other operating expenditures if required, (3)
assessing management’s plans in the context of other audit
evidence obtained during the audit to determine whether it
supported or contradicted the conclusions reached by
management.
We have
served as the Company’s auditor since 2007.
UHY
LLP
Sterling Heights,
Michigan
April
5, 2021
GUIDED
THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS (in thousands)
AS
OF DECEMBER 31,
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
and cash equivalents
|
$182
|
$899
|
|
Accounts
receivable, net of allowance for doubtful accounts of $126 and $114
at December 31, 2020 and 2019, respectively
|
24
|
13
|
|
Inventory,
net of reserves of $758 and $831 at December 31, 2020 and 2019,
respectively
|
605
|
48
|
|
Other
current assets
|
85
|
70
|
|
Total
current assets
|
896
|
1,030
|
|
NONCURRENT
ASSETS:
|
|
|
|
Property
and equipment, net
|
1
|
-
|
|
Lease
asset-right, net of amortization
|
453
|
132
|
|
Other
assets
|
-
|
18
|
|
Total
noncurrent assets
|
454
|
150
|
|
TOTAL
ASSETS
|
1,350
|
1,180
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Current
portion of long-term debt
|
28
|
-
|
|
Notes
payable in default, related parties
|
1
|
349
|
|
Notes
payable in default
|
328
|
427
|
|
Short-term
notes payable
|
45
|
380
|
|
Short-term
notes payable, related parties, past due
|
51
|
646
|
|
Convertible
notes in default
|
-
|
2,915
|
|
Convertible
notes payable, past due
|
1,930
|
-
|
|
Short-term
convertible notes payable
|
951
|
73
|
|
Short-term
convertible notes payable, related parties
|
-
|
513
|
|
Accounts
payable
|
2,419
|
2,897
|
|
Accounts
payable, related parties
|
116
|
136
|
|
Accrued
liabilities
|
2,995
|
3,235
|
|
Subscription
receivable
|
-
|
635
|
|
Current
portion of lease liability
|
56
|
103
|
|
Deferred
revenue
|
42
|
101
|
|
Total
current liabilities
|
8,962
|
12,410
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
Warrants,
at fair value
|
2,203
|
5,092
|
|
Lease
liability
|
392
|
29
|
|
Derivative
liability
|
25
|
-
|
|
Long-term
convertible notes payable, net
|
-
|
15
|
|
Long-term
debt
|
23
|
-
|
|
Long-term
debt-related parties
|
600
|
569
|
|
Total
long-term liabilities
|
3,243
|
5,705
|
|
TOTAL
LIABILITIES
|
12,205
|
18,115
|
|
|
|
|
|
COMMITMENTS & CONTINGENCIES (Note 8)
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
Series
C convertible preferred stock, $.001 par value; 9.0 shares
authorized, 0.3 shares issued and outstanding as of December 31,
2020 and 2019. (Liquidation preference of $286 at December 31, 2020
and 2019).
|
105
|
105
|
|
Series
C1 convertible preferred stock, $.001 par value; 20.3 shares
authorized, 1.0 shares issued and outstanding as of December 31,
2020 and 2019. (Liquidation preference of $1,049 at December 31,
2020 and 2019).
|
170
|
170
|
|
Series
C2 convertible preferred stock, $.001 par value; 5,000 shares
authorized, 3.3 shares issued and outstanding as of December 31,
2020 and 2019. (Liquidation preference of $3,263 at December 31,
2020 and 2019).
|
531
|
531
|
|
Series D
convertible preferred stock, $.001 par value; 6.0 shares
authorized, 0.8 and nil shares issued and outstanding as of
December 31, 2020 and 2019, respectively. (Liquidation preference
of $763 and nil at December 31, 2020 and 2019),
respectively.
|
276
|
-
|
|
Series E
convertible preferred stock, $.001 par value; 5.0 shares
authorized, 1.7 and nil shares issued and outstanding as of
December 31, 2020 and 2019, respectively. (Liquidation preference
of $1,736 and nil at December 31, 2020 and 2019),
respectively.
|
1,639
|
-
|
|
Common
stock, $.001 par value; 3,000,000 shares authorized, 13,138 and
3,319 shares issued and outstanding as of December 31, 2020 and
2019, respectively
|
3,403
|
3,394
|
|
Additional
paid-in capital
|
123,109
|
118,552
|
|
Treasury
stock, at cost
|
(132)
|
(132)
|
|
Accumulated
deficit
|
(139,956)
|
(139,555)
|
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(10,855)
|
(16,935)
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
1,350
|
1,180
|
The accompanying
notes are an integral part of these consolidated
statements.
GUIDED
THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands)
FOR
THE YEARS ENDED DECEMBER 31,
|
|
|
|
|
REVENUE:
|
|
|
|
Sales
– devices and disposables, net
|
$102
|
$36
|
|
Cost
of goods recovered (sold)
|
41
|
(70)
|
|
Gross
profit (loss)
|
143
|
(34)
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
Research
and development
|
143
|
122
|
|
Sales
and marketing
|
139
|
87
|
|
General
and administrative
|
913
|
694
|
|
Total
operating expenses
|
1,195
|
903
|
|
|
|
|
|
Operating
loss
|
(1,052)
|
(937)
|
|
|
|
|
|
OTHER
INCOME (EXPENSES):
|
|
|
|
Other
income
|
271
|
48
|
|
Interest
expense
|
(1,056)
|
(1,412)
|
|
Loss
from extinguishment of debt
|
(296)
|
-
|
|
Change
in fair value of derivative liability
|
(25)
|
-
|
|
Change
in fair value of warrants
|
1,879
|
380
|
|
Total
other income (expenses)
|
773
|
(984)
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
(279)
|
(1,921)
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
-
|
-
|
|
|
|
|
|
NET
LOSS
|
(279)
|
(1,921)
|
|
|
|
|
|
PREFERRED
STOCK DIVIDENDS
|
(122)
|
-
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$(401)
|
$(1,921)
|
|
|
|
NET
LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
|
$(0.04)
|
$(0.58)
|
|
DILUTED
|
$(0.04)
|
$(0.58)
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
BASIC
|
10,767
|
3,302
|
|
DILUTED
|
10,767
|
3,302
|
The accompanying
notes are an integral part of these consolidated
statements.
GUIDED
THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2020 and 2019
(In
Thousands)
|
|
|
Preferred
Stock
Series
C1
|
Preferred
Stock
Series
C2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 1,
2019
|
-
|
$105
|
1
|
$170
|
3
|
$531
|
-
|
$-
|
-
|
$-
|
|
Shares in
transit
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Conversion of debt into common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Beneficial conversion feature of
convertible debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
BALANCE, December 31,
2019
|
-
|
$105
|
1
|
$170
|
3
|
$531
|
-
|
$-
|
-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D preferred
offering
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
276
|
-
|
-
|
|
Series E preferred
offering
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2
|
1,639
|
|
Conversion of debt into common
stock – exchange agreements
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Conversion of debt into common
stock – convertible debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of common stock for
manufacturing agreements
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of common stock for
payment of Series D preferred dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Beneficial conversion feature of
convertible debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Warrants exchanged for fixed price
warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Adjustment to warrant liability for
adoption of ASU 2017-11
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Accrued preferred
dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
BALANCE,
December 31, 2020
|
-
|
$105
|
1
|
$170
|
3
|
$531
|
1
|
$276
|
2
|
$1,639
|
The
accompanying notes are an integral part of these consolidated
statements.
GUIDED
THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2020 and 2019 (In
Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 1,
2019
|
2,669
|
$2,877
|
$118,259
|
$(132)
|
$(137,634)
|
$(15,824)
|
|
Shares in
transit
|
-
|
-
|
692
|
-
|
-
|
692
|
|
Conversion of debt
into common stock
|
650
|
517
|
(484)
|
-
|
-
|
33
|
|
Beneficial
conversion feature of convertible debt
|
-
|
-
|
77
|
-
|
-
|
77
|
|
Stock-based
compensation
|
-
|
-
|
8
|
-
|
-
|
8
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(1,921)
|
(1,921)
|
|
BALANCE, December
31, 2019
|
3,319
|
$3,394
|
$118,552
|
$(132)
|
$(139,555)
|
$(16,935)
|
|
|
|
|
|
|
|
|
|
Series D preferred
offering
|
1,526
|
1
|
460
|
-
|
-
|
737
|
|
Series E preferred
offering
|
-
|
-
|
-
|
-
|
-
|
1,639
|
|
Conversion of debt
into common stock – exchange agreements
|
7,957
|
8
|
2,871
|
-
|
-
|
2,879
|
|
Conversion of debt
into common stock – convertible debt
|
175
|
-
|
50
|
-
|
-
|
50
|
|
Issuance of common
stock for manufacturing agreements
|
12
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of common
stock for payment of Series D preferred dividends
|
149
|
-
|
40
|
-
|
-
|
40
|
|
Beneficial
conversion feature of convertible debt
|
-
|
-
|
82
|
-
|
-
|
82
|
|
Warrants exchanged
for fixed price warrants
|
-
|
-
|
117
|
-
|
-
|
117
|
|
Adjustment to
warrant liability for adoption of ASU 2017-11
|
-
|
-
|
627
|
-
|
-
|
627
|
|
Stock-based
compensation
|
-
|
-
|
310
|
-
|
-
|
310
|
|
Accrued preferred
dividends
|
-
|
-
|
-
|
-
|
(122)
|
(122)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(279)
|
(279)
|
|
BALANCE,
December 31, 2020
|
13,138
|
$3,403
|
$123,109
|
$(132)
|
$(139,956)
|
$(10,855)
|
GUIDED
THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31,
(In
Thousands)
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(279)
|
$(1,921)
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
Bad
debt expense
|
12
|
-
|
|
Inventory
reserve
|
(73)
|
|
|
Depreciation
|
-
|
21
|
|
Amortization
of debt issuance costs and discounts
|
394
|
105
|
|
Amortization
of beneficial conversion feature
|
102
|
92
|
|
Stock
based compensation
|
310
|
8
|
|
Change
in fair value of warrants
|
(1,879)
|
(380)
|
|
Loss
on extinguishment of debt
|
296
|
-
|
|
Change
in fair value of derivatives
|
25
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(23)
|
-
|
|
Inventory
|
(483)
|
66
|
|
Other
current assets
|
(15)
|
(2)
|
|
Other
assets
|
18
|
1
|
|
Accounts
payable
|
(372)
|
20
|
|
Deferred
revenue
|
(59)
|
35
|
|
Accrued
liabilities
|
151
|
1,149
|
|
Total
adjustments
|
(1,596)
|
1,115
|
|
Net
cash used in operating activities
|
(1,875)
|
(806)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Additions
to property and equipment
|
(1)
|
-
|
|
Net
cash used in investing activities
|
(1)
|
-
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds
from Series D offering, net of costs
|
102
|
635
|
|
Proceeds
from Series E offering, net of costs
|
1,639
|
-
|
|
Proceeds
from debt financing, net of discounts and debt issuance
costs
|
519
|
1,351
|
|
Payments
made on notes and loans payable
|
(1,101)
|
(281)
|
|
Net
cash provided by financing activities
|
1,159
|
1,705
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(717)
|
899
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, beginning of year
|
899
|
-
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of year
|
$182
|
$899
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF:
|
|
|
|
Cash paid
for:
|
|
|
|
Interest
|
$295
|
$14
|
|
|
|
|
|
NONCASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
Issuance
of common stock as debt repayment
|
$2,929
|
$33
|
|
Dividends
on preferred stock
|
$122
|
$-
|
|
Subscription
receivable
|
$635
|
$-
|
|
Warrants
exchanged for fixed price warrants
|
$131
|
$-
|
|
Settlement
of dividends through common stock issuance
|
$40
|
$-
|
The
accompanying notes are an integral part of these consolidated
statements.
|
GUIDED
THERAPEUTICS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 and 2019
1.
ORGANIZATION, BACKGROUND, AND BASIS OF PRESENTATION
Guided
Therapeutics, Inc. (formerly SpectRx, Inc.), together with its
wholly owned subsidiary, InterScan, Inc. (formerly Guided
Therapeutics, Inc.), collectively referred to herein as the
“Company”, is a medical
technology company focused on developing innovative medical devices
that have the potential to improve healthcare. The Company’s
primary focus is the continued commercialization of its LuViva
non-invasive cervical cancer detection device and extension of its
cancer detection technology into other cancers, including
esophageal. The Company’s technology, including products in
research and development, primarily relates to biophotonics
technology for the non-invasive detection of
cancers.
Basis
of Presentation
All
information and footnote disclosures included in the consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United
States.
A 1:800
reverse stock split of all of the Company’s issued and
outstanding common stock was implemented on March 29, 2019. As a
result of the reverse stock split, every 800 shares of issued and
outstanding common stock were converted into 1 share of common
stock. All fractional shares created by the reverse stock split
were rounded to the nearest whole share. The number of authorized
shares of common stock did not change. The reverse stock split
decreased the Company’s issued and outstanding shares of
common stock from 2,652,309,322 shares to 3,319,486 shares as of
that date with rounding. See Note 4, Stockholders’ Deficit.
Unless otherwise specified, all per share amounts are reported on a
post-stock split basis, as of December 31, 2020 and
2019.
The
Company’s prospects must be considered in light of the
substantial risks, expenses and difficulties encountered by
entrants into the medical device industry. This industry is
characterized by an increasing number of participants, intense
competition and a high failure rate. The Company has experienced
net losses since its inception and, as of December 31, 2020, it had
an accumulated deficit of approximately $140.0 million. To date,
the Company has engaged primarily in research and development
efforts and the early stages of marketing its products. The Company
may not be successful in growing sales for its products. Moreover,
required regulatory clearances or approvals may not be obtained in
a timely manner, or at all. The Company’s products may not
ever gain market acceptance and the Company may not ever generate
significant revenues or achieve profitability. The development and
commercialization of the Company’s products requires
substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. The Company expects operating
losses to continue for the foreseeable future as it continues to
expend substantial resources to complete development of its
products, obtain regulatory clearances or approvals, build its
marketing, sales, manufacturing and finance capabilities, and
conduct further research and development.
Certain
prior year amounts have been reclassified in order to conform to
the current year presentation.
Going
Concern
The
Company’s consolidated financial statements have been
prepared and presented on a basis assuming it will continue as a
going concern. The factors below raise substantial doubt about the
Company’s ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary from the outcome of this uncertainty.
At
December 31, 2020, the Company had a negative working capital of
approximately $8.0 million, accumulated deficit of $140.0 million,
and incurred a net loss of $0.4 million for the year then ended.
Stockholders’ deficit totaled approximately $10.9 million at
December 31, 2020, primarily due to recurring net losses from
operations, deemed dividends on warrants and preferred stock,
offset by proceeds from the exercise of options and warrants and
proceeds from sales of stock.
The
Company has taken the following steps to improve certain factors
that are generating the going concern opinion,
including:
●
During the end of
2019 and during 2020, the Company was able to raise over $3.5
million in equity and debt investments;
●
The
Company has executed several exchange agreements that converted of
approximately $2.7 million of debt for equity; and
●
During the quarter
ended September 30, 2020, the Company uplisted to the Over the
Counter (OTC) bulletin board;
If
sufficient capital cannot be raised during 2021, the Company will
continue its plans of curtailing operations by reducing
discretionary spending and staffing levels and attempting to
operate by only pursuing activities for which it has external
financial support. However, there can be no assurance that such
external financial support will be sufficient to maintain even
limited operations or that the Company will be able to raise
additional funds on acceptable terms, or at all. In such a case,
the Company might be required to enter into unfavorable agreements
or, if that is not possible, be unable to continue operations, and
to the extent practicable, liquidate and/or file for bankruptcy
protection.
The
Company had warrants exercisable for approximately 28.3 million
shares of its common stock outstanding at December 31, 2020, with
exercise prices ranging between $0.04 and $1.82 per share.
Exercises of in the money warrants would generate a total of
approximately $5.0 million in cash, assuming full exercise,
although the Company cannot be assured that holders will exercise
any warrants. Management may obtain additional funds through the
public or private sale of debt or equity, and grants, if
available.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Significant areas where estimates are used include the
allowance for doubtful accounts, inventory valuation and input
variables for Black-Scholes, Monte Carlo simulations and binomial
calculations. The Company uses the Monte Carlo simulations and
binomial calculations in the calculation of the fair value of the
warrant liabilities and the valuation of embedded conversion
options and freestanding warrants.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts
of Guided Therapeutics, Inc. and its wholly owned subsidiary. All
intercompany transactions are eliminated.
Accounting
Standard Updates
Recently Adopted Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments -
Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments. ASU 2016-13 requires that expected credit
losses relating to financial assets are measured on an amortized
cost basis and available-for-sale debt securities be recorded
through an allowance for credit losses. ASU 2016-13 limits the
amount of credit losses to be recognized for available-for-sale
debt securities to the amount by which carrying value exceeds fair
value and also requires the reversal of previously recognized
credit losses if fair value increases. The Company adopted the
standard on January 1, 2020. The adoption of ASU 2016-13 did not
have a material impact on the Company.
In
July, 2017, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update No. 2017-11
(“ASU 2017-11”), which addressed accounting for (I)
certain financial instruments with down round features and (II)
replacement of the indefinite deferral for mandatorily redeemable
financial instruments of certain nonpublic entities and certain
mandatorily redeemable non-controlling interests with a scope
exception. The main provisions of Part I of ASU 2017-11 is to
“change the classification analysis of certain equity-linked
financial instruments (or embedded features) with down round
features. When determining whether certain financial instruments
should be classified as liabilities or equity instruments, a down
round feature no longer precludes equity classification when
assessing whether the instrument is indexed to an entity’s
own stock. The amendments also clarify existing disclosure
requirements for equity-classified instruments. As a result, a
freestanding equity-linked financial instrument (or embedded
conversion option) no longer would be accounted for as a derivative
liability at fair value as a result of the existence of a down
round feature. For freestanding equity classified financial
instruments, the amendments require entities that present earnings
per share (EPS) to recognize the effect of the down round feature
when it is triggered. That effect is treated as a dividend and as a
reduction of income available to common shareholders in basic
EPS.” Under previous US GAAP, warrants with a down round
feature are not being considered indexed to the entity’s own
stock, which results in classification of the warrant as a
derivative liability. Under ASU 2017-11, the down round feature
qualifies for a scope exception from derivative treatment. ASU
2017-11 is effective for public companies as of December 15, 2018
and interim periods within that fiscal year. Early adoption is
permitted, including adoption in an interim period, with
adjustments reflected as of the beginning of the fiscal year. The
Company has issued financial instruments with down round features.
The Company opted to adopt ASU 2017-11 as of December 31, 2020. If
the Company had adopted the standard on the effective date the
impact would have been immaterial to the financial statements. The
impact of this adoption on the quarterly reports for 2020 would
require the following debits and (credits) as shown in the schedule
below:
|
|
|
|
|
Warrant
liability decrease
|
$870,499
|
$3,512,254
|
$2,594,111
|
|
Long-term debt
increase
|
(244,941)
|
(209,096)
|
(173,251)
|
|
Interest expense
decrease
|
(35,845)
|
(71,690)
|
(107,535)
|
|
Accumulated deficit
increase
|
13,437
|
2,691,036
|
1,808,738
|
|
Additional paid in
capital increase
|
(625,558)
|
(3,303,158)
|
(2,420,860)
|
|
Change in fair
value of warrants during the year
|
22,408
|
2,619,347
|
1,701,203
|
In
August 2018, the FASB issued Accounting Standards Update No.
2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement, or ASU 2018-13. The amendments in ASU 2018-13
eliminate, add, and modify certain disclosure requirements for fair
value measurements. The amendments are effective for the
Company’s interim and annual reporting periods beginning
after December 15, 2019, with early adoption permitted for either
the entire ASU or only the provisions that eliminate or modify
requirements. The amendments with respect to changes in unrealized
gains and losses, the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value
measurements, and the narrative description of measurement
uncertainty are to be applied prospectively. All other amendments
are to be applied retrospectively to all periods presented. The
adoption of ASU 2016-13 did not have a material impact on the
Company.
A
variety of proposed or otherwise potential accounting standards are
currently under consideration by standard-setting organizations and
certain regulatory agencies. Because of the tentative and
preliminary nature of such proposed standards, management has not
yet determined the effect, if any, that the implementation of such
proposed standards would have on the Company’s consolidated
financial statements.
Cash
Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be a cash
equivalent.
Accounts
Receivable
The
Company performs periodic credit evaluations of its
distributors’ financial conditions and generally does not
require collateral. The Company reviews all outstanding accounts
receivable for collectability on a quarterly basis. An allowance
for doubtful accounts is recorded for any amounts deemed
uncollectable. Uncollectibility, is determined based on the
determination that a distributor will not be able to make payment
and the time frame has exceeded one year. The Company does not
accrue interest receivables on past due accounts
receivable.
Concentrations
of Credit Risk
The
Company, from time to time during the years covered by these
consolidated financial statements, may have bank balances in excess
of its insured limits. Management has deemed this a normal business
risk.
Inventory
Valuation
All
inventories are stated at lower of cost or net realizable value,
with cost determined substantially on a “first-in,
first-out” basis. Selling, general, and administrative
expenses are not inventoried, but are charged to expense when
incurred. At December 31, 2020 and 2019, our inventories were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
Raw
materials
|
$1,276
|
$781
|
|
Work in
process
|
80
|
81
|
|
Finished
goods
|
7
|
17
|
|
Inventory
reserve
|
(758)
|
(831)
|
|
Total
|
$605
|
$48
|
|
|
|
|
The
company periodically reviews the value of items in inventory and
provides write-downs or write-offs of inventory based on its
assessment of market conditions. Write-downs and write-offs are
charged to cost of goods sold.
Deposits
made for long-term inventory parts were recorded in Other Assets.
On September 4, 2020, the Company paid and additional deposit of
$200,000 for the deposit of a major part in the assembly of the
Company’s devices. The Company had a prior deposit of
$292,000 with this vendor that was being held until the Company
could pay the entire balance of the $493,000 order. The Company had
reserved and recorded an expense for the entire balance of $292,000
in prior periods as it was unsure when it would have the financial
resources to pay the balance. Upon the payment of the additional
deposit the Company reversed the reserve of $292,000. The parts
were received during the year ended December 31, 2020.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation is computed using
the straight-line method over estimated useful lives of three to
seven years. Leasehold improvements are amortized at the shorter of
the useful life of the asset or the remaining lease term.
Depreciation and amortization expense are included in general and
administrative expense on the statement of operations. Expenditures
for repairs and maintenance are expensed as incurred. Property and
equipment are summarized as follows at December 31, 2020 and 2019
(in thousands):
|
|
|
|
|
|
|
|
|
Equipment
|
$1,042
|
$1,349
|
|
Software
|
652
|
740
|
|
Furniture and
fixtures
|
41
|
124
|
|
Leasehold
Improvement
|
12
|
180
|
|
|
1,747
|
2,393
|
|
Less accumulated
depreciation and amortization
|
(1,746)
|
(2,393)
|
|
Total
|
$1
|
$—
|
During
the year ended December 31, 2020, the Company disposed of
approximately $647,000 of property and equipment that was fully
depreciated.
Debt Issuance Costs
Debt
issuance costs are capitalized and amortized over the term of the
associated debt. Debt issuance costs are presented in the balance
sheet as a direct deduction from the carrying amount of the debt
liability consistent with the debt discount.
Patent Costs (Principally Legal Fees)
Costs
incurred in filing, prosecuting, and maintaining patents are
recurring, and expensed as incurred. Maintaining patents are
expensed as incurred as the Company has not yet received U.S. FDA
approval and recovery of these costs is uncertain. Such costs
aggregated approximately $17,000 and $15,000 for the year ended
December 31, 2020 and 2019, respectively.
Leases
With the implementation of ASU 2016-02,
“Leases (Topic 842)”, the Company recorded a
lease-right-of-use asset and a lease liability. The Company adopted
the standard on January 1, 2019. The implementation required the
analysis of certain criteria in determining its treatment. The
Company determined that its corporate office lease met those
criteria. The Company implemented the guidance using the
alternative transition method. Under this alternative, the
effective date would be the date of initial application. The
Company analyzed the lease at its effective date and calculated an
initial lease payment amount of $267,380 with a present value of
$213,000 using a 20% discount. See Note 8: Commitments and
Contingencies.
The
cumulative effect of initially applying the new guidance had an
immaterial impact on the opening balance of retained earnings. The
Company elected the practical expedients permitted under the
transition guidance within the new standards, which allowed the
Company to carry forward the historical lease
classification.
Accrued
Liabilities
Accrued
liabilities are summarized as follows (in thousands):
|
|
|
|
|
Compensation
|
$1,094
|
$1,123
|
|
Professional
fees
|
83
|
181
|
|
Interest
|
1,517
|
1,603
|
|
Warranty
|
-
|
2
|
|
Vacation
|
34
|
41
|
|
Preferred
dividends
|
202
|
120
|
|
Other accrued
expenses
|
65
|
165
|
|
Total
|
$2,995
|
$3,235
|
Subscription
receivables
Cash
received from investors for common stock shares that has not
completed processing is recorded as a liability to subscription
receivables. As of December 31, 2020, all common stock shares were
issued to investors. As of December 31, 2020, the outstanding
subscription receivable was nil. As of December 31, 2019, the
Company had reserved 635 Series D preferred shares and 1,270,000
common stock shares in exchange for $635,000.
Revenue
recognition
The Company follows, ASC 606 Revenue from Contracts with Customers
establishes a single and comprehensive framework which sets out how
much revenue is to be recognized, and when. The core principle is
that a vendor should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the vendor expects to be entitled in
exchange for those goods or services. Revenue will now be
recognized by a vendor when control over the goods or services is
transferred to the customer. In contrast, revenue based revenue
recognition around an analysis of the transfer of risks and
rewards; this now forms one of a number of criteria that are
assessed in determining whether control has been transferred. The
application of the core principle in ASC 606 is carried out in five
steps: Step 1 – Identify the contract with a customer: a
contract is defined as an agreement (including oral and implied),
between two or more parties, that creates enforceable rights and
obligations and sets out the criteria for each of those rights and
obligations. The contract needs to have commercial substance and it
is probable that the entity will collect the consideration to which
it will be entitled. Step 2 – Identify the performance
obligations in the contract: a performance obligation in a contract
is a promise (including implicit) to transfer a good or service to
the customer. Each performance obligation should be capable of
being distinct and is separately identifiable in the contract. Step
3 – Determine the transaction price: transaction price is the
amount of consideration that the entity can be entitled to, in
exchange for transferring the promised goods and services to a
customer, excluding amounts collected on behalf of third parties.
Step 4 – Allocate the transaction price to the performance
obligations in the contract: for a contract that has more than one
performance obligation, the entity will allocate the transaction
price to each performance obligation separately, in exchange for
satisfying each performance obligation. The acceptable methods of
allocating the transaction price include adjusted market assessment
approach, expected cost plus a margin approach, and, the residual
approach in limited circumstances. Discounts given should be
allocated proportionately to all performance obligations unless
certain criteria are met and reallocation of changes in standalone
selling prices after inception is not permitted. Step 5 –
Recognize revenue as and when the entity satisfies a performance
obligation: the entity should recognize revenue at a point in time,
except if it meets any of the three criteria, which will require
recognition of revenue over time: the entity’s performance
creates or enhances an asset controlled by the customer, the
customer simultaneously receives and consumes the benefit of the
entity’s performance as the entity performs, and the entity
does not create an asset that has an alternative use to the entity
and the entity has the right to be paid for performance to
date.
Revenue
by product line (in thousands):
|
|
|
|
|
|
|
|
Devices
|
$-
|
17
|
|
Disposables
|
2
|
2
|
|
Major part
components
|
100
|
15
|
|
Warranty
|
-
|
2
|
|
Total
|
$102
|
$36
|
Revenue
by geographic location (in thousands):
|
|
|
|
|
|
|
|
Asia
|
$102
|
$22
|
|
Europe
|
-
|
14
|
|
Total
|
$102
|
$36
|
Significant
Distributors
Accounts
receivable, that netted to a balance of $24,000, and were reserved
against, were from one distributor as of December 31, 2020. The
Allowance on Accounts Receivable was recorded on all but one
distributor. During the year ended December 31, 2020, $100,000 or
98% of the total revenue was from one distributor for the sale of
parts and cerival guides. During the year ended December 31, 2019,
revenues were from two distributors and for extended warranties.
Sales revenues from these distributors totaled $34,000 or 94% of
the total revenue for the period ended December 31,
2019.
Deferred revenue
The
Company defers payments received as revenue until earned based on
the related contracts and applying ASC 606 as required. As of
December 31, 2020, and 2019, the Company had $42,000 and $101,000
in deferred revenue, respectively.
Research
and Development
Research
and development expenses consist of expenditures for research
conducted by the Company and payments made under contracts with
consultants or other outside parties and costs associated with
internal and contracted clinical trials. All research and
development costs are expensed as incurred.
Income
Taxes
The
Company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and
tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Management provides valuation
allowances against the deferred tax assets for amounts that are not
considered more likely than not to be realized.
The Company has filed its 2019 federal and state
corporate tax returns. The Company has entered into an agreed upon
payment plan with the IRS for delinquent payroll taxes. The Company
is currently in process of setting up a payment arrangement for its
delinquent state income taxes with the State of Georgia and the
returns are currently under review by state authorities. Although
the Company has been experiencing recurring losses, it is obligated
to file tax returns for compliance with IRS regulations and that of
applicable state jurisdictions. At December 31, 2020, the Company
has approximately $71 million of net operating losses, but it has
not filed its Federal tax returns, therefore this number may not be
accurate. This net operating loss will be eligible to be carried
forward for tax purposes at federal and applicable states level. A
full valuation allowance has been recorded related the deferred tax
assets generated from the net operating losses.
The
current corporate tax rates in the U.S. is 21%.
Uncertain
Tax Positions
The
Company assesses each income tax position is assessed using a
two-step process. A determination is first made as to whether it is
more likely than not that the income tax position will be
sustained, based upon technical merits, upon examination by the
taxing authorities. If the income tax position is expected to meet
the more likely than not criteria, the benefit recorded in the
financial statements equals the largest amount that is greater than
50% likely to be realized upon its ultimate settlement. At December
31, 2020 and, 2019, there were no uncertain tax
positions.
The
Company has entered into an agreed upon payment plan with the IRS
for delinquent payroll taxes. The Company has an established
payment arrangement for its delinquent state income taxes with the
State of Georgia.
Warrants
The
Company has issued warrants, which allow the warrant holder to
purchase one share of stock at a specified price for a specified
period of time. The Company records equity instruments including
warrants issued to non-employees based on the fair value at the
date of issue. The fair value of warrants classified as equity
instruments at the date of issuance is estimated using the
Black-Scholes Model. The fair value of warrants classified as
liabilities at the date of issuance is estimated using the Monte
Carlo Simulation or Binomial model.
Stock
Based Compensation
The
Company records compensation expense related to options granted to
employees and non-employees based on the fair value of the award.
Compensation cost is recorded as earned for all unvested stock
options outstanding at the beginning of the first year based upon
the grant date fair value estimates, and for compensation cost for
all stock based payments granted or modified subsequently based on
fair value estimates.
On
July 14, 2020, the Company granted stock options to employees and
consultants. The new Stock Plan (the “Plan”) allows for
the issuance of incentive stock options, nonqualified stock
options, and stock purchase rights. The exercise price of options
was determined by the Company’s board of directors, but
incentive stock options were granted at an exercise price equal to
the fair market value of the Company’s common stock as of the
grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant.
Stock
options granted have a 10-year life and expire 90 days after
employment or upon termination of consulting agreement. Vesting
schedule varies per grantee. Generally stock options granted vest
as follows: 25% vest immediately, and the remaining stock options
vest over 33 months, beginning three months after
grant.
For
the year ended December 31, 2020 and 2019, stock based compensation
for options attributable to employees, non-employees, officers and
Board members was approximately $310,000 and $8,000, respectively.
These amounts have been included in the Company’s statements
of operations under general and administrative expense.
Compensation costs for stock options which vest over time are
recognized over the vesting period. As of December 31, 2020, and
2019 the Company had $559,000 and nil, of unrecognized compensation
costs related to granted stock options that will be recognized,
respectively.
Beneficial
Conversion Features of Convertible Securities
The
Company has adopted the provisions of ASU 2017-11 to account for
the down round features of warrants issued with private placements
effective as of January 1, 2020. In doing so, warrants with a down
round feature previously treated as a derivative liabilities in the
consolidated balance sheet and measured at fair value are
henceforth treated as equity, with no adjustment for changes in
fair value at each reporting period. Previously, the Company
accounted for conversion options embedded in convertible notes in
accordance with ASC 815. ASC 815 generally requires companies to
bifurcate conversion options embedded in convertible notes from
their host instruments and to account for them as free standing
derivative financial instruments. ASC 815 provides for an exception
to this rule when convertible notes, as host instruments, are
deemed to be conventional, as defined by ASC 815-40. The Company
accounts for convertible notes deemed conventional and conversion
options embedded in non-conventional convertible notes which
qualify as equity under ASC 815, in accordance with the provisions
of ASC 470-20, which provides guidance on accounting for
convertible securities with beneficial conversion features.
Accordingly, the Company records, as a discount to convertible
notes, the intrinsic value of such conversion options based upon
the differences between the fair value of the underlying common
stock at the commitment date of the note transaction and the
effective conversion price embedded in the note. Debt discounts
under these arrangements are amortized over the term of the related
debt.
Conversion
options that are not bifurcated as a derivative pursuant to ASC 815
and not accounted for as a separate equity component under the cash
conversion guidance are evaluated to determine whether they are
beneficial to the investor at inception (a beneficial conversion
feature) or may become beneficial in the future due to potential
adjustments. The beneficial conversion feature guidance in ASC
470-20 applies to convertible stock as well as convertible debt
which are outside the scope of ASC 815. A beneficial conversion
feature is defined as a nondetachable conversion feature that is in
the money at the commitment date. The beneficial conversion feature
guidance requires recognition of the conversion option’s
in-the-money portion, the intrinsic value of the option, in equity,
with an offsetting reduction to the carrying amount of the
instrument. The resulting discount is amortized as a dividend over
either the life of the instrument, if a stated maturity date
exists, or to the earliest conversion date, if there is no stated
maturity date. If the earliest conversion date is immediately upon
issuance, the dividend must be recognized at inception. When there
is a subsequent change to the conversion ratio based on a future
occurrence, the new conversion price may trigger the recognition of
an additional beneficial conversion feature on
occurrence.
Derivatives
The
Company reviews the terms of convertible debt issued to determine
whether there are embedded derivative instruments, including
embedded conversion options, which are required to be bifurcated
and accounted for separately as derivative financial instruments.
In circumstances where the host instrument contains more than one
embedded derivative instrument, including the conversion option,
that is required to be bifurcated, the bifurcated derivative
instruments are accounted for as a single, compound derivative
instrument.
Bifurcated
embedded derivatives are initially recorded at fair value and are
then revalued at each reporting date with changes in the fair value
reported as non-operating income or expense. When the equity or
convertible debt instruments contain embedded derivative
instruments that are to be bifurcated and accounted for as
liabilities, the total proceeds received are first allocated to the
fair value of all the bifurcated derivative instruments. The
remaining proceeds, if any, are then allocated to the host
instruments themselves, usually resulting in those instruments
being recorded at a discount from their face value. The discount
from the face value of the convertible debt, together with the
stated interest on the instrument, is amortized over the life of
the instrument through periodic charges to interest
expense.
3.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The
guidance for fair value measurements, ASC820, Fair Value
Measurements and Disclosures, establishes the authoritative
definition of fair value, sets out a framework for measuring fair
value, and outlines the required disclosures regarding fair value
measurements. Fair value is the price that would be received to
sell an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at
the measurement date. The Company uses a three-tier fair value
hierarchy based upon observable and non-observable inputs as
follow:
●
Level 1 –
Quoted market prices in active markets for identical assets and
liabilities;
●
Level 2 –
Inputs, other than level 1 inputs, either directly or indirectly
observable; and
●
Level 3 –
Unobservable inputs developed using internal estimates and
assumptions (there is little or no market date) which reflect those
that market participants would use.
The
Company records its derivative activities at fair value, which
consisted of warrants as of December 31, 2020 and 2019. The fair
value of the warrants was estimated using the Binomial Simulation
model. Gains and losses from derivative contracts are included in
net gain (loss) from derivative contracts in the statement of
operations. The fair value of the Company’s derivative
warrants is classified as a Level 3 measurement, since unobservable
inputs are used in the valuation.
The
following table presents the fair value for those liabilities
measured on a recurring basis as of December 31, 2020 and
2019:
FAIR
VALUE MEASUREMENTS (In Thousands)
The
following is summary of items that the Company measures at fair
value on a recurring basis:
|
|
Fair Value at
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in
connection with Senior Secured Debt
|
-
|
-
|
(2,203)
|
(2,203)
|
|
Derivative
liability/bifurcated conversion option in connection with Auctus
$1,100,000 loan on December 17, 2019
|
-
|
-
|
(25)
|
(25)
|
|
Total
long-term liabilities at fair value
|
$-
|
$-
|
$(2,228)
|
$(2,228)
|
|
|
Fair Value at
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in
connection with Distributor Debt
|
-
|
-
|
(114)
|
(114)
|
|
Warrants issued in
connection with Short-term loans
|
-
|
-
|
(83)
|
(83)
|
|
Warrants issued in
connection with Long-term loans
|
-
|
-
|
(893)
|
(893)
|
|
Warrants issued in
connection with Senior Secured Debt
|
-
|
-
|
(4,002)
|
(4,002)
|
|
Derivative
liability/bifurcated conversion option in connection with Auctus
$1,100,000 loan on December 17, 2019
|
-
|
-
|
-
|
-
|
|
Total
long-term liabilities at fair value
|
$-
|
$-
|
$(5,092)
|
$(5,092)
|
The following is a summary of changes to Level 3
instruments during the year ended December 31,
2020:
|
|
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2019
|
$(114)
|
$(83)
|
$(893)
|
$(4,002)
|
$-
|
$(5,092)
|
|
Transfer to equity
as a result of warrants exchanged for fixed price
warrants
|
67
|
50
|
-
|
-
|
-
|
117
|
|
Change in fair
value of derivatives during the year
|
-
|
-
|
-
|
-
|
(25)
|
(25)
|
|
Transfer to equity
as a result of adoption of ASU 2017-11
|
-
|
-
|
627
|
-
|
-
|
627
|
|
Reduction of debt
discount as result of adoption of ASU 2017-11
|
-
|
-
|
266
|
-
|
-
|
266
|
|
Change in fair
value of warrants during the year
|
47
|
33
|
-
|
1,799
|
-
|
1,879
|
|
Balance, December
31, 2020
|
$-
|
$-
|
$-
|
$(2,203)
|
$(25)
|
$(2,228)
|
As of
December 31, 2020, the fair value of warrants was approximately
$2.2 million and the fair value of
the derivative liability was $25,000. A net change of
approximately $1.9 million has been recorded to the accompanying
statement of operations for the year ended, as well as an
adjustment to the liability of $0.9 million.
4.
STOCKHOLDER’S DEFICIT
Common
Stock
The
Company has authorized 3,000,000,000 shares of common stock with
$0.001 par value, of which 13,138,282 were issued and outstanding
as of December 31, 2020. As of December 31, 2019, there were
3,000,000,000 authorized shares of common stock, of which 3,319,469
were issued and outstanding.
For the
year ended December 31, 2020, the Company issued 9,818,813 shares
of common stock as listed below:
|
Conversion of debt
into common shares – exchange agreements
|
7,957,013
|
|
Conversion of debt
into common shares
|
175,000
|
|
Shares issued for
manufacturing agreements
|
12,147
|
|
Shares issued for
payment of Series D dividends
|
148,653
|
|
Investments
|
1,526,000
|
|
Issued during the
year ended December 31, 2020
|
9,818,813
|
Summary
table of common stock share transactions:
|
Balance at December
31, 2019
|
3,319,469
|
|
Issued in
2020
|
9,818,813
|
|
Balance at December
31, 2020
|
13,138,282
|
Investments
During
2020, the Company received equity investments in the amount of
$1,735,500 and incurred fees due on these investments of $96,985.
These investors received a total of 1,736 Series E preferred stock
(if the Investor elects to convert their Series E preferred stock,
each Series E preferred stock shares converts into 4,000 shares of
the Company’s common stock shares).
During
January and April 2020, the Company received equity investments in
the amount of $128,000. These investors received a total of 256,000
common stock shares and 256,000 warrants issued to purchase common
stock shares at a strike price of $0.25, 256,000 warrants to
purchase common stock shares at a strike price of $0.75 and 128
Series D preferred stock (if the Investor elects to convert their
Series D preferred stock, each Series D preferred stock shares
converts into 3,000 shares of the Company’s common stock
shares). Of the amount invested $38,000 was from related
parties.
During
December 2019, the Company received equity investments in the
amount of $635,000. The $635,000 of investments were recorded as a
subscription liability in December 2019. The common stock shares
were issued in January 2020. These investors received a total of
1,270,000 common stock shares and 1,270,000 warrants to purchase
common stock shares at a strike price of $0.25, 1,270,000 warrants
issued to purchase common stock shares at a strike price of $0.75
and 635 Series D preferred stock (each Series D preferred stock
shares converts into 3,000 shares of the Company’s common
stock shares). Of the amount invested $350,000 was from related
parties.
For
the Series D preferred stock, the Company received equity
investments in the amount of $763,000 and incurred fees due on
these investments of $26,000.
Debt Exchanges
On January 8, 2020, the Company exchanged $2,064,366 in debt for
several equity instruments (noted below) that were determined to
have a total fair value of $2,065,548, resulting in a loss on
extinguishment of debt of $1,183 which is recorded in other income
(expense) on the accompanying consolidated statements of
operations. The Company also issued 6,957,013 warrants to purchase
common stock shares; with exercise prices of $0.25, $0.75 and
$0.20. In addition, one of the investors forgave approximately
$29,000 of debt, which was recorded as a gain for extinguishment of
debt.
On June 3, 2020, the Company exchanged $328,422 in
debt from Auctus, (summarized in footnote 10: Convertible
Notes), for 500,000 common
stock shares and 700,000 warrants to purchase common stock shares.
The fair value of the common stock shares was $250,000 (based on a
$0.50 fair value for the Company’s stock) and of the warrants
to purchase common stock shares was $196,818 (based on a $0.281
black scholes fair valuation). This resulted in a net loss on
extinguishment of debt of $118,396 ($446,818 fair value less the
$328,422 of exchanged debt).
On
June 30, 2020, the Company exchanged $125,000 in debt (during June
2020, $125,000 in payables had been converted into short-term debt)
from Mr. James Clavijo, for 500,000 common stock shares and 250,000
warrants to purchase common stock shares. The fair value of the
common stock shares was $250,000 (based on a $0.50 fair value for
the Company’s stock) and of the warrants to purchase common
stock shares was $99,963 (based on a $0.40 black scholes fair
valuation). This resulted in a net loss on extinguishment of debt
of $224,963 ($349,963 fair value less the $125,000 of exchanged
debt). After the exchange transaction a balance was due to Mr.
Clavijo of $10,213 which was paid.
On
July 9, 2020, the Company entered into an exchange agreement with
Mr. Bill Wells (one of its former employees) for an outstanding
debt to him of $220,000. In lieu of agreeing to dismiss
approximately half of what is owed by the Company, Mr. Wells will
receive the following: (i) cash payments of $20,000 within 60 days
of the signing of the agreement; cash payments over time in the
amount of $90,000 in the form of an unsecured note with the Company
to be executed within 30 days of a new financing(s) totaling at
least $3.0 million. The note shall bear interest of 6.0% and mature
over 18 months; (ii) 66,000 common share stock options that vest at
a rate of 3,667 per month and have a $0.49 exercise price (if two
consecutive payments in (iii) are not made the stock options will
be canceled and a cash payment will be required; and (iv) the total
amount of forgiveness by creditor of approximately $110,000 shall
be prorated according to amount paid. During the year ended
December 31, 2020, the Company made a payment of $20,000; this
payment allowed the Company to reduce $40,000 in debt, with the
corresponding $20,000 difference recorded as a gain.
The
following table summarizes the debt exchanges:
|
|
Total Debt and
Accrued Interest
|
|
|
|
Warrants
(Exercise $0.25)
|
Warrants
(Exercise $0.75)
|
Warrants
(Exercise $0.20)
|
Warrants
(Exercise $0.15)
|
Warrants
(Exercise $0.50)
|
|
Aquarius
|
$145,544
|
$107,500
|
38,044
|
$291,088
|
145,544
|
145,544
|
-
|
-
|
-
|
|
K2 Medical (Shenghuo)3
|
803,653
|
771,927
|
31,726
|
1,905,270
|
704,334
|
704,334
|
496,602
|
-
|
-
|
|
Mr. Blumberg
|
305,320
|
292,290
|
13,030
|
1,167,630
|
119,656
|
119,656
|
928,318
|
-
|
-
|
|
Mr. Case
|
179,291
|
150,000
|
29,291
|
896,456
|
-
|
-
|
896,456
|
-
|
-
|
|
Mr. Grimm
|
51,050
|
50,000
|
1,050
|
255,548
|
-
|
-
|
255,548
|
-
|
-
|
|
Mr. Gould
|
111,227
|
100,000
|
11,227
|
556,136
|
-
|
-
|
556,136
|
-
|
-
|
|
Mr. Mamula
|
15,577
|
15,000
|
577
|
77,885
|
-
|
-
|
77,885
|
-
|
-
|
|
Dr. Imhoff2
|
400,417
|
363,480
|
36,937
|
1,699,255
|
100,944
|
100,944
|
1,497,367
|
-
|
-
|
|
Ms. Rosenstock1
|
50,000
|
50,000
|
-
|
100,000
|
50,000
|
50,000
|
-
|
-
|
-
|
|
Mr. James2
|
2,286
|
2,000
|
286
|
7,745
|
1,227
|
1,227
|
5,291
|
-
|
-
|
|
Auctus
|
328,422
|
249,119
|
79,303
|
500,000
|
-
|
-
|
-
|
700,000
|
-
|
|
Mr. Clavijo
|
125,000
|
125,000
|
-
|
500,000
|
-
|
-
|
-
|
-
|
500,000
|
|
Mr. Wells4
|
220,000
|
220,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
$2,737,787
|
$2,496,316
|
$241,471
|
7,957,013
|
1,121,705
|
1,121,705
|
4,713,603
|
700,000
|
500,000
|
1 Ms.
Rosenstock also forgave $28,986 in debt to the
Company.
2 Mr.
Imhoff and Mr. James are members of the board of directors and
therefore related parties.
3 The
Company’s COO and director, Mark Faupel, is a shareholder of
Shenghuo, and a former director, Richard Blumberg, is a managing
member of Shenghuo.
4 Mr.
Wells will also receive 66,000 common share stock options; the
details of which are explained above.
Preferred Stock
The
Company has authorized 5,000,000 shares of preferred stock with a
$.001 par value. The board of directors has the authority to issue
these shares and to set dividends, voting and conversion rights,
redemption provisions, liquidation preferences, and other rights
and restrictions. The board of directors designated 525,000 shares
of preferred stock redeemable convertible preferred stock, none of
which remain outstanding, 33,000 shares of preferred stock as
Series B Preferred Stock, none of which remain outstanding, 9,000
shares of preferred stock as Series C Convertible Preferred Stock,
(the “Series C Preferred Stock”), of which 286 were
issued and outstanding at December 31, 2020 and 2019, respectively
and 20,250 shares of preferred stock as Series C1 Preferred Stock,
of which 1,050 shares were issued and outstanding at December 31,
2020 and 2019. In addition, some holders separately agreed to
exchange each share of the Series C1 Preferred Stock held for one
(1) share of the Company’s newly created Series C2 Preferred
Stock. In total, for 3,262.25 shares of Series C1 Preferred Stock
to be surrendered, the Company issued 3,262.25 shares of Series C2
Preferred Stock. At December 31, 2020, shares of Series C2 had a
conversion price of $0.50 per share, such that each share of Series
C preferred stock would convert into approximately 2,000 shares of
the Company’s common stock.
In
2019 and 2020, the board of directors designated 6,000 shares of
preferred stock as Series D Preferred Stock, 763 of which remain
outstanding, and 6,000 shares of preferred stock as Series E
Preferred Stock, 1,736 of which remain outstanding.
Series C Convertible Preferred Stock
Pursuant
to the Series C certificate of designations, shares of Series C
preferred stock are convertible into common stock by their holder
at any time and may be mandatorily convertible upon the achievement
of specified average trading prices for the Company’s common
stock. At December 31, 2020 and 2019, there were 286 shares
outstanding with a conversion price of $0.50 per share, such that
each share of Series C preferred stock would convert into
approximately 2,000 shares of the Company’s common stock; for
a total convertible of 572,000 common stock shares, subject to
customary adjustments, including for any accrued but unpaid
dividends and pursuant to certain anti-dilution provisions, as set
forth in the Series C certificate of designations. The conversion
price will automatically adjust downward to 80% of the then-current
market price of the Company’s common stock 15 trading days
after any reverse stock split of the Company’s common stock,
and 5 trading days after any conversions of the Company’s
outstanding convertible debt.
Holders
of the Series C preferred stock are entitled to quarterly
cumulative dividends at an annual rate of 12.0% until 42 months
after the original issuance date (the “Dividend End
Date”), payable in cash or, subject to certain conditions,
the Company’s common stock. In addition, upon conversion of
the Series C preferred stock prior to the Dividend End Date, the
Company will also pay to the converting holder a “make-whole
payment” equal to the number of unpaid dividends through the
Dividend End Date on the converted shares. At December 31, 2020,
the “make-whole payment” for a converted share of
Series C preferred stock would convert to 200 shares of the
Company’s common stock. The Series C preferred stock
generally has no voting rights except as required by Delaware law.
Upon the Company’s liquidation or sale to or merger with
another corporation, each share will be entitled to a liquidation
preference of $1,000, plus any accrued but unpaid dividends. In
addition, the purchasers of the Series C preferred stock received,
on a pro rata basis, warrants exercisable to purchase an aggregate
of approximately 1 share of Company’s common stock. The
warrants contain anti-dilution adjustments in the event that the
Company issues shares of common stock, or securities exercisable or
convertible into shares of common stock, at prices below the
exercise price of such warrants. As a result of the anti-dilution
protection, the Company is required to account for the warrants as
a liability recorded at fair value each reporting period. At
December 31, 2020, the exercise price per share was
$512,000.
Series C1 Convertible Preferred Stock
Between
April 27, 2016 and May 3, 2016, the Company entered into various
agreements with certain holders of Series C preferred stock,
including directors John Imhoff and Mark Faupel, pursuant to which
those holders separately agreed to exchange each share of Series C
preferred stock held for 2.25 shares of the Company’s newly
created Series C1 Preferred Stock and 12 (9,600 pre-split) shares
of the Company’s common stock (the “Series C
Exchanges”). In connection with the Series C Exchanges, each
holder also agreed to roll over the $1,000 stated value per share
of the holder’s shares of Series C1 Preferred Stock into the
next qualifying financing undertaken by the Company on a
dollar-for-dollar basis and, except in the event of an additional
$50,000 cash investment in the Company by the holder, to execute a
customary “lockup” agreement in connection with the
financing. In total, for 1,916 shares of Series C preferred stock
surrendered, the Company issued 4,312 shares of Series C1 Preferred
Stock and 29 shares of common stock.
On
August 31, 2018, 3,262.25 shares of Series C1 Preferred Stock were
surrendered, and the Company issued 3,262.25 shares of Series C2
Preferred Stock.
At
December 31, 2020, there were 1,049.25 shares outstanding with a
conversion price of $0.50 per share, such that each share of Series
C1 preferred stock would convert into approximately 2,000 shares of
the Company’s common stock; for a total convertible of
2,098,500 common stock shares.
The
Series C1 preferred stock has terms that are substantially the same
as the Series C preferred stock, except that the Series C1
preferred stock does not pay dividends (unless and to the extent
declared on the common stock) or at-the-market “make-whole
payments” and, while it has the same anti-dilution
protections afforded the Series C preferred stock, it does not
automatically reset in connection with a reverse stock split or
conversion of our outstanding convertible debt.
Series C2 Convertible Preferred Stock
On
August 31, 2018, the Company entered into agreements with certain
holders of the Company’s Series C1 Preferred Stock, including
the chairman of the Company’s board of directors, and the
Chief Operating Officer and a director of the Company pursuant to
which those holders separately agreed to exchange each share of the
Series C1 Preferred Stock held for one (1) share of the
Company’s newly created Series C2 Preferred Stock. In total,
for 3,262.25 shares of Series C1 Preferred Stock to be surrendered,
the Company issued 3,262.25 shares of Series C2 Preferred Stock. At
December 31, 2020, shares of Series C2 had a conversion price of
$0.50 per share, such that each share of Series C preferred stock
would convert into approximately 2,000 shares of the
Company’s common stock; for a total convertible of 6,524,500
common stock shares.
The
terms of the Series C2 Preferred Stock are substantially the same
as the Series C1 Preferred Stock, except that (i) shares of Series
C1 Preferred Stock may not be convertible into the Company’s
common stock by their holder for a period of 180 days following the
date of the filing of the Certificate of Designation (the
“Lock-Up Period”); (ii) the Series C2 Preferred Stock
has the right to vote as a single class with the Company’s
common stock on an as-converted basis, notwithstanding the Lock-Up
Period; and (iii) the Series C2 Preferred Stock will automatically
convert into that number of securities sold in the next Qualified
Financing (as defined in the Exchange Agreement) determined by
dividing the stated value ($1,000 per share) of such share of
Series C2 Preferred Stock by the purchase price of the securities
sold in the Qualified Financing.
Series D Convertible Preferred Stock
On
January 8, 2020, the Company entered into a Security Agreement with
the Series D Investors (the “Series D Security
Agreement”) pursuant to which all obligations under the
Series D Certificate of Designation are secured by all of the
Company’s assets and personal properties, with certain
accredited investors, including the Chief Executive Officer, Chief
Operating Officer and a director of the Company. In total, for
$763,000 the Company issued 763 shares of Series D Preferred Stock,
1,526,000 common stock shares, 1,526,000 common stock warrants,
exercisable at $0.25, and 1,526,000 common stock warrants,
exercisable $0.75. Each Series D Preferred Stock is convertible
into 3,000 common stock shares. The Series D Preferred Stock will
have cumulative dividends at the rate per share of 10% per annum.
The stated value and liquidation preference on the Series D
Preferred Stock is $554.
Each
share of Series D Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series D
Certificate of Designation (the “Series D Conversion
Price”). The conversion of Series D Preferred is subject to a
4.99% beneficial ownership limitation, which may be increased to
9.99% at the election of the holder of the Series D Preferred. If
the average of the VWAPs (as defined in the Series D Certificate of
Designation) for any consecutive 5 trading day period
(“Measurement Period”) exceeds 200% of the then Series
D Conversion Price and the average daily trading volume of the
Common Stock on the primary trading market exceeds 1,000 shares per
trading day during the Measurement Period (subject to adjustments),
the Company may redeem the then outstanding Series D Preferred, for
cash in an amount equal to aggregate Stated Value then outstanding
plus accrued but unpaid dividends .
The
Series D Warrants may be exercised cashlessly if there is no
effective registration statement covering the Common Stock issuable
upon exercise of the Series D Warrants. The Series D Warrants
contain a 4.99% beneficial ownership blocker which may be increased
to 9.99% at the holder’s election.
On
January 8, 2020, the Company also entered into a Registration
Rights Agreement (the “Series D Registration Rights Agreement
“) with the Series D Investors pursuant to which the Company
agreed to file with the SEC, a registration statement on a Form S-3
(or on other appropriate form if a Form S-3 is not available)
covering the Common Stock issuable upon conversion of the Series D
Warrants within 90 days of the date of the Registration Rights
Agreement and cause such registration statement to be declared
effective within 120 days of the date of the Registration Rights
Agreement. All reasonable expenses related to such registration
shall be borne by the Company.
During
August 2020, the Company issued 148,653 common stock shares for the
payment of Series D Preferred Stock dividends accrued. As of
December 31, 2020, the Company had accrued dividends of
$14,306.
Series E Convertible Preferred Stock
During
year ended December 31, 2020, the Company entered into a Security
Agreement with the Series E Investors (the “Series E Security
Agreement”) pursuant to which all obligations under the
Series E Certificate of Designation are secured by all of the
Company’s assets and personal properties, with certain
accredited investors. In total, for $1,736,000 the Company issued
1,736 shares of Series E Preferred Stock. Each Series E Preferred
Stock is convertible into 4,000 common stock shares. The Series E
Preferred Stock will have cumulative dividends at the rate per
share of 6% per annum. The stated value and liquidation preference
on the Series E Preferred Stock is $1,736. The Company incurred
fees due on these investments of $91,895.
Each
share of Series E Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series E
Certificate of Designation (the “Series E Conversion
Price”). The conversion of Series E Preferred is subject to a
4.99% beneficial ownership limitation, which may be increased to
9.99% at the election of the holder of the Series E Preferred. If
the average of the VWAPs (as defined in the Series E Certificate of
Designation) for any consecutive 5 trading day period
(“Measurement Period”) exceeds 200% of the then Series
E Conversion Price and the average daily trading volume of the
Common Stock on the primary trading market exceeds 1,000 shares per
trading day during the Measurement Period (subject to adjustments),
the Company may redeem the then outstanding Series E Preferred, for
cash in an amount equal to aggregate Stated Value then outstanding
plus accrued but unpaid dividends. As of December 31, 2020, the
Company had not issued shares as payment of Series E Preferred
Stock dividends. As of December 31, 2020, the Company had accrued
dividends of $67,247.
Warrants
The
following table summarizes transactions involving the
Company’s outstanding warrants to purchase common stock for
the year ended December 31, 2020:
|
|
Warrants
(Underlying
Shares)
|
|
Outstanding,
January 1, 2020
|
46,016,840
|
|
Issuances
|
11,270,013
|
|
Cancelled /
Expired
|
(70)
|
|
Exchanged in debt
restructuring
|
(28,962,508)
|
|
Exercised
|
—
|
|
Outstanding,
December 31, 2020
|
28,324,275
|
The
Company had the following shares reserved for the warrants as of
December 31, 2020:
|
Warrants
(Underlying Shares)
|
|
Exercise Price
|
Expiration Date
|
|
4,262
|
(1)
|
$1.824
per share
|
March
19, 2021
|
|
7,185,000
|
(2)
|
$0.20
per share
|
February
12, 2023
|
|
1,725,000
|
(3)
|
$0.04
per share
|
February
21, 2021
|
|
325,000
|
(4)
|
$0.18
per share
|
April
4, 2022
|
|
215,000
|
(5)
|
$0.25
per share
|
July
1, 2022
|
|
100,000
|
(6)
|
$0.25
per share
|
September
1, 2022
|
|
7,500,000
|
(7)
|
$0.20
per share
|
December
17, 2024
|
|
250,000
|
(8)
|
$0.16
per share
|
March
31, 2025
|
|
2,597,705
|
(9)
|
$0.25
per share
|
December
30, 2022
|
|
2,597,705
|
(10)
|
$0.75
per share
|
December
30, 2022
|
|
4,713,603
|
(11)
|
$0.20
per share
|
December
30, 2022
|
|
60,000
|
(12)
|
$0.25
per share
|
April
23, 2023
|
|
50,000
|
(13)
|
$0.25
per share
|
December
30, 2022
|
|
50,000
|
(14)
|
$0.75
per share
|
December
30, 2022
|
|
700,000
|
(15)
|
$0.15
per share
|
May
21, 2023
|
|
250,000
|
(16)
|
$0.50
per share
|
June
23, 2023
|
|
1,000
|
(17)
|
$0.50
per share
|
August
10, 2022
|
|
28,324,275
|
|
|
|
|
(1)
|
Issued
to investors for a loan in March 2018.
|
|
(2)
|
Exchanged in
January 2020 from amount issued as part of a February 2016 private
placement with senior secured
debt
holder
|
|
(3)
|
Issued
to a placement agent in conjunction with a February 2016 private
placement with senior secured debt holder
|
|
(4)
|
Issued
to investors for a loan in April 2019
|
|
(5)
|
Issued
to investors for a loan in July 2019
|
|
(6)
|
Issued
to investors for a loan in September 2019
|
|
(7)
|
Issued
to investors for a loan in December 2019
|
|
(8)
|
Issued
to investors for a loan in January 2020
|
|
(9)
|
Issued
to investors as part of Series D Preferred Stock Capital raise in
December 2020
|
|
(10)
|
Issued
to investors as part of Series D Preferred Stock Capital raise in
December 2020
|
|
(11)
(12)
(13)
(14)
(15)
(16)
|
Issued
to investors as part of Series D Preferred Stock Capital raise in
December 2020
Issued
to a consultant for services in April 2020
Issued
to an investor as part of Series D Preferred Stock Capital raise in
April 2020
Issued
to an investor as part of Series D Preferred Stock Capital raise in
April 2020
Issued
to an investor for a loan in May 2020
Issued
to an investor in exchange of debt in June 2020
|
|
(17)
|
Issued
to a consultant for services in August 2020
|
Footnote
(2) - On January 16, 2020, the Company entered into an exchange
agreement with GPB. This exchange agreement canceled the existing
outstanding warrants, which were subject to anti-dilution and
ratchet provisions, to purchase 35,937,500 shares of common stock
at an exercise price of $0.04 per share and resulted in the
issuance of new warrants to purchase 7,185,000 share of common
stock at a price of $0.20 per share. The new warrants have fixed
exercise prices of $0.20. On January 8, 2021, the Company met the
requirement by making the final payment of $750,000 as required by
the exchange agreement with GPB, which canceled the previously
issued warrants.
Warrant
to purchase 70 shares of common stock were not recorded as their
exercise price after considering reverse stock splits, were greater
than $60,000 and deemed to be immaterial for
disclosure
On
January 6, 2020, the Company entered into a finder’s fee
agreement. The finder will receive 5% cash and 5% warrants on all
funds it raises including bridge loans. The three-year common stock
share warrants will have an exercise price of $0.25. During 2019
and 2020, the finder helped the Company raise $300,000, therefore a
fee of $31,650 was paid and 126,600 warrants will be
issued.
On
January 22, 2020, the Company entered into a promotional agreement
with a consultant. The consultant will provide the Company investor
and public relations services. As compensation for these services,
the Company will issue a total of 5,000,000 common stock warrants
at a $0.25 strike price and expiring in three years, if the
following conditions occur: 1,250,000 common stock warrants, 6
months after the close of the Series D Preferred Stock units, if
the minimum common stock share price is a at least $0.50 based on a
30-day VWAP, with a two year term; 1,250,000 common stock warrants,
12 months after the close of the Series D Preferred Stock units, if
the minimum common stock share price is at least $0.75 based on a
30-day VWAP, with a one and half year term; 1,250,000 common stock
warrants, 18 months after the close of the Series D Preferred Stock
units, if the minimum common stock share price is a minimum of
$1.00 based on a 30-day VWAP, with a one year term; and 1,250,000
common stock warrants, 24 months after the close of the Series D
Preferred Stock units, if the minimum common stock share price is a
minimum of $1.25 based on a 30-day VWAP, with a one year term. The
consultant agrees to a 10.0% blocker at any single point in time it
cannot own 10.0% of the total common stock shares
outstanding.
5.
INCOME TAXES
The
Company has incurred net operating losses ("NOLs") since inception.
As of December 31, 2020, the company had NOL carryforwards
available through 2038 of approximately $71.4 million to offset its
future income tax liability. The company has recorded deferred tax
assets but reserved against, due to uncertainties related to
utilization of NOLs as well as calculation of effective tax rate.
Utilization of existing NOL carryforwards may be limited in future
years based on significant ownership changes. The company is in the
process of analyzing their NOL and has not determined if the
company has had any change of control issues that could limit the
future use of NOL. NOL carryforwards that were generated after 2017
of approximately $6.2 million may only be used to offset 80% of
taxable income and are carried forward indefinitely.
Components of
deferred taxes are as follow at December 31 (in
thousands):
|
|
|
|
|
Deferred tax
assets:
|
|
|
|
Warrant
liability
|
$617
|
$1,087
|
|
Accrued executive
compensation
|
519
|
515
|
|
Reserves and
other
|
421
|
468
|
|
Net operating loss
carryforwards
|
17,851
|
18,961
|
|
|
19,408
|
21,031
|
|
Valuation
allowance
|
(19,408)
|
(21,031)
|
|
Net deferred tax
assets
|
$0
|
$0
|
The
following is a summary of the items that caused recorded income
taxes to differ from taxes computed using the statutory federal
income tax rate for the years ended December 31:
|
|
|
|
|
Statutory federal
tax rate
|
21%
|
21%
|
|
State taxes, net of
federal benefit
|
4
|
4
|
|
Nondeductible
expenses
|
-
|
-
|
|
Valuation
allowance
|
(25)
|
(25)
|
|
Effective tax
rate
|
0%
|
0%
|
The
Company applies the applicable authoritative guidance which
prescribes a comprehensive model for the manner in which a company
should recognize, measure, present and disclose in its financial
statements all material uncertain tax positions that the Company
has taken or expects to take on a tax return. As of December 31,
2020, the Company has no uncertain tax positions. There are no
uncertain tax positions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly
increase or decrease within twelve months from December 31,
2020.
The
Company files federal income tax returns and income tax returns in
various state tax jurisdictions with varying statutes of
limitations. The Company has filed its 2019 federal and state
corporate tax returns.
The
provision for income taxes as of the dates indicated consisted of
the following (in thousands) December 31:
|
|
|
|
|
Current
|
$-
|
$-
|
|
Deferred
|
-
|
-
|
|
Deferred
provision (credit)
|
1,623
|
434
|
|
Change
in valuation allowance
|
(1,623)
|
(434)
|
|
Total provision for
income taxes
|
$-
|
$-
|
In 2020
and 2019, our effective tax rate differed from the U.S. federal
statutory rate due to the valuation allowance over our deferred tax
assets.
6.
STOCK OPTIONS
The
Company’s 1995 Stock Plan (the “Plan”) has
expired pursuant to its terms, so zero shares remained available
for issuance at December 31, 2020 and 2019. The Plan allowed for
the issuance of incentive stock options, nonqualified stock
options, and stock purchase rights. The exercise price of options
was determined by the Company’s board of directors, but
incentive stock options were granted at an exercise price equal to
the fair market value of the Company’s common stock as of the
grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant. As of December 31, 2020, and 2019, there were no stock
options outstanding and exercisable.
On
July 14, 2020, the Company granted 1,800,000 stock options to
employees and consultants. The new Stock Plan (the
“Plan”) allows for the issuance of incentive stock
options, nonqualified stock options, and stock purchase rights. The
exercise price of options was determined by the Company’s
board of directors, but incentive stock options were granted at an
exercise price equal to the fair market value of the
Company’s common stock as of the grant date. Options
historically granted have generally become exercisable over four
years and expire ten years from the date of grant. The plan
provides for stock options to be granted up to 10% of the
outstanding common stock shares.
The
fair value of options issued during the year ended December 31,
2020 was estimated using the Black-Scholes option-pricing model and
the following assumptions:
●
a
dividend yield of 0%;
●
an
expected life of 10 years;
●
volatility
of 153.1%; and
●
risk-free
interest rate of 0.98%.
The
fair value of each option grant made during 2020 was estimated on
the date of each grant using the Black-Scholes option pricing model
and recognized as stock based compensation rateably over the option
vesting periods, which approximates the service
period.
The
following lists the stock options granted:
|
|
|
|
|
Number of Stock
Options Granted
|
|
|
|
|
|
|
|
|
|
|
|
Cartwright,
Gene
|
07/14/2020
|
07/13/2030
|
Vesting(1)
|
400,000
|
$0.49
|
$0.483
|
|
Faupel,
Mark
|
07/14/2020
|
07/13/2030
|
Vesting(1)
|
400,000
|
$0.49
|
$0.483
|
|
Imhoff,
John
|
07/14/2020
|
07/13/2030
|
Immediate
|
50,000
|
$0.49
|
$0.483
|
|
James,
Michael
|
07/14/2020
|
07/13/2030
|
Immediate
|
50,000
|
$0.49
|
$0.483
|
|
Clavijo,
James
|
07/14/2020
|
07/13/2030
|
Vesting(1)
|
300,000
|
$0.49
|
$0.483
|
|
Battle,
Lisa
|
07/14/2020
|
07/13/2030
|
Vesting(1)
|
178,000
|
$0.49
|
$0.483
|
|
Sufka,
Melissa
|
07/14/2020
|
07/13/2030
|
Vesting(1)
|
178,000
|
$0.49
|
$0.483
|
|
Waterstreet,
Alesandra
|
07/14/2020
|
07/13/2030
|
Vesting(1)
|
178,000
|
$0.49
|
$0.483
|
|
Wells,
William
|
07/14/2020
|
07/13/2030
|
18
months
|
66,000
|
$0.49
|
$0.483
|
|
|
1,800,000
|
|
|
(1) 25% immediate and
25% each year thereafter; 36 months in total
As
of December 31, 2020, the Company has issued and outstanding
options to purchase a total of 1,800,000 shares of common stock
pursuant to the plan, at a weighted average exercise price of $0.49
per share.
As
of December 31, 2020,
|
Stock options
vested
|
641,909
|
|
Stock options
unvested
|
1,158,091
|
|
Total stock options
granted at December 31, 2020
|
1,800,000
|
Stock
option activity for the year ended December 31, 2020 is as
follows:
|
|
|
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
Outstanding at
beginning of year
|
-
|
-
|
|
Options
granted
|
1,800,000
|
$0.49
|
|
Options
exercised
|
-
|
-
|
|
Options
expired/forfeited
|
-
|
-
|
|
Outstanding at end
of the period
|
1,800,000
|
$0.49
|
7.
LITIGATION AND CLAIMS
From
time to time, the Company may be involved in various legal
proceedings and claims arising in the ordinary course of business.
Management believes that the dispositions of these matters,
individually or in the aggregate, are not expected to have a
material adverse effect on the Company’s financial condition.
However, depending on the amount and timing of such disposition, an
unfavorable resolution of some or all of these matters could
materially affect the future results of operations or cash flows in
a particular year.
As of
December 31, 2020, and 2019, there was no accrual recorded for any
potential losses related to pending litigation.
8.
COMMITMENTS AND CONTINGENCIES
Operating
Leases
In
December 2009, the Company moved its offices, which comprise its
administrative, research and development, marketing and production
facilities to 5835 Peachtree Corners East, Suite B, Peachtree
Corners, Georgia 30092. The Company leased approximately 23,000
square feet under a lease that expired in June 2017. In July 2017,
the Company leased the offices on a month to month basis. On
February 23, 2018, the Company modified its lease to reduce its
occupancy to 12,835 square feet. The fixed monthly lease expense
will be: $13,859 each month for the period beginning January 1,
2018 and ending June 30, 2018; $8,022 each month for the period
beginning April 1, 2018 and ending June 30, 2019; $8,268 each month
for the period beginning April 1, 2019 and ending June 30, 2020;
and $8,514 each month for the period beginning April 1, 2020 and
ending March 31, 2021.
On
October 27, 2020, the Company amended the lease of its offices in
Norcross, Georgia. The Company has extended the lease for sixty-two
(62) months. The lease will begin on April 1, 2021 and end on May
31, 2026. Rents for the one-year periods beginning on April 1, 2021
and ending on May 31, 2026 are: $8,824, $9,091, $9,370, $9,648,
$9,936, and $10,236. Also, the Company will pay any additional rent
for the Company’s proportionate share of basic costs and all
other charges when due and payable under the lease. These costs are
accounted for as variable costs and are not determinable at the
lease commencement date and are not included in the measurement of
the lease asset and liabilities. The landlord will abate the rent
for the first two months. In addition, the Company will have a
five-year renewal option effective June 1, 2026. The rent for the
renewal option will be based upon prevailing market rate and shall
escalate by three percent (3%). As of December 31, 2020, the right
of use asset calculated for the amended lease was
$453,322.
The
Company recognizes lease expense on a straight-line basis over the
estimated lease term and combine lease and non-lease components.
Future minimum rental payments at December 31, 2020 under
non-cancellable operating leases for office space and equipment are
as follows (in thousands):
|
Year
|
|
|
2021
|
$91
|
|
2022
|
108
|
|
2023
|
112
|
|
2024
|
115
|
|
2025
|
119
|
|
Thereafter
|
50
|
|
Total
|
595
|
|
Less:
Interest
|
147
|
|
Present value of
lease liability
|
$448
|
Related
Party Contracts
On
June 5, 2016, the Company entered into a license agreement with
Shenghuo Medical, LLC pursuant to which the Company granted
Shenghuo an exclusive license to manufacture, sell and distribute
LuViva in Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar,
Philippines, Singapore, Thailand, and Vietnam. Shenghuo was already
the Company’s exclusive distributor in China, Macau and Hong
Kong, and the license extended to manufacturing in those countries
as well. Under the terms of the license agreement, once Shenghuo
was capable of manufacturing LuViva in accordance with ISO 13485
for medical devices, Shenghuo would pay the Company a royalty equal
to $2.00 or 20% of the distributor price (subject to a discount
under certain circumstances), whichever is higher, per disposable
distributed within Shenghuo’s exclusive territories. In
connection with the license grant, Shenghuo was to underwrite the
cost of securing approval of LuViva with Chinese Food and Drug
Administration. At its option, Shenghuo also would provide up to
$1.0 million in furtherance of the Company’s efforts to
secure regulatory approval for LuViva from the U.S. Food and Drug
Administration, in exchange for the right to receive payments equal
to 2% of the Company’s future sales in the United States, up
to an aggregate of $4.0 million. Pursuant to the license agreement,
Shenghuo had the option to have a designee appointed to the
Company’s board of directors (current director Richard
Blumberg is the designee).
On
September 6, 2016, the Company entered into a royalty agreement
with one of its directors, John Imhoff, and another stockholder,
Dolores Maloof, pursuant to which the Company sold to them a
royalty of future sales of single-use cervical guides for LuViva.
Under the terms of the royalty agreement, and for consideration of
$50,000, the Company will pay them an aggregate perpetual royalty
initially equal to $0.10, and from and after October 2, 2016, equal
to $0.20, for each disposable that the Company sells (or that is
sold by a third party pursuant to a licensing arrangement with the
Company).
Other Commitments
On
July 24, 2019, Shandong Yaohua Medical Instrument Corporation
(“SMI”), agreed to modify its existing agreement. Under
the terms of this modification, the Company agreed to grant (1)
exclusive manufacturing rights, excepting the disposable cervical
guides for the Republic of Turkey, and the final assembly rights
for Hungary, and (2) exclusive distribution and sales for LuViva in
jurisdictions, subject to the following terms and conditions.
First, SMI shall complete the payment for parts, per the purchase
order, for five additional LuViva devices. Second, in consideration
for the $885,144 that the Company received, SMI will receive 12,147
common stock shares. Third, SMI shall honor all existing purchase
orders it has executed to date with the Company, in order to
maintain jurisdiction sales and distribution rights. If SMI needs
to purchase cervical guides then it will do so at a cost including
labor, plus ten percent markup. The Company will provide 200
cervical guides at no cost for the clinical trials. Fourth, the
Company and SMI will make best efforts to sell devices after CFDA
approval. With an initial estimate of year one sales of 200 LuViva
devices; year two sales of 500 LuViva devices; year three sales of
1,000 LuViva devices; and year four sales of 1,250 LuViva devices.
Fifth, SMI shall pay for entire costs of securing approval of
LuViva with the Chinese FDA. Sixth, SMI shall arrange, at its sole
cost, for a manufacturer in China to build tooling to support
manufacture. In addition, SMI retains the right to manufacture for
China, Hong Kong, Macau and Taiwan, where SMI has distribution and
sales rights. For each single-use cervical guide sold by SMI in the
jurisdictions, SMI shall transfer funds to escrow agent at a rate
of $1.90 per device chip. If within 18 months of the
license’s effective date, SMI fails to achieve
commercialization of LuViva in China, SMI shall no longer have any
rights to manufacture, distribute or sell LuViva. Commercialization
is defined as: filing an application with the Chinese FDA for the
approval of LuViva; any assembly or manufacture of the devices or
disposables that begins in China; and purchase of at least 10
devices and disposables for clinical evaluations and regulatory use
and or sales in the jurisdictions. On March 5, 2020 the Company had
recorded an accrued liability for SMI of $692,335, which was
reclassified to additional paid in capital and 12,147 common stock
shares.
Contingencies
Based
on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen
responsible for COVID-19, which has already had an impact on
financial markets, there could be additional repercussions to the
Company’s operating business, including but not limited to,
the sourcing of materials for product candidates, manufacture of
supplies for preclinical and/or clinical studies, delays in
clinical operations, which may include the availability or the
continued availability of patients for trials due to such things as
quarantines, conduct of patient monitoring and clinical trial data
retrieval at investigational study sites.
The
future impact of the outbreak is highly uncertain and cannot be
predicted, and the Company cannot provide any assurance that the
outbreak will not have a material adverse impact on the
Company’s operations or future results or filings with
regulatory health authorities. The extent of the impact to the
Company, if any, will depend on future developments, including
actions taken to contain the coronavirus.
9.
NOTES PAYABLE
Notes
Payable in Default
At December 31, 2020 and 2019, the Company
maintained notes payable to both related and non-related parties
totaling approximately $329,000 and $776,000, respectively. These
notes are short term, straight-line amortizing notes. The notes
carry annual interest rates between 0% and 10% and have default
rates as high as 20%. The Company is accruing interest at the
default rate of 18.0% on two of the loans. As described
in Note 4: STOCKHOLDERS’
DEFICIT, certain notes payable
in default outstanding had been exchanged for equity and cash as
described in the note.
As
described previously, the Company entered into an exchange
agreement with Dr. Imhoff. Based on this agreement the Company
exchanged $199,417 of short-term debt outstanding.
As
described previously, the Company entered into an exchange
agreement with Ms. Rosenstock. Based on this agreement the Company
exchanged $50,000 of short-term debt outstanding and Mr. Rosenstock
forgave $28,986.
On February 8, 2019, a note payable in default to
Aquarius as reported in the Company’s Form 10-K report
- Footnote 9: Notes payable
– Note payable in default, was exchanged for a note with a convertible
option. The balance on the note was $107,500 and accrued interest
was $38,044 for a total of $145,544 outstanding. As of December 31,
2020, the Company had entered into an exchange agreement with
Aquarius. Based on this agreement the Company exchanged $145,544 of
debt outstanding for: 291,088 common stock shares; 145,544 warrants
issued to purchase common stock shares at a strike price of $0.25;
and 145,544 warrants issued to purchase common stock shares at a
strike price of $0.75.
On
July 1, 2019, the Company entered into a loan agreement with
Accilent Capital Management Inc / Rev Royalty Income and Growth
Trust (“Accilent”), providing for the purchase by
Accilent of an unsecured promissory note in the principal amount of
$49,389 (CAD$ 65,500). The note was fully funded on July 9, 2019
(net of an 8% original issue discount and other expenses). The note
bears an interest rate of 16% and was due and payable on September
11, 2019. Following maturity, demand, default, or judgment and
until actual payment in full, interest rate shall be paid at the
rate of 19% per annum. The Company issued 315,000 warrants at an
exercise price of $0.25 per warrant and exercisable within 3 years
from issuance (the “Initial Warrants”). As of December
31, 2020, the loan had been paid off. As of December 31, 2019,
$57,946 remained outstanding, which included a fee of $4,951 and
interest of $4,606.
As
described previously, the Company entered into an exchange
agreement with Mr. Blumberg. Based on this agreement the Company
exchanged $82,320 of short-term debt outstanding.
As
described previously, the Company entered into an exchange
agreement with Mr. James. Based on this agreement the Company
exchanged $2,286 of short-term debt outstanding.
The
following table summarizes the Notes payable in default, including related
parties:
|
|
|
|
|
Dr.
Imhoff
|
$-
|
$199
|
|
Dr.
Cartwright
|
1
|
2
|
|
Ms.
Rosenstock
|
-
|
50
|
|
Mr.
Fowler
|
26
|
26
|
|
Mr.
Mermelstein
|
285
|
244
|
|
GHS
|
-
|
-
|
|
GPB
|
17
|
17
|
|
Aquarius
|
-
|
108
|
|
Accilent
|
|
58
|
|
Mr.
Blumberg
|
-
|
70
|
|
Mr.
James
|
-
|
2
|
|
Notes
payable in default
|
$329
|
$776
|
The
notes payable to related parties was $1,000 of the $329,000 balance
at December 31, 2020 and $349,000 of the $776,000 balance at
December 31, 2019.
Short
Term Notes Payable
At
December 31, 2020 and 2019, the Company maintained short term notes
payable to both related and non-related parties totaling $96,000
and $1,026,000, respectively. These notes are short term,
straight-line amortizing notes. The notes carry annual interest
rates between 5% and 19%.
As
described previously, the Company entered into an exchange
agreement with Dr. Imhoff. Based on this agreement the Company
exchanged $201,000 of short-term debt outstanding.
The
Company issued promissory notes to Mr. Cartwright and Mr. Faupel,
in the amounts of approximately $48,000 and $4,000, respectively.
The notes were initially issued with 0% interest, however interest
increased to 6.0% interest 90 days after the Company received
$1,000,000 in financing proceeds.
On
August 22, 2018, the Company issued a promissory note to Mr. Case
for $150,000 in aggregate principal amount of a 6% promissory note
for an aggregate purchase price of $157,500 (representing a $7,500
original issue discount). As of December 31, 2020, the Company had
exchanged $179,291 of debt outstanding for: 896,456 common stock
shares; and 896,455 warrants issued to purchase common stock shares
at a strike price of $0.20. As of December 31, 2019, the Company
had not repaid the note and original issue discount of $157,500
($7,500 is recorded in accrued expenses).
As
described previously, the Company entered into an exchange
agreement with Mr. Mamula. Based on this agreement the Company
exchanged $15,577 of short-term debt outstanding.
On
September 19, 2018, and February 15, 2019, the Company issued
promissory notes to Mr. Gould for $50,000 each in aggregate
principal amount of a 6% promissory note for an aggregate purchase
price of $52,500 each (representing a $2,500 original issue
discount). As of December 31, 2020, the Company had entered into an
exchange agreement with Mr. Gould. Based on this agreement the
Company exchanged $111,227 of debt outstanding for: 556,136 common
stock shares; and 556,136 warrants issued to purchase common stock
shares at a strike price of $0.20. As of December 31, 2019, the
Company had not repaid the note and original issue discount of
$52,500 ($2,500 is recorded in accrued expenses) and therefore the
accrued interest rate increased to 12%.
As
described previously, the Company entered into an exchange
agreement with K2 Medical. Based on this agreement the Company
exchanged $203,000 of short-term debt outstanding.
On
February 14, 2019, the Company entered into a Purchase and Sale
Agreement with Everest Business Funding for the sale of its
accounts receivable. The transaction provided the Company with
$48,735 after $1,265 in debt issuance costs (bank costs) for a
total purchase amount of $50,000, in which the Company would have
to repay $68,500. At a minimum the Company would need to pay
$535.16 per day or 20.0% of the future collected accounts
receivable or “receipts.” The effective interest rate
as calculated for this transaction is approximately 132.5%. As of
December 31, 2019, $60,105 had been paid, leaving a balance of
$8,016. As of December 31, 2020, the balance of $68,121 had been
paid in full.
In
July 2019, the Company entered into a premium finance agreement to
finance its insurance policies totaling $142,000. The note requires
monthly payments of $14,459, including interest at 4.91% and
matures in April 2020. As of December 31, 2020, the balance was
paid in full. The balance due on insurance policies totaled $57,483
at December 31, 2019.
On
July 4, 2020, the Company entered into a premium finance agreement
to finance its insurance policies totaling $109,000. The note
requires monthly payments of $11,299, including interest at 4.968%
and matures in April 2021. As of December 31, 2020, the balance was
$44,916.
As
described previously, the Company entered into an exchange
agreement with Mr. Blumberg. Based on this agreement the Company
exchanged $223,000 of short-term debt outstanding.
As
described previously, the Company entered into an exchange
agreement with Mr. Grimm. Based on this agreement the Company
exchanged $51,050 of short-term debt outstanding.
On
June 30, 2020, the Company exchanged $125,000 in debt (during June
2020, $125,000 in payables had been converted into short-term debt)
from Mr. James Clavijo, for 500,000 common stock shares and 250,000
warrants to purchase common stock shares. The fair value of the
common stock shares was $250,000 (based on a $0.50 fair value for
the Company’s stock) and of the warrants to purchase common
stock shares was $99,963 (based on a $0.40 black scholes fair
valuation). This resulted in a net loss on extinguishment of debt
of $224,963 ($349,963 fair value less the $125,000 of exchanged
debt). After the exchange transaction a balance was due Mr. Clavijo
of $10,213 which was paid.
The
following table summarizes the Short-term notes payable, including related
parties:
|
|
|
|
|
Dr.
Imhoff
|
$-
|
$167
|
|
Dr.
Cartwright
|
46
|
48
|
|
Dr.
Faupel
|
5
|
5
|
|
Ms.
Mamula
|
-
|
15
|
|
Mr.
Case
|
-
|
150
|
|
Mr.
Gould
|
-
|
100
|
|
K2
(Shenghuo)
|
-
|
203
|
|
Premium Finance
(insurance)
|
45
|
58
|
|
Everest
|
-
|
8
|
|
Mr.
Grimm
|
-
|
49
|
|
Mr.
Blumberg
|
-
|
223
|
|
Short-term
notes payable, including related parties
|
$96
|
$1,026
|
The
short-term notes payable past due to related parties was $51,000 of
the $96,000 balance at December 31, 2020 and $645,000 of the
$1,026,000 balance at December 31, 2019.
Troubled Debt Restructuring
The
debt extinguished for Notes Payable was $1,808,712 in debt for
common stock shares and warrants as described above that were
determined to have a total fair value of $2,235,811, resulting in a
loss on extinguishment of debt of $427,099 which is recorded in
other income (expense) on the accompanying consolidated statements
of operations. Included in that total was an amount that an
investor forgave of approximately $29,000 of debt, which was
recorded as a gain for extinguishment of debt. This debt
extinguished met the criteria for troubled debt. The basic criteria
are that the borrower is troubled, ie., they are having financial
difficulties, and a concession is granted by the creditor. Due to
the Company being in default on several of its loans the debt is
considered troubled debt. The troubled debt restructuring for Note
Payable, would have increased the loss per share calculation from
.04 to .08.
10.
SHORT-TERM CONVERTIBLE DEBT
Related
Party Convertible Note Payable – Short-Term
On
June 5, 2016, the Company entered into a license agreement with a
distributor pursuant to which the Company granted the distributor
an exclusive license to manufacture, sell and distribute the
Company’s LuViva Advanced Cervical Cancer device and related
disposables in Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar,
Philippines, Singapore, Thailand, and Vietnam. The distributor was
already the Company’s exclusive distributor in China, Macau
and Hong Kong, and the license will extend to manufacturing in
those countries as well.
As partial consideration for, and as a condition
to, the license, and to further align the strategic interests of
the parties, the Company agreed to issue a convertible note to the
distributor, in exchange for an aggregate cash investment of
$200,000. The note will provide for a payment to the distributor of
$240,000, due upon consummation of any capital raising transaction
by the Company within 90 days and with net cash proceeds of at
least $1.0 million. As of December 31, 2019, the Company had a note due of $512,719. As
of December 31, 2020, the note
had been exchanged for common stock shares and warrants. This was
part of the exchange made on January 8, 2020, for $790,544 of debt
outstanding for: 1,905,270 common stock shares issued on March 23,
2020; 496,602 warrants issued to purchase common stock shares at a
strike price of $0.20; 692,446 warrants issued to purchase common
stock shares at a strike price of $0.25; and 692,446 warrants
issued to purchase common stock shares at a strike price of
$0.75.
Troubled Debt Restructuring
The
debt extinguished for Related Party Convertible Note Payable
– Short-Term, which closed on January 8, 2020, the Company
exchanged in part $600,653 in debt for several common stock shares
and warrants as described above. The exchange resulted in a gain of
$249,938. This debt extinguished met the criteria for troubled
debt. The basic criteria are that the borrower is troubled, i.e.,
they are having financial difficulties, and a concession is granted
by the creditor. Due to the Company being in default on several of
its loans the debt is considered troubled debt. The troubled debt
restructuring for Related Party Convertible Note Payable –
Short-Term, would have reduced the loss per share calculation from
.04 to .01.
Short-term Convertible Notes Payable
Auctus
On
December 17, 2019, the Company entered into a securities purchase
agreement and convertible note with Auctus. The convertible note
issued to Auctus will be for a total of $2.4 million. The first
tranche of $700,000 was received in December 2019 and matures
December 17, 2021 and accrues interest at a rate of ten percent
(10%). The note may not be prepaid in whole or in part except as
otherwise explicitly allowed. Any amount of principal or interest
on the note which is not paid when due shall bear interest at the
rate of the lessor of 24% or the maximum permitted by law (the
“default interest”). The variable conversion prices
shall equal the lesser of: (i) the lowest trading price on the
issue date, and (ii) the variable conversion price. The variable
conversion price shall mean 95% multiplied by the market price (the
market price means the average of the five lowest trading prices
during the period beginning on the issue date and ending on the
maturity date), minus $0.04 per share, provided however that in no
event shall the variable conversion price be less than $0.15. If an
event of default under this note occurs and/or the note is not
extinguished in its entirety prior to December 17, 2020 the $0.15
price shall no longer apply. In connection with the first tranche
of $700,000, the Company issued to 7,500,000 warrants to purchase
common stock at an exercise price of $0.20. The fair value of the
warrants at the date of issuance was $745,972 and was $635,000
allocated to the warrant liability and a loss of $110,972 was
recorded at the date of issuance for the amount of the fair value
in excess of the net proceeds received of $635,000. The $700,000
proceeds were received net of debt issuance costs of $65,000 (net
proceeds of $635,000, after administrative and legal expenses
Company received $570,000). The Company used $65,000 of the
proceeds to make a partial payment of the $89,250 convertible
promissory note issued on July 3, 2018 to Auctus. On May 27, 2020,
the second tranche of $400,000 was received. The last tranche of
$1.3 million will be received within 60 days of the S-1
registration statement becoming effective. The conversion price of
the notes will be at market value with a minimum conversion amount
of $0.15. The last two tranches will have warrants attached. As of
December 31, 2020, and 2019, $700,000 remained outstanding and
accrued interest of $73,889 and $2,722, respectively. Further, as
December 31, 2020 and 2019, the Company had unamortized debt
issuance costs of $33,854 and $64,000, respectively and an
unamortized debt discount on warrants of $330,729, and $621,271,
respectively and providing a net balance of $501,989 and $12,007,
respectively. The Company also recorded a liability for the fair
value of derivative liability in the amount of $25,000 as of
December 31, 2020.
On
May 27, 2020, the Company received the second tranche in the amount
of $400,000, from the December 17, 2019, securities purchase
agreement and convertible note with Auctus. The net amount paid to
the Company was $313,000 This second tranche is part of the
convertible note issued to Auctus for a total of $2.4 million of
which $700,000 has already been provided by Auctus. The notes
maturity date is December 17, 2021 and an interest rate of ten
percent (10%). The note may not be prepaid in whole or in part
except as otherwise explicitly allowed. Any amount of principal or
interest on the note which is not paid when due shall bear interest
at the rate of the lessor of 24% or the maximum permitted by law
(the “default interest”). The variable conversion
prices shall equal the lesser of: (i) the lowest trading price on
the issue date, and (ii) the variable conversion price. The
variable conversion price shall mean 95% multiplied by the market
price (the market price means the average of the five lowest
trading prices during the period beginning on the issue date and
ending on the maturity date), minus $0.04 per share, provided
however that in no event shall the variable conversion price be
less than $0.15. If an event of default under this note occurs
and/or the note is not extinguished in its entirety prior to
December 17, 2020 the $0.15 price shall no longer apply. The last
tranche of $1.3 million will be received within 60 days of the S-1
registration statement becoming effective. The conversion price of
the notes will be at market value with a minimum conversion amount
of $0.15. In addition, as part of this transaction the Company was
required to pay a 2.0% fee to a registered broker-dealer. As of
December 31, 2020, $400,000 remained outstanding and accrued
interest of $24,222. Further, as of December 31, 2020, the Company
had unamortized debt issuance costs of $47,086, providing a net
balance of $352,914.
The
total outstanding balance for the first two tranches outstanding as
of December 31, 2020, was approximately $1,100,000.
In
addition, the Company determined that the conversion option needed
to be bifurcated from the debt arrangement and will be valued at
fair value each reporting period. The initial value at the date of
issuance deemed to be $0 due to the presence of the $0.15 floor
price. As of December 31, 2020, the Company calculated an intrinsic
value of the bifurcation to be $8,425.
On March 31, 2020, we entered into a securities
purchase agreement with Auctus Fund, LLC for the issuance and sale
to Auctus of $112,750 in aggregate principal amount of a 12%
convertible promissory note. On March 31, 2020, we issued the note
to Auctus and issued 250,000 five-year common stock warrants at an
exercise price of $0.16. On April 3, 2020, we received net proceeds
of $100,000. The note matures on January 26, 2021 and accrues
interest at a rate of 12% per year. We may not prepay the note, in
whole or in part. After the 90th calendar
day after the issuance date, and ending on the later of maturity
date and the date of payment of the default amount, Auctus may
convert the note, at any time, in whole or in part, provided such
conversion does not provide Auctus with more than 4.99% of the
outstanding common share stock. The conversion may be made
converted into shares of the our common stock, at a conversion
price equal to the lesser of: (i) the lowest Trading Price during
the twenty-five (25) trading day period on the last trading prior
to the issue date and (ii) the variable conversion price (55%
multiplied by the market price, market price means the lowest
trading price for the common stock during the twenty-five (25)
trading day period ending on the latest complete trading day prior
to the conversion date. Trading price is the lowest trade price on
the trading market as reported. The note includes customary events
of default provisions and a default interest rate of 24% per year.
As of December 31, 2020, the
note outstanding was $112,750, which consisted of unamortized
balance of $8,424 of a beneficial conversion feature, unamortized
original issue discount of $5,100, unamortized debt issuance costs
of $5,517 and interest of $10,260 included in accrued expenses on
the accompanying consolidated balance sheet.
Other Short-Term Convertible Notes Payable
On
May 15, 2019, the Company entered into a securities purchase
agreement with Eagle Equities, LLC, providing for the purchase by
Eagle of a convertible redeemable note in the principal amount of
$57,750. The note was fully funded on May 21, 2019, upon which the
Company received $45,000 of net proceeds (net of a 10% original
issue discount and other expenses). The note bears an interest rate
of 8% is due and payable on May 15, 2020. The note may be converted
by Eagle at any time after five months from issuance into shares of
the Company common stock (as determined in the notes) calculated at
the time of conversion. The conversion price of the notes will be
equal to 60% of the average of the two lowest closing bid prices of
the Company’s common stock shares as reported on OTC Markets
exchange, for the 20 prior trading days including the day upon
which the Company receives a notice of conversion. The notes may be
prepaid in accordance with the terms set forth in the notes. The
notes also contain certain representations, warranties, covenants
and events of default including if the Company are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Eagle’s
option and in its sole discretion, Eagle may consider the notes
immediately due and payable. During 2020, Eagle provided a
forbearance to the Company on the default after a payment was made.
On May 15, 2019, the Company had recorded a $38,500 beneficial
conversion feature, $5,250 original issue discount and $7,500 of
debt issuance costs. As of December 31, 2019, the outstanding note
was for $25,651, which consisted of unamortized balance of $14,438
of a beneficial conversion feature, unamortized original issue
discount of $1,942, unamortized debt issuance costs of $2,774 and
interest of $1,166 included in accrued expenses on the accompanying
consolidated balance sheet. On May 14, 2020, the outstanding note
was paid off.
On
May 15, 2019, the Company entered into a securities purchase
agreement with Adar Bays, LLC, providing for the purchase by Adar
of a convertible redeemable note in the principal amount of
$57,750. The note was fully funded on May 21, 2019, upon which the
Company received $45,000 of net proceeds (net of a 10% original
issue discount and other expenses). The note bears an interest rate
of 8% and are due and payable on May 15, 2020. The note may be
converted by Adar at any time after five months from issuance into
shares of the Company common stock (as determined in the notes)
calculated at the time of conversion. The conversion price of the
notes will be equal to 60% of the average of the two lowest closing
bid prices of the Company’s common stock shares as reported
on OTC Markets exchange, for the 20 prior trading days including
the day upon which the Company receives a notice of conversion. The
notes may be prepaid in accordance with the terms set forth in the
notes. The notes also contain certain representations, warranties,
covenants and events of default including if the Company are
delinquent in our periodic report filings with the SEC and
increases in the amount of the principal and interest rates under
the notes in the event of such defaults. In the event of default,
at Adar’s option and in its sole discretion, Adar may
consider the notes immediately due and payable. During 2020, Adar
provided a forbearance to the Company on the default after a
payment was made. On May 15, 2019, the Company had recorded a
$38,500 beneficial conversion feature, $5,250 original issue
discount and $7,500 of debt issuance costs. As of December 31,
2019, the note outstanding increased to $84,780 as a default
penalty of $27,030 was added to the outstanding balance of the
note, which consisted of unamortized balance of $14,438 of a
beneficial conversion feature, unamortized original issue discount
of $1,942, unamortized debt issuance costs of $2,774 and interest
of $3,190 included in accrued expenses on the accompanying
consolidated balance sheet. On May 22, 2020, the outstanding note
was paid off.
The
following table summarizes the Convertible notes payable –
short-term:
|
|
|
|
|
Shenghuo
|
$-
|
$513
|
|
Auctus
|
1,213
|
-
|
|
Eagle
|
-
|
26
|
|
Adar
|
-
|
85
|
|
Debt discount and
issuance costs to be amortized
|
(262)
|
(9)
|
|
Debt discount
related to beneficial conversion
|
-
|
(29)
|
|
Convertible
notes payable – short-term, including related
parties
|
$951
|
$586
|
11.
CONVERTIBLE DEBT
Senior Secured Promissory Note
Effective
February 12, 2016, the Company entered into a securities purchase
agreement with GPB Debt Holdings II LLC (“GPB”) for the
issuance of a $1,437,500 senior secured convertible note for an
aggregate purchase price of $1,029,000 (representing an original
issue discount of $287,500 and debt issuance costs of $121,000). On
May 28, 2016, the balance of the note was increased by $87,500 for
a total principal balance of $1,525,000. On December 7, 2016, the
Company entered into an exchange agreement with GPB and as a result
the principal balance increased by a transfer $312,500 (see –
“Senior Secured Promissory Note”) for a total principal
balance of $1,837,500. In addition, GPB received warrants for 2,246
shares of the Company’s common stock. The Company allocated
proceeds totaling $359,555 to the fair value of the warrants at
issuance and recorded an additional discount on the debt. The
warrant is exercisable at any time, pending availability of
sufficient authorized but unissued shares of the Company’s
common stock, at an exercise price per share equal to the
conversion price of the convertible note, subject to certain
customary adjustments and anti-dilution provisions contained in the
warrant. The warrant has a five-year term. At December 31, 2019,
the common stock purchase warrant exercise price had been adjusted
to $0.04 and the number of common stock shares exchangeable for was
35,937,500.
As
of December 31, 2020, and as a result of the January 15, 2020
exchange agreement, the common stock purchase warrant exercise
price had been adjusted to $0.20 and the number of common stock
shares exchangeable for was 7,185,000. This exchange is subject to
the Company meeting repayment conditions. Those conditions involved
in part the repayment of $450,000, $100,000 and $950,000 for the
completion of each Auctus financing tranche. The Company has
executed Tranche 1 and 2 and has paid GPB $550,000. On September 2,
2020, the Company made a payment of $50,000, which provided the
Company an additional four-month forbearance as well as paying and
additional $150,000 to reduce the balance outstanding. On January
8, 2021, the Company made the final payment of $750,000 as required
by this exchange agreement with GPB.
The
convertible note required monthly interest payments at a rate of
17% per year and was due on February 12, 2018. Subject to resale
restrictions and the availability of sufficient authorized but
unissued shares of the Company’s common stock, the note is
convertible at a conversion price equal to 70% of the average
closing price per share for the five trading days prior to
issuance. In an event of default, the note will accrue interest at
a rate of 22%. Upon the occurrence of an event of default, the
holder may require the Company to redeem the convertible note at
120% of the outstanding principal balance, but as of December 31,
2020 and 2019, had not done so. The note is secured by a lien on
substantially all of the Company’s assets.
In
connection with the transaction, on February 12, 2016, the Company
and GPB entered into a four-year consulting agreement, pursuant to
which the investor will provide management consulting services to
the Company in exchange for a royalty payment, payable quarterly,
equal to 3.85% of the Company’s revenues from the sale of
products. As of December 31, 2020, and 2019, GPB had earned
approximately $35,000 and $31,000 in royalties that are unpaid,
respectively. Based on the exchange agreement GPB will no longer
earn royalties.
As
of December 31, 2020, the balance due on the convertible debt was
$1,709,414, consisting of principal of $1,362,384 and a prepayment
penalty of $347,030 and compared to December 31, 2019, where the
balance due on the convertible debt was $2,177,030 consisting of
principal of $1,830,000 and a prepayment penalty of $347,030.
Interest accrued on the note total $1,233,637 and $1,175,925 at
December 31, 2020 and 2019, respectively, and is included in
accrued expenses on the accompanying consolidated balance
sheet.
The
Company used a placement agent in connection with the transaction.
For its services, the placement agent received a cash placement fee
equal to 4% of the aggregate gross proceeds from the transaction
and a warrant to purchase shares of common stock equal to an
aggregate of 6% of the total number of shares underlying the
securities sold in the transaction, at an exercise price equal to,
and terms otherwise identical to, the warrant issued to the
investor. Finally, the Company agreed to reimburse the placement
agent for its reasonable out-of-pocket expenses.
Secured Promissory Note
Effective
September 10, 2014, the Company sold a secured promissory note to
an accredited investor, GHS Investments, LLC (“GHS”),
with an initial principal amount of $1,275,000, for a purchase
price of $570,000 (less an original issue discount of $560,000 and
debt issuance costs of $145,000). The note is secured by the
Company’s current and future accounts receivable and
inventory and accrued interest at a rate of 18% per year. The note
has subsequently been assigned to different credited investors and
the terms of the note were amended extend the maturity until August
31, 2016. The balance of this note was reduced by a transfer of
$306,863 as part of a debt restructuring that occurred on December
7, 2016 (see – “Senior Secured Promissory Note”).
The holder may convert the outstanding balance into shares of
common stock at a conversion price per share equal to 75% of the
lowest daily volume average price of common stock during the five
days prior to conversion. During 2020, GHS converted $50,454 of
principal and interest for 175,000 common stock shares. In
addition, during 2020, as part of the conversion of the outstanding
note, the Company paid $134,133 in cash for principal and interest
that remained outstanding. As of December 31, 2020, the note was
paid in full. The balance due on the note was $148,223 at December
31, 2019.
Other Convertible Debt
GHS
Effective
May 19, 2017, the Company entered into a securities purchase
agreement with GHS for the purchase of a $66,000 convertible
promissory note for the purchase of $60,000 in net proceeds
(representing a 10% original issue discount of $6,000). The accrued
interest rate of 8% per year until it matured in December 31, 2017.
Beginning February 2018, the note is convertible, in whole or in
part, at the holder’s option, into shares of the
Company’s stock at a conversion price equal to 60% of the
lowest trading price during the 25 trading days prior to
conversion. Upon the occurrence of an event of default, the note
will bear interest at a rate of 20% per year and the holder of the
note may require the Company to redeem or convert the note at 150%
of the outstanding principal balance. GHS converted $12,700 of
principal and accrued interest during the year ended December 31,
2019. On December 16, 2020, the Company paid $25,000 on the note
balance. At December 31, 2020 and 2019, the balance due on this
note was $63,520 and $83,094, respectively including a default
penalty of $37,926. Interest accrued on the note totals $17,816,
and $16,641 at December 31, 2020 and 2019, and is included in
accrued expenses on the accompanying consolidated balance sheet,
respectively.
Effective
May 17, 2018, the Company entered into a securities purchase
agreement with GHS for the purchase of a convertible promissory
note with a principal of $9,250 for a purchase price of $7,500
(representing an original issue discount of $750 and debt issuance
costs of $1,000). The note accrued interest at a rate of 8% per
year until its matured June 17, 2019. Beginning February 2018, the
note is convertible, in whole or in part, at the holder's option,
into shares of the Company's stock at a conversion price equal to
70% of the lowest trading price during the 25 trading days prior to
conversion (if the note cannot be converted due to Depository Trust
Company freeze then rate decreases to 60%). Upon the occurrence of
an event of default, the note will bear interest at a rate of 20%
per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At December 31, 2020 and 2019, the balance due on this
note was $14,187, including a default penalty of $4,937. Interest
accrued on the note totals $5,006 and $3,972 at December 31, 2020
and 2019, respectively, and is included in accrued expenses on the
accompanying consolidated balance sheet.
Effective
June 22, 2018, the Company entered into a securities purchase
agreement with GHS for the purchase of a $68,000 convertible
promissory note for a purchase price of $60,000 (representing an
original issue discount of $6,000 and debt issuance costs of
$2,000). At issuance, the Company recorded a $29,143 beneficial
conversion feature, which was fully amortized at December 31, 2019.
The accrued interest at a rate of 10% per year until it matured on
June 22, 2019. Beginning May 2019, the note is convertible, in
whole or in part, at the holder's option, into shares of the
Company's stock at a conversion price equal to 70% of the lowest
trading price during the 25 trading days prior to conversion (if
the note cannot be converted due to Depository Trust Company freeze
then rate decreases to 60%). Upon the occurrence of an event of
default, the note will bear interest at a rate of 20% per year and
the holder of the note may require the Company to redeem or convert
the note at 150% of the outstanding principal balance. At December
31, 2020 and 2019, the balance due on this note was $103,285,
including a default penalty of $35,285. Interest accrued on the
note totals $39,644 and $29,287 at December 31, 2020 and 2019,
respectively, and is included in accrued expenses on the
accompanying consolidated balance sheet.
Auctus
On
May 22, 2020, the Company entered into an exchange agreement with
Auctus. Based on this agreement the Company exchanged three
outstanding notes, in the amounts of $150,000, $89,250, and $65,000
for a total amount $328,422 of debt outstanding, as well as any
accrued interest and default penalty, for: $160,000 in cash
payments (payable in monthly payments of $20,000), converted a
portion of the notes pursuant to original terms of the notes into
500,000 restricted common stock shares (shares were issued on June
3, 2020); and 700,000 warrants issued to purchase common stock
shares at a strike price of $0.15. The fair value of the common
stock shares was $250,000 (based on a $0.50 fair value for the
Company’s stock) and of the warrants to purchase common stock
shares was $196,818 (based on a $0.281 black scholes fair
valuation). During the year ended December 31, 2020, the Company
paid $100,000 to reduce the outstanding balance. As of December 31,
2020, a balance of $40,000 remained to be paid for these exchanged
loans.
Auctus notes exchanged in the May 22, 2020 transaction
Effective
March 20, 2018, the Company entered into a securities purchase with
Auctus Fund, LLC ("Auctus") for the issuance of a $150,000
convertible promissory note and warrants exercisable for 4,262
shares of the Company's common stock. At issuance, the Company
recorded a $97,685 beneficial conversion feature, which was fully
amortized at December 31, 2018. The warrants are exercisable at any
time, at an exercise price equal to $0.04 per share, subject to
certain customary adjustments and price-protection provisions
contained in the warrant. The warrants have a five-year term. The
note accrued interest at a rate of 12% per year until it matured in
December 2018. Beginning December 2018, the note is convertible, in
whole or in part, at the holder's option, into shares of the
Company's stock at a conversion price equal to 60% of the lowest
trading price during the 20 trading days prior to conversion. Upon
the occurrence of an event of default, the note will bear interest
at a rate of 24% per year and the holder of the note may require
the Company to redeem or convert the note at 150% of the
outstanding principal balance. On May 22, 2020, the default penalty
and outstanding interest was exchanged as described in the
preceding paragraph. At December 31, 2019, the balance due on this
total was $192,267, including a default penalty of $70,931,
respectively. Interest accrued on the note totals $45,629 at
December 31, 2019, and is included in accrued expenses on the
accompanying consolidated balance sheet. Auctus converted nil and
$14,236 of principal and accrued interested during year ended
December 31, 2020 and 2019, respectively. During the year ended
December 31, 2020, the Company paid $100,000 to reduce the
outstanding balance. As of December 31, 2020, a balance of $40,000
remained to be paid for these exchanged loans.
Effective
July 3, 2018, the Company entered into a securities purchase with
Auctus for the issuance of a $89,250 convertible promissory note.
At issuance, the Company recorded a $59,000 beneficial conversion
feature, which was fully amortized at December 31, 2019. The note
accrued interest at a rate of 12% per year until it matured in
April 2019. Beginning April 2019, the note is convertible, in whole
or in part, at the holder's option, into shares of the Company's
stock at a conversion price equal to 60% of the lowest trading
price during the 20 trading days prior to conversion. Upon the
occurrence of an event of default, the note will bear interest at a
rate of 24% per year and the holder of the note may require the
Company to redeem or convert the note at 150% of the outstanding
principal balance. At December 31, 2019, the balance due on this
total was $90,641, including a default penalty of $56,852. Interest
accrued on the note totals $16,436 at December 31, 2019, and is
included in accrued expenses on the accompanying consolidated
balance sheet. At December 31, 2020, the balance due on this note
was nil.
Effective
March 29, 2019, the Company entered into a securities purchase with
Auctus for the issuance of a $65,000 convertible promissory note.
At issuance, the Company recorded a $65,000 beneficial conversion
feature, which was fully amortized at December 31, 2019. The note
accrued interest at a rate of 12% until it matured in December
2019. Beginning December 2019, the note is convertible, in whole or
in part, at the holder's option, into shares of the Company's stock
at a conversion price equal to 50% of the lowest trading price
during the 25 trading days prior to conversion. Upon the occurrence
of an event of default, the note will bear interest at a rate of
24% per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At December 31, 2019, the balance due on this total was
$106,210, including a default penalty of $41,210. Interest accrued
on the note totaled $142 at December 31, 2019 and is included in
accrued expenses on the accompanying consolidated balance sheet. At
December 31, 2020, the balance due on this note was
nil.
The following table summarizes
the Convertible notes (including
debt in default):
|
|
|
|
|
GPB
|
$1,709
|
$1,709
|
$2,177
|
$2,177
|
|
GHS
|
-
|
|
149
|
|
|
|
64
|
|
83
|
|
|
|
14
|
|
14
|
|
|
|
103
|
181
|
103
|
349
|
|
Auctus
|
40
|
|
192
|
|
|
|
-
|
|
91
|
|
|
|
-
|
|
106
|
|
|
|
-
|
40
|
-
|
389
|
|
Convertible
notes, past due (including debt in default)
|
|
$1,930
|
|
$2,915
|
The
convertible notes payable, past due was $1,930,000 at December 31,
2020 and the convertible notes in default was the total balance of
$2,915,000 at December 31, 2019.
Troubled Debt Restructuring
The
debt restructured for Convertible Debt, which closed on January 15,
2020, the Company restructured several re-payment plans as
described above and in addition cancelled warrants and issued new
warrants as part of the restructure. The debt exchanged with Auctus
of $328,422 for 500,000 common stock shares resulted in a $118,396
loss. This debt restructure met the criteria for troubled debt. The
basic criteria are that the borrower is troubled, i.e., they are
having financial difficulties, and a concession is granted by the
creditor. The troubled debt restructuring for Convertible Debt,
would have increased the loss per share calculation from .04 to
.05.
12.
LONG-TERM DEBT
Long-term Debt – Related Parties
On
July 24, 2019, Dr. Faupel and Mr. Cartwright agreed to an addendum
to the debt restructuring exchange agreement and to modify the
terms of the original exchange agreement. Under this modification
Dr. Faupel and Mr. Cartwright agreed to extend the note to be due
in full on the third anniversary of that agreement. The
modification also included simple interest at a 6% rate, with the
principal and accrued interest due in total at the date of maturity
or September 4, 2021, the terms are currently being updated and an
amended modification is expected to be completed.
During
the quarter ended September 30, 2018, the Company entered into an
exchange agreement dated July 14, 2018, Dr Faupel, agreed to
exchange outstanding amounts due to him for loans, interest, bonus,
salary and vacation pay in the amount of $661,000 for a $207,000
promissory note dated September 4, 2018. As a result of the
exchange agreement, the Company recorded a gain for extinguishment
of debt of $199,000 and a capital contribution of $235,000 during
the year ended December 31, 2018. The resulting difference of
$20,000 was recorded to accrued interest. In the July 20, 2018
exchange agreement, Dr, Cartwright, agreed to exchange outstanding
amounts due to him for loans, interest, bonus, salary and vacation
pay in the amount of $1,621,000 for a $319,000 promissory note
dated September 4, 2018. As a result of the exchange agreement, the
Company recorded a gain for extinguishment of debt of $840,000 and
a capital contribution of $432,000 during the year ended December
31, 2018. The resulting difference of $30,000 was recorded to
accrued interest and elimination of debt.
Troubled Debt Restructuring
The
debt extinguished for Mr. Cartwright and Mr. Faupel meet the
criteria for troubled debt. The basic criteria are that the
borrower is troubled, i.e., they are having financial difficulties,
and a concession is granted by the creditor. Due to the Company
being in default on several of its loans the debt is considered
troubled debt. The troubled debt restructuring for Long-term Debt
– Related Parties, had an immaterial effect on the
Company’s basic or diluted earnings per share calculation for
December 31, 2020 and 2019 as the gain was recorded in
2018.
The
table below summarizes the detail of the exchange
agreement:
For
Dr. Faupel:
|
Salary
|
$134
|
|
Bonus
|
20
|
|
Vacation
|
95
|
|
Interest on
compensation
|
67
|
|
Loans to
Company
|
196
|
|
Interest on
loans
|
149
|
|
Total
outstanding prior to exchange
|
$661
|
|
Amount
forgiven during the quarter ended September 30, 2018
|
(454)
|
|
Promissory
note dated September 4, 2018
|
$207
|
|
Interest
accrued through December 31, 2019
|
17
|
|
Balance
outstanding at December 31, 2019
|
$224
|
|
Interest
accrued through December 31, 2020
|
12
|
|
Balance
outstanding at December 31, 2020
|
$236
|
For
Dr. Cartwright:
|
Salary
|
$337
|
|
Bonus
|
675
|
|
Interest on
compensation
|
59
|
|
Loans to
Company
|
528
|
|
Interest on
loans
|
22
|
|
Total
outstanding prior to exchange
|
$1,621
|
|
Amount
forgiven during the quarter ended September 30, 2018
|
(1,302)
|
|
Promissory
note dated September 4, 2018
|
$319
|
|
Interest
accrued through December 31, 2019
|
26
|
|
Balance
outstanding at December 31, 2019
|
$345
|
|
Interest
accrued through December 31, 2020
|
19
|
|
Balance
outstanding at December 31, 2020
|
$364
|
On
February 19, 2021, the Company entered into a new promissory note
replacing the original note from September 4, 2018, with Mark
Faupel and Gene Cartwright. For Dr. Cartwright the principal amount
on the new note was $267,085, matures on February 18, 2023, and
will accrue interest at a rate of 6%. For Dr. Faupel the principal
amount on the new note was $153,178, matures on February 18, 2023,
and will accrue interest at a rate of 6%.
On
February 19, 2021, the Company exchanged $100,000 and $85,000 of
long-term debt for Dr. Cartwright and Dr. Faupel in exchange for
100 and 85 shares of Series F Preferred Stock,
respectively.
Future
debt obligations at December 31, 2020 for Long-term Debt –
Related Parties are as follows (in thousands):
|
Year
|
|
|
2021
|
$-
|
|
2022
|
200
|
|
2023
|
215
|
|
Totals
|
$415
|
Long-term debt
On
May 4, 2020, the Company received a loan from the Small Business
Administration (SBA) pursuant to the Paycheck Protection Program
(PPP) as part of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in the amount of $50,184. The loan bears interest
at a rate of 1.00%, and matures in 24 months, with the principal
and interest payments being deferred until the date of forgiveness
with interest accruing, then converting to monthly principal and
interest payments, at the interest rate provided herein, for the
remaining eighteen (18) months. Lender will apply each payment
first to pay interest accrued to the day Lender received the
payment, then to bring principal current, and will apply any
remaining balance to reduce principal. Payments must be made on the
same day as the date of this Note in the months they are due.
Lender shall adjust payments at least annually as needed to
amortize principal over the remaining term of the Note. Under the
provisions of the PPP, the loan amounts will be forgiven as long
as: the loan proceeds are used to cover payroll costs, and most
mortgage interest, rent, and utility costs over a 24 week period
after the loan is made; and employee and compensation levels are
maintained. In addition, payroll costs are capped at $100,000 on an
annualized basis for each employee. Not more than 40% of the
forgiven amount may be for non-payroll costs. As of December 31,
2020, the outstanding balance was $50,477 including $293 in accrued
interest. The Company has applied to have the loan
forgiven.
13.
INCOME (LOSS) PER COMMON SHARE
Basic
net income (loss) per share attributable to common stockholders,
amounts are computed by dividing the net income (loss) plus
preferred stock dividends and deemed dividends on preferred stock
by the weighted average number of shares outstanding during the
year.
Diluted
net income (loss) per share attributable to common stockholders
amounts are computed by dividing the net income (loss) plus
preferred stock dividends, deemed dividends on preferred stock,
after-tax interest on convertible debt and convertible dividends by
the weighted average number of shares outstanding during the year,
plus Series C, Series D and Series E convertible preferred stock,
convertible debt, convertible preferred dividends and warrants
convertible into common stock shares.
The
following table sets forth pertinent data relating to the
computation of basic and diluted net loss per share attributable to
common shareholders.
|
In thousands
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$( 401)
|
$( 1,921)
|
|
|
Basic weighted average number of shares outstanding
|
10,767
|
3,302
|
|
|
Net income (loss) per share (basic)
|
$(0.04)
|
$(0.58)
|
|
|
Diluted weighted average number of shares outstanding
|
80,545
|
3,302
|
|
|
Net income (loss) per share (diluted)
|
$(0.04)
|
$(0.58)
|
|
|
|
|
|
|
|
Dilutive equity instruments (number of equivalent
units):
|
|
|
|
|
Stock options
|
-
|
-
|
|
|
Preferred stock
|
-
|
-
|
|
|
Convertible debt
|
62,095
|
39,636
|
|
|
Warrants
|
7,683
|
30,208
|
|
|
Total Dilutive instruments
|
69,778
|
73,144
|
|
For
period of net loss, basic and diluted earnings per share are the
same as the assumed exercise of warrants and the conversion of
convertible debt are anit-dilutive.
14. SUBSEQUENT
EVENTS
GPB
On January 8, 2021, the
Company made the final payment of $750,000 out of the total
$1,500,000 as required by this exchange agreement with GPB. On
March 31, 2021, the Company issued 2,236 series F preferred stock
shares in accordance with the terms of the agreement (see
NOTE
11: CONVERTIBLE DEBT).
GHS
On
January 29, 2021, the Company paid GHS $40,000 per the agreement to
reduce the outstanding debt.
Series F Convertible Preferred Stock
During
January and February 2021, the Company entered into a Security
Agreement with the Series F Investors (the “Series F Security
Agreement”) pursuant to which all obligations under the
Series F Certificate of Designation are secured by all of the
Company’s assets and personal properties, with certain
accredited investors. In total, for $1,944,000 the Company issued
1,944 shares of Series F Preferred Stock. Each Series F Preferred
Stock is convertible into 4,000 common stock shares. The Series F
Preferred Stock will have cumulative dividends at the rate per
share of 6% per annum. The stated value and liquidation preference
on the Series F Preferred Stock is $1,944.
On
February 19, 2021, the Company exchanged $100,000 and $85,000 of
long-term debt for Dr. Cartwright and Dr. Faupel in exchange for
100 and 85 shares of Series F Preferred Stock,
respectively.
Each
share of Series F Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series F
Certificate of Designation (the “Series F Conversion
Price”). The conversion of Series F Preferred is subject to a
4.99% beneficial ownership limitation, which may be increased to
9.99% at the election of the holder of the Series F Preferred. If
the average of the VWAPs (as defined in the Series F Certificate of
Designation) for any consecutive 5 trading day period
(“Measurement Period”) exceeds 200% of the then Series
F Conversion Price and the average daily trading volume of the
Common Stock on the primary trading market exceeds 1,000 shares per
trading day during the Measurement Period (subject to adjustments),
the Company may redeem the then outstanding Series F Preferred, for
cash in an amount equal to aggregate Stated Value then outstanding
plus accrued but unpaid dividends.
Powerup
(Series G Callable Preferred Stock)
During
January 2021, the Company finalized an investment by Power Up
Lending Group Ltd. Power Up invested $78,500, net to the Company is
$75,000, for 91,000 shares of Series G preferred stock with
additional tranches of financing up to $925,000 in the aggregate
over the terms of the Series G preferred stock. Series G will be
non-voting on any matters requiring shareholder vote. The Series F Preferred Stock will have cumulative
dividends at the rate per share of 8% per annum. At any time during
the period indicated below, after the date of the issuance of
shares of Series G preferred stock, the Company will have the
right, at the Company’s option, to redeem all of the shares
of Series G preferred stock by paying an amount equal to: (i) the
number of shares of Series G preferred stock multiplied by then
stated value (including accrued dividends); (ii) multiplied by the
corresponding percentage as follows: Day 1-60, 105%; Day 61-90,
110%; Day 91-120, 115%; and Day 121-180, 122%. After the expiration
of the 180 days following the issuance date, except for mandatory
redemption, the Company shall have no right to redeem the Series G
preferred stock. Mandatory redemption occurs within 24 months. In
addition, if the Company does not redeem the Series G preferred
stock then Power Up will have the option to convert to common stock
shares. The variable conversion price will be the value equal to a
discount of 19% off of the trading price; which is calculated as
the average of the three lowest closing bid prices over the last
fifteen trading days. The conversion of Series G Preferred is
subject to a 4.99% beneficial ownership limitation, which may be
increased to 9.99% at the election of the holder of the Series G
Preferred.
During
February 2021, the Company finalized an investment by Power Up
Lending Group Ltd. Power Up invested $53,500, net to the Company is
$50,000, for 62,000 shares of Series G preferred stock with
additional tranches of financing up to $925,000 in the aggregate
over the terms of the Series G preferred stock. Series G will be
non-voting on any matters requiring shareholder vote. The Series G Preferred Stock will have cumulative
dividends at the rate per share of 8% per annum. At any time during
the period indicated below, after the date of the issuance of
shares of Series G preferred stock, the Company will have the
right, at the Company’s option, to redeem all of the shares
of Series G preferred stock by paying an amount equal to: (i) the
number of shares of Series G preferred stock multiplied by then
stated value (including accrued dividends); (ii) multiplied by the
corresponding percentage as follows: Day 1-60, 105%; Day 61-90,
110%; Day 91-120, 115%; and Day 121-180, 122%. After the expiration
of the 180 days following the issuance date, except for mandatory
redemption, the Company shall have no right to redeem the Series G
preferred stock. Mandatory redemption occurs within 24 months. In
addition, if the Company does not redeem the Series G preferred
stock then Power Up will have the option to convert to common stock
shares. The variable conversion price will be the value equal to a
discount of 19% off of the trading price; which is calculated as
the average of the three lowest closing bid prices over the last
fifteen trading days. The conversion of Series G Preferred is
subject to a 4.99% beneficial ownership limitation, which may be
increased to 9.99% at the election of the holder of the Series G
Preferred.
Other matters
On
February 19, 2021, the Company entered into a new promissory note
replacing the original note from September 4, 2018, with Mark
Faupel and Gene Cartwright. For Dr. Cartwright the principal amount
on the new note was $267,085, matures on February 18, 2023, and
will accrue interest at a rate of 6%. For Dr. Faupel the principal
amount on the new note was $153,178, matures on February 18, 2023,
and will accrue interest at a rate of 6%.
On
February 22, 2021, the Company based on a past agreement with Mr.
Blumberg, was required to issuance 1,250,000 2-year warrants with
an exercise price of $0.25, when the 30-day vwap reached
$0.50.
On
March 2, 2021, the Company agreed to pay a fee to Aspen Capital
Corporation for investor relations. Aspen would receive a fee of
$49,0000, payable in cash of $24,500 and 98,000 common stock
shares. In addition, they would receive 196,000 three year warrants
to purchase common stock shares at an exercise price of $0.25 and
expiring on March 4, 2024.
On
March 10, 2021, the Company entered into a consulting agreement
with Richard Blumberg. The consulting agreement requires Mr.
Blumberg to provide $350,000 to the Company and additional
consulting services in exchange for the following: (1) 900,000
3-year warrants with an exercise price of $0.30 and 400,000 common
stock shares; (2) 900,000 3-year warrants with an exercise price of
$0.40 and 400,000 common stock shares; (3) 900,000 3-year warrants
with an exercise price of $0.50 and 400,000 common stock shares;
and (4) 900,000 3-year warrants with an exercise price of $0.60 and
400,000 common stock shares. Based on this agreement the Company
will record compensation expense of $3,144,400. In addition,
$88,000 in accrued consulting fees for Mr. Blumberg will be
converted into 88 series F preferred stock shares.
On
March 22, 2021, the Company entered into an exchange agreement with
Richard Fowler. As of December 31, 2020, the Company owed Mr.
Fowler $546,214 ($412,624 in deferred salary and $133,590 in
accrued interest). The Company will exchange the amount owed of
$546,214 for 20 Series F Preferred Shares (convertible into 200,000
common stock shares), a $150,000 unsecured note and Mr. Fowler will
remain on our health insurance plan. The unsecured note of $150,000
will have a four year term, with monthly payments scheduled to
begin on March 15, 2022, and then monthly on the 15th thereafter,
in the amount of $3,600 and accruing interest at a rate of 6%. The
unsecured note will be in default on the 20th of the month. The
amount forgiven by Mr. Fowler was $346,214. In addition, the
Company will reimburse Mr. Fowler for $4,325.42 of accrued
expenses. The Company will also begin repaying two outstanding
notes totaling $45,118 in principal and interest on April 15, 2021.
The notes will be combined into one note with a payment of $3,850
per month and have an interest rate of 6%, if the notes go into
default the interest will be 18%.
Item
9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None.
Item
9A. Controls and
Procedures
We
maintain a set of disclosure controls and procedures designed to
ensure that information required to be disclosed by us in reports
that we file or submit under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) is recorded, processed,
summarized, and reported, within the time periods specified in
Securities and Exchange Commission (“Commission”) rules
and forms. We carried out an evaluation under the supervision and
with the participation of our management, including the Chief
Executive Officer/Acting Chief Financial Officer, Gene Cartwright,
of the effectiveness of its disclosure controls and procedures.
Based on that evaluation, the Chief Executive Officer/Acting Chief
Financial Officer has concluded that our disclosure controls and
procedures were ineffective as of December 31, 2020, due to the
existence of a material weakness in our internal control over
financial reporting, described below, that we have yet to fully
remediate.
Management’s
Annual Report on Internal Control over Financial Reporting: Our
management, including our Chief Executive Officer/Acting Chief
Financial Officer, is responsible for establishing and maintaining
adequate internal control over our financial reporting. Internal
control over financial reporting is a process designed by, or under
the supervision of, our Chief Executive Officer/Chief Financial
Officer and implemented by our board of directors, management and
other personnel, 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 and 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 our assets; (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 our receipts and
expenditures are being made only in accordance with authorization
of our management and directors; and (ii) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a
material effect on the financial statements. Because of their
inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Under
the supervision and with the participation of our management,
including our Principal Executive Officer/Principal Financial
Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the 2013 version
of the Internal Control – Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway
Commission.
Based
on our evaluation, our management concluded that our internal
control over financial reporting was ineffective as of December 31,
2020, due to the existence of the material weakness described
below:
The
Company lacks the resources to properly research and account for
complex transactions. This deficiency has resulted in a material
weakness in our internal control over financial
reporting.
This
annual report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by our independent registered public
accounting firm pursuant to rules of the Commission that permit
non-accelerated filers to provide only the management’s
report in their annual reports on Form 10-K.
Except
as described above, there were no changes to the Company’s
internal controls over financial reporting occurred during the year
ended December 31, 2020 that have materially affected, or are
reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Item
9B. Other Information
None.
Item
10. Directors, Executive Officers and
Corporate Governance
Our
executive officers are elected by and serve at the discretion of
our board of directors. The following table lists information about
our directors and executive officers:
|
Name
|
Age
|
Position with Guided Therapeutics
|
|
Gene
S. Cartwright, Ph.D.
|
66
|
Chief
Executive Officer, President, Acting Chief Financial Officer and
Director
|
|
Mark
Faupel, Ph.D.
|
65
|
Chief
Operating Officer and Director
|
|
Richard
P. Blumberg
|
64
|
Director
|
|
|
|
|
|
John
E. Imhoff, M.D.
|
71
|
Director
|
|
Michael
C. James
|
62
|
Chairman
and Director
|
|
Richard
L. Fowler
|
64
|
Senior
Vice President of Engineering
|
Except
as set forth below, all of the executive officers have been
associated with us in their present or other capacities for more
than the past five years. Officers are elected annually by the
board of directors and serve at the discretion of the board. There
are no family relationships among any of our executive officers and
directors.
Gene S. Cartwright, Ph.D. joined us in
January 2014 as the President, Chief Executive Officer and Acting
Chief Financial Officer. He was elected as a director on January
11, 2014. His most recent position was with Omnyx, LLC, a Joint
Venture between GE Healthcare and the University of Pittsburgh
Medical Center, where, as CEO for over four years he founded and
managed the successful development of products for the field of
Digital Pathology. Prior to his work with Omnyx, LLC, he was
President of Molecular Diagnostics for GE Healthcare. Prior to GE,
Dr. Cartwright was Divisional Vice President/General Manager for
Abbott Diagnostics’ Molecular Diagnostics business. In his
24-year career at Abbott, he also served as Divisional Vice
President for U.S. Marketing for five years. He received a Master
of Management degree from Northwestern’s Kellogg School of
Management and also holds a Ph.D. in chemistry from Stanford
University and an AB from Dartmouth College.
Dr.
Cartwright brings over 30 years of experience working in the IVD
diagnostics industry. He has great experience in the diagnostics
market both in the development and introduction of new diagnostics
technologies, as well as extensive successful commercial experience
with global businesses. With his background and experience, Dr.
Cartwright, as President and Chief Executive Officer, as well as
Acting Chief Financial Officer, works with and advises the board as
to how we can successfully market and build LuViva international
sales.
Mark Faupel, Ph.D., rejoined us as
Chief Operating Officer and director on December 8, 2016. He
previously served on our board of directors through 2013 and has
more than 30 years of experience in developing non-invasive
alternatives to surgical biopsies and blood tests, especially in
the area of cancer screening and diagnostics. Dr. Faupel was one of
our co-founders and also served as our Chief Executive Officer from
May 2007 through 2013. Prior thereto was our Chief Technical
Officer from April 2001 to May 2007. Dr. Faupel has served as a
National Institutes of Health reviewer, is the inventor on 26 U.S.
patents and has authored numerous scientific publications and
presentations, appearing in such peer-reviewed journals as The
Lancet. Dr. Faupel earned his Ph.D. in neuroanatomy and physiology
from the University of Georgia. Dr. Faupel is also a shareholder of
Shenghuo Medical, LLC. See Item 13, Certain Relationships and
Related Transactions and Director Independence
John E. Imhoff, M.D. has served as a
member of our Board of Directors since April 2006. Dr. Imhoff is an
ophthalmic surgeon who specializes in cataract and refractive
surgery. He is one of our principal stockholders and invests in
many other private and public companies. He has a B.S. in
Industrial Engineering from Oklahoma State University, an M.D. from
the University of Oklahoma and completed his ophthalmic residency
at the Dean A. McGee Eye Institute. He has worked as an ophthalmic
surgeon and owner of Southeast Eye Center since 1983.
Dr.
Imhoff has experience in clinical trials and in other technical
aspects of a medical device company. His background in industrial
engineering is especially helpful to us, especially as Dr. Imhoff
can combine this knowledge with clinical applications. His
experience in the investment community is invaluable to a public
company often undertaking capital raising efforts.
Michael C. James has served as
a member of our Board of Directors since March 2007 and as Chairman
of the Board since October 2013. Mr. James is also the Managing
Partner of Kuekenhof Capital Management, LLC, a private investment
management company, Chief Executive Officer and the Chief Financial
Officer of Inergetics, Inc., a nutraceutical supplements company
and also the Chief Financial Officer of Terra Tech Corporation,
which is a hydroponic and agricultural company. He also holds the
position of Managing Director of Kuekenhof Equity Fund, L.P. and
Kuekenhof Partners, L.P. Mr. James currently sits on the Board of
Directors of Inergetics; Inc. Mr. James was Chief Executive
Officer of Nestor, Inc. from January 2009 to September 2009
and served on their Board of Directors from July 2006 to June 2009.
He was employed by Moore Capital Management, Inc., a private
investment management company from 1995 to 1999 and held position
of Partner. He was employed by Buffalo Partners, L.P., a private
investment management company from 1991 to 1994 and held the
position of Chief Financial and Administrative Officer. He began
his career in 1980 as a staff accountant with Eisner LLP. Mr. James
received a B.S. degree in Accounting from Farleigh Dickinson
University in 1980.
Mr.
James has experience both in the areas of company finance and
accounting, which is invaluable to us during financial audits and
offerings. Mr. James has extensive experience in the management of
both small and large companies and his entrepreneurial background
is relevant as we develop as a company.
Richard P. Blumberg was appointed to
the Board of Directors on November 10, 2016 and resigned on March
27, 2019, but was reappointed on September 1, 2020. Mr. Blumberg
has been a long-time investor in the Company. Since 1978, Mr.
Blumberg has been a Principal at Webster, Mrak & Blumberg, a
medical-legal and class action labor litigation firm. He is also
currently a Managing Member of K2 Medical, LLC formerly known as
Shenghuo Medical, LLC (“Shenghuo”), a company with
licensing rights in several Asian countries for the Company’s
LuViva Advanced Cervical Scan, and is a Managing Member of Elysian
Medical, LLC, a company with world-wide rights for certain breast
cancer detection technology. He served from 2004 to 2007 as Chief
Executive Officer of Energy Logics, a wind power company that
developed projects in Alberta, Canada and Montana. Mr. Blumberg
holds a B.S. in Electrical Engineering and Computer Science from
the University of Illinois and received a J. D. from Stanford
University. He also brings extensive experience as a venture
capitalist specializing in high-tech and life science
companies.
Rick Fowler, Senior Vice President of Engineering is an
accomplished Executive with significant experience in the
management of businesses that sell, market, produce and develop
sophisticated medical devices and instrumentation. Mr.
Fowler’s 25 plus years of experience includes assembling and
managing teams, leading businesses and negotiating contracts,
conducting litigation, and developing ISO, CE, FDA QSR, GMP and GCP
compliant processes and products. He is adept at providing product
life cycle management through effective process definition and
communication - from requirements gathering, R&D feasibility,
product development, product launch, production startup and
support. Mr. Fowler combines outstanding analytical,
out-of-the-box, and strategic thinking with strong leadership,
technical, and communication skills and he excels in dynamic,
demanding environments while remaining pragmatic and focused. He is
able to deliver high risk projects on time and under budget as well
as enhance operational effectiveness through outstanding
cross-functional team leadership (R&D, marketing, product
development, operations, quality assurance, sales, service, and
finance). In addition, Mr. Fowler is well versed in global medical
device regulatory and product compliance requirements. Mr. Fowler
became a consultant in 2020, but retained his
title.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers and persons who beneficially
own more than 10% of a registered class of our equity securities to
file reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission. These persons are required
by regulations of the Securities and Exchange Commission to furnish
us with copies of all Section 16(a) forms they file.
Based
solely on our review of the copies of these forms received by us,
we believe that, with respect to fiscal year 2020, our officers,
directors were in compliance with all applicable filing
requirements.
Code
of Ethics
We have
adopted a code of ethics that applies to all of our directors,
officers and employees. To obtain a copy without charge, contact
our Corporate Secretary, Guided Therapeutics, Inc., 5835 Peachtree
Corners East, Suite B, Norcross, Georgia 30092. If we amend our
code of ethics, other than a technical, administrative or
non-substantive amendment, or we grant any waiver, including any
implicit waiver, from a provision of the code that applies to our
principal executive officer, principal financial officer, principal
accounting officer or controller, we will disclose the nature of
the amendment or waiver on our website, www.guidedinc.com, under
the “Investor Relations” tab under the tab “About
Us.” Also, we may elect to disclose the amendment or waiver
in a report on Form 8-K filed with the Securities and Exchange
Commission.
Material
Changes to Security Holders Nomination Procedure
There
has been no material change to the procedures by which security
holders may recommend nominees to the registrant’s board of
directors, since the last disclosure.
Item
11. Executive
Compensation
Summary
Compensation Table
The
following table lists specified compensation we paid or accrued
during each of the fiscal years ended December 31, 2020 and 2019 to
the Chief Executive Officer and our two other most highly
compensated executive officers, collectively referred to as the
“named executive officers,” in 2020:
2020
and 2019 Summary Compensation Table
|
Name and
Principal Position
|
|
Year
|
|
|
|
|
|
|
Gene S. Cartwright,
Ph.D.
|
|
2020
|
12,000
|
-
|
193,200
|
-
|
205,200
|
|
President, CEO,
Acting CFO and Director (2)
|
|
2019
|
-
|
-
|
-
|
-
|
-
|
|
Mark Faupel,
Ph.D.
|
|
2020
|
12,000
|
-
|
193,200
|
14,000
|
219,200
|
|
COO and
Director(3)(2)
|
|
2019
|
-
|
-
|
-
|
36,000
|
36,000
|
|
Richard
Fowler
|
|
2020
|
-
|
-
|
--
|
21,000
|
21,000
|
|
Senior Vice
President of Engineering(2)
|
|
2019
|
62,000
|
-
|
-
|
49,000
|
111,000
|
(1)
Option awards
figure includes the value of Common Stock option awards at grant
date as calculated under FASB ASC 718.
(2)
All amounts
reported as accrued. Dr. Cartwright, Dr. Faupel, and Mr. Fowler
have elected not to get paid a salary, due to our cash
position.
(3)
On December 8,
2016, the board of directors appointed Dr. Faupel as our new COO
and director.
(4)
Dr. Cartwright and
Dr. Faupel accrued $1,000 per month as compensation, the amounts
have not been paid.
(5)
Other expenses are
related to the Company health insurance plan
For
2019, Dr. Cartwright and Dr. Faupel did not receive salary
compensation.
For
2020 and 2019, Mr. Fowler accrued base salary of nil and $62,019.
On March 2016, Mr. Fowler began working half-time and agreed to
reduce his base salary compensation to $107,500 from $215,000 in
2015. For both years he received the usual and customary company
benefits. He received no bonus in the years ended December 31, 2020
and 2019. As of December 31, 2020, Mr. Fowler’s total
deferred salary plus interest was approximately
$546,214.
Outstanding
Equity Awards to Officers at December 31, 2020
Name and
Principal
Position
|
Number
of
Securities
Underlying
Options
Exercisable
(#)(1)
|
Number of
Securities Underlying
Options Un-exercisable
(#)
|
Option
Exercise
Price
($)(2)
|
|
Gene S. Cartwright,
Ph.D.
President, CEO,
Acting CFO and Director
|
2
|
-
|
28,360
|
12/31/2024
|
|
|
127,273
|
272,727
|
0.49
|
07/12/2030
|
Mark Faupel,
Ph.D
COO and
Director
|
9
|
-
|
70,836
|
12/31/2024
|
|
|
127,273
|
272,727
|
0.49
|
07/12/2030
|
Richard
Fowler
Senior Vice
President of Engineering
|
5
|
-
|
49,984
|
12/31/2024
|
|
|
|
|
|
|
(1)
Represents fully
vested options.
(2)
Average price,
based on all outstanding options.
Outstanding
Equity Awards to Directors at December 31, 2020
|
|
|
|
Name and
Principal Position
|
|
|
|
Ronald W. Hart,
Ph.D., Director (resigned as of December 11, 2015)
|
6
|
56,267
|
|
John E. Imhoff,
M.D., Director
|
7
|
57,143
|
|
|
50,000
|
0.49
|
|
Michael C. James,
Chairman and Director
|
6
|
56,267
|
|
|
50,000
|
0.49
|
|
|
|
|
Risk
Oversight
Our
board as a whole has responsibility for risk oversight, with
reviews of certain areas being conducted by the relevant board
committees that report on their deliberations to the full board, as
further described below. Given the small size of the board, the
board feels that this structure for risk oversight is appropriate
(except for those risks that require risk oversight by independent
directors only). The audit committee is specifically charged with
discussing risk management (primarily financial and internal
control risk), and receives regular reports from management and
independent auditors on risks related to, among others, our
financial controls and reporting. The compensation committee
reviews risks related to compensation and makes recommendations to
the board with respect to whether the Company’s compensation
policies are properly aligned to discourage inappropriate
risk-taking, and is regularly advised by management. In addition,
the Company’s management regularly communicates with the
board to discuss important risks for their review and oversight,
including regulatory risk, and risks stemming from periodic
litigation or other legal matters in which we are
involved.
Item
12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
The
following table lists information regarding the beneficial
ownership of our equity securities as of April 5, 2021 by (1) each
person whom we know to beneficially own more than 5% of the
outstanding shares of our common stock, (2) each director, (3) each
officer named in the summary compensation table below, and (4) all
directors and executive officers as a group. Unless otherwise
indicated, the address of each officer and director is 5835
Peachtree Corners East, Suite B, Norcross, Georgia
30092.
|
|
|
Series
D
Preferred Stock
(3)
|
Series
C1
Preferred Stock
(4)
|
Series
C2
Preferred Stock
(5)
|
Name and Address
of Beneficial Owner (1)
|
|
|
|
|
|
|
|
|
|
John E. Imhoff
(8)
|
11,066,185
|
50.42%
|
300
|
39.32%
|
-
|
-
|
2,400.75
|
73.57%
|
|
Lynne Imhoff
(9)
|
1,350,005
|
9.29%
|
-
|
-
|
675.00
|
64.33%
|
-
|
-
|
|
Michael C.
James/Kuekenhof Equity Fund, LLP (10)
|
65,506
|
*
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Gene Cartwright
(11)
|
1,312,621
|
9.07%
|
50
|
6.55%
|
-
|
-
|
-
|
-
|
|
Richard L. Fowler
(12)
|
200,006
|
1.49%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Mark L. Faupel
(13)
|
1,738,156
|
11.66%
|
38
|
4.98%
|
-
|
-
|
300.00
|
9.17%
|
|
Richard Blumberg
(14)
|
5,019,260
|
29.47%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Rosalind Master
Fund (15)
|
4,313,457
|
25.48%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
K2 Medical
(16)
|
3,810,540
|
25.26%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Auctus
(17)
|
8,779,262
|
39.98%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Flynn D. Case
Living Trust (18)
|
1,792,912
|
12.74%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
All directors and
executive officers as a group (5 persons) (19)
|
18,985,882
|
66.83%
|
388
|
50.85%
|
-
|
-
|
2,700.75
|
82.75%
|
|
|
Series
E
Preferred Stock
(6)
|
Series
F
Preferred Stock
(7)
|
Name and Address
of Beneficial Owner (1)
|
|
|
|
|
|
John E. Imhoff
(8)
|
|
|
10
|
*
|
|
Lynne Imhoff
(9)
|
-
|
-
|
-
|
-
|
|
Michael C.
James/Kuekenhof Equity Fund, LLP (10)
|
-
|
-
|
-
|
-
|
|
Gene Cartwright
(11)
|
-
|
-
|
110
|
2.27%
|
|
Richard L. Fowler
(12)
|
-
|
-
|
50
|
1.03%
|
|
Mark L. Faupel
(13)
|
-
|
-
|
97
|
2.00%
|
|
Richard Blumberg
(14)
|
233
|
13.43%
|
438
|
9.01%
|
|
Rosalind Master
Fund (15)
|
-
|
-
|
-
|
-
|
|
K2 Medical
(16)
|
-
|
-
|
-
|
-
|
|
Auctus
(17)
|
-
|
-
|
-
|
-
|
|
Flynn D. Case
Living Trust (18)
|
-
|
-
|
-
|
-
|
|
All directors and
executive officers as a group (5 persons) (19)
|
233
|
13.43%
|
705
|
14.51%
|
(*)
Less than 1%.
(1)
Except as otherwise indicated in the footnotes to this table and
pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to
all shares of common stock.
(2)
Percentage ownership is based on 13,180,417 shares of common stock
outstanding as of April 5, 2021. Beneficial ownership is determined
in accordance with the rules of the SEC, based on factors that
include voting and investment power with respect to shares. Shares
of common stock subject to convertible securities convertible or
exercisable within 60 days after the record date, are deemed
outstanding for purposes of computing the percentage ownership of
the person holding those securities but are not deemed outstanding
for purposes of computing the percentage ownership of any other
person. Note that certain of our outstanding securities, including
certain warrants and the shares of Series C1 preferred stock held
by the persons listed in this table, have anti-dilution
“ratchet” or “price-protection”
provisions that, when triggered, will increase the number of shares
of common stock underlying such securities. Subject to customary
exceptions, these provisions are triggered anytime we issue shares
of common stock to third parties at a price lower than the
then-current conversion price or exercise price of the subject
securities. As a result, the beneficial ownership reported in this
table is only as of the date presented, and the beneficial
ownership amounts of the persons in this table may increase on a
future date, even though such persons have not actually acquired
any additional shares of common stock.
(3)
As of April 5, 2021, there were 763 shares of Series D preferred
stock shares that will be issued, and each such share was
convertible into approximately 3,000 shares of common
stock.
(4)
As of April 5, 2021, there were 1,049.25 shares of Series C1
preferred stock outstanding, and each such share was convertible
into approximately 2,000 shares of common stock. Three shareholders
elected to convert 3,263.00 of their Series C1 preferred stock for
Series C2 preferred stock.
(5)
As of April 5, 2021, there were 3,262.25 shares of Series C2
preferred stock outstanding, and each such share was convertible
into approximately 2,000 shares of common stock.
(6)
As of April 5, 2021, there were 1,735.5 shares of Series E
preferred stock outstanding, and each such share was convertible
into approximately 4,000 shares of common stock.
(7)
As of April 5, 2021, there were 4,858 shares of Series F preferred
stock outstanding, and each such share was convertible into
approximately 4,000 shares of common stock.
(8)
Shares of common stock consist of 2,375,423 shares of common stock
directly held, 2,899,255 shares issuable upon exercise of warrants,
50,007 shares subject to options, 40,000 shares issuable upon
conversion of 10 shares of Series F preferred stock shares, 900,000
shares issuable upon conversion of 300 shares of Series D preferred
stock shares and 4,801,500 shares issuable upon conversion of
2,400.75 shares of Series C2 preferred stock. Dr. Imhoff is on the
board of directors.
(9)
Shares of common stock consist of 5 shares of common stock directly
held, and 1,350,000 shares issuable upon conversion of 675.00
shares of Series C1 preferred stock.
(10)
Shares of commons stock consist of
7,755 shares of common stock directly held, 7,745 shares issuable
upon exercise of warrants, and 50,006 shares subject to options.
Mr. James is on the board of directors.
(11) Shares of commons
stock consist of 122,621 shares of common stock directly held,
200,000 shares issuable upon exercise of warrants,
440,000 shares issuable upon
conversion of 110 shares of Series F preferred stock,
150,000 shares issuable upon conversion of 50 shares
of Series D preferred stock shares
and 400,002 shares subject to
options. Dr. Cartwright
is the CEO and on the board of directors.
(12)
Shares of commons stock consist of 1
shares of common stock directly held, 200,000 shares issuable upon
the conversion of 50 shares of Series F preferred stock and
5 shares subject to
options.
(13)
Shares of common stock consist of
85,647 shares of common stock directly held, 152,000 shares
issuable upon exercise of warrants, 400,009 shares subject to
options, 388,000
shares issuable upon conversion of 97 shares of Series F preferred
stock,
114,000 shares issuable upon
conversion of 38 shares of Series D preferred stock shares and
598,500 shares issuable upon conversion of 300.00 shares of Series
C2 preferred stock. Dr. Faupel is the COO and on the board of
directors.
(14) Shares of commons
stock consists of 1,167,630 shares of common stock directly
held, 1,167,630 shares issuable upon exercise of
warrants, 932,000 shares
issuable upon conversion of 233 shares of Series E preferred stock,
and 1,752,000 shares issuable upon conversion of 438 shares of
Series F preferred stock. Mr. Blumberg is on the board of
directors.
(15) Shares of commons stock consists of 500,000 shares of common
stock directly held, and 1,000,000 shares issuable upon
exercise of warrants.
(16) Shares of commons stock consists of 1,905,270 shares of common
stock directly held, and 1,905,270 shares issuable upon
exercise of warrants.
(17) Shares of commons stock consists of 8,779,262 shares issuable
upon exercise of warrants.
(18) Shares of commons stock consists of 896,456 shares of common
stock directly held, and 896,456 shares issuable upon exercise
of warrants.
(19) Shares of commons
stock consists of 3,759,077 shares of common stock directly
held, 4,426,630 shares issuable upon exercise of warrants,
900,029 shares subject to options, 2,820,000 shares issuable upon conversion of 705 shares of
Series F preferred stock shares 932,000 shares issuable upon conversion of 233 shares
of Series E preferred stock shares 1,164,000
shares issuable upon conversion of 388 shares of Series D preferred
stock shares and 5,400,000 shares
issuable upon conversion of 2,700.75 shares of Series C2 preferred
stock.
As of
April 5, 2021, there were 286 shares of Series C preferred stock
outstanding, and each such share was convertible into approximately
2,000 shares of common stock.
See
Item 5 of this report for information regarding Securities
Authorized for Issuance under Equity Compensation
Plans.
Item
13. Certain Relationships and Related
Transactions and Director Independence
Our
board recognizes that related person transactions present a
heightened risk of conflicts of interest. The audit committee has
the authority to review and approve all related party transactions
involving our directors or executive officers.
Under
the policy, when management becomes aware of a related person
transaction, management reports the transaction to the audit
committee and requests approval or ratification of the transaction.
Generally, the audit committee will approve only related party
transactions that are on terms comparable to those that could be
obtained in arm’s length dealings with an unrelated third
person. The audit committee will report to the full board all
related person transactions presented to it. Based on the
definition of independence of the NASDAQ Stock Market, the board
has determined that Mr. James and Dr. Imhoff are independent
directors.
John E.
Imhoff is one of our directors. In June 2015, Dr. Imhoff agreed to
exchange certain of his warrants, originally issued in December
2014 and exercisable for 1 share of our common stock, for two new
warrants that, unlike the original warrant, do not contain any
price or share reset provisions. Each new warrant is exercisable
for the same number of shares of our common stock as the original
warrant, at any time until December 2, 2020. The exercise price of
the first new warrant is $57,600 per share and the second new
warrant is $70,400 per share but, aside from the exercise price,
the new warrants are identical in terms to each other. As
additional consideration, we issued Dr. Imhoff an additional 1
share of common stock. Dr. Imhoff participated on terms equal to
those of other holders of the December 2014 warrants. As a result
of these transactions, Dr. Imhoff’s beneficial ownership of
our common stock increased from approximately 11.7% immediately
prior to the exchange, to approximately 11.8% immediately
afterward.
In
September 2015, Dr. Imhoff participated in our Series C preferred
stock issuance by exchanging all of his shares of Series B
preferred stock and investing $300,000 in cash, for a total of
1,067 shares of Series C preferred stock and warrants to purchase
211 shares of common stock. Dr. Imhoff participated on terms equal
to those of other Series C investors. As a result of these
transactions, Dr. Imhoff’s beneficial ownership of our common
stock increased from approximately 14% immediately prior to his
first acquisition of shares of Series C preferred stock, to 25%
immediately afterward.
On
March 11, 2016, Dr. Imhoff received 1 share of common stock as a
dividend on his Series B preferred stock (previously accrued but
unpaid), in accordance with the terms of the Series B preferred
stock.
In
April 2016, Dr. Imhoff exchanged his shares of Series C preferred
stock for a total of 2,400.75 shares of Series C1 preferred stock
and 16 shares of common stock. Dr. Imhoff participated on terms
equal to those of other Series C1 investors. As a result of this
transaction, Dr. Imhoff’s beneficial ownership of our common
stock increased from approximately 25% immediately prior to the
transaction, to 77% immediately afterward.
In June
2016, Dr. Imhoff agreed to exchange certain of his warrants,
exercisable for 6 shares of our common stock and subject to certain
anti-dilution provisions, in exchange for new warrants, exercisable
for 11 shares of our common stock, but without those anti-dilution
provisions. Dr. Imhoff will be required to surrender his old
warrants upon consummation of our next financing resulting in net
cash proceeds to us of at least $1 million. The new warrants will
have an initial exercise price equal to the exercise price of the
surrendered warrants as of immediately prior to consummation of the
financing, subject to customary “downside price
protection” for as long as our common stock is not listed on
a national securities exchange, and will expire five years from the
date of issuance.
On
September 6, 2016, we entered into a royalty agreement with Dr.
Imhoff and another party. Pursuant to the royalty agreement, in
exchange for a payment of $50,000 by Dr. Imhoff and the other
party, we granted them a royalty on future sales of our single-use
cervical guides. The royalty rate was initially $0.10 per
disposable, until October 2, 2016, at which point the royalty rate
increased to $0.20 per disposable. Any royalty payments will be
split evenly between Dr. Imhoff and the other party.
Lynne
Imhoff (no relation) currently beneficially owns in excess of 10%
of our outstanding common stock. In September 2015, Ms. Imhoff
participated in our Series C preferred stock issuance by exchanging
all of her shares of Series B preferred stock and investing
$125,000 in cash, for a total of 300 shares of Series C preferred
stock and warrants to purchase 1 shares of common stock. Ms. Imhoff
participated on terms equal to those of other Series C investors.
As a result of these transactions, Ms. Imhoff’s beneficial
ownership of our common stock increased from approximately 2%
immediately prior to her first acquisition of shares of Series C
preferred stock, to 4% immediately afterward.
In
April 2016, Ms. Imhoff exchanged her shares of Series C preferred
stock for a total of 675 shares of Series C1 preferred stock and 5
shares of common stock. Ms. Imhoff participated on terms equal to
those of other Series C1 investors. As a result of this
transaction, Ms. Imhoff’s beneficial ownership of our common
stock increased from approximately 4% immediately prior to the
transaction, to 45% immediately afterward.
In June
2016, Ms. Imhoff agreed to exchange certain of her warrants,
exercisable for 1 share of our common stock and subject to certain
anti-dilution provisions, in exchange for new warrants, exercisable
for 2 shares of our common stock, but without those anti-dilution
provisions. Ms. Imhoff will be required to surrender her old
warrants upon consummation of our next financing resulting in net
cash proceeds to us of at least $1 million. The new warrants will
have an initial exercise price equal to the exercise price of the
surrendered warrants as of immediately prior to consummation of the
financing, subject to customary “downside price
protection” for as long as our common stock is not listed on
a national securities exchange, and will expire five years from the
date of issuance.
Mark
Faupel is one of our directors and our Chief Operating Officer, and
Richard Blumberg is one of our directors. Dr. Faupel is a
shareholder of Shenghuo, and Mr. Blumberg, is a managing member of
Shenghuo. We entered into a license agreement with Shenghuo
pursuant to which we granted Shenghuo an exclusive license to
manufacture, sell and distribute our LuViva Advanced Cervical
Cancer device and related disposables in Taiwan, Brunei Darussalam,
Cambodia, Laos, Myanmar, Philippines, Singapore, Thailand, and
Vietnam. Shenghuo has been our exclusive distributor in China,
Macau and Hong Kong, and the license extends to manufacturing in
those countries as well. Pursuant to the license agreement,
Shenghuo had the option to have a designee appointed to our board
of directors. As partial consideration for, and as a condition to,
the license, and to further align the strategic interests of the
parties, we agreed to issue a convertible note to Shenghuo, in
exchange for an aggregate cash investment of $200,000. The note
will provide for a payment to Shenghuo of $300,000, expected to be
due the earlier of 90 days from issuance and consummation of any
capital raising transaction by us with net cash proceeds of at
least $1.0 million. The note will accrue interest at 20% per year
on any unpaid amounts due after that date. The note will be
convertible into shares of our common stock at a conversion price
per share of $11,137, subject to customary anti-dilution
adjustment. The note will be unsecured and is expected to provide
for customary events of default. We will also issue Shenghuo a
five-year warrant exercisable immediately for 22 shares of common
stock at an exercise price equal to the conversion price of the
note, subject to customary anti-dilution adjustment. As of December
31, 2020, the balance was paid.
In
September 2015, Dr. Faupel participated in our Series C preferred
stock issuance by investing $100,000 in cash, for a total of 133
shares of Series C preferred stock and warrants to purchase 1 share
of common stock. Dr. Faupel participated on terms equal to those of
other Series C investors. In April 2016, Dr. Faupel exchanged his
shares of Series C preferred stock for a total of 300 shares of
Series C1 preferred stock and 2 shares of common stock. Dr. Faupel
participated on terms equal to those of other Series C1
investors.
Item
14. Principal Accountant Fees and
Services
UHY LLP
is our current independent registered public accounting
firm.
We were
billed by UHY LLP $164,650 and $100,869 during the fiscal years
ended December 31, 2020 and 2019, respectively, for professional
services, which include fees associated with the annual audit of
financial statements, as well as the 10-K annual report and review
of our quarterly reports on Form 10-Q, and other SEC
filings.
|
|
|
|
|
Audit
fees
|
$150,000
|
$95,646
|
|
Audit related
fees
|
8,400
|
-
|
|
Tax
fees
|
6,250
|
5,223
|
|
Total
Fees
|
$164,650
|
$100,869
|
Audit Committee Pre-Approval Policy and Permissible Non-Audit
Services of Independent Registered Public Accounting
Firm
Our
Audit Committee pre-approves all audit and permissible non-audit
services provided by our independent registered public accounting
firm. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is
generally provided for up to one year, and any pre-approval is
detailed as to the particular service or category of services and
is generally subject to a specific budget. Our independent
registered public accounting firm and management are required to
periodically report to the Audit Committee regarding the extent of
services provided by the independent registered public accounting
firm in accordance with the pre-approval, and the fees for the
services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case
basis.
Item
15. Exhibits and Financial Statement
Schedules
The
consolidated financial statements included in Item 8 of this report
are filed as part of this report.
The
exhibits listed below are filed as part hereof, or incorporated by
reference into, this Report. All documents referenced below were
filed pursuant to the Securities and Exchange Act of 1934 by Guided
Therapeutics, Inc. (f/k/a SpectRx, Inc.), file number 0-22179,
unless otherwise indicated.
EXHIBIT INDEX
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
3.1
|
|
Restated
Certificate of Incorporation, as amended through November 3,
2016
|
|
|
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.1 to
the current report on Form 8-K, filed March 23, 2012)
|
|
|
|
Amended
and Restated Certificate of Incorporation, (incorporated by
reference to Exhibit 3.1 to the current report on Form 8-K, filed
November 15, 2018)
|
|
3.4
|
|
Certificate of Designation of Preferences, Rights
and Limitations of Series D Convertible Preferred Stock
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
3.5*
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series E
Convertible Preferred Stock
|
|
3.6*
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series F
Convertible Preferred Stock
|
|
|
|
Specimen
Common Stock Certificate (incorporated by reference to Exhibit 4.1
to the amended registration statement on Form S-1/A (No. 333-22429)
filed April 24, 1997)
|
|
|
|
Secured
Promissory Note, dated September 10, 2014 (incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K filed
September 10, 2014)
|
|
|
|
Amendment
#1 to Secured Promissory Note, dated March 10, 2015 (incorporated
by reference to Exhibit 10.1 to the current report on Form 8-K
filed March 19, 2015)
|
|
|
|
Amendment
#2 to Secured Promissory Note, dated May 4, 2015 (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed
May 7, 2015)
|
|
|
|
Amendment
#3 to Secured Promissory Note, dated June 1, 2015 (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed
June 5, 2015)
|
|
|
|
Amendment
#4 to Secured Promissory Note, dated June 16, 2015 (incorporated by
reference to Exhibit 10.4 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Amendment
#5 to Secured Promissory Note, dated June 29, 2015 (incorporated by
reference to Exhibit 10.5 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Amendment
#6 to Secured Promissory Note, dated January 20, 2016 (incorporated
by reference to Exhibit 10.1 to the current report on Form 8-K
filed February 16, 2016)
|
|
|
|
Amendment
#7 to Secured Promissory Note, dated February 11, 2016
(incorporated by reference to Exhibit 10.2 to the current report on
Form 8-K filed February 16, 2016)
|
|
|
|
Amendment
#8 to Secured Promissory Note, dated March 7, 2016 (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed
March 7, 2016)
|
|
|
|
Senior
Secured Convertible Note, dated February 12, 2016 (incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K filed
February 12, 2016)
|
|
|
|
Form
of Exchange Note (GPB) (incorporated by reference to Exhibit 4.1 to
the current report on Form 8-K filed December 7, 2016)
|
|
|
|
10%
OID Convertible Promissory Note (incorporated by reference to
Exhibit 4.1 to the current report on Form 8-K filed December 30,
2016)
|
|
|
|
Convertible
Promissory Note (incorporated by reference to Exhibit 4.1 to the
current report on Form 8-K filed February 16, 2017)
|
|
|
|
Form
of Warrant (Standard Form) (incorporated by reference to Exhibit
4.1 to the current report on Form 8-K, filed September 14,
2010)
|
|
|
|
Form
of Warrant (InterScan) (incorporated by reference to Exhibit 4.13
to the annual report on Form 10-K for the year ended December 31,
2013, filed March 27, 2014)
|
|
|
|
Form
of Warrant (November 2011 Private Placement) (incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K/A, filed
November 28, 2011)
|
|
|
|
Form
of Warrant (Series B-Tranche A) (incorporated by reference to
Exhibit 10.2 to amendment no. 1 to the current report on Form 8-K,
filed May 23, 2013)
|
|
|
|
Form
of Warrant (Series B-Tranche B) (incorporated by reference to
Exhibit 10.3 to amendment no. 1 to the current report on Form 8-K,
filed May 23, 2013)
|
|
|
|
Form
of Warrant (Regulation S) (incorporated by reference to Exhibit 4.1
to the current report on Form 8-K, filed September 8,
2014)
|
|
|
|
Form
of Warrant (2014 Public Offering Placement Agent) (incorporated by
reference to Exhibit 4.2 to the current report on Form 8-K filed
December 4, 2014)
|
|
|
|
Form
of Warrant (2014 Public Offering Warrant Exchanges) (incorporated
by reference to Exhibit 4.1 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Form
of Warrant (Series C) (incorporated by reference to Exhibit 4.3 to
the current report on Form 8-K filed June 30, 2015)
|
|
|
|
Form
of Warrant (Senior Secured Convertible Note) (incorporated by
reference to Exhibit 10.5 to the current report on Form 8-K filed
February 12, 2016)
|
|
|
|
Form
of Warrant (Series B-Tranche B Exchanges; GPB Exchange)
(incorporated by reference to Exhibit 4.1 to the current report on
Form 8-K filed June 14, 2016)
|
|
|
|
Common
Stock Purchase Warrant (Convertible Promissory Note) (incorporated
by reference to Exhibit 4.2 to the current report on Form 8-K filed
February 16, 2017)
|
|
|
|
Senior Secured Convertible Note, dated December
17, 2019, by and between Guided Therapeutics, Inc. and Auctus Fund,
LLC (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Common Stock Warrant, dated December 17, 2019, by
and between Guided Therapeutics, Inc. and Auctus Fund, LLC
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Form of Common Stock Purchase Warrant
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Form of Common Stock Purchase Warrant
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Form of 12% debenture (incorporated by reference
to exhibit filed on Form 10-K filed April 20,
2020)
|
|
|
|
Form of Warrant (Exchange Agreements)
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Form of Common Stock Purchase Warrant
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Convertible
Promissory Note with Auctus, dated March 31, 2020.
|
|
|
|
Form of
Warrant (Auctus Note), dated March 31, 2020.
|
|
|
|
Form of
Warrant (Series D Preferred Stock).
|
|
|
|
Form of
Warrant (Series D Preferred Stock).
|
|
|
|
Form of
Warrant (Ironstone Capital), dated April 23, 2020
|
|
|
|
Form of
Warrant (Auctus Note), dated May 22, 2020.
|
|
|
|
Form of
Warrant (Credential Qtrade Securities Inc. ITF Reve Royalty Income
Growth, dated as of June 23, 2020
|
|
|
|
Form of
Warrant (James Clavijo), dated June 23, 2020
|
|
|
|
Form of
Warrant (Manju Venugopal), dated August 10, 2020.
|
|
|
|
Note
Payable Agreement with Gene Cartwright, dated February 19,
2021
|
|
|
|
Note
Payable Agreement with Mark Faupel, dated February 19,
2021
|
|
|
|
Form of
Warrant (Aspen Capital), dated June 23, 2020
|
|
|
|
1995 Stock Plan and form of Stock Option Agreement
(incorporated by reference to Exhibit 10.2 to the registration
statement on Form S-1 (No. 333-22429) filed February 27,
1997)
|
|
|
|
2005
Amendment to 1995 Stock Plan (incorporated by reference to Appendix
1 to the proxy statement on Schedule 14A, filed May 10,
2005)
|
|
|
|
2010
Amendment to 1995 Stock Plan (incorporated by reference to Exhibit
10.3 to the registration statement on Form S-8 (File No.
333-178261), filed December 1, 2011)
|
|
|
|
2012
Amendment to 1995 Stock Plan (incorporated by reference to Annex 1
to the proxy statement on Schedule 14A, filed April 30,
2012)
|
|
|
|
Securities
Purchase Agreement (Series C), dated June 29, 2015 (incorporated by
reference to Exhibit 10.6 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Registration
Rights Agreement (Series C), dated June 29, 2015 (incorporated by
reference to Exhibit 10.7 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Form
of Joinder Agreement (Series C) (incorporated by reference to
Exhibit 10.1 to the current report on Form 8-K filed July 13,
2015)
|
|
|
|
Interim
Securities Purchase Agreement (Series C), dated September 3, 2015
(incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed September 3, 2015)
|
|
|
|
Securities
Purchase Agreement (Senior Secured Convertible Note), dated
February 11, 2016 (incorporated by reference to Exhibit 10.3 to the
current report on Form 8-K filed February 12, 2016)
|
|
|
|
Security
Agreement (Senior Secured Convertible Note), dated February 11,
2016 (incorporated by reference to Exhibit 10.4 to the current
report on Form 8-K filed February 12, 2016)
|
|
|
|
Royalty
Agreement, dated September 6, 2016, between the Company and Imhoff
and Maloof (incorporated by reference to Exhibit 10.1 to the
current report on Form 8-K filed September 8, 2016)
|
|
|
|
Agreement
between Shandong Yaohua Medical Instrument Corporation and Guided
Therapeutics, Inc., Confidential, Final 22 January 2017
(incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed January 26, 2017)
|
|
|
|
Guided
Therapeutics-Shenghuo Medical Agreement, 22 Jan 2017 (incorporated
by reference to Exhibit 10.2 to the current report on Form 8-K
filed January 26, 2017)
|
|
|
|
Securities Purchase Agreement, dated as of
February 12, 2018, by and between Guided Therapeutics, Inc. and
Adar Bays, LLC (incorporated by reference to exhibit filed on Form
10-K filed April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of
February 22, 2018, by and between Guided Therapeutics, Inc. and
Power Up (incorporated by reference to exhibit filed on Form 10-K
filed April 20, 2020)
|
|
|
|
Lease Modification, dated as of February 23, 2018,
by and between Guided Therapeutics, Inc. and TREA Infill Industrial
Atlanta, LLC (incorporated by reference to exhibit filed on Form
10-K filed April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of March
12, 2018, by and between Guided Therapeutics, Inc. and Eagle
Equities, LLC (incorporated by reference to exhibit filed on Form
10-K filed April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of May 17,
2018, by and between Guided Therapeutics, Inc. and GHS Investments,
Inc (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of March
20, 2018, by and between Guided Therapeutics, Inc. and Auctus Fund,
LLC (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of April
30, 2018, by and between Guided Therapeutics, Inc. and Power Up
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of June 7,
2018, by and between Guided Therapeutics, Inc. and Power Up
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of June
22, 2018, by and between Guided Therapeutics, Inc. and GHS
Investments, Inc (incorporated by reference to exhibit filed on
Form 10-K filed April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of July 3,
2018, by and between Guided Therapeutics, Inc. and Auctus Fund, LLC
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Promissory Note, dated as of August 22, 2018, by
and between Guided Therapeutics, Inc. and Mr. Case (incorporated by
reference to exhibit filed on Form 10-K filed April 20,
2020)
|
|
|
|
Exchange
Agreements, dated as of August 31, 2018, by and between Guided
Therapeutics, Inc. and Series C1 Preferred Stockholders in exchange
for Series C2 Preferred Stock. (incorporated by reference to
Exhibit 10.1 to the current report on Form 8-K filed September 6,
2018)
|
|
|
|
Promissory Note, dated as of September 19, 2018,
by and between Guided Therapeutics, Inc. and Mr. Gould
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Exchange Agreement, dated as of September 30,
2018, by and between Guided Therapeutics, Inc. and Dr. Faupel
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Exchange
Agreement, dated as of September 30, 2018, by and between Guided
Therapeutics, Inc. and Dr. Cartwright
|
|
|
|
Equity Financing Agreement, dated as of March 1,
2018, by and between Guided Therapeutics, Inc. and GHS Investments,
Inc (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Purchase and Sale Agreement, dated as of February
14, 2019, by and between Guided Therapeutics, Inc. and Everest
Business Funding (incorporated by reference to exhibit filed on
Form 10-K filed April 20, 2020)
|
|
|
|
Promissory
Note, dated as of February 15, 2019, by and between Guided
Therapeutics, Inc. and Mr. Gould
|
|
|
|
Securities Purchase Agreement, dated as of March
29, 2019, by and between Guided Therapeutics, Inc. and Auctus Fund,
LLC (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of May 15,
2019, by and between Guided Therapeutics, Inc. and Eagle Equities,
LLC (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of May 15,
2019, by and between Guided Therapeutics, Inc. and Adar Bays, LLC
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Loan Agreement, dated as of July 1, 2019, by and
between Guided Therapeutics, Inc. and Accilent Capital Management
Inc. / Rev Royalty Trust Income and Growth Trust (incorporated by
reference to exhibit filed on Form 10-K filed April 20,
2020)
|
|
|
|
License Agreement Modification, dated as of July
24, 2019, by and between Guided Therapeutics, Inc. and Shandong
Medical Instrument Corporation (incorporated by reference to
exhibit filed on Form 10-K filed April 20,
2020)
|
|
|
|
Addendum to the Exchange Agreement, dated as of
September 30, 2018, by and between Guided Therapeutics, Inc. and
Dr. Faupel (incorporated by reference to exhibit filed on Form 10-K
filed April 20, 2020)
|
|
|
|
Addendum to the Exchange Agreement, dated as of
September 30, 2018, by and between Guided Therapeutics, Inc. and
Dr. Cartwright (incorporated by reference to exhibit filed on Form
10-K filed April 20, 2020)
|
|
|
|
Exchange
Agreement, dated as of December 5, 2019, by and between Guided
Therapeutics, Inc. and Aquarius
|
|
|
|
Securities Purchase Agreement, dated as of
December 17, 2019, by and between Guided Therapeutics, Inc. and
Auctus Fund, LLC (incorporated by reference to exhibit filed on
Form 10-K filed April 20, 2020)
|
|
|
|
Security
Agreement, dated December 17, 2019, by and between Guided
Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Registration Rights Agreement, dated December 17,
2019, by and between Guided Therapeutics, Inc. and Auctus Fund, LLC
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Form of Securities Purchase Agreement between the
Guided Therapeutics, Inc. and investors set forth therein
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Form of Security Agreement between the Guided
Therapeutics, Inc. and investors set forth therein (incorporated by
reference to exhibit filed on Form 10-K filed April 20,
2020)
|
|
|
|
Securities Purchase Agreement (Series D), dated
December 30, 2019 (incorporated by reference to exhibit filed on
Form 10-K filed April 20, 2020)
|
|
|
|
Registration Rights Agreement (Series D), dated
December 30, 2019 (incorporated by reference to exhibit filed on
Form 10-K filed April 20, 2020)
|
|
|
|
Form of Joinder Agreement (Series D), dated
December 30, 2019 (incorporated by reference to exhibit filed on
Form 10-K filed April 20, 2020)
|
|
|
|
Form of Exchange Agreement, dated as of December
30, 2019, by and between Guided Therapeutics, Inc. and Investors
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Exchange Agreement, dated as of December 30, 2019,
by and between Guided Therapeutics, Inc. and K2 (incorporated by
reference to exhibit filed on Form 10-K filed April 20,
2020)
|
|
|
|
Exchange Agreement, dated as of December 30, 2019,
by and between Guided Therapeutics, Inc. and Mr. Blumberg
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Exchange Agreement, dated as of December 30, 2019,
by and between Guided Therapeutics, Inc. and Dr. Imhoff
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Exchange Agreement, dated as of January 6, 2020,
by and between Guided Therapeutics, Inc. and Jones Day Law Firm
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Finder’s Fee Agreement, dated as of January
6, 2020, by and between Guided Therapeutics, Inc. and Iron Stone
Capital (incorporated by reference to exhibit filed on Form 10-K
filed April 20, 2020)
|
|
|
|
Promissory Note, dated as of January 15, 2020, by
and between Guided Therapeutics, Inc. and IRTH Communications, LLC
(incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Exchange Agreement, dated as of January 16, 2020,
by and between Guided Therapeutics, Inc. and GPB Debt Holdings II,
LLC (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Promotional Agreement, dated as of January 22,
2020, by and between Guided Therapeutics, Inc. and Blumberg &
Bowles Consulting, LLC (incorporated by reference to exhibit filed
on Form 10-K filed April 20, 2020)
|
|
|
|
Securities Purchase Agreement, dated as of March
31, 2020, by and between Guided Therapeutics, Inc. and Auctus Fund,
LLC (incorporated by reference to exhibit filed on Form 10-K filed
April 20, 2020)
|
|
|
|
Finder’s Fee
Agreement with JH Darbie, dated as of May 19, 2020
|
|
|
|
Debt
for Equity Exchange Agreement with Auctus, dated as of May 22,
2020
|
|
|
|
Securities Purchase
Agreement with Auctus, dated as of May 27, 2020
|
|
|
|
Finder’s Fee
Agreement with FCMI, dated as of June 11, 2020
|
|
|
|
Exchange Agreement
with William Wells, dated as of July 9, 2020
|
|
|
|
Securities Purchase
Agreement with PowerUp, dated as of December 24, 2020
|
|
|
|
Securities Purchase
Agreement with PowerUp, dated as of February 10, 2021
|
|
|
|
Consulting
Agreement with Richard Blumberg, dated as of March 11,
2021
|
|
|
|
Exchange Agreement
with Richard Fowler, dated as of March 22, 2021
|
|
|
|
Securities Purchase Agreement (Series E), dated
June 30, 2020
|
|
|
|
Securities
Purchase Agreement (Series F), dated March 31, 2020
|
|
|
|
Subsidiaries
(incorporated by reference to Exhibit 21.1 to the registration
statement on Form S-1 (No. 333-169755) filed October 5,
2010)
|
|
|
|
Consent
of UHY LLP
|
|
101.1*
|
|
Interactive
Data File
|
Item
16. Form 10-K Summary
Not
applicable.
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
GUIDED THERAPEUTICS,
INC.
|
|
|
|
|
|
By:
|
/s/ Gene S.
Cartwright
|
|
|
|
President, Chief Executive Officer and
Acting
Chief Financial Officer
|
|
|
Date:
April 5, 2021
|
In
accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
DATE
|
|
SIGNATURE
|
|
TITLE
|
|
|
|
|
|
|
|
April
5, 2021
|
|
/s/ Gene S. Cartwright
|
|
President,
Chief Executive Officer, Acting Chief Financial Officer (Principal
Executive Officer and Principal Financial and Accounting
Officer)
|
|
Gene
S. Cartwright
|
|
|
|
|
|
|
|
April
5, 2021
|
|
/s/ Michael C. James
|
|
Chairman
of the Board and Director
|
|
|
|
Michael
C. James
|
|
|
|
|
|
|
|
|
|
April
5, 2021
|
|
/s/ John E. Imhoff
|
|
Director
|
|
|
|
John
E. Imhoff
|
|
|
|
|
|
|
|
|
|
April
5, 2021
|
|
/s/ Mark Faupel
|
|
Chief
Operating Officer and Director
|
|
|
|
Mark
Faupel
|
|
|
|
April
5, 2021
|
|
/s/ Richard Blumberg
|
|
Director
|
|
|
|
Richard
Blumberg
|
|
|
Exhibit 3.5
EXHIBIT
A.
GUIDED THERAPEUTICS, INC.
CERTIFICATE
OF DESIGNATION OF PREFERENCES,
RIGHTS
AND LIMITATIONS
OF
SERIES
E CONVERTIBLE
PREFERRED STOCK
PURSUANT TO SECTION
151 OF THE
DELAWARE GENERAL
CORPORATION LAW
The
undersigned, Gene S. Cartwright, does hereby certify
that:
1.
He is the President, Chief Executive Officer, and acting Chief
Financial Officer of Guided Therapeutics, Inc., a Delaware
corporation (the “Corporation”).
2.
The Corporation is authorized to issue 5 million shares of
preferred stock.
3.
The following resolutions were duly adopted by the board of
directors of the Corporation (the “Board of
Directors”):
WHEREAS,
the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of 5 million shares, $0.001 par value per share, issuable from time
to time in one or more series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set
forth in the Purchase Agreement, up to 6,000 shares of the
preferred stock which the Corporation has the authority to issue,
as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS
OF PREFERRED STOCK
Section
1. Definitions. For the purposes
hereof, the following terms shall have the following
meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Bankruptcy Event” means
any of the following events: (a) the Corporation or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X under the U.S. securities laws) thereof commences a case or
other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Corporation or any Significant Subsidiary thereof, (b) there is
commenced against the Corporation or any Significant Subsidiary
thereof any such case or proceeding that is not dismissed within 60
days after commencement, (c) the Corporation or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any
order of relief or other order approving any such case or
proceeding is entered, (d) the Corporation or any Significant
Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such
appointment, (e) the Corporation or any Significant Subsidiary
thereof makes a general assignment for the benefit of creditors,
(f) the Corporation or any Significant Subsidiary thereof calls a
meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts, or (g) the Corporation or
any Significant Subsidiary thereof, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in
any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.
“Business Day” means 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.
"Canadian Trading Market" means
any of the following markets or exchanges on which the Common Stock
is listed or quoted for trading on a date in question: the TSX
Venture Exchange and the Toronto Stock Exchange (or any successors
to any of the foregoing).
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1 of the Purchase Agreement.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto and all
conditions precedent to (i) each Holder’s obligations to pay
the Subscription Amount and (ii) the Corporation’s
obligations to deliver the Securities have been satisfied or
waived.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Dividend Conversion Rate”
means the Market Price (as such term is defined in the policies of
the TSX Venture Exchange) immediately prior to the Dividend Payment
Date in question provided, however, that if the Common Stock is not
listed or quoted for trading on a Canadian Trading Market, then the
"Dividend Conversion Rate" shall mean the average of the 20 volume
weighted average prices of the Common Stock on the principal
Trading Market immediately prior to the Dividend Payment Date in
question.
“Dividend Conversion
Shares” shall have the meaning set forth in Section
3(a).
“Dividend Notice Period”
shall have the meaning set forth in Section 3(a).
“Dividend Payment Date”
shall have the meaning set forth in Section 3(a).
“Dividend Share Amount”
shall have the meaning set forth in Section 3(a).
“Effective Date” means all of the
Conversion Shares have been sold pursuant to Rule 144 or may be
sold pursuant to Rule 144 without the requirement for the
Corporation to be in compliance with the current public information
required under Rule 144 and without volume or manner-of-sale
restrictions, (c) following the one year anniversary
of the Closing Date provided that a holder of the Underlying Shares
is not an Affiliate of the Corporation or (d) all of the Underlying
Shares may be sold pursuant to an exemption from registration under
Section 4(1) of the Securities Act without volume or manner-of-sale
restrictions.
“Equity
Conditions” means, during the period in question, (a) the
Corporation shall have duly honored all conversions scheduled to
occur or occurring by virtue of one or more Notices of Conversion
of the applicable Holder on or prior to the dates so requested or
required, if any, (b)(i) there is an effective Registration
Statement pursuant to which the Holders are permitted to utilize
the prospectus thereunder to resell all of the shares of Common
Stock issuable pursuant to this Certificate of Designation (and the
Corporation believes, in good faith, that such effectiveness will
continue uninterrupted for the foreseeable future) or (ii) all of
the Conversion Shares issuable pursuant to this Certificate of
Designation may be resold pursuant to Rule 144 without volume or
manner-of-sale restrictions, (c) the Common Stock is trading on a
Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed or quoted for trading on such
Trading Market (and the Corporation believes, in good faith, that
trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (d) there is a
sufficient number of authorized, but unissued and otherwise
unreserved, shares of Common Stock for the issuance of all of the
shares then issuable pursuant to the this Certificate of
Designation and (e) the shares issuable upon conversion in full of
the redemption amount to the applicable Holder would not violate
the limitations set forth in Section 6(d) herein.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Holder” shall have the
meaning given such term in Section 2.
“Junior Securities” means
the Common Stock and all other Common Stock Equivalents of the
Corporation other than those securities which are explicitly senior
or pari
passu to the
Preferred Stock in dividend rights or liquidation
preference.
“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.
“Liquidation” shall have
the meaning set forth in Section 5.
“New York Courts” shall
have the meaning set forth in Section 9(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Optional Redemption”
shall have the meaning set forth in Section 8(b).
“Optional Redemption
Amount” means the aggregate Stated Value then
outstanding plus accrued but unpaid dividends in respect of the
Preferred Stock.
“Optional Redemption Date”
shall have the meaning set forth in Section 8(b).
“Optional Redemption
Notice” shall have the meaning set forth in Section
8(b).
“Optional Redemption Notice
Date” shall have the meaning set forth in Section
8(b).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred
Stock regardless of the number of transfers of any particular
shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred
Stock.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of the Original Issue
Date, among the Corporation and the original Holders, as amended,
modified or supplemented from time to time in accordance with its
terms.
“Rule
144” means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such
Rule.
“Securities” means
Preferred Stock and the Underlying Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Stated Value” shall have
the meaning set forth in Section 2, as the same may be increased
pursuant to Section 3.
“Subscription Amount”
shall mean, as to each Holder, the aggregate amount to be paid for
the Preferred Stock purchased pursuant to the Purchase Agreement as
specified below such Holder’s name on the signature page of
the Purchase Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.
“Subsidiary” means any
subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Corporation formed or acquired after the
date of the Purchase Agreement.
“Successor Entity” shall
have the meaning set forth in Section 7(e).
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“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,
OTCQX, the Toronto Stock Exchange and the TSX Venture Exchange (or
any successors to any of the foregoing).
“Transaction Documents”
means this Certificate of Designation, the Purchase Agreement, all
exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions
contemplated pursuant to the Purchase Agreement.
“Transfer Agent” means
Computershare, the current transfer agent of the Corporation, and
any successor transfer agent of the Corporation.
“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion or
redemption of the Preferred Stock.
Section
2. Designation, Amount and Par
Value. The series of preferred stock shall be designated as
its Series E Convertible Preferred Stock (the “Preferred Stock”) and the
number of shares so designated shall be up to 5,000. Each share of
Preferred Stock shall have a par value of $0.001 per share and a
stated value equal to $1,000.00, subject to increase set forth in
Section 3 below (the “Stated
Value”).
Section
3. Dividends.
a) Dividends in Cash or in Kind.
Each Holder of Preferred Stock (each, a “Holder” and collectively,
the “Holders”) shall be
entitled to receive, and the Corporation shall pay, cumulative
dividends at the rate per share (as a percentage of the Stated
Value per share) of 8% per annum (subject to increase pursuant to
Section 10(b)), payable
annually, beginning on the first such date after the Original Issue
Date and on each Optional Redemption Date (with respect only to
Preferred Stock being redeemed) (each such date, a
“Dividend Payment
Date”) (if any Dividend Payment Date is not a Trading
Day, the applicable payment shall be due on the next succeeding
Trading Day) in cash, or, following the approval of Canadian
Trading Market if required and at the Corporation’s option
(subject to the waterfall
below), in duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock as set forth in this Section
3(a), or a combination thereof (the dollar amount to be paid in
shares of Common Stock, the “Dividend Share Amount”)
based on the Dividend Conversion Rate.;
provided, however, the Corporation’s election to pay the
Dividend Share Amount in lieu of cash is subject to the following
order of priority: (i) if funds are legally available for the
payment of dividends and the Equity Conditions have not been met
during on the applicable Dividend Payment Date, in cash only, (ii)
if funds are legally available for the payment of dividends and the
Equity Conditions have been met on the applicable Dividend Payment
Date, at the sole election of the Corporation, in cash or shares of
Common Stock which shall be valued as determined above, (iii) if
funds are not legally available for the payment of dividends and
the Equity Conditions have been met on the applicable Dividend
Payment Date, in shares of Common Stock which shall be valued as
determined above, (iv) if funds are not legally available for the
payment of dividends and the Equity Conditions have not been met on
the applicable Dividend Payment Date, then, at the election of such
Holder, such dividends shall accrue to the next Dividend Payment
Date or shall be accreted to, and increase, the outstanding Stated
Value.
b) Corporation’s Ability to Pay
Dividends in Cash or Kind. The Corporation shall promptly
notify the Holders at any time the Corporation shall become able or
unable, as the case may be, to legally pay cash dividends. If at
any time the Corporation has the right to pay dividends in cash or
shares of Common Stock, the Corporation must provide the Holders
with at least 5 Trading Days’ notice of its election to pay a
regularly scheduled dividend in shares of Common Stock (the
Corporation may indicate in such notice that the election contained
in such notice shall continue for later periods until revised by a
subsequent notice).
c) Dividend Calculations.
Dividends on the Preferred Stock shall be calculated on the basis
of a 360-day year, consisting of twelve 30 calendar day periods,
and shall accrue daily commencing on the Original Issue Date, and
shall be deemed to accrue from such date whether or not earned or
declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends.
d) Late Fees. Any dividends,
whether paid in cash or shares of Common Stock, that are not paid
within three Trading Days following a Dividend Payment Date shall
continue to accrue and shall entail a late fee, which must be paid
in cash, at the rate of 12% per annum or the lesser rate permitted
by applicable law which shall accrue daily from the Dividend
Payment Date through and including the date of actual payment in
full.
Section
4. Voting Rights. Except as
otherwise provided herein or as otherwise required by law, the
Preferred Stock shall have no voting rights. However, as long as
any shares of Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote of the Holders of a
majority of the then outstanding shares of the Preferred Stock, (a)
alter or change adversely the powers, preferences or rights given
to the Preferred Stock or alter or amend this Certificate of
Designation, (b) authorize or create any class of stock ranking as
to dividends, redemption or distribution of assets upon a
Liquidation (as defined in Section 5) senior to, or otherwise
pari passu with, the Preferred
Stock, (c) amend its certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the
Holders, (d) increase the number of authorized shares of Preferred
Stock, or (e) enter into any agreement with respect to any of the
foregoing.
Section
5. Liquidation. Upon any
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary (a “Liquidation”), the
Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any
other fees or liquidated damages then due and owing thereon under
this Certificate of Designation, for each share of Preferred Stock
before any distribution or payment shall be made to the holders of
any Junior Securities, and if the assets of the Corporation shall
be insufficient to pay in full such amounts, then the entire assets
to be distributed to the Holders shall be ratably distributed among
the Holders in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full.
Section
6. Conversion.
a) Conversions at Option of
Holder. Each share of Preferred Stock shall be convertible,
at any time and from time to time from and after the Original Issue
Date until the 5-year anniversary of the Original Issue Date at the
option of the Holder thereof, into that number of shares of Common
Stock (subject to the limitations set forth in Section 6(d))
determined by dividing the Stated Value of such share of Preferred
Stock by the Conversion Price. Holders shall effect conversions by
providing the Corporation with the form of conversion notice
attached hereto as Annex
A (a “Notice
of Conversion”). Each Notice of Conversion shall
specify the number of shares of Preferred Stock to be converted,
the number of shares of Preferred Stock owned prior to the
conversion at issue, the number of shares of Preferred Stock owned
subsequent to the conversion at issue and the date on which such
conversion is to be effected, which date may not be prior to the
date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required. The calculations and entries set
forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions of shares of
Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversion Price. The
conversion price for the Preferred Stock shall equal $0.25, subject to adjustment herein (the
“Conversion
Price”).
c)
Mechanics of
Conversion.
i. Delivery of Conversion Shares Upon
Conversion. Not later than five (5) Trading Days after each
Conversion Date, the Corporation shall deliver, or cause to be
delivered, to the converting Holder the number of Conversion Shares
being acquired upon the conversion of the Preferred
Stock.
ii. Obligation Absolute; Partial
Liquidated Damages. The Corporation’s obligation to
issue and deliver the Conversion Shares upon conversion of
Preferred Stock in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by a
Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by such Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation
of law by such Holder or any other person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Corporation to such Holder in connection with the issuance of
such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Corporation of any such action
that the Corporation may have against such Holder.
iii. Reservation
of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out
of its authorized and unissued shares of Common Stock for the sole
purpose of issuance upon conversion of the Preferred Stock and
payment of dividends on the Preferred Stock, each as herein
provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and
the other holders of the Preferred Stock), not less than such
aggregate number of shares of the Common Stock as shall (subject to
the terms and conditions set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of
Section 7) upon the conversion of the then outstanding shares of
Preferred Stock and payment of dividends hereunder.
iv. Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of the Preferred Stock. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such conversion, the Corporation shall at its
election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
v. Transfer Taxes and Expenses.
The issuance of Conversion Shares on conversion of this Preferred
Stock shall be made without charge to any Holder for any
documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such Conversion Shares, provided that
the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and
delivery of any such Conversion Shares upon conversion in a name
other than that of the Holders of such shares of Preferred Stock
and the Corporation shall not be required to issue or deliver such
Conversion Shares unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Corporation the amount
of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
d) Beneficial
Ownership Limitation. The Corporation shall not effect
any conversion of the Preferred Stock, and a Holder shall not have
the right to convert any portion of the Preferred Stock, to the
extent that, after giving effect to the conversion set forth on the
applicable Notice of Conversion, such Holder (together with such
Holder’s Affiliates, and any Persons acting as a group
together with such Holder or any of such Holder’s Affiliates
(such Persons, “Attribution Parties”))
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation
subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, the
Preferred Stock) beneficially owned by such Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 6(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred
Stock is convertible (in relation to other securities owned by such
Holder together with any Affiliates and Attribution Parties) and of
how many shares of Preferred Stock are convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder’s determination
of whether the shares of Preferred Stock may be converted (in
relation to other securities owned by such Holder together with any
Affiliates and Attribution Parties) and how many shares of the
Preferred Stock are convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this
restriction, each Holder will be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Corporation shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 6(d), in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Corporation’s most recent periodic or annual report filed
with the Commission, as the case may be, (ii) a more recent public
announcement by the Corporation or (iii) a more recent written
notice by the Corporation or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or
oral request of a Holder, the Corporation shall within one Trading
Day confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the
Corporation, including the Preferred Stock, by such Holder or its
Affiliates or Attribution Parties since the date as of which such
number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% (or, upon
election by a Holder prior to the issuance of any shares of
Preferred Stock, 9.99%) of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of Preferred Stock
held by the applicable Holder. A Holder, upon notice to the
Corporation, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its
Preferred Stock provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Preferred Stock
held by the Holder and the provisions of this Section 6(d) shall
continue to apply. Any such increase in the Beneficial Ownership
Limitation will not be effective until the 61st day after such
notice is delivered to the Corporation and shall only apply to such
Holder and no other Holder. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of Preferred Stock.
Section
7. Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Corporation, at any time while this Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock
on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or
payment of a dividend on, this Preferred Stock), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 7(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, combination or
re-classification.
b) Fundamental Transaction. If, at
any time while this Preferred Stock is outstanding, (i) the
Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation
with or into another Person, (ii) the Corporation, directly or
indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any,
direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Corporation, directly or
indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such
other Person acquires more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of this Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Preferred
Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of this Preferred Stock). For purposes of any such
conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and
the Corporation shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Preferred Stock following such Fundamental
Transaction.
c) Calculations. All calculations
under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Corporation) issued and outstanding.
d) Notice to the
Holders.
i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 7, the Corporation shall promptly deliver to each
Holder by facsimile or email a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Corporation, then, in each case, the Corporation shall cause
to be filed at each office or agency maintained for the purpose of
conversion of this Preferred Stock, and shall cause to be delivered
by facsimile or email to each Holder at its last facsimile number
or email address as it shall appear upon the stock books of the
Corporation, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 8.
Optional Redemption at Election of
Corporation. Subject to the
provisions of this Section 8, at any time following the Effective Date if the average of the
VWAPs for any consecutive 5 Trading Day period (“Measurement
Period”) exceeds 200% of the then Conversion Price and the
average daily trading volume of the Common Stock on the primary
Trading Market exceeds 20,000 shares per Trading Day during the
Measurement Period (subject to adjustment for reverse and forward
stock splits and the like), then the Corporation may deliver a notice to the Holders (an
“Optional Redemption
Notice” and the date such
notice is deemed delivered hereunder, the
“Optional
Redemption Notice Date”)
of its irrevocable election to redeem some or all of the then
outstanding Preferred Stock, for cash in an amount equal to the
Optional Redemption Amount on the 20th
Trading Day following the Optional
Redemption Notice Date (such date, the “Optional Redemption
Date” and such
redemption, the “Optional
Redemption”). The
Optional Redemption Amount is payable in full on the Optional
Redemption Date. The
Corporation may only effect an Optional Redemption if each of the
Equity Conditions shall have been met on each Trading Day occurring
during the period commencing on the Optional Redemption Notice Date
through to the Optional Redemption Date and through and including
the date payment of the Optional Redemption Amount is actually
made. If
any of the Equity Conditions shall cease to be satisfied at any
time during the 20 Trading Day period, then a Holder may elect to
nullify the Optional Redemption Notice as to such Holder by notice
to the Corporation within 3 Trading Days after the first day on
which any such Equity Condition has not been met (provided that if,
by a provision of the Transaction Documents, the Corporation is
obligated to notify the Holders of the non-existence of an Equity
Condition, such notice period shall be extended to the third
Trading Day after proper notice from the Corporation) in which case
the Optional Redemption Notice shall be null and void, ab
initio. The
Corporation covenants and agrees that
it will honor all Notices of Conversion tendered from the time of
delivery of the Optional Redemption Notice through the date the
Optional Redemption Amount is paid in
full.
Section
9. Miscellaneous
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile or
e-mail attachment, or sent by a nationally recognized overnight
courier service, addressed to the Corporation, at the address set
forth above Attention: Mark L. Faupel, COO, e-mail address of
mfaupel@guidedinc.com, or such other facsimile number, e-mail
address or address as the Corporation may specify for such purposes
by notice to the Holders delivered in accordance with this Section
11. Any and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile or e-mail attachment, or sent by
a nationally recognized overnight courier service addressed to each
Holder at the facsimile number, e-mail address or address of such
Holder appearing on the books of the Corporation, or if no such
facsimile number, e-mail address or address appears on the books of
the Corporation, at the principal place of business of such Holder,
as set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number or e-mail attachment at the e-mail address set forth in this
Section prior to 5:30 p.m. (New York City time) on any date, (ii)
the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number
or e-mail attachment at the e-mail address set forth in this
Section on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be
given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated
damages, accrued dividends and accrued interest, as applicable, on
the shares of Preferred Stock at the time, place, and rate, and in
the coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock
Certificate. If a Holder’s Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the Corporation
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated certificate, or in lieu of or in
substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the
Corporation.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws
of the State of Delaware, without regard to the principles of
conflict of laws thereof. All legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). The
Corporation and each Holder hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New
York Courts are improper or inconvenient venue for such proceeding.
The Corporation and each Holder hereby irrevocably waives personal
service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
applicable law. The Corporation and each Holder hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of
or relating to this Certificate of Designation or the transactions
contemplated hereby. If the Corporation or any Holder shall
commence an action or proceeding to enforce any provisions of this
Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
e) Waiver. Any waiver by the
Corporation or a Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a
waiver by any other Holders. The failure of the Corporation or a
Holder to insist upon strict adherence to any term of this
Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of
the right thereafter to insist upon strict adherence to that term
or any other term of this Certificate of Designation on any other
occasion. Any waiver by the Corporation or a Holder must be in
writing.
f) Severability. If any provision
of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to
all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law.
g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Certificate of Designation and shall not be deemed to limit
or affect any of the provisions hereof.
i) Status of Converted or Redeemed
Preferred Stock. Shares of Preferred Stock may only be
issued pursuant to the Purchase Agreement. If any shares of
Preferred Stock shall be converted, redeemed or reacquired by the
Corporation, such shares shall resume the status of authorized but
unissued shares of preferred stock and shall no longer be
designated as Series E Convertible Preferred Stock.
j) Non-Transferrable. The
Preferred Stock (but not the Conversion Shares following a
conversion hereunder) may not be transferred.
*********************
RESOLVED, FURTHER,
that the Chairman, the president or any vice-president, and the
secretary or any assistant secretary, of the Corporation be and
they hereby are authorized and directed to prepare and file this
Certificate of Designation of Preferences, Rights and Limitations
in accordance with the foregoing resolution and the provisions of
Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this ___ day of July, 2019.
|
__________________________________________
Name:
Gene S. Cartwright
Title:
President and CEO
|
__________________________________________
Name:
Mark Faupel
Title:
Secretary and COO
|
ANNEX
A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series
E Convertible Preferred Stock indicated below into shares of common
stock, par value $0.001 per share (the “Common Stock”), of Guided
Therapeutics, Inc., a Delaware corporation (the “Corporation”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates and opinions as may be required by the Corporation in
accordance with the Purchase Agreement. No fee will be charged to
the Holders for any conversion, except for any such transfer
taxes.
Conversion
calculations:
|
Date to
Effect Conversion:
_____________________________________________
|
|
Number
of shares of Preferred Stock owned prior to Conversion:
_______________
|
|
Number
of shares of Preferred Stock to be Converted:
________________________
|
|
Stated
Value of shares of Preferred Stock to be Converted:
____________________
|
|
Number
of shares of Common Stock to be Issued:
___________________________
|
|
Applicable
Conversion
Price:____________________________________________
|
|
Number
of shares of Preferred Stock subsequent to Conversion:
________________
|
|
Address
for Delivery: ______________________
or
DWAC
Instructions:
Broker
no: _________
Account
no: ___________
|
|
[HOLDER]
By:___________________________________
Name:
Title:
|
Exhibit 3.6
EXHIBIT
A.
GUIDED
THERAPEUTICS, INC.
CERTIFICATE OF DESIGNATION OF
PREFERENCES,
RIGHTS
AND LIMITATIONS
OF
SERIES
F CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION
151 OF THE
DELAWARE GENERAL
CORPORATION LAW
The
undersigned, Gene S. Cartwright, does hereby certify
that:
1.
He is the President, Chief Executive Officer, and acting Chief
Financial Officer of Guided Therapeutics, Inc., a Delaware
corporation (the “Corporation”).
2.
The Corporation is authorized to issue 5 million shares of
preferred stock.
3.
The following resolutions were duly adopted by the board of
directors of the Corporation (the “Board of
Directors”):
WHEREAS,
the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of 5 million shares, $0.001 par value per share, issuable from time
to time in one or more series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set
forth in the Purchase Agreement, up to 4,700 shares of the
preferred stock which the Corporation has the authority to issue,
as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS
OF PREFERRED STOCK
Section
1. Definitions. For the purposes
hereof, the following terms shall have the following
meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Business Day” means 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.
"Canadian Trading Market" means
any of the following markets or exchanges on which the Common Stock
is listed or quoted for trading on a date in question: the TSX
Venture Exchange and the Toronto Stock Exchange (or any successors
to any of the foregoing).
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1 of the Purchase Agreement.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto and all
conditions precedent to (i) each Holder’s obligations to pay
the Subscription Amount and (ii) the Corporation’s
obligations to deliver the Securities have been satisfied or
waived.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Dividend Conversion Rate”
means the Market Price (as such term is defined in the policies of
the TSX Venture Exchange) immediately prior to the Dividend Payment
Date in question provided, however, that if the Common Stock is not
listed or quoted for trading on a Canadian Trading Market, then the
"Dividend Conversion Rate" shall mean the average of the 20 volume
weighted average prices of the Common Stock on the principal
Trading Market immediately prior to the Dividend Payment Date in
question.
“Dividend Conversion
Shares” shall have the meaning set forth in Section
3(a).
“Dividend Notice Period”
shall have the meaning set forth in Section 3(a).
“Dividend Payment Date”
shall have the meaning set forth in Section 3(a).
“Dividend Share Amount”
shall have the meaning set forth in Section 3(a).
“Equity
Conditions” means, during
the period in question, (a) the Corporation shall have duly honored
all conversions scheduled to occur or occurring by virtue of one or
more Notices of Conversion of the applicable Holder on or prior to
the dates so requested or required, if any, (b)(i) there is an
effective Registration Statement pursuant to which the Holders are
permitted to utilize the prospectus thereunder to resell all of the
shares of Common Stock issuable pursuant to this Certificate of
Designation (and the Corporation believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable
future) or (ii) all of the Conversion Shares issuable pursuant to
this Certificate of Designation may be resold pursuant to Rule 144
without volume or manner-of-sale restrictions, (c) the Common Stock
is trading on a Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed or quoted for
trading on such Trading Market (and the Corporation believes, in
good faith, that trading of the Common Stock on a Trading Market
will continue uninterrupted for the foreseeable future), (d) there
is a sufficient number of authorized, but unissued and otherwise
unreserved, shares of Common Stock for the issuance of all of the
shares then issuable pursuant to the this Certificate of
Designation and (e) the shares issuable upon conversion in full of
the redemption amount to the applicable Holder would not violate
the limitations set forth in Section 6(d)
herein.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Holder” shall have the
meaning given such term in Section 2.
“Junior Securities” means
the Common Stock and all other Common Stock Equivalents of the
Corporation other than those securities which are explicitly senior
or pari
passu to the
Preferred Stock in dividend rights or liquidation
preference.
“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.
“Liquidation” shall have
the meaning set forth in Section 5.
“New York Courts” shall
have the meaning set forth in Section 9(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Optional Redemption”
shall have the meaning set forth in Section 8(b).
“Optional Redemption
Amount” means the aggregate Stated Value then
outstanding plus accrued but unpaid dividends in respect of the
Preferred Stock.
“Optional Redemption Date”
shall have the meaning set forth in Section 8(b).
“Optional Redemption
Notice” shall have the meaning set forth in Section
8(b).
“Optional Redemption Notice
Date” shall have the meaning set forth in Section
8(b).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred
Stock regardless of the number of transfers of any particular
shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred
Stock.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of the Original Issue
Date, among the Corporation and the original Holders, as amended,
modified or supplemented from time to time in accordance with its
terms.
“Rule
144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Securities” means
Preferred Stock and the Underlying Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Stated Value” shall have
the meaning set forth in Section 2, as the same may be increased
pursuant to Section 3.
“Subscription Amount”
shall mean, as to each Holder, the aggregate amount to be paid for
the Preferred Stock purchased pursuant to the Purchase Agreement as
specified below such Holder’s name on the signature page of
the Purchase Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.
“Subsidiary” means any
subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Corporation formed or acquired after the
date of the Purchase Agreement.
“Successor Entity” shall
have the meaning set forth in Section 7(e).
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“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,
OTCQX, the Toronto Stock Exchange and the TSX Venture Exchange (or
any successors to any of the foregoing).
“Transaction Documents”
means this Certificate of Designation, the Purchase Agreement, all
exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions
contemplated pursuant to the Purchase Agreement.
“Transfer Agent” means
Computershare, the current transfer agent of the Corporation, and
any successor transfer agent of the Corporation.
“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion or
redemption of the Preferred Stock.
Section
2. Designation, Amount and Par
Value. The series of preferred stock shall be designated as
its Series F Convertible Preferred Stock (the “Preferred Stock”) and the
number of shares so designated shall be up to 4,700. Each share of
Preferred Stock shall have a par value of $0.001 per share and a
stated value equal to $1,000.00, subject to increase set forth in
Section 3 below (the “Stated
Value”).
Section
3. Dividends.
a) Dividends in Cash or in Kind.
Each Holder of Preferred Stock (each, a “Holder” and collectively,
the “Holders”) shall be
entitled to receive, and the Corporation shall pay, cumulative
dividends at the rate per share (as a percentage of the Stated
Value per share) of 6% per annum (subject to increase pursuant to
Section 10(b)), payable
annually, beginning on the first such date after the Original Issue
Date and on each Optional Redemption Date (with respect only to
Preferred Stock being redeemed) (each such date, a
“Dividend Payment
Date”) (if any Dividend Payment Date is not a Trading
Day, the applicable payment shall be due on the next succeeding
Trading Day) in cash, or, following the approval of Canadian
Trading Market if required and at the Corporation’s option
(subject to the waterfall
below), in duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock as set forth in this Section
3(a), or a combination thereof (the dollar amount to be paid in
shares of Common Stock, the “Dividend Share Amount”)
based on the Dividend Conversion Rate.;
provided, however, the Corporation’s election to pay the
Dividend Share Amount in lieu of cash is subject to the following
order of priority: (i) if funds are legally available for the
payment of dividends and the Equity Conditions have not been met
during on the applicable Dividend Payment Date, in cash only, (ii)
if funds are legally available for the payment of dividends and the
Equity Conditions have been met on the applicable Dividend Payment
Date, at the sole election of the Corporation, in cash or shares of
Common Stock which shall be valued as determined above, (iii) if
funds are not legally available for the payment of dividends and
the Equity Conditions have been met on the applicable Dividend
Payment Date, in shares of Common Stock which shall be valued as
determined above, (iv) if funds are not legally available for the
payment of dividends and the Equity Conditions have not been met on
the applicable Dividend Payment Date, then, at the election of such
Holder, such dividends shall accrue to the next Dividend Payment
Date or shall be accreted to, and increase, the outstanding Stated
Value.
b) Corporation’s Ability to Pay
Dividends in Cash or Kind. The Corporation shall promptly
notify the Holders at any time the Corporation shall become able or
unable, as the case may be, to legally pay cash dividends. If at
any time the Corporation has the right to pay dividends in cash or
shares of Common Stock, the Corporation must provide the Holders
with at least 5 Trading Days’ notice of its election to pay a
regularly scheduled dividend in shares of Common Stock (the
Corporation may indicate in such notice that the election contained
in such notice shall continue for later periods until revised by a
subsequent notice).
c) Dividend Calculations.
Dividends on the Preferred Stock shall be calculated on the basis
of a 360-day year, consisting of twelve 30 calendar day periods,
and shall accrue daily commencing on the Original Issue Date, and
shall be deemed to accrue from such date whether or not earned or
declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends.
d) One Time Additional Dividend.
In addition to the 6% annual dividend described in Section 3a.
above, the Corporation also will pay a one-time, non-recuring,
dividend equal to 15% of the aggregate Stated Value of Preferred
Stock then held by the Holder, in cash or Common Stock, at the
option of the Corporation otherwise pursuant to the terms set forth
in Section 3(a), if both of the following circumstances
occur:
i. The Corporation is
unable to successfully uplist to the NASDAQ Stock Exchange by
December 31, 2021; and
ii. The Corporation is
unable to file its clinical data intended for FDA approval of its
primary product, LuViva, by December 31, 2021.
e) Late Fees. Any dividends,
whether paid in cash or shares of Common Stock, that are not paid
within three Trading Days following a Dividend Payment Date shall
continue to accrue and shall entail a late fee, which must be paid
in cash, at the rate of 12% per annum or the lesser rate permitted
by applicable law which shall accrue daily from the Dividend
Payment Date through and including the date of actual payment in
full.
Section
4. Voting Rights. Except as
otherwise provided herein or as otherwise required by law, the
Preferred Stock shall have no voting rights. However, as long as
any shares of Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote of the Holders of a
majority of the then outstanding shares of the Preferred Stock, (a)
alter or change adversely the powers, preferences or rights given
to the Preferred Stock or alter or amend this Certificate of
Designation, (b) authorize or create any class of stock ranking as
to dividends, redemption or distribution of assets upon a
Liquidation (as defined in Section 5) senior to, or otherwise
pari passu with, the Preferred
Stock, (c) amend its certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the
Holders, (d) increase the number of authorized shares of Preferred
Stock, or (e) enter into any agreement with respect to any of the
foregoing.
Section
5. Liquidation. Upon any
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary (a “Liquidation”), the
Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any
other fees or liquidated damages then due and owing thereon under
this Certificate of Designation, for each share of Preferred Stock
before any distribution or payment shall be made to the holders of
any Junior Securities, and if the assets of the Corporation shall
be insufficient to pay in full such amounts, then the entire assets
to be distributed to the Holders shall be ratably distributed among
the Holders in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full.
Section
6. Conversion.
a) Conversions at Option of
Holder. Each share of Preferred Stock shall be convertible,
at any time and from time to time from and after the Original Issue
Date until the 5-year anniversary of the Original Issue Date at the
option of the Holder thereof, into that number of shares of Common
Stock (subject to the limitations set forth in Section 6(d))
determined by dividing the Stated Value of such share of Preferred
Stock by the Conversion Price. Holders shall effect conversions by
providing the Corporation with the form of conversion notice
attached hereto as Annex
A (a “Notice
of Conversion”). Each Notice of Conversion shall
specify the number of shares of Preferred Stock to be converted,
the number of shares of Preferred Stock owned prior to the
conversion at issue, the number of shares of Preferred Stock owned
subsequent to the conversion at issue and the date on which such
conversion is to be effected, which date may not be prior to the
date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required. The calculations and entries set
forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions of shares of
Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversion Price. The
conversion price for the Preferred Stock shall equal $0.25, subject to adjustment herein (the
“Conversion
Price”).
c)
Mechanics of
Conversion.
i. Delivery of Conversion Shares Upon
Conversion. The Corporation shall deliver, or cause to be
delivered, to the converting Holder the number of Conversion Shares
being acquired upon the conversion of the Preferred
Stock.
ii. Obligation Absolute; Partial
Liquidated Damages. The Corporation’s obligation to
issue and deliver the Conversion Shares upon conversion of
Preferred Stock in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by a
Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by such Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation
of law by such Holder or any other person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Corporation to such Holder in connection with the issuance of
such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Corporation of any such action
that the Corporation may have against such Holder.
iii. Reservation
of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out
of its authorized and unissued shares of Common Stock for the sole
purpose of issuance upon conversion of the Preferred Stock and
payment of dividends on the Preferred Stock, each as herein
provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and
the other holders of the Preferred Stock), not less than such
aggregate number of shares of the Common Stock as shall (subject to
the terms and conditions set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of
Section 7) upon the conversion of the then outstanding shares of
Preferred Stock and payment of dividends hereunder.
iv. Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of the Preferred Stock. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such conversion, the Corporation shall at its
election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
v. Transfer Taxes and Expenses.
The issuance of Conversion Shares on conversion of this Preferred
Stock shall be made without charge to any Holder for any
documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such Conversion Shares, provided that
the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and
delivery of any such Conversion Shares upon conversion in a name
other than that of the Holders of such shares of Preferred Stock
and the Corporation shall not be required to issue or deliver such
Conversion Shares unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Corporation the amount
of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
d) Beneficial
Ownership Limitation. The Corporation shall not effect
any conversion of the Preferred Stock, and a Holder shall not have
the right to convert any portion of the Preferred Stock, to the
extent that, after giving effect to the conversion set forth on the
applicable Notice of Conversion, such Holder (together with such
Holder’s Affiliates, and any Persons acting as a group
together with such Holder or any of such Holder’s Affiliates
(such Persons, “Attribution Parties”))
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation
subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, the
Preferred Stock) beneficially owned by such Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 6(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred
Stock is convertible (in relation to other securities owned by such
Holder together with any Affiliates and Attribution Parties) and of
how many shares of Preferred Stock are convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder’s determination
of whether the shares of Preferred Stock may be converted (in
relation to other securities owned by such Holder together with any
Affiliates and Attribution Parties) and how many shares of the
Preferred Stock are convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this
restriction, each Holder will be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Corporation shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 6(d), in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Corporation’s most recent periodic or annual report filed
with the Commission, as the case may be, (ii) a more recent public
announcement by the Corporation or (iii) a more recent written
notice by the Corporation or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or
oral request of a Holder, the Corporation shall within one Trading
Day confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the
Corporation, including the Preferred Stock, by such Holder or its
Affiliates or Attribution Parties since the date as of which such
number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% (or, upon
election by a Holder prior to the issuance of any shares of
Preferred Stock, 9.99%) of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of Preferred Stock
held by the applicable Holder. A Holder, upon notice to the
Corporation, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its
Preferred Stock provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Preferred Stock
held by the Holder and the provisions of this Section 6(d) shall
continue to apply. Any such increase in the Beneficial Ownership
Limitation will not be effective until the 61st day after such
notice is delivered to the Corporation and shall only apply to such
Holder and no other Holder. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of Preferred Stock.
Section
7. Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Corporation, at any time while this Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock
on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or
payment of a dividend on, this Preferred Stock), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 7(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, combination or
re-classification.
b) Fundamental Transaction. If, at
any time while this Preferred Stock is outstanding, (i) the
Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation
with or into another Person, (ii) the Corporation, directly or
indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any,
direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Corporation, directly or
indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such
other Person acquires more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of this Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Preferred
Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of this Preferred Stock). For purposes of any such
conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and
the Corporation shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Preferred Stock following such Fundamental
Transaction.
c) Calculations. All calculations
under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Corporation) issued and outstanding.
d) Notice to the
Holders.
i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 7, the Corporation shall promptly deliver to each
Holder by facsimile or email a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Corporation, then, in each case, the Corporation shall cause
to be filed at each office or agency maintained for the purpose of
conversion of this Preferred Stock, and shall cause to be delivered
by facsimile or email to each Holder at its last facsimile number
or email address as it shall appear upon the stock books of the
Corporation, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section
8. Optional Redemption at Election of
Corporation. Subject to the
provisions of this Section 8, at any time following the Effective Date if the average of the
VWAPs for any consecutive 5 Trading Day period (“Measurement
Period”) exceeds 200% of the then Conversion Price and the
average daily trading volume of the Common Stock on the primary
Trading Market exceeds 20,000 shares per Trading Day during the
Measurement Period (subject to adjustment for reverse and forward
stock splits and the like), then the Corporation may deliver a notice to the Holders (an
“Optional Redemption
Notice” and the date such
notice is deemed delivered hereunder, the
“Optional
Redemption Notice Date”)
of its irrevocable election to redeem some or all of the then
outstanding Preferred Stock, for cash in an amount equal to the
Optional Redemption Amount on the 20th
Trading Day following the Optional
Redemption Notice Date (such date, the “Optional Redemption
Date” and such
redemption, the “Optional
Redemption”). The
Optional Redemption Amount is payable in full on the Optional
Redemption Date. The
Corporation may only effect an Optional Redemption if each of the
Equity Conditions shall have been met on each Trading Day occurring
during the period commencing on the Optional Redemption Notice Date
through to the Optional Redemption Date and through and including
the date payment of the Optional Redemption Amount is actually
made. If
any of the Equity Conditions shall cease to be satisfied at any
time during the 20 Trading Day period, then a Holder may elect to
nullify the Optional Redemption Notice as to such Holder by notice
to the Corporation within 3 Trading Days after the first day on
which any such Equity Condition has not been met (provided that if,
by a provision of the Transaction Documents, the Corporation is
obligated to notify the Holders of the non-existence of an Equity
Condition, such notice period shall be extended to the third
Trading Day after proper notice from the Corporation) in which case
the Optional Redemption Notice shall be null and void, ab
initio. The
Corporation covenants and agrees that
it will honor all Notices of Conversion tendered from the time of
delivery of the Optional Redemption Notice through the date the
Optional Redemption Amount is paid in full. In addition, the
Corporation may exercise its option to convert the Series F
Preferred Shares to common shares should it be necessary to meet
the requirements of uplisting the Company’s stock to Nasdaq,
but only if all other requirements can be met by the
Company.
Section
9. Miscellaneous
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile or
e-mail attachment, or sent by a nationally recognized overnight
courier service, addressed to the Corporation, at the address set
forth above Attention: Mark L. Faupel, COO, e-mail address of
mfaupel@guidedinc.com, or such other facsimile number, e-mail
address or address as the Corporation may specify for such purposes
by notice to the Holders delivered in accordance with this Section
11. Any and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile or e-mail attachment, or sent by
a nationally recognized overnight courier service addressed to each
Holder at the facsimile number, e-mail address or address of such
Holder appearing on the books of the Corporation, or if no such
facsimile number, e-mail address or address appears on the books of
the Corporation, at the principal place of business of such Holder,
as set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number or e-mail attachment at the e-mail address set forth in this
Section prior to 5:30 p.m. (New York City time) on any date, (ii)
the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number
or e-mail attachment at the e-mail address set forth in this
Section on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be
given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated
damages, accrued dividends and accrued interest, as applicable, on
the shares of Preferred Stock at the time, place, and rate, and in
the coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock
Certificate. If a Holder’s Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the Corporation
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated certificate, or in lieu of or in
substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the
Corporation.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws
of the State of Delaware, without regard to the principles of
conflict of laws thereof. All legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). The
Corporation and each Holder hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New
York Courts are improper or inconvenient venue for such proceeding.
The Corporation and each Holder hereby irrevocably waives personal
service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
applicable law. The Corporation and each Holder hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of
or relating to this Certificate of Designation or the transactions
contemplated hereby. If the Corporation or any Holder shall
commence an action or proceeding to enforce any provisions of this
Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
e) Waiver. Any waiver by the
Corporation or a Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a
waiver by any other Holders. The failure of the Corporation or a
Holder to insist upon strict adherence to any term of this
Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of
the right thereafter to insist upon strict adherence to that term
or any other term of this Certificate of Designation on any other
occasion. Any waiver by the Corporation or a Holder must be in
writing.
f) Severability. If any provision
of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to
all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law.
g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Certificate of Designation and shall not be deemed to limit
or affect any of the provisions hereof.
i) Status of Converted or Redeemed
Preferred Stock. Shares of Preferred Stock may only be
issued pursuant to the Purchase Agreement. If any shares of
Preferred Stock shall be converted, redeemed or reacquired by the
Corporation, such shares shall resume the status of authorized but
unissued shares of preferred stock and shall no longer be
designated as Series F Convertible Preferred Stock.
j) Non-Transferrable. The
Preferred Stock may not be transferred.
*********************
RESOLVED, FURTHER,
that the Chairman, the president or any vice-president, and the
secretary or any assistant secretary, of the Corporation be and
they hereby are authorized and directed to prepare and file this
Certificate of Designation of Preferences, Rights and Limitations
in accordance with the foregoing resolution and the provisions of
Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this ___ day of ______________, 20____.
|
__________________________________________
Name:
Gene S. Cartwright
Title:
CEO
|
__________________________________________
Name:
Mark L. Faupel
Title:
COO / Secretary
|
ANNEX
A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
PREFERRED STOCK)
The undersigned
hereby elects to convert the number of shares of Series F
Convertible Preferred Stock indicated below into shares of common
stock, par value $0.001 per share (the “Common Stock”), of Guided
Therapeutics, Inc., a Delaware corporation (the “Corporation”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates and opinions as may be required by the Corporation in
accordance with the Purchase Agreement. No fee will be charged to
the Holders for any conversion, except for any such transfer
taxes.
Conversion
calculations:
|
Date to
Effect Conversion:
_____________________________________________
|
|
Number
of shares of Preferred Stock owned prior to Conversion:
_______________
|
|
Number
of shares of Preferred Stock to be Converted:
________________________
|
|
Stated
Value of shares of Preferred Stock to be Converted:
____________________
|
|
Number
of shares of Common Stock to be Issued:
___________________________
|
|
Applicable
Conversion
Price:____________________________________________
|
|
Number
of shares of Preferred Stock subsequent to Conversion:
________________
|
|
Address
for Delivery: ______________________
or
DWAC
Instructions:
Broker
no: _________
Account
no: ___________
|
|
[HOLDER]
By:___________________________________
Name:
Title:
|
Exhibit 4.24
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I)
IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL
SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II)
UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Principal
Amount: US$1l2,750.00
Issue
Date: March 31, 2020
Purchase
Price: US$112,750.00
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, GUIDED THERAPEUTICS, INC., a
Delaware corporation (hereinafter called the "Borrower") (Trading
Symbol: GTHP), hereby promises to pay to the order of AUCTUS FUND,
LLC, a Delaware limited liability company, or registered assigns
(the "Holder") the sum ofUS$112,750.00 together with any interest
as set forth herein, on January 26, 2021 (the "Maturity Date"), and
to pay interest on the unpaid principal balance hereof at the rate
of twelve percent (12%) (the "Interest Rate") per annum from the
date hereof (the "Issue Date") until the same becomes due and
payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part
except as otherwise explicitly set forth herein. Any amount of
principal or interest on this Note which is not paid when due shall
bear interest at the rate of the lesser of (i) twenty-four percent
(24%) per annum and (ii) the maximum amount permitted under law from the
due date thereof until the same is paid (the "Default Interest").
Interest shall commence accruing on the date that the Note is
funded by the Holder and shall be computed on the basis of a
360-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock,
$0.001 par value per share (the "Common Stock") in accordance with
the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as
the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note. Whenever any
amount expressed to be due by the terms of this Note is due on any
day which is not a business day, the same shall instead be due on
the next succeeding day which is a business day and, in the case of
any interest payment date which is not the date on which this Note
is paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term "business
day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of New York, New York are
authorized or required by law or executive order to remain closed.
Each capitalized term used herein, and not otherwise defined, shall
have the meaning ascribed thereto in that certain securities
purchase agreement dated the date hereof, pursuant to which this
Note was originally issued (the "Purchase
Agreement").
This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.
The
following terms shall also apply to this Note:
ARTICLE
1. CONVERSION RIGHTS
1.1
Conversion Right. The Holder shall have the right
from time to time, and at any time following the
90th
calendar day after the Issue Date, and
ending on the later of (i) the Maturity Date and (ii) the date of
payment of the Default Amount (as defined in Article III) pursuant
to Section 1.6(a) or Article III, each in respect of the remaining
outstanding principal amount of this Note to convert all or any
part of the outstanding and unpaid principal, interest, penalties,
and all other amounts under this Note into fully paid and
non-assessable shares of Common Stock, as such Common Stock exists
on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall
hereafter be changed or reclassified at the Conversion Price (as
defined below) determined as provided herein (a "Conversion");
provided, however, that in no event shall the Holder be entitled to
convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of (I) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Notes
or the unexercised or unconverted portion of any other security of
the Borrower subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the conversion of the
portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (the "Beneficial Ownership Limitations").
For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
l3(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Regulations l3D-G thereunder, except as
otherwise provided in clause (1) of such proviso. The number of shares of Common
Stock to be issued upon each conversion of this Note shall be
determined by dividing the Conversion Amount (as defined below) by
the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto
as Exhibit A (the "Notice of Conversion"), delivered to the
Borrower by the Holder in accordance with Section 1.4 below;
provided that the Notice of Conversion is submitted by facsimile or
e-mail (or by other means resulting in, or reasonably expected to
result in, notice) to the Borrower before 11:59 p.m., New York, New
York time on such conversion date (the "Conversion Date"). The term
"Conversion Amount" means, with respect to any conversion of this
Note, the sum of (1) the principal amount of this Note to be converted
in such conversion plus (2) at the Holder's option, accrued and
unpaid interest, if any, on such principal amount at the interest
rates provided in this Note to the Conversion Date, provided
however, that the Borrower shall have the right to pay any or all
interest in cash plus (3) at the Holder's option, Default Interest,
if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2) plus (4) at the Holder's option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof.
1.2
Conversion Price.
Calculation
of Conversion Price. Subject to the adjustments described herein,
the conversion price (the "Conversion Price") shall equal the
lesser of: (i) the lowest Trading Price (as defined below) during
the twenty-five (25) Trading Day period ending on the latest
complete Trading Day prior to the Issue Date and (ii) the Variable
Conversion Price (as defined herein) (subject to equitable
adjustments for stock splits, stock dividends or rights offerings
by the Borrower relating to the Borrower's securities or the
securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions
and similar events). The "Variable Conversion Price" shall mean 55%
multiplied by the Market Price (as defined herein) (representing a
discount rate of 45%). "Market Price" means the lowest Trading
Price (as defined below) for the Common Stock during the
twenty-five (25) Trading Day period ending on the latest complete
Trading Day prior to the Conversion Date. "Trading Price" means,
for any security as of any date, the lesser of: (i) the lowest
trade price on the OTC Pink, OTCQB or applicable trading market as
reported by a reliable reporting service ("Reporting Service")
designated by the Holder or, if the OTC Pink is not the principal
trading market for such security, the trading price of such
security on the principal securities exchange or trading market
where such security is listed or traded or, if no trading price of
such security is available in any of the foregoing manners, the
average of the trading prices of any market makers for such
security that are listed in the "pink sheets" by the National
Quotation Bureau, Inc., or (ii) the closing bid price on the OTC
Pink, OTCQB or applicable trading market as reported by a Reporting
Service designated by the Holder or, if the OTC Pink is not the
principal trading market for such security, the closing bid price
of such security on the principal securities exchange or trading
market where such security is listed or traded or, if no closing
bid price of such security is available in any of the foregoing
manners, the average of the closing bid prices of any market makers
for such security that are listed in the "pink sheets" by the
National Quotation Bureau, Inc. To the extent the Conversion Price
of the Borrower' s Common Stock closes below the par value per
share, the Borrower will take all steps necessary to solicit the
consent of the stockholders to reduce the par value to the lowest
value possible under law. The Borrower agrees to honor all
conversions submitted pending this adjustment. If the shares of the
Borrower's Common Stock have not been delivered within three (3)
business days to the Borrower, the Notice of Conversion may be
rescinded. At any time after the Closing Date, if in the case that
the Borrower's Common Stock is not deliverable by DWAC (including
if the Borrower's transfer agent has a policy prohibiting or
limiting delivery of shares of the Borrower's Common Stock
specified in a Notice of Conversion), an additional 10% discount
will apply for all future conversions under all Notes. If in the
case that the Borrower's Common Stock is "chilled" for deposit into
the DTC system and only eligible for clearing deposit, an
additional 15% discount shall apply for all future conversions
under all Notes while the "chill" is in effect. If in the case of
both of the above, an additional cumulative 25% discount shall
apply. Additionally, if the Borrower ceases to be a reporting
company pursuant to the 1934 Act or if the Note cannot be converted
into free trading shares after one hundred eighty-one (181) days
from the Issue Date, an additional 15% discount will be attributed
to the Conversion Price. If the Trading Price cannot be calculated
for such security on such date in the manner provided above, the
Trading Price shall be the fair market value as mutually determined
by the Borrower and the holders of a majority in interest of the
Notes being converted for which the calculation of the Trading
Price is required in order to determine the Conversion Price of
such Notes. "Trading Day" shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, OTCQB or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. The Borrower shall be
responsible for the fees of its transfer agent and all DTC fees
associated with any such issuance. Holder shall be entitled to
deduct $500.00 from the conversion amount in each Notice of
Conversion to cover Holder's deposit fees associated with each
Notice of Conversion.
While
this Note is outstanding, each time any 3rd party has the right to
convert monies owed to that 3rd party (or receive shares pursuant
to a settlement or otherwise), including but not limited to under
Section 3(a)(9) and Section 3(a)(10), at a discount to market
greater than the Conversion Price in effect at that time (prior to
all other applicable adjustments in the Note), then the Holder, in
Holder's sole discretion, may utilize such greater discount
percentage (prior to all applicable adjustments in this Note) until
this Note is no longer outstanding. While this Note is outstanding,
each time any 3rd party has a look back period greater than the
look back period in effect under the Note at that time, including
but not limited to under Section 3(a)(9) and Section 3(a)(10), then
the Holder, in Holder's sole discretion, may utilize such greater
number of look back days until this Note is no longer outstanding.
The Borrower shall give written notice to the Holder within one (1)
business day of becoming aware of any event that could permit the
Holder to make any adjustment described in the two immediately
preceding sentences.
(a)
Conversion Price During Major Announcements. Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event
the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a
merger in which the Borrower is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any
person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower's Common
Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective
upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which would have been
applicable for a Conversion occurring on the Announcement Date and
(y) the Conversion Price that would otherwise be in effect. From
and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in this Section
1.2(a). For purposes hereof, "Adjusted Conversion Price Termination
Date" shall mean, with respect to any proposed transaction or
tender offer (or takeover scheme) for which a public announcement
as contemplated by this Section 1.2(b) has been made, the date upon
which the Borrower (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this
Section 1.2(b) to become operative.
(b) Pro Rata Conversion; Disputes.
In
the event of a dispute as to the
number of shares of Common Stock issuable to the Holder
in
connection with a conversion of this
Note, the Borrower shall issue to the Holder the number of shares
of Co=on Stock not in dispute and resolve such dispute in
accordance with Section 4.13.
(c)
If at any time the Conversion Price as determined hereunder for any
conversion would be less than the par value of the Common Stock,
then the Conversion Price hereunder shall equal such par value for
such conversion and the Conversion Amount for such conversion shall
be increased to include Additional Principal, where "Additional
Principal" means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
conversion shares issuable upon such conversion to equal the same
number of conversion shares as would have been issued had the
Conversion Price not been subject to the minimum price set forth in
this Section 1.2(c).
1.3 Authorized Shares. The Borrower covenants that
during the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Co=on Stock a sufficient
number of shares, free from preemptive rights, to provide for the
issuance of Co=on Stock upon the full conversion of this Note
issued pursuant to the Purchase Agreement. The Borrower is required
at all times to have authorized and reserved ten times the number
of shares that is actually issuable upon full conversion of the
Note (based on the Conversion Price of the Notes in effect from
time to time) (the "Reserved Amount"). The Reserved Amount shall be
increased from time to time in accordance with the Borrower's
obligations pursuant to Section 3(d) of the Purchase Agreement. The
Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable.
In
addition, if the Borrower shall issue
any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the
Notes shall be convertible at the then current Conversion Price,
the Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Co=on
Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue
certificates for the Co=on Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Co=on Stock in
accordance with the terms and conditions of this Note.
Notwithstanding the foregoing, in no event shall the Reserved
Amount be lower than the initial Reserved Amount, regardless of any
prior conversions.
If,
at any time the Borrower does not maintain or replenish the
Reserved Amount within three (3) business days of the request of
the Holder, the principal amount of the Note shall increase by Five
Thousand and No/100 United States Dollars ($5,000) (under Holder's
and Borrower's expectation that any principal amount increase will
tack back to the Issue Date) per occurrence.
1.4
Method of Conversion.
(a) Mechanics of Conversion. Subject to Section
1.1, this Note may be converted by the Holder in whole or in part
at any time from time to time after the 90th
calendar day after the Issue Date, by
(A) submitting to the Borrower a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 11:59 p.m., New York,
New York time) and (B) subject to Section 1.4(b), surrendering this
Note at the principal office of the Borrower.
(b) Surrender of Note Upon Conversion.
Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note
is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion.
In
the event of any dispute or
discrepancy, such records of the Borrower shall,
prima
facie, be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder
rust
physically surrenders this Note to the
Borrower, whereupon the Borrower will forthwith issue and deliver
upon the order of the Holder a new Note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Note. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted principal
amount of this Note represented by this Note may be less than the
amount stated on the face hereof.
(c)
Payment of Taxes. The Borrower shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or
property on conversion of this Note in a name other than that of
the Holder (or in street name), and the Borrower shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder' s account) requesting the issuance thereof
shall have paid to the Borrower the amount of any such tax or shall
have established to the satisfaction of the Borrower that such tax
has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile transmission or e-mail (or
other reasonable means of communication) of a Notice of Conversion
meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3)
business days after such receipt (the "Deadline") (and, solely in
the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note) in accordance with the terms hereof
and the Purchase Agreement.
(e) Obligation of Borrower to Deliver Common
Stock. Upon receipt by the Borrower of a Notice of Conversion, the
Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Note
shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article
I,
all rights with respect to the portion
of this Note being so converted shall forthwith terminate except
the right to receive the Common Stock or other securities, cash or
other assets, as herein provided, on such conversion.
If
the Holder shall have given a Notice
of Conversion as provided herein, the Borrower's obligation to
issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure
or delay in the enforcement of any other obligation of the Borrower
to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by
the Borrower before 11:59 p.m., New York, New York time, on such
date.
(f) Delivery of Common Stock by Electronic
Transfer. In
lieu of delivering physical
certificates representing the Common Stock issuable upon
conversion, provided the Borrower is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and its compliance
with the provisions contained in Section 1.1 and in this Section
1.4, the Borrower shall use its commercially reasonable best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting
the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal At Custodian ("DWAC") system.
(g) DTC Eligibility &
Market Loss. If the Borrower fails to
maintain its status as "DTC Eligible" for any reason, or, if the
Conversion Price is less than $0.05 at any time after the
30th
calendar day after the Issue Date, the
principal amount of the Note shall increase by Fifteen Thousand and
No/ IOO United States Dollars ($15,000) and the Variable Conversion
Price shall be redefined to mean thirty percent (30%) multiplied by
the Market Price, subject to adjustment as provided in this
Note.
(h)
Failure to Deliver Common Stock Prior to Delivery Deadline. Without
in any way limiting the Holder's right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (other than a failure
due to the circumstances described in Section 1.3 above, which
failure shall be governed by such Section) the Borrower shall pay
to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock until
the Borrower issues and delivers a certificate to the Holder or
credit the Holder's balance account with OTC for the number of
shares of Common Stock to which the Holder is entitled upon such
Holder's conversion of any Conversion Amount (under Holder's and
Borrower's expectation that any damages will tack back to the Issue
Date).. Such cash amount shall be paid to Holder by the fifth day
of the month following the month in which it has accrued or, at the
option of the Holder (by written notice to the Borrower by the
first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in
which event interest shall accrue thereon in accordance with the
terms of this Note and such additional principal amount shall be
convertible into Common Stock in accordance with the terms of this
Note. The Borrower agrees that the right to convert is a valuable
right to the Holder. The damages resulting from a failure, attempt
to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly the parties acknowledge
that the liquidated damages provision contained in this Section
1.4(h) are justified.
(i) Rescindment of a Notice of Conversion. If (i)
the Borrower fails to respond to Holder within one (l) business day
from the Conversion Date confirming the details of Notice of
Conversion, (ii) the Borrower fails to provide any of the shares of
the Borrower's Common Stock requested in the Notice of Conversion
within three (3) business days from the date of receipt of the Note
of Conversion, (iii) the Holder is unable to procure a legal
opinion required to have the shares of the Borrower's Common Stock
issued unrestricted and/or deposited to sell for any reason related
to the Borrower's standing, (iv) the Holder is unable to deposit
the shares of the Borrower's Common Stock requested in the Notice
of Conversion for any reason related to the Borrower's standing,
(v) at any time after a missed Deadline, at the Holder's sole
discretion, or (vi) if OTC Markets changes the Borrower's
designation to 'Limited Information' (Yield), 'No Information'
(Stop Sign), 'Caveat Emptor' (Skull &
Crossbones), 'OTC', 'Other OTC' or
'Grey Market' (Exclamation Mark Sign) or other trading restriction
on the day of or any day after the Conversion Date, the Holder
maintains the option and sole discretion to rescind the Notice of
Conversion ("Rescindment") with a ''Notice of
Rescindment."
1.5
Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless (i)
such shares are sold pursuant to an effective registration
statement under the Act or (ii) the Borrower or its transfer agent
shall have been furnished with an opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares
to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or
transferred pursuant to Rule 144 under the Act (or a successor
rule) ("Rule 144") or (iv) such shares are transferred to an
"affiliate" (as defined in Rule 144) of the Borrower who agrees to
sell or otherwise transfer the shares only in accordance with this
Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase
Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon
conversion of this Note have been registered under the Act or
otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common
Stock issuable upon conversion of this Note that has not been so
included in an effective registration statement or that has not
been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY TIDS CERTIFICATE NOR THE SECURITIES INTO WIDCH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I)
IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
The
legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to
the effect that a public sale or transfer of such Common Stock may
be made without registration under the Act, which opinion shall be
reasonably accepted by the Borrower so that the sale or transfer is
effected or (ii) in the case of the Common Stock issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.
1.6
Effect of Certain Events.
(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder,
the sale, conveyance or disposition of all or substantially all of
the assets of the Borrower, the effectuation by the Borrower of a
transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the
consolidation, merger or other business combination of the Borrower
with or into any other Person (as defined below) or Persons when
the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article ill) pursuant to which
the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount
equal to the Default Amount (as defined in Article ill) or (ii) be
treated pursuant to Section 1.6(b) hereof. "Person" shall mean any
individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
(b) Adjustment Due to Merger,
Consolidation. Etc. If, at any time when this Note is issued and
outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on
conversion set forth herein), and in any such case appropriate
provisions shall be made with respect to the rights and interests
of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon
conversion of the Note) shall thereafter be applicable, as nearly
as may be practicable in relation to any securities or assets
thereafter deliverable upon the conversion hereof. The Borrower
shall not affect any transaction described in this Section 1.6(b)
unless (a) it first gives, to the extent practicable, thirty (30)
days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special
meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to
convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the
obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(c) Adjustment Due to Distribution.
If
the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or
distribution to the Borrower's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the Holder of this Note shall
be entitled, upon any conversion of this Note after the date of
record for determining shareholders entitled to such Distribution,
to receive the amount of such assets which would have been payable
to the Holder with respect to the shares of Common Stock issuable
upon such conversion had such Holder been the holder of such shares
of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes
are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued
or sold, except for shares of Common Stock issued directly to
vendors or suppliers of the Borrower in satisfaction of amounts
owed to such vendors or suppliers (provided, however, that such
vendors or suppliers shall not have an arrangement to transfer,
sell or assign such shares of Common Stock prior to the issuance of
such shares), any shares of Common Stock for no consideration or
for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Conversion Price in effect on
the date of such issuance (or deemed issuance) of such shares of
Common Stock (a "Dilutive Issuance"), then immediately upon the
Dilutive Issuance, the Conversion Price will be reduced to the
amount of the consideration per share received by the Borrower in
such Dilutive Issuance.
The Borrower shall be deemed to
have issued or sold shares of Common Stock if the Borrower in any
manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for
which Common Stock is issuable upon
the exercise of such Options is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price
per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such
Options" is determined by dividing (i) the total amount, if any,
received or receivable by the Borrower as consideration for the
issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to
the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
Additionally,
the Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of
Options), and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the
Conversion Price then in effect, then the Conversion Price shall be
equal to such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion
or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment
to the Conversion Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities.
(e) Purchase Rights. If,
at any time when any Notes are issued
and outstanding, the Borrower issues any convertible securities or
rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of any class
of Common Stock, then the Holder of this Note will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if
such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of this Note (without regard to
any limitations on conversion contained herein) immediately before
the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights or, if no such record is taken, the date as
of which the record holders of Common Stock are to be determined
for the grant, issue or sale of such Purchase
Rights.
(f)
Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events
described in this Section 1.6, the Borrower, at its expense, shall
promptly compute such adjustment or readjustment and prepare and
furnish to the Holder a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Borrower shall, upon the
written request at any time of the Holder, furnish to such Holder a
like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon
conversion of the Note.
1.7
[Intentionally Omitted]
1.8 Status as Shareholder. Upon submission of a Notice
of Conversion by a Holder, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their
issuance would exceed such Holder's allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted
into shares of Common Stock and (ii) the Holder's rights as a
Holder of such converted portion of this Note shall cease and
terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or
otherwise available at law or in equity to such Holder because of a
failure by the Borrower to comply with the terms of this Note.
Notwithstanding the foregoing, if a Holder has not received
certificates for alI shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Deadline with
respect to a conversion of any portion of this Note for any reason,
then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder
shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as
soon as practicable, return such unconverted Note to the Holder
or, if
the Note has not been surrendered,
adjust its records to reflect that such portion of this Note has
not been converted. In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the
right to receive Conversion Default Payments pursuant to Section
1.3 to the extent required thereby for such Conversion Default and
any subsequent Conversion Default and (ii) the right to have the
Conversion Price with respect to subsequent conversions determined
in accordance with Section 1.3) for the Borrower's failure to
convert this Note.
1.9
Prepayment. The Borrower may prepay the amounts outstanding
hereunder pursuant to the following terms and conditions and
subject to the terms of this Note:
(a) At any time during the period beginning on the
Issue Date and ending on the date which is sixty (60) calendar days
following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written
notice to the Holder of the Note, to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to
the Holder of an amount in cash equal to 115%, multiplied by the
sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount
ofthis Note plus (y) Default Interest, if any.
(b)
At any time during the period beginning the day which is sixty one
(61) calendar days following the Issue Date and ending on the date
which is one hundred twenty (120) calendar days following the Issue
Date, the Borrower shall have the right, exercisable on not less
than three (3) Trading Days prior written notice to the Holder of
the Note, to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 125%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note plus
(y) Default Interest, if any.
(c)
At any time during the period beginning the day which is one
hundred twenty one (121) calendar days following the Issue Date and
ending on the date which is one hundred eighty (180) calendar days
following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written
notice to the Holder ofthe Note, to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to
the Holder of an amount in cash equal to 150%, multiplied by the
sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of
this Note plus (y) Default Interest, if any
1.10 Any notice of prepayment hereunder (an
"Optional Prepayment Notice") shall be delivered to the Holder of
the Note at its registered addresses by physical mail and shall
state: (I) that the Borrower is requesting to prepay the Note, and
(2) the date of the requested prepayment which shall be not more
than three (3) Trading Days from the date of the Optional
Prepayment Notice. On the date fixed for prepayment (the "Optional
Prepayment Date"), the Borrower shall make payment of the
applicable prepayment amount to or upon the order of the Holder as
specified by the Holder in writing to the Borrower.
If the Borrower
delivers an Optional Prepayment Notice, and Borrower fails to pay
the applicable prepayment amount due to the Holder of the Note within two (2) business
days following the Optional Prepayment Date, the Borrower shall
forever forfeit its right to request a prepayment pursuant to
Section 1.9.
ARTICLE
II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Note, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such
payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders' rights plan which is approved by a majority of
the Borrower's disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Borrower shall
have any obligation under this Note, the Borrower shall not without
the Holder's written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in anyone transaction or series of related
transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such
shares.
2.3
Borrowings. Other than Permitted Indebtedness, so long as the
Borrower shall have any obligation under this Note, the Borrower
shall not, without the Holder's written consent, create, incur,
assume guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm,
partnership, joint venture or corporation, except by the
endorsement of negotiable instruments for deposit or collection, or
suffer to exist any liability for borrowed money, except (a)
borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date
hereof, (b) indebtedness to trade creditors financial institutions
or other Holders incurred in the ordinary course of business or (c)
borrowings, the proceeds of which shall be used to repay this
Note.
2.4
Sale of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's
written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business. Any consent to the disposition of any assets shall be
conditioned on a specified use of the proceeds towards the
repayment of this Note.
2.5
Advances and Loans. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder's written consent, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including,
without limitation, officers, directors, employees, subsidiaries
and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the date hereof and which the
Borrower has informed Holder in writing prior to the date hereof,
(b) made in the ordinary course of business or (c) not in excess of
$100,000.00.
2.6
Section 3(a)(9) or 3 (a)(l 0) Transaction. So long as this Note is
outstanding, the Borrower shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related
or pursuant to, in whole or in part, either Section 3(a)(9) of the
Securities Act (a "3(a)(9) Transaction") or Section 3(a)(to) of the
Securities Act (a "3(a)(to) Transaction"). In the event that the
Borrower does enter into, or makes any issuance of Common Stock
related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while
this note is outstanding, a liquidated damages charge of 25% of the
outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars $15,000, will be assessed and will become
immediately due and payable to the Holder at its election in the
form of cash payment or addition to the balance of this
Note.
2.7
Preservation of Existence, etc. The Borrower shall maintain and
preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant
Subsidiaries that have no or minimum assets) to become or remain,
duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary.
2.8
Non-circumvention. The Borrower hereby covenants and agrees that
the Borrower will not, by amendment of its Certificate or Articles
of Incorporation or Bylaws, or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement,
dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Note, and will at all times in good faith
carry out all the provisions of this Note and take all action as
may be required to protect the rights of the Holder.
ARTICLE
III. EVENTS OF DEFAULT
If
any of the following events of default (each, an "Event of
Default") shall occur:
3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower (i)
fails to issue shares of Common Stock to the Holder (or announces
or threatens in writing that it will not honor its obligation to do
so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note, (ii) fails to
transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares
of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note,
(iii) directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or
issuing) (electronically or in certificated form) any certificate
for shares of Co=on Stock to be issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, (iv) fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for three
(3) business days after the Holder shall have delivered a Notice of
Conversion, (v) fails to remain current in its obligations to its
transfer agent, (vi) causes a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent, (vii) fails to repay Holder, within forty eight
(48) hours of a demand from the Holder, any amount of funds
advanced by Holder to Borrower's transfer agent in order to process
a conversion, (viii) fails to reserve sufficient amount of shares
of co=on stock to satisfy the Reserved Amount at all times,
(ix)
fails to provide a Rule 144 opinion
letter from the Borrower's legal counsel to the Holder, covering
the Holder's resale into the public market of the respective
conversion shares under this Note, within two (2) business days of
the Holder's submission of a Notice of Conversion to the Borrower
(provided that the Holder must request the opinion from the
Borrower at the time that Holder submits the respective Notice of
Conversion and the date of the respective Notice of Conversion must
be on or after the date which follows the date that the shares may
be sold pursuant to Rule 144), and/or (x) an exemption under Rule
144 is unavailable for the Holder's deposit into Holder's brokerage
account and resale into the public market of any of the conversion
shares under this Note at any time after the date which is six (6)
months after the date that the Holder funded the Purchase Price
under this Note.
3.3
Failure to Deliver Transaction Expense Amount. The Borrower fails
to deliver the Transaction Expense Amount (as defined in the
Purchase Agreement) to the Holder within three (3) business days of
the date such amount is due.
3.4
Breach of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the
Holder.
3.5
Breach of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to
this Note or the Purchase Agreement.
3.6
Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors or commence
proceedings for its dissolution, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee
shall otherwise be appointed for the Borrower or for a substantial
part of its property or business without its consent and shall not
be discharged within sixty (60) days after such
appointment.
3.7
Judgments. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the
Borrower or any of its property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstayed for a
period of twenty (20) days unless otherwise consented to by the
Holder, which consent will not be unreasonably
withheld.
3.8
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings, voluntary or involuntary, for
relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower, or the Borrower admits in writing its
inability to pay its debts generally as they mature, or have filed
against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable or the Borrower admits in
writing its inability to pay its debts generally as they mature, or
have filed against it an involuntary petition for bankruptcy
relief, all under international, federal or state laws as
applicable.
3.9
Delisting of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTC Pink, OTCQB,
Nasdaq National Market, Nasdaq Small Cap Market, New York Stock
Exchange, NYSE MKT, or an equivalent replacement
exchange.
3.10
Failure to Comply with the Exchange Act. The Borrower shall fail to
comply with the reporting requirements of the Exchange Act
(including but not limited to becoming delinquent in its filings);
and/or the Borrower shall cease to be subject to the reporting
requirements of the Exchange Act.
3.11
Liquidation. Any dissolution, liquidation, or winding up of
Borrower or any substantial portion of its business.
3.12
Cessation of Operations. Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of
the Borrower's ability to continue as a "going concern" shall not
be an admission that the Borrower cannot pay its debts as they
become due.
3.13
Maintenance of Assets. The failure by Borrower to maintain any
material intellectual property rights, personal, real property or
other assets which are necessary to conduct its business (whether
now or in the future), or any disposition or conveyance of any
material asset of the Borrower.
3.14
Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower with the SEC for any date or
period from two years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.
3.15
Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.
3.16
Replacement of Transfer Agent. In the event that the Borrower
proposes to replace its transfer agent, the Borrower fails to
provide, prior to the effective date of such replacement, a fully
executed Irrevocable Transfer Agent Instructions in a form as
initially delivered pursuant to the Purchase Agreement (including
but not limited to the provision to irrevocably reserve shares of
Common Stock in the Reserved Amount) signed by the successor
transfer agent to Borrower and the Borrower.
3.17
Cessation of Trading. Any cessation of trading of the Common Stock
on at least one of the OTC Pink, OTCQB, Nasdaq National Market,
Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an
equivalent replacement exchange, and such cessation oftrading shall
continue for a period of five consecutive (5) Trading
Days.
3.18
Cross-Default. Notwithstanding anything to the contrary contained
in this Note or the other related or companion documents, a breach
or default by the Borrower of any covenant or other term or
condition contained in any of the Other Agreements (as defined
herein), after the passage of all applicable notice and cure or
grace periods, shall, at the option of the Holder, be considered a
default under this Note and the Other Agreements, in which event
the Holder shall be entitled (but in no event required) to apply
all rights and remedies of the Holder under the terms of this Note
and the Other Agreements by reason of a default under said Other
Agreement or hereunder. "Other Agreements" means, collectively, all
agreements and instruments between, among or by: (1) the Borrower,
and, or for the benefit of, (2) the Holder (and any affiliate of
the Holder) or any other third party, including, without
limitation, promissory notes; provided, however, the term "Other
Agreements" shall not include the agreements and instruments
defined as the Documents. Each of the loan transactions will be
cross-defaulted with each other loan transaction and with all other
existing and future debt of Borrower to the Holder.
3.19
Bid Price. The Borrower shall lose the "bid" price for its Common
Stock ($0.0001 on the "Ask" with zero market makers on the "Bid"
per Level 2) and/or a market (including the OTC Pink, OTCQB or an
equivalent replacement exchange).
3.20
OTC Markets Designation. OTC Markets changes the Borrower's
designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull
and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market'
(Exclamation Mark Sign).
3.21
Inside Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to transmit, convey, disclose, or any
actual transmittal, conveyance, or disclosure by the Borrower or
its officers, directors, and/or affiliates of, material non-public
information concerning the Borrower, to the Holder or its
successors and assigns, which is not immediately cured by
Borrower's filing of a Form 8-K pursuant to Regulation FD on that
same date.
3.22 Unavailability of Rule 144. If, at any time
on or after the date which is six (6) months after the Issue Date,
the Holder is unable to (i) obtain a standard "144 legal opinion
letter" from an attorney reasonably acceptable to the Holder, the
Holder's brokerage firm
(and respective clearing firm), and
the Borrower's transfer agent in order to facilitate the Holder's
conversion of any portion of the Note into free trading shares of
the Borrower's Common Stock pursuant to Rule 144, and (ii)
thereupon deposit such shares into the Holder's brokerage
account.
3.23
Delisting or Suspension of Trading of Common Stock. If, at any time
on or after the Issue Date, the Borrower's Common Stock (i) is
suspended from trading, (ii) halted from trading, and/or (iii)
fails to be quoted or listed (as applicable) on any level of the
OTC Markets, any tier of the NASDAQ Stock Market, the New York
Stock Exchange, or the NYSE American.
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2 AND/OR 3.22 OF TIDS NOTE, THE NOTE
SHALL BECOME IMMEDIATELY AND AUTOMATICALLY DUE AND PAYABLE WITHOUT
DEMAND, PRESENTMENT, OR NOTICE AND THE BORROWER SHALL
PAY
TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS
HEREUNDER, AN
AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN) MULTIPLIED
BY (Z)
TWO (2). Upon the occurrence of any
Event of Default specified in Sections 3.1, 3.3, 3.4, 3.5, 3.6,
3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,3.16.3.17, 3.18,
3.19, 3.20, 3.21, and/or 3.23, the Note shall become immediately
and automatically due and payable without demand, presentment or
notice and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to (i)
130% times the sum of (w) the then outstanding principal amount of
this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the date of payment (the
"Mandatory Prepayment Date") plus (y) Default Interest, if any, on
the amounts referred to in clauses (w) and/or (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof (the then outstanding principal amount of this Note to the
date of payment plus the amounts referred to in clauses (x), (y)
and (z) shall collectively be known as the "Default Sum") or (ii)
at the option of the Holder, the "parity value" of the Default Sum
to be prepaid, where parity value means (a) the highest number of
shares of Common Stock issuable upon conversion of or otherwise
pursuant to such Default Sum in accordance with Article
I,
treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the "Conversion Date"
for purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the highest
Trading Price for the Common Stock during the period beginning on
the date of first occurrence of the Event of Default and ending one
day prior to the Mandatory Prepayment Date (the "Default Amount")
and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of
which hereby are expressly waived, together with all costs,
including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. Further, if a
breach of Sections 3.9, 3.10 and/or 3.19 occurs or is continuing
after the six (6) month anniversary of this Note, then the
principal amount of the Note shall increase by Fifteen Thousand and
No/ IOO United States Dollars ($15,000) and the Holder shall be
entitled to use the lowest Trading Price during the delinquency
period as a base price for the conversion with the Variable
Conversion Price shall be redefined to mean forty percent (40%)
multiplied by the Market Price, subject to adjustment as provided
in this Note. For example, if the lowest Trading Price during the
delinquency period is $0.50 per share and the conversion discount
is 50%, then the Holder may elect to convert future conversions at
$0.25 per share. If this Note is not paid at Maturity Date, then
the outstanding principal due under this Note shall increase by
Fifteen Thousand and No/IOO United States Dollars
($15,000).
The
Holder shall have the right at any time after an Event of Default
occurs under this Note to require the Borrower, to immediately
issue, in lieu of the Default Amount and/or Default Sum, the number
of shares of Common Stock of the Borrower equal to the Default
Amount and/or Default Sum divided by the Conversion Price then in
effect, pursuant to the terms of this Note (including but not
limited to any beneficial ownership limitations contained herein).
This requirement by the Borrower shall automatically apply upon the
occurrence of an Event of Default without the need for any party to
give any notice or take any other action.
.
If
the Holder shall commence an action or proceeding to enforce any
provisions of this Note, including, without limitation, engaging an
attorney, then if the Holder prevails in such action, the Holder
shall be reimbursed by the Borrower for its attorneys' fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
ARTICLE
IV. MISCELLANEOUS
4.1
Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2
Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, electronic mail, or
facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective ( a) upon hand delivery or
delivery by electronic mail or facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business
day dllling normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be:
If
to the Borrower, to:
Guided
Therapeutics, Inc.
5835
Peachtree Comers East, Suite B
Norcross,
Georgia 30092
Attn:
Gene Cartwright
E-mail:
info@guidedinc.com
If
to the Holder:
Auctus
Fund, LLC
545
Boylston Street, 2nd Floor
Boston,
MA 02116
Attn:
Lou Posner
Facsimile:
(617) 532-6420
With
a copy to (which copy shall not constitute notice) :
Chad
Friend, Esq., LL.M.
Anthony
L.G., PLLC
625
N. Flagler Drive, Suite 600
West
Palm Beach, FL 33401
E-mail:
CFriend@AnthonyPLLC.com
4.3
Amendments. This Note and any provision hereof may only be amended
by an instrument in writing signed by the Borrower and the Holder.
The term "Note" and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Notes issued
pursuant to the Purchase Agreement) as originally executed, or if
later amended or supplemented, then as so amended or
supplemented.
4.4
Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the
Holder and its successors and assigns. Neither the Borrower nor the
Holder shall assign this Note or any rights or obligations
hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Holder may assign its rights
hereunder to any "accredited investor" (as defmed in Rule 501(a) of
the 1933 Act) in a private transaction from the Holder or to any of
its "affiliates", as that term is defined under the 1934 Act,
without the consent of the Borrower. Notwithstanding anything in
this Note to the contrary, this Note may be pledged as collateral
in connection with a bona fide margin account or other lending
arrangement. The Holder and any assignee, by acceptance of this
Note, acknowledge and agree that following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.
4.5
Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees .
4.6 Governing Law. This Note shall be governed by
and construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Note shall be brought only in the
state courts located in the Commonwealth of Massachusetts or
federal courts located in the Commonwealth of Massachusetts. The
parties to this Note hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or
based upon forum non conveniens.
THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION WITH OR ARISING OUT OF TIDS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs. In
the event that any provision of this Note or any other agreement
delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to lirnit in any
way any right to serve process in any other manner permitted by
law.
4.7
Certain Amounts. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest plus Default Interest on such
interest, the Borrower and the Holder agree that the actual damages
to the Holder from the receipt of cash payment on this Note may be
difficult to determine and the amount to be so paid by the Borrower
represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to
convert this Note and to earn a return from the sale of shares of
Common Stock acquired upon conversion of this Note at a price in
excess of the price paid for such shares pursuant to this Note. The
Borrower and the Holder hereby agree that such amount of stipulated
damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity
to convert this Note into shares of Common Stock.
4.8
Purchase Agreement. By its acceptance of this Note, each party
agrees to be bound by the applicable terms of the Purchase
Agreement.
4.9 Notice of Corporate Events. Except as
otherwise provided below, the Holder of this Note shall have no
rights as a Holder of Common Stock unless and only to the extent
that it converts this Note into Common Stock. The Borrower shall
provide the Holder with prior notification of any meeting of the
Borrower's shareholders (and copies of proxy materials and other
information sent to shareholders). In
the event of any taking by the
Borrower of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any
dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of
any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are
entitled to vote in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the
Borrower or any proposed liquidation, dissolution or winding up of
the Borrower, the Borrower shall mail a notice to the Holder, at
least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding
the amount and character of such dividend, distribution, right or
other event to the extent known at such time. The Borrower shall
make a public announcement of any event requiring notification to
the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this
Section 4.9 including, but not limited to, name changes,
recapitalizations, etc. as soon as possible under
law.
4.10 Usury. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law
governing usury, the applicable provision shall automatically be
revised to equal the maximum rate of interest or other amount
deemed interest permitted under applicable law. The Borrower
covenants (to the extent that it may lawfully do so) that it will
not seek to claim or take advantage of any law that would prohibit
or forgive the Borrower from paying all or a portion of the
principal or interest on this Note.
4.11
Remedies. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Borrower acknowledges that the remedy at
law for a breach of its obligations under this Note will be
inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions ofthis Note, that the
Holder shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce
specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other
security being required. No provision of this Note shall alter or
impair the obligation of the Borrower, which is absolute and
unconditional, to pay the principal of, and interest on, this Note
at the time, place, and rate, and in the form, herein
prescribed.
4.12 Severability. In
the event that any provision of this
Note is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified
to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.
4.13 Dispute Resolution. In
the case of a dispute as to the
determination of the Conversion Price, Conversion Amount, any
prepayment amount or Default Amount, Default Sum, Closing or
Maturity Date, the closing bid price, or fair market value (as the
case may be) or the arithmetic calculation of the Conversion Price
or the applicable prepayment amount(s) (as the case may be), the
Borrower or the Holder shall submit the disputed determinations or
arithmetic calculations via facsimile (i) within two (2) Business
Days after receipt of the applicable notice giving rise to such
dispute to the Borrower or the Holder or (ii) if no notice gave
rise to such dispute, at any time after the Holder learned of the
circumstances giving rise to such dispute. If the Holder and the
Borrower are unable to agree upon such determination or calculation
within two (2) Business Days of such disputed determination or
arithmetic calculation (as the case may be) being submitted to the
Borrower or the Holder, then the Borrower shall, within two (2)
Business Days, submit via facsimile (a) the disputed determination
of the Conversion Price, the closing bid price, the or fair market
value (as the case may be) to an independent, reputable investment
bank selected by the Borrower and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Price, Conversion
Amount, any prepayment amount or Default Amount, Default Sum to an
independent, outside accountant selected by the Holder that is
reasonably acceptable to the Borrower. The Borrower shall cause at
its expense the investment bank or the accountant to perform the
determinations or calculations and notify the Borrower and the
Holder of the results no later than ten (10) Business Days from the
time it receives such disputed determinations or calculations. Such
investment bank' s or accountant's determination or calculation
shall be binding upon all parties absent demonstrable
error.
4.14
Terms of Future Financings. So long as this Note is outstanding,
upon any issuance by the Borrower or any of its subsidiaries of any
security with any term more favorable to the holder of such
security or with a term in favor of the holder of such security
that was not similarly provided to the Holder in this Note, then
the Borrower shall notify the Holder of such additional or more
favorable term and such term, at Holder's option, shall become a
part of the transaction documents with the Holder. The types of
terms contained in another security that may be more favorable to
the holder of such security include, but are not limited to, terms
addressing conversion discounts, prepayment rate, conversion
lookback periods, interest rates, original issue discounts, stock
sale price, private placement price per share, and
warrant
coverage.
4.15 Piggyback Registration Rights. The Borrower
shall include on each registration statement that the Borrower
files with SEC all shares issuable upon conversion of this Note and
exercise of the Warrant (as defined in the Purchase Agreement). The
Borrower's failure to comply with this Section 4.15 shall result in
liquidated damages of 25% of the outstanding principal balance of
this Note, but not less than Fifteen Thousand and
No/100 United States Dollars ($15,000), being
immediately due and payable to the Holder at its election in the
form of cash payment or addition to the balance of this
Note.
4.16 Future Raises; Repayment from Proceeds. Until
the Note is satisfied in full, if the Borrower receives cash
proceeds from any source or series of related or unrelated sources,
including but not limited to, from the issuance of equity and/or
debt securities, the conversion of outstanding warrants of the
Borrower, the issuance of securities pursuant to an equity line of
credit of the Borrower or the sale of assets, the Borrower shall,
within one (I)
business day of Borrower's receipt of
such proceeds, inform the Holder of such receipt, following which
the Holder shall have the right in its sole discretion to require
the Borrower to immediately apply all or any portion of such
proceeds to repay all or any portion of this Note. Failure of the
Borrower to comply with this provision shall constitute an Event of
Default under Section 3.4 of the Note. In
the event that such proceeds are
received by the Holder prior to the Maturity Date, the required
prepayment shall be subject to the terms of Section 1.9
herein.
[signature page follows]
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the date first above
written.
GUIDED THERAPEUTICS, INC.
By:
/Gene S. Cartwright/
Name:
Gene S. Cartwright
Title:
Chief Executive Officer
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert
$_______
principal amount of the Note (defined
below) together with $____________ of accrued and unpaid interest
thereto, totaling $ _________into that number of shares of Common Stock to be
issued pursuant to the conversion of the Note ("Common Stock") as
set forth below, of Guided Therapeutics, Inc., a Delaware
corporation (the "Borrower"), according to the conditions of the
convertible promissory note of the Borrower dated as of March 31,
2020 (the "Note"), as of the date written below. No fee will be
charged to the Holder for any conversion, except for transfer
taxes, if any.
Box
Checked as to applicable instructions:
[ ]
The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of
the undersigned or its nominee with DTC through its Deposit
Withdrawal At Custodian system ("DWAC Transfer").
Name
of DTC Prime Broker:
Account
Number:
[ ]
The undersigned hereby requests that the Borrower issue a
certificate or certificates for the number of shares of Common
Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately
below or, if additional space is necessary, on an attachment
hereto:
Name: [NAME]
Address:
[ADDRESS]
Date
of Conversion:
Applicable
Conversion Price: $_________
Number
of Shares of Common Stock to be Issued Pursuant to Conversion of
the Notes:___________
Amount
of Principal Balance Due remaining Under the Note after this
conversion:_______________
Accrued
and unpaid interest remaining:
_________________________________________________
[HOLDER]
By:
_______
Name: [NAME]
Title:
[TITLE]
Date:
[DATE]
Exhibit 4.35
NEITHER THIS SECURITY NOR THE SECURITIES AS TO
WHICH THIS SECURITY MAYBE EXERCISED HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS SECURITY
MAY BE PLEDGED IN
CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE
WARRANT
GUIDED
THERAPEUTICS,
INC.
Warrant Shares: 250,000
Date of Issuance: March 31, 2020
("Issuance Date")
This COMMON
STOCK PURCHASE WARRANT (the "Warrant") certifies
that, for
value received
(in connection with the
issuance of
the convertible
promissory note in the principal amount of $112,750.00 to the Holder (as defined
below) of even date)
(the "Note"),
Auctus Fund,
LLC, a Delaware
limited liability
company (including any
permitted and registered
assigns, the "Holder"),
is entitled, upon the terms and subject to
the limitations
on exercise and the conditions hereinafter set forth, at any
time on or after the
date of issuance hereof, to purchase from Guided Therapeutics, Inc., a
Delaware corporation (the "Company"), up
to 250,000 shares of Common Stock
(as defined below) (the "Warrant Shares") (whereby
such number may be adjusted from time to
time pursuant
to the terms and conditions of
this Warrant) at the Exercise
Price per share then
in effect. This Warrant
is issued by the Company as of the date
hereof in connection with that certain
securities purchase agreement dated March 31, 2020,
by and among the Company and the Holder
(the "Purchase Agreement").
Capitalized terms used in
this Warrant shall have the
meanings set forth in the Purchase Agreement unless otherwise defined in the body of this
Warrant or in
Section 12 below. For purposes of
this Warrant, the
term "Exercise Price" shall
mean $0.16, subject to adjustment
as provided herein (including but not limited to cashless
exercise), and the
term "Exercise Period" shall mean the
period commencing on the Issuance Date and ending on 5 :00 p.m.
eastern standard time
on the five-year
anniversary thereof.
1. EXERCISE OF
WARRANT.
(a) Mechanics of Exercise.
Subject to the terms
and conditions
hereof, the rights represented by this Warrant may be
exercised in whole or in part at any time or times
during the Exercise Period by delivery of a written
notice, in the form attached hereto as Exhibit A (the
"Exercise Notice"), of the Holder's election to exercise this
Warrant. The Holder shall not
be required to
deliver the original Warrant in order to
affect an exercise hereunder. Partial exercises of this Warrant resulting in
purchases of a portion of the total
number of Warrant Shares available hereunder shall
have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal
to the applicable number of
Warrant Shares purchased. On or
before the second Trading Day (the "Warrant Share Delivery
Date") following the date on which the Holder sent
the Exercise Notice to the Company or
the Company's
transfer agent,
and upon receipt by the
Company of payment to the Company
of an amount equal to the applicable
Exercise Price multiplied by
the number of Warrant Shares as to
which all or a portion of this
Warrant is being exercised (the "Aggregate Exercise Price"
and together with the Exercise Notice, the "Exercise
Delivery Documents") in cash or by wire transfer of
immediately available funds (or by cashless
exercise, in which case
there shall be no
Aggregate Exercise Price provided), !be Company shall (or direct its
transfer agent to) issue and dispatch by
overnight courier to the
address as specified in
the Exercise
Notice, a certificate, registered io the Company's share register in the name of the Holder
or its designee, for
the number of shares of Common Stock
to which the Holder
is entitled pursuant to such exercise (or deliver such
shares of Common Stock
in electronic format if
requested by the
Holder). Upon delivery of the
Exercise Delivery Documents, the Holder shall be deemed for all
corporate purposes to have
become the holder of
record of the Warrant
Shares with respect to
which this Warrant has
been exercised, irrespective of the
date of delivery of the
certificates evidencing such Warrant
Shares. If this Warrant is submitted in
connection with any
exercise and the
number of Warrant Shares represented by this Warrant submitted for exercise is greater than
the number of
Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable
and in no event
later than three Business Days
after any exercise and at its own expense, issue a
new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant
Shares purchasable immediately prior to such
exercise under this
Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised.
If the Company
fails to cause its transfer
agent to transmit to the
Holder the respective shares of Common Stock by the
respective Warrant Share Delivery Date, then the
Holder will have the
right to rescind
such exercise in
Holder's sole discretion, and such failure shall be deemed an
event of default under the Note.
If the
Market Price of
one share of
Common Stock is greater than the
Exercise Price,
then the Holder may elect to receive Warrant Shares
pursuant to a cashless exercise, in lieu of a
cash exercise, equal to
the value of this Warrant
determined in the
manner described below (or of any portion thereof remaining unexercised) by surrender
of this Warrant and a Notice of Exercise, in which event
the Company shall issue
to Holder a number of Common Stock
computed using the following formula:
x =
Y (A-B) / A
Where
X =
the number of
Shares to be
issued to Holder.
Y =
the number of Warrant Shares that the Holder
elects to purchase
under this Warrant (at
the date of such calculation).
A=
the Market Price
(at the date of such calculation).
B =
Exercise Price (as adjusted to the
date of such calculation).
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of
this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including
fractions) issuable upon exercise
of this Warrant may
be aggregated for
purposes of determining
whether the exercise would
result in the issuance of any fractional share. If, after
aggregation, the
exercise would result
in the issuance of a fractional share,
the Company shall, in lieu of issuance of any fractional share, pay the Holder
otherwise entitled to
such fraction a sum in cash equal to
the product resulting
from multiplying the then-current fair
market value of a Warrant Share by such
fraction.
(c) Holder 's Exercise Limitations.
The Company shall not
affect any exercise of this Warrant, and a
Holder shall not have the right
to exercise any portion of this Warrant,
to the extent that
after giving effect to
issuance of Warrant Shares upon exercise as set forth on
the applicable Notice of
Exercise, the Holder
(together with the Holder's Affiliates, and any other
persons acting
as a group
together with the Holder or
any of the Holder's Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation,
as defined below. For
purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable
upon exercise of this
Warrant with respect to which such determination is being made,
but shall exclude the
number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, non-exercised portion of this
Warrant beneficially owned by
the Holder or any of its
Affiliates and (ii) exercise
or conversion of the unexercised or non-converted portion of any
other securities of
the Company (including without limitation any
other Common Stock Equivalents) subject to a
limitation on conversion or
exercise analogous to the
limitation contained herein beneficially owned by the
Holder or
any of its Affiliates. Except as set forth in the preceding sentence, for
purposes of this paragraph (d), beneficial ownership shall be
calculated in accordance
with Section 13(d) of the
Exchange Act,
it being acknowledged by the Holder
that the Company
is not representing to the Holder that
such calculation is in compliance with Section 13(d)
of the Exchange
Act and the Holder is
solely responsible for any
schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this paragraph
applies, the determination of whether this Warrant
is exercisable (in
relation to other securities owned by the Holder together with any affiliates) and of which portion
of this Warrant is
exercisable shall be in
the sole discretion
of the Holder, and the
submission of a
Notice of Exercise shall be
deemed to be the Holder's determination of whether this Warrant is
exercisable (in
relation to other securities owned by the Holder together with any Affiliates)
and of which portion of this Warrant is
exercisable, in each case subject to
the Beneficial Ownership
Limitation, and the
Company shall have no obligation to verify or
confirm the accuracy of such determination.
For purposes
of this paragraph, in determining the number of outstanding
shares of Common Stock, a
Holder may rely on the number of outstanding shares
of Common Stock as reflected in (A) the Company's most
recent periodic or annual
report filed with the Commission, as
the case may be, (B) a more recent public announcement by
the Company or (C)
a more recent written notice by
the Company or its transfer agent setting forth
the number of shares of
Common Stock
outstanding. Upon the request of a Holder,
the Company shall within
two Trading Days
confirm to the Holder the
number of shares of
Common Stock then outstanding.
In any case,
the number of outstanding shares
of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the
Company, including this
Warrant, by the Holder or its affiliates since the date
as of which such number of
outstanding shares of
Common Stock was
reported. The "Beneficial Ownership Limitation"
shall be 4.99% of the
number of shares of
the Common Stock
outstanding immediately after giving effect to the issuance
of shares of
Common Stock issuable upon
exercise of this Warrant. The limitations contained in this
paragraph shall apply to a successor Holder of this Warrant.
2. ADJUSTMENTS. The Exercise Price and the number
of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets.
If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common
Stock, by way of return
of capital or otherwise (including without limitation any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off,
reclassification, corporate
rearrangement or other similar transaction) (a "Distribution"), at
any time after the issuance of this
Warrant, then, in each
such case:
(i) any Exercise Price in effect immediately prior to the close of business on the record
date fixed for the determination of holders of shares
of Common Stock entitled to receive the
Distribution shall
be reduced, effective
as of the close of business on such record
date, to a price determined by multiplying such Exercise Price by
a fraction (i)
the numerator of which shall be
the Closing Sale
Price of the shares of Common Stock on the Trading
Day immediately preceding such record
date minus the value
of the Distribution
(as determined in good faith by the
Company's Board of Directors) applicable to
one share of Common
Stock, and (ii) the
denominator of
which shall be the
Closing Sale Price of
the shares of Common
Stock on the Trading
Day immediately preceding such record
date; and (ii) the
number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of
Common Stock obtainable
immediately prior to the close
of business on the record
date fixed for the determination of holders of shares of Common Stock entitled to
receive the Distribution multiplied by the reciprocal of the
fraction set forth
in the immediately preceding clause
(i); provided,
however, that in the
event that the Distribution is of shares of
common stock
of a company
(other than the Company)
whose common stock is traded on a national securities exchange or a
national automated
quotation system ("Other
Shares of Common Stock"), then the
Holder may elect to receive a
warrant to purchase
Other Shares of Common Stock
in lieu of an increase in the number of Warrant Shares, the terms
of which shall be identical to those of this Warrant, except that
such warrant shall be exercisable into the number of shares of Other
Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution
had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding clause (i) and
the number of Warrant Shares calculated in accordance with the
first part of this clause (ii).
(b)
[Intentionally Omitted].
(c) Subdivision or Combination of Common
Stock. If the Company at any time on or after the
Issuance Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or
more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be
proportionately increased. If
the Company at any time on or after the Issuance Date combines (by
combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased. Any adjustment
under this Section 2(c) shall become effective at the close of
business on the date the subdivision or combination becomes
effective. Each such adjustment of the Exercise Price shall be
calculated to the nearest one-hundredth of a cent. Such adjustment
shall he made successively whenever any event covered by this
Section 2(c) shall occur.
1. FUNDAMENTAL TRANSACTIONS. If, at any time while
this Warrant is outstanding, (i) the Company effects any merger of
the Company with or into another entity and the Company is not the
surviving entity (such surviving entity, the
"Successor Entity"),
(ii) the Company
effects any sale of all or substantially all of its
assets in one or a series of related
transactions,
(iii) any tender offer or exchange
offer (whether by the Company or by another individual or entity,
and approved by the Company) is completed pursuant to
which holders of Common Stock are permitted to tender or exchange
their shares of Common Stock for other securities, cash or property
and the holders of at least 50% of
the Common Stock accept such offer, or
(iv) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock) (in any such
case, a "Fundamental Transaction"),
then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive the number of shares of
Common Stock of the Successor Entity or
of the Company and any additional consideration (the
"Alternate Consideration") receivable upon or as a
result of such reorganization, reclassification, merger,
consolidation or disposition of
assets by a holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
such event (disregarding any limitation on
exercise contained herein solely for the purpose of such
determination). For purposes of any such
exercise, the determination of the Exercise Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental
Transaction,
then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental
Transaction.
To the extent necessary to effectuate
the foregoing provisions, any
Successor Entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with
the foregoing provisions and evidencing the Holder's right
to exercise such warrant
into Alternate Consideration.
2. NON-CIRCUMVENTION.
The Company covenants and agrees that it will not, by amendment of
its certificate of incorporation, bylaws or
through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of
this Warrant,
and will at all times
in good faith carry out all the provisions of this Warrant and take
all action as may be required to protect the rights of the Holder.
Without limiting the generality of the foregoing, the Company (i)
shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall take all such actions as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of Common Stock
upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant
is outstanding, have authorized and
reserved, free
from preemptive rights, ten
times the number of
shares of Common Stock that is actually issuable upon full exercise of the Warrant (based
on the Exercise
Price in effect from
time to time,
and without regard to any limitations on
exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein,
this Warrant,
in and of itself, shall not entitle
the Holder to any
voting rights or other rights as a stockholder of the
Company. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any
securities (upon exercise of this
Warrant or
otherwise) or as a stockholder of
the Company,
whether such liabilities are asserted by the Company
or by creditors
of the Company.
6.
REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant.
If this Warrant is
lost, stolen,
mutilated or destroyed, the
Company will, on
such terms as to indemnity or
otherwise as
it may reasonably
impose (which shall,
in the case of a mutilated
Warrant, include the surrender thereof), issue a new Warrant
of like denomination and tenor as this
Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New
Warrants. Whenever the
Company is required to
issue a new Warrant pursuant to the terms of this
Warrant, such new
Warrant shall be of
like tenor with this Warrant,
and shall have an
issuance date,
as indicated on the
face of such
new Warrant which is
the same as the Issuance Date.
7.
TRANSFER. This
Warrant shall
be binding upon the Company and its successors
and assigns, and
shall inure to be the benefit of
the Holder and
its successors and assigns. Notwithstanding anything to the
contrary herein, the rights, interests or
obligations of
the Company hereunder may not be assigned, by operation
of law or otherwise, in
whole or in part, by the Company
without the prior
signed written consent of the
Holder, which consent
may be withheld at the sole discretion of the
Holder (any such assignment or
transfer shall be null
and void if the Company does
not obtain the
prior signed written
consent of the Holder). This Warrant or any of
the severable
rights and obligations inuring to the
benefit of or
to be performed
by Holder hereunder may be assigned by
Holder to a third
party, in whole or in part, without
the need to obtain the Company's
consent thereto.
8.
NOTICES. Whenever notice is required to be
given under this Warrant, unless otherwise provided herein, such notice shall be given in
accordance with the notice provisions contained in
the Purchase Agreement. The
Company shall provide the Holder
with prompt written
notice (i) immediately upon any adjustment of the Exercise Price, setting forth
in reasonable
detail, the calculation of such
adjustment and
(ii) at least 20 days
prior to the date on
which the Company closes its books or
takes a record
(A) with respect to any dividend or distribution upon the shares of Common Stock, (8)
with respect to any
grants, issuances or
sales of any
stock or other securities
directly or indirectly
convertible into or
exercisable or exchangeable for shares of Common
Stock or other property, pro
rata to the holders of shares of Common Stock or (C)
for determining
rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that
such information shall
be made known to the public prior to or
in conjunction with such notice being
provided to the
Holder.
9.
AMENDMENT AND WAIVER. The terms of this Warrant may be amended or
waived (either generally or in a
particular instance
and either retroactively or
prospectively) only with the
written consent of
the Company and the
Holder.
10.
GOVERNING LAW AND
VENUE. This Warrant shall be governed by
and construed in accordance
with the laws of
the State of Nevada without regard to
principles of
conflicts of laws.
Any action brought by
either party against the other
concerning the
transactions contemplated by this
Warrant shall
be brought only in
the state courts located in the
Commonwealth of Massachusetts or in the federal courts located
in the Commonwealth of Massachusetts. The parties to this Warrant hereby irrevocably waive any objection to
jurisdiction and venue of any
action instituted hereunder
and shall not assert
any defense based
on lack of
jurisdiction or venue or
based upon forum non conveniens.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT
TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF TIDS
WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY. The
prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and
costs. In the
event that any provision of this
Warrant or any other agreement
delivered in connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and
shall be deemed modified to conform with such statute or
rule of law.
Any such provision which may
prove invalid or unenforceable under any law shall
not affect the validity
or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and
consents to process
being served in any suit,
action or proceeding in
connection with this Agreement
or any other Transaction
Document by mailing a copy
thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees
that such service shall constitute good and sufficient
service of process and
notice thereof. Nothing
contained herein
shall be deemed
to limit in any way any right to serve process
in any other manner permitted by law.
11.
ACCEPTANCE. Receipt of this Warrant by the Holder
shaIl constitute acceptance of and agreement to all of
the terms and conditions contained herein.
12.
CERTAIN DEFINITIONS. For purposes
of this Warrant,
the following terms shall have the
following meanings:
(a) "Nasdaq" means
www.Nasdaq.com.
(b) "Closing Sale Price" means, for any
security as of any
date, (i) the last closing trade price for such
security on the Principal Market, as reported by
Nasdaq, or, if the
Principal Market begins to
operate on an extended hours basis and does not designate
the closing trade price, then the last trade price of
such security prior to
4:00 p.m., New York time, as
reported by Nasdaq, or (ii) if the foregoing
does not apply, the last trade
price of such security in
the over-the-counter market for
such security as reported by
Nasdaq, or (iii) if no
last trade price is reported
for such security by Nasdaq, the
average of the bid and ask prices of any
market makers for such security as reported by
the OTC Markets. If the
Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the
Closing Sale
Price of such security on
such date shall be the fair market value as mutually
determined by
the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend,
stock split,
stock combination or other similar
transaction during the
applicable calculation
period.
(c) "Common Stock" means the Company's
common stock, and any other class of securities into which such
securities may hereafter
be reclassified or
changed.
(d) "Common Stock Equivalents" means any
securities of the Company that
would entitle the holder
thereof to acquire at any time Common
Stock, including without limitation any debt, preferred stock,
rights, options, warrants or other instrument that is
at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the
holder thereof
to receive, Common
Stock.
(e) "Dilutive Issuance" is
any issuance of Common Stock or Common Stock Equivalents described
in Section 2(b) above; provided, however, that
a Dilutive Issuance shall not include
any Exempt Issuance.
(f) "Exempt Issuance" means the issuance of (i)
shares of Common Stock or options to employees, officers, or
directors of the Company pursuant to any stock or option plan duly adopted
by a majority of the non-employee
members of the Board of
Directors of the Company or a majority of
the members of a committee of
nonemployee directors
established for such
purpose, and (ii) shares of Common Stock issued pursuant to
real property leasing
arrangement from a bank approved by the Board of
Directors of the Company; (iii) securities upon the conversion of
the Note , and (iv) securities issued pursuant to
acquisitions or strategic transactions approved by a majority
of the disinterested directors of the
Company.
(g) "Principal Market"
means the primary national securities
exchange on which the Common
Stock is then
traded.
(h) "Market Price" means
the highest traded price of the
Co=on Stock on the Trading
Day immediately prior to the date of the respective
Exercise
Notice.
(i) "Trading Day"
means (i) any day on which the Common Stock
is listed or
quoted and traded on its
Principal Market, (ii) if the
Co=on Stock is not then listed or quoted and
traded on any national
securities
exchange, then
a day on
which trading occurs on any
over-the-counter markets, or (iii) if
trading does not occur on the over-the-counter markets, any Business Day.
*******
IN WI1NESS WHEREOF, the
Company has caused this Warrant to be
duly executed as of the Issuance Date set forth
above.
GUIDED THERAPEUTICS, INC.
By:
/Gene S. Cartwright/
Name:
Gene Cartwright
Title:
Chief Executive Officer
EXHIBIT
A
EXERCISE NOTICE
(To be executed by the registered
holder to exercise
this Common Stock Purchase Warrant)
THE UNDERSIGNED holder hereby exercises the right
to purchase of the shares of Common Stock
("Warrant Shares")
of Guided Therapeutics,
Inc., a Delaware corporation (the "Company"), evidenced by the attached copy of the
Common Stock Purchase Warrant (the "Warrant"). Capitalized terms
used herein and not otherwise defined shall have the respective
meanings set forth in the Warrant.
1.
Form of
Exercise Price. The
Holder intends that payment of
the Exercise
Price shall be made as
(check one):
☐
A cash exercise with respect
to ________ Warrant Shares; or
☐
by
cashless exercise pursuant to the Warrant.
2.
Payment of
Exercise Price.
If cash exercise is selected above, the
holder shall pay the
applicable Aggregate Exercise Price
in the sum of $ to
the Company in accordance with the
terms of the Warrant.
3.
Delivery of Warrant
Shares. The Company shall deliver to the holder
________ Warrant Sh.ares in accordance with the terms
of the Warrant.
Date: _____________
(Print
Name of Registered Holder)
By: _______________
Name:
Title: ________ ________
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be
signed only upon authorized transfer
of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns, and transfers unto the right to purchase
shares of common stock of Guided Therapeutics, Inc., to which the
within Common Stock Purchase Warrant relates and appoints
, as attorney-in-fact, to transfer said right on
the books of Guided Therapeutics, Inc. with full
power of substitution and re-substitution in the premises. By accepting such transfer, the
transferee has
agreed to be bound in all respects by
the terms and conditions of the within Warrant.
Dated:
________
(Signature) *
(Name)
(Address)
(Social
Security or Tax Identification No.)
* The signature on this Assignment of
Warrant must
correspond to the name as
written upon
the face of the Common Stock Purchase
Warrant in every
particular without alteration
or enlargement or any change whatsoever. When signing on behalf of
a corporation, partnership, trust or other entity, please
indicate your
position(s) and title(s) with such
entity.
Exhibit
4.36
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
Warrant Shares:
__________
Initial
Exercise Date: __________, 2020
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, __________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on _________, 2023 (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to
_________ shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock. The purchase price of one
share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b).
Section
1.
Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated December 30, 2019, among the Company and the purchasers
signatory thereto.
Section
2.
Exercise.
a) Exercise
of Warrant. 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 Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). 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 2(c) 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 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 on which 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 two (2) Business Days 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) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.25 (the
“Exercise
Price”).
c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) =
the VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(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.
As used
herein, “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 determined by an
independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3.
Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(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,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
4.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5.
Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
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 shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:__________________________________________
Name:
Title:
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NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, 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 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
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
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:
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(Please
Print)
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Address:
|
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Phone
Number:
Email
Address:
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(Please
Print)
______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit
4.37
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
Warrant Shares:
__________
Initial
Exercise Date: __________, 2020
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, __________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on _________, 2023 (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to
_________ shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock. The purchase price of one
share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b).
Section
1.
Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated December 30, 2019, among the Company and the purchasers
signatory thereto.
Section
2.
Exercise.
a) Exercise
of Warrant. 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 Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). 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 2(c) 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 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 on which 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 two (2) Business Days 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) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.75 (the
“Exercise
Price”).
c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) = the
VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(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.
As used
herein, “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 determined by an
independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3.
Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(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,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
4.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5.
Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
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 shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:__________________________________________
Name:
Title:
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NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, 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 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
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
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
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Name:
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(Please
Print)
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Address:
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Phone
Number:
Email
Address:
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(Please
Print)
______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit 4.38
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON STOCK PURCHASE WARRANT
GUIDED THERAPEUTICS, INC.
Warrant
Shares: 59,600
Initial
Exercise Date: April 23, 2020
THIS COMMON STOCK PURCHASE WARRANT (the
“Warrant”)
is pursuant to the Finder’s Fee Agreement executed by Guided
Therapeutics and IRON STONE CAPITAL on January 6, 2020 and certifies that, for value
received, IRON STONE CAPITAL or its assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on
or after the date hereof (the “Initial Exercise
Date”) and on or prior to
5:00 p.m. (New York City time) on April 23, 2023 (the
“Termination
Date”) but not
thereafter, to subscribe for and purchase from Guided Therapeutics,
Inc., a Delaware corporation (the “Company”),
up to 59,600 shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock.
The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase
Agreement”), dated
December 30, 2019, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
a) Exercise of
Warrant. 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 Initial Exercise
Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy or PDF copy submitted by
e-mail (or e-mail attachment) of the Notice of Exercise in the form
annexed hereto (the “Notice of
Exercise”). 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 2(c) 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 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 on which 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 two (2) Business Days 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) Exercise
Price. The exercise price per
share of the Common Stock under this Warrant shall be
$0.25
(the “Exercise
Price”).
c) Mechanics of
Exercise.
i. Delivery of Warrant
Shares Upon Exercise. The
Company shall deliver to the Holder the number of Warrant Shares to
which the Holder is entitled pursuant to such exercise to the
address specified by the Holder in the Notice of Exercise. Upon
delivery of the Notice of Exercise, the Holder shall be deemed for
all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New
Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the Warrant Shares, deliver
to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant.
iii. Rescission
Rights. If the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such
exercise.
iv. No Fractional Shares
or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such exercise,
the Company shall, at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole
share.
v. Charges, Taxes and
Expenses. Issuance of Warrant
Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance
of such Warrant Shares, all of which taxes and expenses shall be
paid by the Company, and such Warrant Shares shall be issued in the
name of the Holder or in such name or names as may be directed by
the Holder; provided,
however,
that in the event that Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto.
vi. Closing of
Books. The Company will not
close its stockholder books or records in any manner which prevents
the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The
Company shall not affect any exercise of this Warrant, and a Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the
applicable Notice of Exercise, the Holder (together with the
Holder’s Affiliates, and any other Persons acting as a group
together with the Holder or any of the Holder’s Affiliates
(such Persons, “Attribution
Parties”)), would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder
and its Affiliates and Attribution Parties shall include the number
of shares of Common Stock issuable upon exercise of this Warrant
with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, nonexercised portion
of this Warrant beneficially owned by the Holder or any of its
Affiliates or Attribution Parties and (ii) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial Ownership
Limitation” shall be
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon
notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st
day after such notice is delivered to
the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation herein contained or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this
Warrant.
Section
3. Certain
Adjustments.
a) Stock Dividends and
Splits. If the Company, at any
time while this Warrant is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company
upon exercise of this Warrant), (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) combines
(including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues by
reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant
shall remain unchanged. Any adjustment made pursuant to this
Section 3(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, combination
or re-classification.
b) Fundamental
Transaction. If, at any time
while this Warrant is outstanding, (i) the Company, directly or
indirectly, in one or more related transactions effects any merger
or consolidation of the Company with or into another Person, (ii)
the Company, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for
other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the
Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon
any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been
issuable upon such exercise immediately prior to the occurrence of
such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this
Warrant), the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the
“Alternate
Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations.
All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 3, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
d) Notice to
Holder.
i. Adjustment to Exercise
Price. Whenever the Exercise
Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly deliver to the Holder by facsimile or email
a notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow
Exercise by Holder. If (A) the
Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock, (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the
Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the
Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in
each case, the Company shall cause to be delivered by facsimile or
email to the Holder at its last facsimile number or email address
as it shall appear upon the Warrant Register of the Company, at
least 10 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder shall remain
entitled to exercise this Warrant during the period commencing on
the date of such notice to the effective date of the event
triggering such notice except as may otherwise be expressly set
forth herein.
Section
4. Transfer of
Warrant.
a)
Transferability.
Subject to compliance with any applicable securities laws and the
conditions set forth in Section 4(d) hereof and to the provisions
of Section 4.1 of the Purchase Agreement, this Warrant and all
rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company unless the Holder has assigned this Warrant in full,
in which case, the Holder shall surrender this Warrant to the
Company within three (3) Trading Days of the date on which the
Holder delivers an assignment form to the Company assigning this
Warrant in full. The Warrant, if properly assigned in accordance
herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant
issued.
b) New
Warrants. This Warrant may be
divided or combined with other Warrants upon presentation hereof at
the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to
be issued, signed by the Holder or its agent or attorney. Subject
to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such
notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant
Register. The Company shall
register this Warrant, upon records to be maintained by the Company
for that purpose (the “Warrant
Register”), in the name
of the record Holder hereof from time to time. The Company may deem
and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the time
of the surrender of this Warrant in connection with any transfer of
this Warrant, the transfer of this Warrant shall not be either (i)
registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue
sky laws or (ii) eligible for resale without volume or
manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
Section 5.7 of the Purchase Agreement.
e) Representation by the
Holder. The Holder, by the
acceptance hereof, represents and warrants that it is acquiring
this Warrant and, upon any exercise hereof, will acquire the
Warrant Shares issuable upon such exercise, for its own account and
not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or
any applicable state securities law, except pursuant to sales
registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as
Stockholder Until Exercise.
This Warrant does not entitle the Holder to any voting rights,
dividends or other rights as a stockholder of the Company prior to
the exercise hereof as set forth in Section 2(d)(i), except as
expressly set forth in Section 3.
b) Loss, Theft,
Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then,
such action may be taken or such right may be exercised on the next
succeeding Business Day.
d) Authorized
Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction.
All questions concerning the construction, validity, enforcement
and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase
Agreement.
f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered and the Holder does not
utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g) Nonwaiver and
Expenses. No course of dealing
or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise
prejudice the Holder’s rights, powers or remedies. Without
limiting any other provision of this Warrant or the Purchase
Agreement, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h) Notices.
Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase
Agreement.
i) Limitation of
Liability. No provision hereof,
in the absence of any affirmative action by the Holder to exercise
this Warrant to purchase Warrant Shares, and no enumeration herein
of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the
Company.
j) Remedies.
The Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k) Successors and
Assigns. Subject to applicable
securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon
the successors and permitted assigns of the Company and the
successors and permitted assigns of Holder. The provisions of this
Warrant are intended to be for the benefit of any Holder from time
to time of this Warrant and shall be enforceable by the Holder or
holder of Warrant Shares.
l) Amendment.
This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the
Holder.
m) Severability.
Wherever 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 shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n) Headings.
The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of
this Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
GUIDED
THERAPEUTICS, INC.
By:
/Gene Cartwright/
Name:
Gene Cartwright
Title:
CEO & President
Date:
6/16/2020
NOTICE OF EXERCISE
TO:
GUIDED THERAPEUTICS, 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 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 permitted the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or
in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4) Accredited
Investor. The undersigned is an
“accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE
OF HOLDER]
Name of Investing Entity:
________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_________________________________________________
Name of Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT B
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:
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(Please
Print)
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Address:
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(Please
Print)
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Phone
Number:
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______________________________________
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Email
Address:
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______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit 4.39
NEITHER THIS SECURITY NOR THE
SECURITIES AS TO WHICH THIS SECURITY MAYBE EXERCISED HA VE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN A V AILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LA WS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAYBE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITlES.
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
Warrant
Shares: 700,000
Date
of Issuance: May 22, 2020 ("Issuance Date")
This
COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received (in connection with the execution of that certain
exchange agreement by and between the Company (as defined below)
and Holder (as defined below) dated May 22, 2020 (the "Exchange
Agreement")), Auctus Fund, LLC, a Delaware limited liability
company (including any permitted and registered assigns, the
"Holder"), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date of issuance hereof, 10 purchase
from Guided Therapeutics, Inc., a Delaware corporation (the
"Company"), up to 700,000 shares of Common Stock (as defined below)
(the "Warrant Shares") (whereby such number may be adjusted from
time to time pursuant to the terms and conditions of this Warrant)
at the Exercise Price per share then in effect. This Warrant is
issued by the Company as of the date hereof in connection with that
certain Exchange Agreement.
For
purposes of this Warrant, the term "Exercise Price" shall mean
$0.15, subject to adjustment as provided herein (including but not
limited to cashless exercise), and the term " Exercise Period"
shall mean the period commencing on the Issuance Date and ending on
5:00 p.m. eastern standard time on the three-year anniversary
thereof.
I.
EXERCISE OF WARRANT.
(a) Mechanics of Exercise.
Subject to the terms and conditions
hereof, the rights represented by this Warrant may be exercised in
whole or in part at any time or times during the Exercise Period by
delivery of a written notice, in the form attached hereto as
Exhibit A (the "Exercise Notice"), of the Holder's election to
exercise this Warrant. The Holder shall not be required to deliver
the original Warrant in order to affect an exercise hereunder.
Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable
number of Warrant Shares purchased. On or before the second Trading
Day (the "Warrant Share Delivery Date") following the date on which
the Holder sent the Exercise Notice to the Company or the Company's
transfer agent, and upon receipt by the Company of payment to the
Company of an amount equal to the applicable Exercise Price
multiplied by the Dumber of Warrant Shares as to which all or a
portion of this Warrant is being exercised (the "Aggregate Exercise
Price" and together with the Exercise Notice, the "Exercise
Delivery Documents") in cash or by wire transfer of immediately
available funds (or by cashless exercise, in which case there shall
be no Aggregate Exercise Price provided), the Company shall (or
direct its transfer agent to) issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company's share register in the name
of the Holder or its designee, for the number of shares of Common
Stock to which the Holder is entitled pursuant (0 such exercise (or
deliver such shares of Common Stock in electronic format if
requested by the Holder). Upon delivery of the Exercise Delivery
Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date
of delivery of the certificates evidencing such Warrant Shares. If
this Warrant is submitted in connection with any exercise and the
number of Warrant Shares represented by this Warrant submitted for
exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three Business Days after
any exercise and at its own expense, issue a new Warrant (in
accordance with Section 6) representing the right to purchase the
number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised.
If
the Company fails to cause its transfer agent to transmit to the
Holder the respective shares of Common Stock by the respective
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise in Holder's sale discretion, in addition to
all other rights and remedies.
If
the Market Price of one share of Common Stock is greater than the
Exercise Price, then, unless there is an effective non-stale
registration statement of the Company covering the Holder's
immediate resale of the Warrant Shares at prevailing market prices
(and not fixed prices) without any limitation, the Holder may elect
to receive Warrant
Shares pursuant to a cashless exercise, in lieu of a cash exercise,
equal to the value of this Warrant determined
in the manner described below (or of any portion thereof remaining
unexercised) by surrender of this Warrant and a Notice of Exercise,
in which event the Company shall issue to Holder a number of Common
Stock computed using the following formula:
X=Y(A-B)
/A
Where
X
= the number of Shares to be issued
to Holder.
Y =
the
number of Warrant Shares that the Holder elects to purchase under
this Warrant (at the date of such calculation).
A=
the
Market Price (at the date of such calculation).
B=
Exercise
Price (as adjusted to the date of such calculation).
(b) No Fractional Shares.
No fractional shares shall be issued
upon the exercise of this Warrant as a consequence of any
adjustment pursuant hereto. All Warrant Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated
for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the
exercise would result in the issuance of a fractional share, the
Company shall, in lieu of issuance of any fractional share, pay the
Holder otherwise entitled to such fraction a sum in cash equal to
the product resulting from multiplying the then-current fair market
value of a Warrant Share by such fraction.
(c) Holder 's Exercise
Limitations. The Company shall
not affect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, to the
extent that after giving effect to issuance of Warrant Shares upon
exercise as set forth on the applicable Notice of Exercise, the
Holder (together with the Holder's Affiliates, and any other
persons acting as a group together with the Holder or any of the
Holder's Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation, as defined below. For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include
the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, non-exercised portion
of this Warrant beneficially owned by the Holder or any of its
Affiliates and (ii) exercise or conversion of the unexercised or
non-converted portion of any other securities of the Company
(including without limitation any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any
of its Affiliates. Except as set forth in the preceding sentence,
for purposes of this paragraph (d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act, it
being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance
with Section l3(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith. To the extent that the limitation contained in this
paragraph applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any affiliates) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Exercise shall be deemed to be the
Holder's determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable, in
each case subject to the Beneficial Ownership Limitation, and the
Company shall have no obligation to verity or confirm the accuracy
of such determination.
For
purposes of this paragraph, in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company's most recent periodic or annual report filed with the
Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or its transfer agent setting forth the number of
shares of Common Stock outstanding. Upon the request of a Holder,
the Company shall within two Trading Days confirm to the Holder the
number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by the Holder or its
affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The "Beneficial Ownership
Limitation" shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon exercise of this Warrant.
The limitations contained in this paragraph shall apply to a
successor Holder of this Warrant.
2.
ADJUSTMENTS. The Exercise Price and the number of Warrant Shares
shall be adjusted from time to time as follows:
(a) Distribution 0/ Assets.
If the Company shall declare or make
any dividend or other distribution of its assets (or rights to
acquire its assets) to holders of shares of Common Stock, by way of
return of capital or otherwise (including without limitation any
distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a "Distribution"), at
any time after the issuance of this Warrant, then, in each such
case: (i) any Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of
holders of shares of Common Stock entitled to receive the
distribution shall be reduced, effective as of the close of
business on such record date, to a price determined by multiplying
such Exercise Price by a fraction (i) the numerator of which shall
be the Closing Sale Price of the shares of Common Stock on the
Trading Day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company's
Board of Directors) applicable to one share of Common Stock, and
(ii) the denominator of which shall be the Closing Sale Price of
the shares of Common Stock on the Trading Day immediately preceding
such record date; and (ii) the number of Warrant Shares shall be
increased to a number of shares equal to the number of shares of
Common Stock obtainable immediately prior to the close of business
on the record date fixed for the determination of holders of shares
of Common Stock entitled to receive the Distribution multiplied by
the reciprocal of the fraction set forth in the immediately
preceding clause (i); provided, however, that in the event that the
Distribution is of shares of common stock of a company (other than
the Company) whose common stock is traded on a national securities
exchange or a national automated quotation system ("Other Shares of
Common Stock"), then the Holder may elect to receive a warrant to
purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to
those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common
Stock that would have been payable to the Holder pursuant to the
Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding clause (i) and
the number of Warrant Shares calculated in accordance with the
first part of this clause (ii).
(b) [Intentionally
Omitted].
(c) Subdivision or Combination of
Common Stock. If the Company at
any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased. If the Company at
any time on or after the Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this
Section 2(c) shall become effective at the close of business on the
date the subdivision or combination becomes effective. Each such
adjustment of the Exercise Price shall be calculated to the nearest
one-hundredth of a cent. Such adjustment shall be made successively
whenever any event covered by this Section 2(c) shall
occur.
3.
FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is
outstanding, (i) the Company effects any merger of the Company with
or into another entity and the Company is not the surviving entity
(such surviving entity, the "Successor Entity"), (ii) the Company
effects any sale of all or substantially all of its assets in one
or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or by another individual or
entity, and approved by the Company) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares of Common Stock for other securities, cash or property and
the holders of at least 50% of the Common Stock accept such offer,
or (iv) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock) (in any such
case, a "Fundamental Transaction"), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to
receive the number of shares of Common Stock of the Successor
Entity or of the Company and any additional consideration (the
"Alternate Consideration") receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
such event (disregarding any limitation on exercise contained
herein solely for the purpose of such determination). For purposes
of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Exercise Price among the Alternate
Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any Successor Entity in such
Fundamental Transaction shall issue to the Holder a new warrant
consistent with the foregoing provisions and evidencing the
Holder's right to exercise such warrant into Alternate
Consideration.
4.
NON-CIRCUMVENTION. The Company covenants and agrees that it will
not, by amendment of its certificate of incorporation, bylaws or
through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant,
and will at all times in good faith carry out all the provisions of
this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise Price then in effect, (ii) shall take all such
actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon the exercise of this Warrant, and (iii)
shall, for so long as this Warrant is outstanding, have authorized
and reserved, free from preemptive rights, ten times the number of
shares of Common Stock that is actually issuable upon full exercise
of the Warrant (based on the Exercise Price in effect from time to
time, and without regard to any limitations on
exercise).
5.
WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, this Warrant, in and of itself, shall
not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the
Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the
Company.
6.
REISSUANCE.
(a) Lost, Stolen or Mutilated
Warrant. If this Warrant is
lost, stolen, mutilated or destroyed, the Company will, on such
terms as to indemnity or otherwise as it may reasonably impose
(which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and
tenor as this Warrant so lost, stolen, mutilated or
destroyed.
(b) Issuance of New
Warrants. Whenever the Company
is required to issue a new Warrant pursuant to the terms of this
Warrant, such new Warrant shall be of like tenor with this Warrant,
and shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance
Date.
1.
TRANSFER.
This Warrant shall be binding upon the Company and its successors
and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Notwithstanding anything to the
contrary herein, the rights, interests or obligations of the
Company hereunder may not be assigned, by operation of law or
otherwise, in whole or in part, by the Company without the prior
signed written consent of the Holder, which consent may be withheld
at the sole discretion of the Holder (any such assignment or
transfer shall be null and void if the Company does not obtain the
prior signed written consent of the Holder). This Warrant or any of
the severable rights and obligations inuring to the benefit of or
to be performed by Holder hereunder may be assigned by Holder to a
third party, in whole or in part, without the need to obtain the
Company's consent thereto.
2.
NOTICES.
The Company shall provide the Holder with prompt written notice (i)
immediately upon any adjustment of the Exercise Price, setting
forth in reasonable detail, the calculation of such adjustment and
(ii) at least 20 days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or
distribution upon the shares of Common Stock, (B) with respect to
any grants, issuances or sales of any stock or other securities
directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock or other property, pro rata
to the holders of shares of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in
conjunction with such notice being provided to the
Holder.
3.
AMENDMENT
AND WAIVER. The terms of this Warrant may be amended or waived
(either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of
the Company and the Holder.
4.
GOVERNING LAW AND VENUE. This Warrant shall be
governed by and construed in accordance with the laws of the State
of Nevada without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the
transactions contemplated by this Warrant shall be brought only in
the state courts located in the Commonwealth of Massachusetts or in
the federal courts located in the Commonwealth of Massachusetts.
The parties to this Warrant hereby irrevocably waive any objection
to jurisdiction and venue of any action instituted hereunder and
shall not assert any defense based on lack of jurisdiction or venue
or based upon forum non conveniens.
THE BORROWER HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED
HEREBY. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event
that any provision of this Warrant or any other agreement delivered
in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
11.
ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions
contained herein.
12.
CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:
(a)
"Nasdaq" means www.Nasdaq.com.
(b)
"Closing Sale Price" means, for any security as of any date, (i)
the last closing trade price for such security on the Principal
Market, as reported by Nasdaq, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the
closing trade price, then the last trade price of such security
prior to 4:00 p.m., New York time, as reported by Nasdaq, or (ii)
if the foregoing does not apply, the last trade price of such
security in the over-the-counter market for such security as
reported by Nasdaq, or (iii) if no last trade price is reported for
such security by Nasdaq, the average of the bid and ask prices of
any market makers for such security as reported by the OTC Markets.
If the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Sale
Price of such security on such date shall be the fair market value
as mutually determined by the Company and the Holder. All such
determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during
the applicable calculation period.
(c)
"Common Stock" means the Company's common stock, and any other
class of securities into which such securities may hereafter be
reclassified or changed.
(d)
"Common Stock Equivalents" means any securities of the Company that
would entitle the holder thereof to acquire at any time Common
Stock, including without limitation any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(e)
"Dilutive Issuance" is any issuance of Comman Stock or Common Stock
Equivalents described in Section 2(b) above; provided, however,
that a Dilutive Issuance shall not include any Exempt
Issuance.
(f)
"Exempt Issuance" means the issuance of (i) shares of Common Stock
or options to employees, officers, or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of
the non-employee members of the Board of Directors of the Company
or a majority of the members of a committee of nonemployee
directors established for such purpose, and (ii) shares of Common
Stock issued pursuant to real property leasing arrangement from a
bank approved by the Board of Directors of the Company; (iii)
[intentionally omitted], and (iv) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Company.
(g)
"Principal Market" means the primary national securities exchange
on which the Common Stock is then traded.
(b)
"Market Price" means the highest traded price of the Common Stock
on the Trading Day immediately prior to the date of the respective
Exercise Notice.
(i)
"Trading Day" means (i) any day on which the Common Stock is listed
or quoted and traded on its Principal Market, (ii) if the Common
Stock is not then listed or quoted and traded on any national
securities exchange, then a day on which trading occurs on any
over-the-counter markets, or (iii) if trading does not occur on the
over-the-counter markets, any Business Day.
* *
* * * * *
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the Issuance Date set forth above.
GUIDED
THERAPEUTICS, INC.
By:
/Gene S. Cartwright/
Name:
Gene S. Cartwright
Title:
Chief Executive Officer
EXHIBIT
A
EXERCISE
NOTICE
(To
be executed by the registered holder to exercise this Common Stock
Purchase Warrant)
THE
UNDERSIGNED bolder bereby exercises the right to purchase of the
shares of Common Stock ("Warrant Shares") of Guided Therapeutics,
Inc., a Delaware corporation (the "Company"), evidenced by the
attacbed copy of the Common Stock Purchase Warrant (the "Warrant").
Capitalized terms used berein and not otherwise defined shall have
the respective meanings set forth in the Warrant.
1.
Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as (check one):
☐
a
cash exercise with respect to _ ___ ___ _ Warrant Shares;
or
☐
by
cashless exercise pursuant to the Warrant.
2.
Payment
of Exercise Price. If cash exercise is selected above, the holder
shall pay the applicable Aggregate Exercise Price in the sum of$ to
the Company in accordance with the terms of the
Warrant.
3.
Delivery
of Warrant Shares. The Company shall deliver to the holder _ _
_____ _ Warrant Shares in accordance with the terms of the
Warrant.
Date:
(Print
Name of Registered Holder)
By:
Name:
Title:
________________
EXHlBIT
B
ASSIGNMENT
OF WARRANT
(To
be signed only upon authorized transfer of the
Warrant)
FOR
VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase shares of common stock of
Guided Therapeutics, Inc. , to which the within Common Stock
Purchase Warrant relates and appoints , as attorney-in-fact, to
transfer said right on the books of Guided Therapeutics, Inc. with
full power of substitution and re-substitution in the premises. By
accepting such transfer, the transferee has agreed to be bound in
all respects by the terms and conditions of the within
Warrant.
Dated:
____ ____
(Signature)
*
(Name)
(Address)
(Social
Security or Tax Identification No.)
*
The signature on this Assignment of Warrant must
correspond to the name as written upon the face of the Common Stock
Purchase Warrant in every particular without alteration or
enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, please indicate
your position(s) and title(s) with such entity.
Exhibit 4.40
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON STOCK PURCHASE WARRANT
GUIDED THERAPEUTICS, INC.
Warrant
Shares: 315,000
Initial
Exercise Date: June 23, 2020
THIS COMMON STOCK PURCHASE WARRANT (the
“Warrant”)
certifies that, for value received, Credential Qtrade Securities
Inc. ITF. Rev Royalty Income Growth Trust or its assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on
or after the date hereof (the “Initial Exercise
Date”) and on or prior to
5:00 p.m. (New York City time) on June 23, 2023 (the
“Termination
Date”) but not
thereafter, to subscribe for and purchase from Guided Therapeutics,
Inc., a Delaware corporation (the “Company”),
up to 315,000 shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock.
The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
1(b).
Section
1. Exercise.
a) Exercise of
Warrant. 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 Initial Exercise
Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy or PDF copy submitted by
e-mail (or e-mail attachment) of the Notice of Exercise in the form
annexed hereto (the “Notice of
Exercise”). 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 2(c) 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 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 on which 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 two (2) Business Days 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) Exercise
Price. The exercise price per
share of the Common Stock under this Warrant shall be
$0.25
(the “Exercise
Price”).
c) Mechanics of
Exercise.
i. Delivery of Warrant
Shares Upon Exercise. The
Company shall deliver to the Holder the number of Warrant Shares to
which the Holder is entitled pursuant to such exercise to the
address specified by the Holder in the Notice of Exercise. Upon
delivery of the Notice of Exercise, the Holder shall be deemed for
all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New
Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the Warrant Shares, deliver
to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant.
iii. Rescission
Rights. If the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such
exercise.
iv. No Fractional Shares
or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such exercise,
the Company shall, at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole
share.
v. Charges, Taxes and
Expenses. Issuance of Warrant
Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance
of such Warrant Shares, all of which taxes and expenses shall be
paid by the Company, and such Warrant Shares shall be issued in the
name of the Holder or in such name or names as may be directed by
the Holder; provided,
however,
that in the event that Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto.
vi. Closing of
Books. The Company will not
close its stockholder books or records in any manner which prevents
the timely exercise of this Warrant, pursuant to the terms
hereof.
d) Holder’s
Exercise Limitations. The
Company shall not affect any exercise of this Warrant, and a Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the
applicable Notice of Exercise, the Holder (together with the
Holder’s Affiliates, and any other Persons acting as a group
together with the Holder or any of the Holder’s Affiliates
(such Persons, “Attribution
Parties”)), would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder
and its Affiliates and Attribution Parties shall include the number
of shares of Common Stock issuable upon exercise of this Warrant
with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, nonexercised portion
of this Warrant beneficially owned by the Holder or any of its
Affiliates or Attribution Parties and (ii) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial Ownership
Limitation” shall be
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon
notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st
day after such notice is delivered to
the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation herein contained or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this
Warrant.
Section
2. Certain
Adjustments.
a) Stock Dividends and
Splits. If the Company, at any
time while this Warrant is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company
upon exercise of this Warrant), (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) combines
(including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues by
reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant
shall remain unchanged. Any adjustment made pursuant to this
Section 3(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, combination
or re-classification.
b) Fundamental
Transaction. If, at any time
while this Warrant is outstanding, (i) the Company, directly or
indirectly, in one or more related transactions effects any merger
or consolidation of the Company with or into another Person, (ii)
the Company, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for
other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the
Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon
any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been
issuable upon such exercise immediately prior to the occurrence of
such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this
Warrant), the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the
“Alternate
Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations.
All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 3, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
d) Notice to
Holder.
i. Adjustment to Exercise
Price. Whenever the Exercise
Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly deliver to the Holder by facsimile or email
a notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow
Exercise by Holder. If (A) the
Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock, (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the
Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the
Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in
each case, the Company shall cause to be delivered by facsimile or
email to the Holder at its last facsimile number or email address
as it shall appear upon the Warrant Register of the Company, at
least 10 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder shall remain
entitled to exercise this Warrant during the period commencing on
the date of such notice to the effective date of the event
triggering such notice except as may otherwise be expressly set
forth herein.
Section
3. Transfer of
Warrant.
a) Transferability.
Subject to compliance with any applicable securities laws and the
conditions set forth in Section 4(d) hereof and to the provisions
of Section 4.1 of the Purchase Agreement, this Warrant and all
rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company unless the Holder has assigned this Warrant in full,
in which case, the Holder shall surrender this Warrant to the
Company within three (3) Trading Days of the date on which the
Holder delivers an assignment form to the Company assigning this
Warrant in full. The Warrant, if properly assigned in accordance
herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant
issued.
b) New
Warrants. This Warrant may be
divided or combined with other Warrants upon presentation hereof at
the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to
be issued, signed by the Holder or its agent or attorney. Subject
to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such
notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant
Register. The Company shall
register this Warrant, upon records to be maintained by the Company
for that purpose (the “Warrant
Register”), in the name
of the record Holder hereof from time to time. The Company may deem
and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the time
of the surrender of this Warrant in connection with any transfer of
this Warrant, the transfer of this Warrant shall not be either (i)
registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue
sky laws or (ii) eligible for resale without volume or
manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
Section 5.7 of the Purchase Agreement.
e) Representation by the
Holder. The Holder, by the
acceptance hereof, represents and warrants that it is acquiring
this Warrant and, upon any exercise hereof, will acquire the
Warrant Shares issuable upon such exercise, for its own account and
not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or
any applicable state securities law, except pursuant to sales
registered or exempted under the Securities
Act.
Section
4. Miscellaneous.
a) No Rights as
Stockholder Until Exercise.
This Warrant does not entitle the Holder to any voting rights,
dividends or other rights as a stockholder of the Company prior to
the exercise hereof as set forth in Section 2(d)(i), except as
expressly set forth in Section 3.
b) Loss, Theft,
Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then,
such action may be taken or such right may be exercised on the next
succeeding Business Day.
d) Authorized
Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company
will
(i)
not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such
increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction.
All questions concerning the construction, validity, enforcement
and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase
Agreement.
f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered and the Holder does not
utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g) Nonwaiver and
Expenses. No course of dealing
or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise
prejudice the Holder’s rights, powers or remedies. Without
limiting any other provision of this Warrant or the Purchase
Agreement, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h) Notices.
Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase
Agreement.
i) Limitation of
Liability. No provision hereof,
in the absence of any affirmative action by the Holder to exercise
this Warrant to purchase Warrant Shares, and no enumeration herein
of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the
Company.
j) Remedies.
The Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k) Successors and
Assigns. Subject to applicable
securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon
the successors and permitted assigns of the Company and the
successors and permitted assigns of Holder. The provisions of this
Warrant are intended to be for the benefit of any Holder from time
to time of this Warrant and shall be enforceable by the Holder or
holder of Warrant Shares.
l) Amendment.
This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the
Holder.
m) Severability.
Wherever 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 shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n) Headings.
The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of
this Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
GUIDED
THERAPEUTICS, INC.
By:
/Gene Cartwright/
Name:
Gene Cartwright
Title:
CEO & President
NOTICE OF EXERCISE
TO:
GUIDED THERAPEUTICS, 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 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 permitted the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or
in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4) Accredited
Investor. The undersigned is an
“accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE
OF HOLDER]
Name of Investing Entity:
________________________________________________________________________
Signature of Authorized
Signatory of Investing Entity:
_________________________________________________
Name of Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT B
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:
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(Please
Print)
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Address:
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(Please
Print)
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Phone
Number:
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______________________________________
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Email
Address:
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______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit
4.41
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
Warrant Shares:
250,000
Initial
Exercise Date: June 23, 2020
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, James
Clavijo or its assigns (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on June 23, 2023 (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to 250,000
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 1(b).
Section
1.
Exercise.
a) Exercise
of Warrant. 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 Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). 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 2(c) 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 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 on which 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 two (2) Business Days 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) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.50 (the
“Exercise
Price”).
c)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
d) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
2. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(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,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
3.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
4.
Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
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 shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
GUIDED
THERAPEUTICS, INC.
By:
/Gene Cartwright/
Name:
Gene Cartwright
Title:
CEO & President
NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, 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 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
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
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
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Name:
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Print)
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Address:
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Phone
Number:
Email
Address:
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(Please
Print)
______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit
4.42
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
Warrant Shares:
1,000
Initial
Exercise Date: August 10, 2020
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, Manju
Venugopal or its assigns (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on August 10, 2022 (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to 1,000
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 1(b).
Section
1.
Exercise.
a) Exercise
of Warrant. 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 Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). 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 2(c) 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 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 on which 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 two (2) Business Days 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) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.50 (the
“Exercise
Price”).
c)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
d) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
2. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(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,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
3.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
4.
Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
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 shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
GUIDED
THERAPEUTICS, INC.
By:
/Gene Cartwright/
Name:
Gene Cartwright
Title:
CEO & President
NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, 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 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
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
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
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Name:
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(Please
Print)
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Address:
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Phone
Number:
Email
Address:
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(Please
Print)
______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit 4.43
PROMISSORY
NOTE
Per
Board Compensation Committee Memo dated February 19,
2021.
(Replaces long term
note payable of original principal of $319,204.30, dated September
4, 2018)
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Original
Issuance Date: February 19, 2021
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Principal
Amount: $267,085.25
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THIS
PROMISSORY NOTE is duly authorized and validly Note of Guided
Therapeutics, Inc., a Delaware corporation, (the
“Company”), having its principal place of business at
5835 Peachtree Corners East, Suite B, Norcross, Georgia
30092.
FOR
VALUE RECEIVED, the undersigned promises to pay to Gene S. Cartwright
(“Holder”) the principal sum of TWO HUNDRED SIXTY SEVEN
THOUSAND EIGHTY FIVE DOLLARS AND TWENTY FIVE CENTS ($267,085.25),
in lawful money of the United States of America, at such place as
Holder may designate in writing.
The
entire unpaid principal balance due on this Promissory Note (this
“Note”), together with all accrued and unpaid interest
and fees, if any, at the choice of the Holder, shall be due and
payable in full on the second
anniversary of this agreement. The Note shall accrue 6%
simple annual interest from the date thereof and mature on February
18, 2023.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest, if any; and all such parties waive all and every kind of
notice of such change or changes and agree that the same may be
made without notice or consent of any of them.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
GUIDED
THERAPEUTICS, INC.
By:/Mark L.
Faupel/
Name:
Mark L. Faupel
Title:
COO
Exhibit 4.44
PROMISSORY
NOTE
Per
Board Compensation Committee Memo dated February 19,
2021.
(Replaces long term
note payable of original principal of $207,110.86, dated September
4, 2018)
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Original
Issuance Date: February 19, 2021
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Principal
Amount: $153,177.69
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THIS
PROMISSORY NOTE is duly authorized and validly Note of Guided
Therapeutics, Inc., a Delaware corporation, (the
“Company”), having its principal place of business at
5835 Peachtree Corners East, Suite B, Norcross, Georgia
30092.
FOR
VALUE RECEIVED, the undersigned promises to pay to Mark L. Faupel (“Holder”)
the principal sum of ONE HUNDRED FIFTY THREE THOUSAND ONE HUNDRED
SEVENTY SEVEN DOLLARS AND SIXTY NINE CENTS ($153,177.69), in lawful
money of the United States of America, at such place as Holder may
designate in writing.
The
entire unpaid principal balance due on this Promissory Note (this
“Note”), together with all accrued and unpaid interest
and fees, if any, at the choice of the Holder, shall be due and
payable in full on the second
anniversary of this agreement. The Note shall accrue 6%
simple annual interest from the date thereof and mature on February
18, 2023.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest, if any; and all such parties waive all and every kind of
notice of such change or changes and agree that the same may be
made without notice or consent of any of them.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
GUIDED
THERAPEUTICS, INC.
By:/Gene S.
Cartwright/
Name:
Gene S. Cartwright
Title:
Chief Executive
Officer
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
[2021-01]
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Warrant
Shares: 196,000
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Initial
Exercise Date: March 3, 2021
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THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) is pursuant to
the Company’s Board approval, dated March 2, 2021, for
advisory services provided in connection with certain Canadian
investors that participated in the Company’s Series F
financing. This Warrant is executed by Guided Therapeutics and
Aspen Capital
Corporation on March 3, 2021 and certifies that, for value
received, Aspen Capital
Corporation or its assigns (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on March 3, 2024 (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to 196,000
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 1(b).
Section
1.
Exercise.
a) Exercise
of Warrant. 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 Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). 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(c) 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 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 on which 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 two (2) Business Days 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) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.25 (the
“Exercise
Price”).
c)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
1(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
d) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 1 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 1(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 1(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 1(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 1(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
1(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 1(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
2.
Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 2(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,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 1(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 1(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 2 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 2, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 2, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
3.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 3(d) hereof, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 3(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
4. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
1(d)(i), except as expressly set forth in Section 2.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and 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 such Warrant or stock certificate.
c) 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 not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any 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 issuing the necessary
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 or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
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 shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
GUIDED
THERAPEUTICS, INC.
By:
/Gene Cartwright/
Name:
Gene Cartwright
Title:
CEO & President
NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, 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 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
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
1(c), 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(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
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:
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(Please
Print)
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Address:
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Phone
Number:
Email
Address:
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(Please
Print)
______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit 10.59
Guided
Therapeutics, Inc.
5835
Peachtree Comers East, Suite B
Norcross,
GA 30092
Re:
Finder's Fee Agreement
Dear
Gene Cartwright:
As
you know, Guided Therapeutics, Inc. (the ' Issuer"), has expressed
an interest in obtaining private equity or debt capital for various
purposes. This letter agreement ("Agreement") sets forth the terms
and conditions upon which
J.H.
Darbi.e & Co., Inc. ("Darbie"), will introduce the Issuer to
third-party investors (each, an "Introduced
Party”).
1.
Nature of Agreement and Services.
(a)
Promptly upon execution of this Agreement by the issuer, Darbie
will use its best efforts to initiate an introductory meeting
between principals of the Introduced Party and the Issuer to
discuss a possible Transaction (as defined herein). The Issuer
understands that Darbie is not guaranteeing that a Transaction will
be consummated, is not offering to purchase any securities of the
Issuer and is not obligated to provide any additional services
beyond the scope of this Agreement.
(b)
Issuer is not at the time of this Agreement a customer, affiliate,
or representative of Darbie.
(c)
Darbie is not providing any recommendation to the Issuer in
connection with any possible Transaction.
(d)
Darbie has not provided any investment banking, advisory, or
analytic services to the Issuer, including underwriting or
placement agent services, either as principal or agent, in
connection with the offer or sale of any securities of the
Issuer.
(e) Darbie is not and will not be a party to any
contract entered into between the 1ssuer and any Introduced
Party(f) Darbie will not participate in any way in fulfilling any
obligations to any Introduced Party undertaken, by the Issuer,
including services relating to the offer or sale of securities,
such as: (i) performing any independent analysis of the offer or
sale of securities; ii) engaging in any due diligence activities;
(iii) assisting in or providing financing for such pm-chases; (iv)
providing any advice relating to the valuation of or the financial
advisability of such an investment; (v) advising or providing
infom1ation regarding the suitability of any investment for any
person; or (vi) handling any funds or
securities.
2.
Term.
(a) This Agreement will
remain in effect for a period of 30 days from its date (the
"Term"). Darbie will have the right to terminate this Agreement
upon five days' prior written notice to the Issuer. The Issuer
will not have the right to
terminate this Agreement unless there has been a breach by Darbie
of a material term of this Agreement, and the Issuer has provided
Darbie with written notice of such breach; provided, however,
Darbie will have the right to cure
such breach within 10 days of the date of the notice sent by the
Issuer. Notwithstanding termination of this Agreement, Darbie will
be entitled to receive compensation under section 3 in the event
the Issuer and an Introduced Party consummate a Transaction (as
defined herein) at any tune during the Term, commencing on the date
hereof Sections 2, 3,6,8, and 11 will survive termination of this
Agreement.
(b)
If during the Term, an Introduced Party enters into an agreement to
purchase securities from the Issuer, which is consummated at: any
time thereafter; each of the foregoing, a "Transaction." the Issuer
will pay Darbie, upon the receipt of the purchase price for the
securities or the close of the Transaction, a Finder's Fee in the
amount that would otherwise have been payable to Darbie in
accordance with this Agreement had such Transaction occurred during
the Term.
3. Finder's Fee and
Expenses.
(a) In consideration of the foregoing, upon
consummation of the closing regarding a financing on behalf of the
Issuer, directly or through a structured Transaction,
Darbie
will be entitled to receive a finder fee ("Finder's Fee") in cash
equal to 2% of the gross proceeds of an equity convertible debt
transaction and 2% of the gross proceeds of a debt transaction
received by the Issuer within three business days from the closing
date. The Issuer and the
Introduced Party will not be obligated to pay Darbie if the Issuer
does not receive the Transaction Proceeds for any reason
whatsoever.
(b) In the event that the Issuer proceeds with a
non-financing transaction with one or more Introduced Parties, then
prior to closing the Issuer and Darbie shall mutually agree upon
compensation payable to Darbie which may include an ownership
interest in the resulting licensed, joint venture and/or
merged/acquiring entity. III the event the Issuer completes a
non-financing transaction with an Introduced Party without first
agreeing with Darbie on the finder's fee for the non-financing
transaction. then Darbie shall be entitled to receive a cash fee
equal to 3% of any licensing fees payable upon receipt by the
licensor, a cash fee equal to 3% of the value of the Issuer related
portion of the surviving entity resulting from any merger or
acquisition payable upon closing of the transaction and, in the
case of a joint venture, equal to 3% of Darbie's ownership portion
of the joint venture.
(c) The Finder's Fee will
be paid in cash and will be payable whether or not the Transaction
involves equity or debt securities, or a combination of equity and
debt securities and cash or is made on the installment-sale basis. The Finder's Fee
will be deducted from the Transaction Proceeds by the Introduced
Party, and the introduced Party will remit the Finder's Fee
directly to Darbie on Issuer's behalf. For purposes of this
Agreement "Transaction Proceeds" will mean the fair market value of
all cash and securities received by the Issuer from the Introduced
Party, including a debt repayment or debt assumption, all
determined in accordance with generally accepted accounting
principles. Notwithstanding the foregoing, in the event that the
Transaction Proceeds are received by the Issuer in installments,
the compensation payable to Darbie hereunder will be due and
payable upon receipt by the Issuer of each installment in the same
manner described earlier in this section.
(d)
Darbie will be solely liable for the payment of any taxes imposed
or arising out of any Finder's Fee received by it under this
Agreement.
(e) Issuer agrees to not circumvent Darbie by
entering into business relations with any Introduced Party without
providing payment of the agreed upon Finder's Fee as stated
in this Agreement.
(f)
Issuer and Darbie will each pay its own expenses arising out of or
relating to this Agreement.
(g)
Preexisting Relationship. In the event Issuer has prior evidentiary
communication with an Introduced Parry, the Issuer will notify
Darbie of such a relationship and, upon written request, provide
documentation of the Issuer's prior communication with an
Introduced Party. Communication will include phone or e-mail
contact or written representations
by both Issuer and an Introduced Party of a preexisting
relationship. For purposes of this paragraph, email communication
is deemed acceptable.
Guided
Therapeutics, Inc.
5/14/2020
Page
3
(h)
Darbie's Representations and Warranties. Darbie, a registered
broker-dealer, represents and warrants that: (a) it is not
prohibited by any legal contractual, fiduciary, or other obligation
from receiving a Finder's Fee; (ii) it has the full legal authority
and capacity to sign this Agreement; (iii) it is acting merely as a
tinder and will not provide investment banking or related services
to Issuer or any potential Introduced Parties; and (iv) no other
person or entity is entitled to or has arty claim to the Finder's
Fee or arty portion thereof. Darbie agrees to notify the Issuer
promptly if any of the foregoing representations ceases to be
true.
(i)
Confidential Information. Darbie will hold in confidence, for a
period of two years from the date hereof, any confidential
information that the Issuer may provide to it pursuant to this
Agreement unless the Issuer gives Darbie permission in writing to
disclose such confidential information to a specific third party.
Notwithstanding the foregoing, Darbie will not be required to
maintain confidentiality for information: (a) that is or becomes
part of the public domain through no fault or action of Darbie; (b)
of which it had independent knowledge prior to disclosure to it by
the Issuer; (c) that comes into Darbie's possession in the normal
and routine course of its own business from and through
independent, nonconfidential sources; or (d) that is required to be
disclosed by Darbie by governmental or security regulatory
requirements. If Darbie is requested or required (by oral
questions, interrogatories, requests for information or document
subpoenas, civil investigative demands, or similar process) to
disclose any confidential information supplied to it by the Issuer
or the existence of other negotiations in the course of its
dealings with the Issuer or its representatives, Darbie will,
unless prohibited by law, promptly notify the Issuer of such a
request so that the Issuer may seek an appropriate protective
order.
(j)
Independent Contractor. Nothing in this Agreement win constitute a
business combination, joint venture, partnership or employment
relationship between the Issuer and Darbie. Darbie acknowledges and
agrees that it is merely and strictly acting as a finder, and not
as an agent, employee, or representative of the Issuer, and has no
authority to negotiate for or to bind the issuer. This Agreement is
not exclusive, and each party is free to enter into similar
arrangements with third parties. Darbie agrees it will not make,
publish, or distribute any advertisement or marketing material
using the trademarks, logos, trade names or abbreviations thereof,
or any other such identifying mark or name of the Issuer or its
affiliates without the prior consent of the Issuer.
(k) Indemnification. Each party hereto agrees to
indemnify and hold harmless the other parry and its officers,
directors, employees, agents, representatives, and controlling
persons (and the officer's, directors, employees, agents,
representatives, and controlling persons of each of them) (as such
are defined in Section 20 of the Securities Exchange Act of 1934,
as amended), from and against any and all losses, claims, damages:
liabilities, costs, and expenses (and all actions, suits,
proceedings, or claims in respect thereof) and any legal or other
expenses in giving testimony or furnishing documents in response to
a subpoena or otherwise (including the cost of investigating,
preparing, or defending any such action, suit, proceeding or claim,
whether or not in connection with any action, suit, proceeding, or
claim in which Darbie or the Issuer is a party), as and when incurred, directly
or indirectly, caused by, relati.ng to, based upon, or arising out
of Darbie's service pursuant to this Agreement, including any suit
based upon the terms and conditions of a Transaction or
information, representations, or warranties provided by the Issuer
to a Transaction party by the Issuer. The Issuer further agrees
that Darbie will incur no liability to the Issuer for any acts OJ
omissions by Darbie arising out of or relating to this Agreement or
Darbie's performance or failure to perform any services under this
Agreement, except for: (a) Darbie's intentional or willful
misconduct; or (b) information regarding Darbie that is provided by
Darbie to the Issuer or to a Transaction party. Further, in no
event will Darbie be liable to the Issuer or to any third party or
Transaction party for an amount in excess of the cash compensation
received pursuant to section 3 hereof. This section 8 will survive
the termination of this Agreement. Notwithstanding the foregoing,
no party otherwise entitled to indemnification will be entitled
thereto to the extent such party has been determined to have acted
in a manner that has been deemed as gross negligence or willful
misconduct regarding the matter for which indemnification is sought
herein.
Guided
Therapeutics, Inc.
5/14/2020
Page
4
(I)
Notices. Any notice, demand, request, or other communication
permitted or required under this Agreement will be in writing and
will be deemed to have been given as of the date so delivered, if
personally delivered; as of the date so sent, if sent by electronic
mail and receipt is acknowledged by the recipient; and one day
after the date so sent, if delivered by overnight courier service;
addressed as follows:
If
to the Issuer:
Guided
Therapeutics, Inc.
5835
Peachtree Comers East Suite B
Norcross,
GA 30092
Email:
gcartwright@guidedinc.com
If
to Darbie, to: J H Darbie & Co.,Inc.
40
Wall Street New York, NY l0005
Email:
ib@jhdarbie.com
Notwithstanding
the foregoing, service or legal process or other similar
communications will not be given by electronic mail and will not be
deemed duly given under this Agreement if delivered by such means.
Each party, by notice duly given in accordance herewith, may
specify a different address for the giving of any notice
hereunder.
(m)
Successors and Assigns. No party will assign its rights, duties,
and obligations under Agreement without the written consent of the
other party, which will not be unreasonably withheld, except as
otherwise specifically contemplated in this Agreement. This
Agreement will be binding upon, inure to the benefit of, and be
enforceable by the parties and their permitted successors and
assigns.
(n)
Governing Law and Enforcement. This Agreement will be governed by
and constructed under and in accordance with the laws of the state
of New York, without giving effect to any choice or conflict of law
provision or rule (whether the state of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the state of New York. All matters
involving the Issuer and Darbie, whether arising under this
Agreement or otherwise will be heard and determined by mediation or
arbitration.
(o)
Entire Agreement. This Agreement incorporates and includes all
prior negotiations, correspondence, conversations, agreements, or
understandings applicable to the matters contained herein, and the
parties agree that there are no commitments, agreements, or
understandings concerning the subject matter of this Agreement that
are not contained in this document. The parties acknowledge that,
in deciding to enter into this Agreement, they have not relied upon
any statements, promises, or representation!>, written or oral,
express or implied, other than those set forth in tills Agreement.
Accordingly, it is agreed that no deviation from the terms hereof
will be predicated upon any prior representations or agreements,
whether oral or written. The parties acknowledge that they have
negotiated this Agreement at arm's-length with adequate
representation on an equal basis, and the filing of a suit
challenging the negotiated terms of this Agreement by either party
will be deemed a default and this Agreement will be terminated as
provided herein.
Guided
Therapeutics, Inc.
5/14/2020
Page
5
(p)
Amendment. Any amendment, modification, or waiver of the terms of
this Agreement must be executed in writing by both
parties.
(q)
Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable, or unenforceable
under any applicable law, such void, voidable, or unenforceable
provision will not affect or invalidate any other provision of this
Agreement, which will continue to govern the relative rights and
duties of the parties as though the void, voidable, or
unenforceable provision was not a part hereof. In addition, it is
the intention and agreement of the parties that all the terms and
conditions hereof be enforced to the fullest extent permitted by
law.
(r)
Warranty of Authority. Each of the individuals signing this
Agreement on behalf of a party hereto warrants and represents that
such individual is duly authorized and empowered to enter in this
Agreement and bind such party hereto.
(s)
Counterpart Signatures. This Agreement may be executed in any
number of counterparts (and any counterpart may be executed by
original, portable document format (pdf), or facsimile signature)
each of which when executed and delivered will be deemed an
original, but all of which will constitute one and the same
instrument.
If
the foregoing is acceptable to you, please so indicate by signing
in the space provided below and returning a signed copy of this
Agreement to us for our records.
Sincerely,
J H
DARBlE & CO., INC.
Agreed to and accepted this
19 day
of May, 2020.
Issuer:
Guided Therapeutics,
Inc.
Name:/Gene
Cartwright/
Title:
CEO
Exhibit 10.60
EXCHANGE
AGREEMENT
This
EXCHANGE AGREEMENT (this “Agreement”) is made and
entered into effective as of May 22, 2020, by and between GUIDED
THERAPEUTICS, INC., a Delaware corporation (the “Company”) and Auctus
Fund, LLC, a Delaware limited liability company (the
“Creditor”).
W I
T N E S S E T H :
WHEREAS, the
Creditor is the payee of certain obligations owed to the Creditor
by the Company as set forth in the convertible promissory notes
listed on Exhibit A
hereto (the “Notes”) (the collective obligations under
the Notes shall referred to herein as the “Obligations”);
WHEREAS, in
satisfaction in full of the Obligations, the Creditor is willing to
accept the Cash Payments (as defined in this Agreement) and
Securities (as defined in this Agreement) (the “Exchange”);
WHEREAS, the
Exchange is being made in reliance upon the exemption from
registration provided by Section 4(a)(2) of the Securities
Act.
WHEREAS, the
Company and the Creditor desire to enter into this Agreement to
evidence and set forth the terms of the exchange of the Cash
Payments and Securities (as defined in this Agreement) for and in
satisfaction of the Obligations;
NOW,
THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties
hereto, being duly sworn, do covenant, agree and certify as
follows:
1. Recitals.
The parties hereto acknowledge and agree that the foregoing
recitals are true and accurate and constitute part of this
Agreement to the same extent as if contained in the body
hereof.
2. Definitions.
In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Obligations, and (b) the
following terms have the meanings set forth in this Section
1.1:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board of Directors” means
the board of directors of the Company.
“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Securities” has the
meaning set forth in the Preamble of this Agreement.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
3. Exchange
and Satisfaction. The
Obligations will be exchanged for the Cash Payments (as defined
below), Securities and other considerations according to the
following terms and conditions and pursuant to the terms of this
Agreement:
a.
The Creditor will
receive $160,000 in cash payments (the “Cash Payments”)
according to the following schedule:
●
$20,000 on or
before May 30, 2020 (the “Initial Payment”);
and
●
$20,000 every
thirty (30) calendar days thereafter for seven consecutive calendar
months (a total of $140,000.00).
b.
In addition to the
Cash Payments, the Creditor will be entitled to convert a portion
of the Notes pursuant to the original terms of the Notes into
500,000 shares of the Company’s common stock (the
“First Shares”). The sale of the First Shares by the
Creditor shall be restricted until November 1, 2020, according to
the following schedule:
i.
200,000 shares
cannot be sold unless the market share price is above 15
cents.
ii.
150,000 shares
cannot be sold unless the marker share price is above 20
cents.
iii.
150,000 shares
cannot be sold unless the market share price is above 25
cents.
c.
On the Effective
Date, the Company shall issue to Creditor a common stock purchase
warrant for the purchase of 700,000 shares of the Company’s
common stock (the “Warrant”), a form of which us
attached hereto as Exhibit
B.
d.
For the avoidance
of doubt, the Creditor shall be subject to the beneficial ownership
limitations with respect to the Company’s common stock
provided in the Notes at all times.
e.
Notwithstanding
anything in this Agreement to the contrary, if the Company fails to
timely make any of the Cash Payments to Creditor and/or the Company
fails to comply with the terms of this Agreement, then Creditor may
declare this Agreement null and void and of no further force or
effect in Creditor’s sole discretion (provided , however,
that the Creditor shall retain all rights with respect to the
Warrant even if this Agreement is declared a null and void and of
no further force or effect).
4. Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to Creditor:
(a) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith. This Agreement have been (or
upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(b) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed
by the Company. The shares of Common Stock underlying the
Securities (if any), when issued in accordance with the terms of
the Securities, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer required by law. The
Creditor’s holding period with respect to such Securities and
the Common Stock underlying the Securities shall tack back to the
original acquisition date of the Obligations pursuant to Section
3(a)(9) of the Securities Act.
5. Representations
and Warranties of the Creditor. Creditor hereby represents
and warrants as of the date hereof and as of the Closing Date to
the Company as follows (unless as of a specific date
therein):
(a) Own
Account. Creditor understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Creditor’s right to sell the Securities pursuant to a
registration statement or otherwise in compliance with applicable
federal and state securities laws). The Creditor is acquiring the
Securities hereunder in the ordinary course of its
business.
(c) Creditor’s
Status. At the time the Creditor was offered the Securities,
it was, and as of the date hereof it is, an “accredited
investor” as defined in Rule 501(a) under the Securities
Act.
(d) Experience
of Creditor. Creditor, either alone or together with its
representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Such Creditor is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
6. Release.
The Creditor acknowledges and agrees that it shall have no further
rights or interest in, and shall not receive any further
consideration, payment or distribution of any kind with respect to,
the Obligations, except as provided in this Agreement. In such
regard, the Creditor hereby waives, relinquishes, remises and
releases all rights, claims, interests or liabilities, known and
unknown, of any nature whatsoever in law or equity which the
Creditor may previously have had or may now or hereafter have as
against or to receive from the Company arising out of, resulting
from or relating to the Obligations or any rights or interest of
the Creditor with respect thereto, except as provided in this
Agreement. The Company acknowledges and agrees that it shall have
no further rights or interest in, and shall not receive any further
consideration, payment or distribution of any kind with respect to,
the Obligations, except as provided in this Agreement. In such
regard, the Company hereby waives, relinquishes, remises and
releases all rights, claims, interests or liabilities, known and
unknown, of any nature whatsoever in law or equity which the
Company may previously have had or may now or hereafter have as
against or to receive from the Creditor arising out of, resulting
from or relating to the Obligations or any rights or interest of
the Company with respect thereto, except as provided in this
Agreement
7. Transfer
Restrictions. The Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or Rule 144 under the Securities Act or
other applicable exemption, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by
the Creditor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act.
8. Further
Assurances. The
Creditor shall hereafter, without further consideration, execute
and deliver promptly to the Company such further consents, waivers,
assignments, endorsements and other documents and instruments, and
to take all such further actions, as the Company may from time to
time reasonably request with respect to the Exchange and
satisfaction of the Obligations and the consummation in full
thereof. The Company shall hereafter, without further
consideration, execute and deliver promptly to the Creditor such
further consents, waivers, assignments, endorsements and other
documents and instruments, and to take all such further actions, as
the Creditor may from time to time reasonably request with respect
to the Exchange and satisfaction of the Obligations and the
consummation in full thereof.
9. Successors
and Assigns. This
Agreement is binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and assigns,
provided, however, that any assignment of the rights and benefits
hereunder by the Company must be agreed to in a signed writing by
the Creditor.
10. Counterparts.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which, when taken
together, shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have affixed their hands and
seals by signing this Agreement as of the day and year first above
written.
Company:
GUIDED
THERAPEUTICS, INC.
By:
/Gene S. Cartwirght
Name:
Gene S. Cartwright
Title:
President and CEO
Creditor:
Auctus
Fund, LLC
By:
/Lou Posner
Name:
Lou Posner
Title:
Managing Director
Exhibit
A
1.
That certain
convertible promissory note in the original principal amount of
$150,000.00 dated March 20, 2018
2.
That certain
convertible promissory note in the original principal amount of
$89,250.00 dated July 3, 2018.
3.
That certain
convertible promissory note in the original principal amount of
$65,000.00 dated March 29, 2019.
Exhibit
B
(see
attached)
AMENDMENT
# 1 TO THE SECURITIES PURCHASE AGREEMENT AND SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE DATED DECEMBER 17, 2019
THIS
AMENDMENT #1 (the “Amendment”) TO THE SECURITIES
PURCHASE AGREEMENT AND SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
dated December 17, 2019, is made effective as of May 27, 2020 (the
“Effective Date”), by and between Guided Therapeutics,
Inc. a Delaware corporation (the “Company”), and Auctus
Fund, LLC, a Delaware limited liability company (the
“Holder”) (collectively the
“Partiers”).
BACKGROUND
A.
The Company and the
parties to the certain securities purchase agreement (the
“SPA”) and senior secured convertible promissory note
in the principal amount of $700,000.00 (the “Note”),
all dated December 17, 2019; and
B.
The Company and the
Holder desire to consummate a second tranche of $400,00.00 under
the Note (the “Second Tranche”), which principal amount
will be added to the Note on the Effective Date; and
C.
Accordingly, the
Parties desire to amend the SPA and Notes as set forth expressly
below.
NOW
THEREFORE, in consideration of the execution and delivery of the
Amendment and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1.
The principal
balance of the Note shall be increased by $400,000.00 in the
Effective Date to reflect the addition of the Second Tranche to the
Note, which the Holder will fund on or around the date hereof as
specified in the disbursement authorization attached hereto as
Exhibit “A”.
2.
With respect to the
Company’s prepayment of the Second Tranche under Section 1.9
of the Note, the references to “Issue Date” throughout
Section 1.9 of the Note shall be amended to “the date that
the Holder Funded the purchase price for the second tranche of
$400,000.00 under this Note as specified in that certain amendment
#1 to the Purchase Agreement and this Note”.
3.
The following
sentence shall be added to Section 3 (q) of the SPA:
“With respect
to the consummation of the second tranche of $400,000.00 under the
Note as specified in that certain amendment #1 to this Agreement
and the Note dated May 27, 2020, the Company has taken no action
which would give rise to any claim by any person for brokerage
commissions, transaction fee or similar payments except with
respect to J.H.Darbie & Co., a registered broker-dealer (CRD#:
43520).”
4.
This Amendment
shall be deemed part of, but shall take precedence over and
superseded any provisions to the contrary contained in the SPA and
Note. Except as specifically modified hereby, all of the provisions
of the SPA and Note, which are not in conflict with the terms of
this Amendment, shall remain in full force and effect.
[Signature page to follow]
IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
Guided
Therapeutics, Inc.
By:
/Gene S. Cartwright/
Name:
Gene S. Cartwright
Title:
CEO & President
Auctus
Fund, LLC
By:
/Lou Posner/
Name:
Lou Posner
Title:
Managig Director
AMENDED FINDER'S FEE AGREEMENT
THIS
AMENDMENT TO THE AMENDED FINDER'S FEE AGREEMENT IS DATED JUNE 11,
2020 (the Effective Date")
BETWEEN:
Guided
Therapeutics Inc., a US registered public company incorporated in
the State of Delaware with a registered and records office at 5835
Peachtree Corners East, Suite B Norcross GA 30092.
("the
Company")
AND
Fieldhouse
Capital Management Inc., a British Columbia, Alberta, Saskatchewan,
Manitoba, and Ontario Registered Exempt Market dealer with a
registered and records office at 230 -11 Mainland St., Vancouver,
BC V6B 5L1..
("the
Finder")
The
Company and the Finder hereby amend the Finder's Agreement
previously entered into by the parties
on or about April 10, 2019 in the following regards:
WHEREAS:
A.
The parties entered into an Amended Finder's Fee Agreement dated on
or about May 22, 2020 in regards to a completed Series D Financing
in December 2019 and the Company is in the process of closing a
2020 Series E Preferred Share Financing. which the parties agree is
to be further amended.
B.
Unchanged.
C.
Unchanged.
1.
FINDER SERVICES AND FEES 1.1-1.3 Unchanged
1.4
Finder's Fees. The Company agrees to provide the following
consideration to the Finder:
(a)
As an approved Finder, payment in cash consisting of:
i)
Five Percent (5%) of the gross proceeds raised ("GPR") from all
accepted subscription agreements for the 2020 Series E Preferred
Share financing ("2020 Financing") from investors introduced to the
Company by the Finder (the "Fee").
ii)
Two percent (2%) from the 2019 Series D financing only (which
amounts to $15,260 based on gross proceeds of
$763,000).
iii)
Based on the GPR by Finder, there shall be a payment to Finder
based on the percentages and caps shown in the table below from the
exercise of any warrants for the period of 3 years after the 2020
Financing that have been or will be issued in connection with this
and prior financings and debt settlements ("warrant exercise
commissions"); provided however that warrant exercise commissions
shall expire three (3) years from the close of the 2020
Financing.
b)
Deleted
1.5.
Fee Payment Terms: The Fee shall be paid within 5 business days
after all funds have been received by the Company in the 2020
Financing.
1.6-1.7:
Unchanged.
2.
TERM OF AGREEMENT
2.1.
The term of this agreement shall be three (3) years from the close
of the 2020 Series E Financing.
3-9.
Unchanged. IN WITNESS WHEREOF this Amendment has been executed by
the parties hereto on the Effective Date.
Guided
Therapeutics, Inc.
By:
/Gene Cartwright/
Title:
CEO & President
Fieldhouse
Capital Management, Inc
By:
/Douglas Sereda/
Title:
Chief Executive Officer (CEO) Director
Exhibit 10.63
EXCHANGE
AGREEMENT
This
EXCHANGE AGREEMENT (this "Agreement") is made and entered into
effective as of the 9th day of July, 2020
by and between GUIDED THERAPEUTICS, INC., a Delaware corporation
(the "Company") and the undersigned creditor of the Company (the
"Creditor").
W I T N E S S E T H :
WHEREAS, the
Creditor is the payee of certain obligations owed to the Creditor
by the Company as set forth on Exhibit A hereto (the
"Obligations");
NOW,
THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties
hereto, being duly sworn, do covenant, agree and certify as
follows:
1. Recitals. The
parties hereto acknowledge and agree that the foregoing recitals
are true and accurate and constitute part of this Agreement to the
same extent as if contained in the body hereof.
2.
Exchange and
Satisfaction. The Obligations are hereby
surrendered by the Creditor and exchanged for the Note and other
considerations according to the following terms and
conditions.
a.
The Creditor is or
has been a manager or consultant of the Company and
both parties wish to continue their relationship under
mutually agreeable terms.
b.
In lieu of agreeing
to dismiss approximately half of what he is currently owed
by the Company, the Creditor agrees to accept:
(i)
Cash payments of
$20,000.00 (Twenty Thousand Dollars and Zero Cents). The cash
payments shall be made as follows:
●
$10,000 upon the
signing of this Agreement
●
$5,000 within 30
days of the signing of this Agreement
●
$5,000 within 60
days of the signing of this Agreement
(ii)
Cash payments over
time in the amount of $90,000.00 (Ninety Thousand Dollars and Zero
Cents) in the form of an unsecured note with the Company to be
executed within 30 days of the closing of a new financing or new
financings totaling at least $3 million. The note shall have a term
of 18 months, carry a six percent (6%) annual interest rate and be
paid at a rate of $5,000.00 (Five Thousand Dollars and Zero Cents)
per month starting 30 days after the closing of the new financing
or new financings totaling at least $3 million.
(iii)
66,000 stock
options that vest at a rate of 1/18th or 3,667 per month.
Should two consecutive payments under term 2.b (i) or (ii) be
missed, then any remaining stock options will be canceled and
instead cash payments of $66,000.00 (Sixty-six Thousand Dollars and
Zero Cents) will be added to the total amount owed and payable at a
rate of $6,000.00 (Six Thousand Dollars and Zero Cents) per month
starting in month 19 after the closing of a financing of a least $2
million.
(iv)
The total amount of
forgiveness by Creditor of approximately $110,000.00 shall be
prorated according to the amount of funds paid to Creditor. For
example, once the first $20,000.00 of payment is made, then
Creditor has forgiven $20,000.00. Once all $110,000.00 has been
paid and equity described in Section 2(b)(iii) awarded to Creditor,
then terms and conditions of this Agreement shall have been deemed
fully satisfied.
3. Successors
and Assigns. This Agreement is
binding upon, and shall inure to the benefit of, the parties hereto
and their respective successors and assigns.
4. Counterparts. This
Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which, when taken together,
shall constitute one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have affixed their hands and
seals by signing this Agreement as of the day and year first above
written.
[Signatures on
Following Page]
Company:
GUIDED
THERAPEUTICS, INC.
By: /Gene S.
Cartwright/
Name:
Gene Cartwright
Title:
President and CEO
Creditor:
By:
/William Wells/
Name:
William Wells
Exhibit 10.64
SERIES G PREFERRED STOCK PURCHASE AGREEMENT
This SERIES G PREFERRED STOCK
PURCHASE AGREEMENT (the
"Agreement"), dated as of December 23, 2020, by and between
GUIDED
THERAPEUTICS, INC., a Delaware
corporation, with its address at 5835 Peachtree Corners East, Suite
B, Norcross, Georgia 30092 (the "Company"), and POWER UP LENDING GROUP
LTD., a New York corporation, with its
address at 111 Great Neck Road, Suite 216, Great Neck, NY 11021
(the "Buyer").
WHEREAS:
A.
The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the rules and regulations as promulgated
by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act");
and
B. Buyer desires to purchase and the Company
desires to issue and sell, upon the terms and conditions set forth
in this Agreement, 91,000 shares of Series G Preferred Stock of the
Company ("Series G Shares") with the rights and preferences as set
forth on the Certificate of Designation of the Series G Preferred
Stock attached hereto as Exhibit A ("Certificate of
Designation").
NOW THEREFORE,
in consideration of the mutual
covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the Company and the
Buyer severally (and not jointly) hereby agree as
follows:
1.
Purchase and Sale of Series G Shares.
a.
Purchase of Series G Shares. On the Closing Date (as defined
below), the Company shall issue and sell to the Buyer and the Buyer
agrees to purchase from the Company 91,000 Series G Shares with the
rights and preferences as set forth in the Certificate of
Designation.
b.
Form of Payment. On the Closing Date (as defined below), (i) the
Buyer shall pay $78,500.00 for the Series G Shares to be issued and
sold to it at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against
delivery of the Series G Shares, and (ii) the Company shall deliver
such duly executed and authorized Series G Shares on behalf of the
Company, to the Buyer, against delivery of such Purchase
Price.
c.
Closing Date. Subject to the satisfaction (or written waiver) of
the conditions set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Series G Shares pursuant
to this Agreement (the "Closing Date") shall be 12:00 noon, Eastern
Standard Time on or about December 29, 2020, or such other mutually
agreed upon time. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the Closing Date at
such location as may be agreed to by the parties.
2.
Buyer's Representations and Warranties. The Buyer represents and
warrants to the Company that:
a.
The Buyer has full power and authority to enter into this
Agreement, the execution and delivery of which has been duly
authorized and this Agreement constitutes a valid and legally
binding obligation of the Buyer, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws
of general application relating to or affecting the enforcement of
rights of creditors, and except as enforceability of the
obligations hereunder are subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or law).
b.
The Buyer acknowledges its understanding that the offering and sale
of the Series G Shares and the shares of common stock issuable upon
conversion of the Series G Shares (such shares of common stock
being collectively referred to herein as the "Conversion Shares"
and, collectively with the Series G Shares, the "Securities") is
intended to be exempt from registration under the 1933 Act, by
virtue of Rule S06(b) promulgated under the Securities Act of 1933,
as amended, and the provisions of Regulation D promulgated
thereunder. In furtherance thereof, the Buyer represents and
warrants to the Company and its affiliates as follows:
i.
The Buyer realizes that the basis for the exemption from
registration may not be available if, notwithstanding the Buyer's
representations contained herein, the Buyer is merely acquiring the
Securities for a fixed or determinable period in the future, or for
a market rise, or for sale if the market does not rise. The Buyer
does not have any such intention.
ii.
The Buyer realizes that the basis for exemption would not be
available if the offering is part of a plan or scheme to evade
registration provisions of the 1933 Act or any applicable state or
federal securities laws, except sales pursuant to a registration
statement or sales that are exempted under the 1933
Act.
iii.
The Buyer is acquiring the Securities solely for the Buyer's own
beneficial account, for investment purposes, and not with a view
towards, or resale in connection with, any distribution of the
Securities.
iv.
The Buyer has the financial ability to bear the economic risk of
the Buyer's investment, has adequate means for providing for its
current needs and contingencies, and has no need for liquidity with
respect to an investment in the Company.
v.
The Buyer and the Buyer's attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively, the
"Advisors") has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of a prospective investment in the Securities. The Buyer also
represents it has not been organized solely for the purpose of
acquiring the Securities.
vi.
The Buyer (together with its Advisors, if any) has received all
documents requested by the Buyer, if any, and has carefully
reviewed them and understands the information contained therein,
prior to the execution of this Agreement.
c.
The Buyer is not relying on the Company or any of its employees,
agents, sub-agents or advisors with respect to the legal, tax,
economic and related considerations involved in this investment.
The Buyer has relied on the advice of, or has consulted with, only
its Advisors.
d. The Buyer has carefully considered the
potential risks relating to the Company and a purchase of the
Securities, and fully understands that the Securities are a
speculative investment that involves a high degree of risk of loss
of the Buyer's entire investment. Among other things, the Buyer has
carefully considered each of the risks described under the
heading "Risk Factors"
in the Company's SEC
filings.
e.
The Buyer will not sell or otherwise transfer any Securities
without registration under the 1933 Act or an exemption therefrom,
and fully understands and agrees that the Buyer must bear the
economic risk of its purchase because, among other reasons, the
Securities have not been registered under the 1933 Act or under the
securities laws of any state and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless they are
subsequently registered under the 1933 Act and under the applicable
securities laws of such states, or an exemption from such
registration is available. In particular, the Buyer is aware that
the Securities are "restricted securities," as such term is defined
in Rule 144, and they may not be sold pursuant to Rule 144 unless
all of the conditions of Rule 144 are met. The Buyer also
understands that the Company is under no obligation to register the
Securities on behalf of the Buyer. The Buyer understands that any
sales or transfers of the Securities are further restricted by
state securities laws and the provisions of this
Agreement.
f.
The Buyer and its Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person
or persons acting on behalf of the Company concerning the offering
and the business, financial condition, results of operations and
prospects of the Company, and all such questions have been answered
to the full satisfaction of the Buyer and its Advisors, if
any.
g.
The Buyer represents and warrants that: (i) the Buyer was contacted
regarding the sale of the Securities by the Company (or an
authorized agent or representative thereof) with whom the Buyer had
a prior substantial pre-existing relationship; and (ii) no
Securities were offered or sold to it by means of any form of
general solicitation or general advertising, and in connection
therewith, the Buyer did not: (A) receive or review any
advertisement, article, notice or other communication published in
a newspaper or magazine or similar media or broadcast over
television or radio, whether closed circuit, or generally
available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation
or general advertising; or (C) observe any website or filing of the
Company with the SEC in which any offering of securities by the
Company was described and as a result learned of any offering of
securities by the Company.
h.
The Buyer has taken no action that would give rise to any claim by
any person for brokerage commissions, finders' fees or the like
relating to this Agreement or the transactions contemplated
hereby.
i.
The Buyer is an "accredited investor" as that term is defined in
Rule 50l(a) of Regulation D.
j.
Legends. The Buyer understands that until such time as the
Securities have been registered under the 1933 Act or may be sold
pursuant to an applicable exemption from registration, the
Securities shall bear a restrictive legend in substantially the
following form: I
"THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR 0ITHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE
ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
ACCEPTABLE TO THE ISSUER'S TRANSFER AGENT, THAT SUCH SECURITIES MAY
BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENTUNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS.”
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to an exemption from
registration without any restriction as to the number of securities
as of a particular date that can then be immediately
sold, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act, which
opinion shall be accepted by the Company so that the sale or
transfer is affected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does
not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144, at the Deadline (as defined in the
Certificate of Designation), it will be considered an Event of
Default (as defined in the Certificate of
Designation).
3.
Representations and Warranties of the Company. The Company
represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used,
operated and conducted. "Subsidiaries" means any corporation or
other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other
ownership interest.
b.
Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this
Agreement and to consummate the transactions contemplated hereby
and thereby and to issue the Securities, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this
Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without
limitation, the issuance of the Series G Shares and the issuance
and reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required,
(iii)
this Agreement has been duly executed and delivered by the Company
by its authorized representative, and such authorized
representative is the true and official representative with
authority to sign this Agreement and the other documents executed
in connection herewith and bind the Company accordingly, and (iv)
this Agreement constitutes, and upon execution and delivery by the
Company of the Series G Shares, each of such instruments will
constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except
as may be limited by bankruptcy, reorganization, insolvency,
moratorium and similar laws of general application relating to or
affecting the enforcement of rights of creditors, and except as
enforceability of the obligations hereunder are subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law).
c. Capitalization.
As of the date hereof, the authorized common stock of the Company
consists of 3,000,000,000 authorized shares of common stock, $0.001
par value per share, of which 13,096,189 shares are issued and
outstanding and 5,000,000 shares of preferred stock, par value
$0.001 per share of which the Company designated 525,000 shares of
preferred stock redeemable convertible preferred stock, none of
which remain outstanding, 33,000 shares of preferred stock as
Series B Preferred Stock, none of which remain outstanding, 9,000
shares of preferred stock as Series C Convertible Preferred Stock,
of which 286 are issued and outstanding; 20,250 shares of preferred
stock as Series C1 Preferred Stock, of which 1,050 shares are
issued and outstanding; 15,000 shares of preferred stock as Series
C2 Preferred Stock, of which 3,62.25 shares are issued and
outstanding; 6,000 shares of preferred stock as Series D Preferred
Stock, of which 763 shares are issued and outstanding; and 5,000
shares of preferred stock as Series E Preferred Stock, of which
1,636.50 shares are issued and outstanding ; . On or prior to the
Closing Date, the Certificate of Designation shall be filed with
the Delaware Secretary of State authorizing 1,500,000 Series G
Shares. All of such outstanding shares of capital stock are duly
authorized, validly issued, fully paid and
non-assessable.
d. Issuance
of Securities. The Securities upon issuance will be validly issued,
fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall
not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.
e.
No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Securities and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Articles of
Incorporation, as amended or By-laws, or (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or b9th
could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its
Subsidiaries
or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have
a Material Adverse Effect (as defined herein)) . The businesses of
the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. "Material Adverse Effect" means any material
adverse effect on the business, operations, assets or financial
condition of the Company or its Subsidiaries, if any, taken as a
whole, or on the transact ions contemplated hereby or by the
agreements on instruments to be entered into in connection
herewith.
e.
SEC
Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended I(the "1934 Act")
(all of the foregoing filed prior to the date hereof and all
exhibits included therein an~ financial statements and schedules
thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). Upon written request the Company
will deliver to the Buyer true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. As
of their respective dates or if amended, as of the dates of the
amendments, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of
the statements made in any such SEC Documents is, or has been,
required to be amended or updated under applicable law (except for
such statements as have bee7 amended or updated in subsequent
filings prior the date hereof). As of their respective dates or if
a1mended, as of the dates of the amendments, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved and
fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). The
Company is subject to the reporting requirements of the 1934
Act.
g.
Absence of Certain Changes. Since September 30, 2020, except as set
forth in the SEC Documents, there has been no material adverse
change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition,
results of operations, prospects or 1934 Act reporting status of
the Company or any of its Subsidiaries.
h.
Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company or any of its Subsidiaries, or
their officers or directors in their capacity as such, that could
have a Material Adverse Effect. The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to
any of the foregoing.
i.
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sa les in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its
securities.
j.
No Investment Company. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will
not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "Investment Company"). The
Company is not controlled by an Investment Company.
4.
COVENANTS.
a.
Best Efforts. The Company shall use its commercially reasonable
efforts to satisfy timely each of the conditions described in
Section 7 of this Agreement.
b.
Form D; Blue Sky Laws. The Company agrees to timely make any
filings required by federal and state laws as a result of the
closing of the transactions contemplated by this
Agreement.
c.
Use of Proceeds. The Company shall use the proceeds for general
working capital purposes.
d.
Expenses. At the Closing, the Company's obligation with respect to
the transactions contemplated by this Agreement is to reimburse
Buyer's expenses for Buyer's legal fees and due diligence fee in an
amount not to exceed $3,500.
e.
Corporate Existence. So long as the Buyer beneficially owns any
Series G Shares, the Company shall maintain its corporate existence
and shall not sell JII or substantially all of the Company's
assets, except with the prior written consent of the
Buyer.
f.
Breach of Covenants. If the Company breaches any of the covenants
set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be
considered an event of default under the Certificate of
Designation.
g.
Failure to Comply with the 1934 Act. So long as the Buyer
beneficially owns any Series G Shares, the Company shall comply
with the reporting requirements of the 1934 Act and the Company
shall continue to be subject to the reporting requirements of the
1934 Act; any breach of the foregoing shall be considered an event
of default under the Certificate of Designation.
h.
Trading Activities. Neither the Buyer nor its Affiliates has an
open short position in the common stock of the Company and the
Buyer agrees that it shall not, and that it will cause its
affiliates not to, engage in any short sales of or hedging
transactions with respect to the common stock of the
Company.
i.
The Buyer is Not a "Dealer". The Buyer and the Company hereby
acknowledge and agree that the Buyer has not: (i) acted as an
underwriter; (ii) acted as a market maker or specialist; (iii)
acted as "de facto" market maker; or (iv) conducted any other
professional market activities such as providing investment advice,
extending credit and lending securities in connection; and thus
that the Buyer is not a "Dealer" as such term is defined in the
1934 Act.
5.
Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Series G Shares in
accordance with the terms of the Certificate of Designation (the
"Irrevocable Transfer Agent Instructions"). In the event that the
Company proposes to replace its transfer agent, the Company shall
provide, prior to the effective date of such replacement, a fully
executed Irrevocable Transfer Agent Instructions in a form as
initially delivered pursuant to this Agreement (including but not
limited to the provision to irrevocably reserve shares of common
stock in the Reserved Amount (as defined in the Certificate of
Designation) signed by the successor transfer agent to Company and
the Company. Prior to registration of the Conversion Shares under
the 1933 Act or the date on which the Conversion Shares may be sold
pursuant to an exemption from registration, all such certificates
shall bear the restrictive legend specified in Section 20) of this
Agreement. The Company warrants that: (i) no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this
Section 5, will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in
this Agreement and the Certificate of Designation; (ii) it will not
direct its transfer agent not to transfer or delay, impair, and/or
hinder its transfer agent in transferring (or
issuing)(electronically or in certificated form) any certificate
for Conversion Shares to be issued to the Buyer upon conversion of
or otherwise pursuant to the Certificate of Designation or this
Agreement as and when required by thereby; and (iii) it will not
fail to remove (or direct its transfer agent not to remove or
impair, delay, and/or hinder its transfer agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions
in respect thereof) on any certificate for any Conversion Shares
issued to the Buyer upon conversion of the Series G Shares of or
otherwise pursuant to the Certificate of Designation or this
Agreement as and when required thereby. If the Buyer provides the
Company and the Company's transfer, at the cost of the Buyer, with
an opinion of counsel in form, substance and scope customary for
opinions in comparable transactions, to the effect that a public
sale or transfer of such Securities may be made without
registration under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates, free
from restrictive legend, in such name and in such denominations as
specified by the Buyer. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the
Buyer, by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5
may be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section
5, that the Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
6.
Conditions to the Company's Obligation to Sell. The obligation of
the Company hereunder to issue and sell the Series G Shares to the
Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole
discretion:
a.
The Buyer shall have executed this Agreement and delivered the same
to the Company.
b.
The Buyer shall have delivered the Purchase Price in accordance
with Section 1(b) above.
c.
The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
d.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
7.
Conditions to The Buyer's Obligation to Purchase. The obligation of
the Buyer hereunder to purchase the Series G Shares at the Closing
is subject to the satisfaction, at or before the Closing Date of
each of the following conditions, provided that these conditions
are for the Buyer's sole benefit and may be waived by the Buyer at
any time in its sole discretion:
a.
The
Company shall have executed this Agreement and delivered the same
to the Buyer.
b.
The
Company shall have delivered to the Buyer the Series G Shares by
way of book entry as confirmed by the Company's transfer agent in
accordance with Section l(b) above.
c.
The
Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's Transfer
Agent.
d.
The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Board of Directors' resolutions
relating to the transactions contemplated hereby.
e.
No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f.
No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including, but not
limited, to a change in the 1934 Act reporting status of the
Company or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g.
The
Company's transfer agent shall be engaged to act as the transfer
agent for the Series G Preferred Shares.
h.
The
Certificate of Designation shall be properly authorized and filed
with the Secretary of State of the State of Delaware and declared
effective.
8.
Governing law; Miscellaneous.
a. Governing law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in
the Eastern District of New York. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon
forum non conveniens.
The Company and Buyer waive trial by
jury. The prevailing party shall be entitled to recover from the
other party its reas10nable attorney's fees and costs. In the event
that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement, the Series G Shares, the Certificate of Designation or
any related document or agreement by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
b.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and
delivered to the other party.
c.
Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d.
Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such Provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.
e.
Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the parties hereto.
f.
Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, email, or facsimile,
addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such
notice is to be received), or the first (1") business day following
such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b)
on the second (2"d) business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be as set forth
in the heading of this Agreement with a copy by fax only to (which
copy shall not constitute notice) to Naidich Wurman LLP, 111 Great
Neck Road, Suite 214, Great Neck, NY 11021, Attn: Allison Naidich,
facsimile: 516-466-3555, el-mail: allison@nwlaw.com. Each party
shall provide notice to the other party of any change in
address.
g.
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other.
h.
Survival and Indemnification. The representations and warranties
and the agreements and covenants set forth in this Agreement shall
survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the either party. The
Company agrees to indemnify and hold harmless the Buyer and all
their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred. The Buyer agrees to indemnify and hold
harmless the Company and all their officers directors, employees
and agents for loss or damage arising as a result of or related to
any breach or alleged breach by the Buyer of any of its
representations, warranties and covenants set forth in this
Agreement or any of its covenants and obligations under this
Agreement, including advancement of expenses as they are
incurred.
i.
Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
j.
No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
k.
Remedies. Each party acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the other
party by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, each party acknowledges that the
remedy at law for a breach of its obligations under this Agreement
will be inadequate and agrees, in the event of a breach or
threatened breach by the other party of the provisions of this
Agreement, that the non-breaching party shall be entitled, in
addition to all other available remedies at law or in equity, and
in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this
Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without
any bond or other security being required.
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above
written.
GUIDED THERAPEUTICS,
INC.
By:
/Gene S. Cartwright/
Name:
Gene S. Cartwright
Title:
President and Chief Executive Officer
POWER UP LENDING GROUP LTD.
By:
/ Curt Kramer/
Name:
Curt Kramer
Title:
Chief Executive Officer
AGGREGATED
SUBSCRIPTION AMOUNT:
Number of Series G Preferred Shares
purchased:
91,000
Aggregated Purchase
Price
$78,500.00
EXHIBIT
A
Certificate
of Designation
See
attached.
SERIES
G PREFERRED STOCK PURCHASE AGREEMENT
This SERIES G PREFERRED STOCK PURCHASE AGREEMENT
(the "Agreement"), dated as of February 2, 2021, by
and between GUIDED THERAPEUTICS, INC., a Delaware
corporation, with its address at
5835 Peachtree Corners East,
Suite B, Norcross, Georgia 30092 (the
"Company"), and POWER UP LENDING GROUP, LTD., a New York
corporation, with its address at 111 Great Neck Road, Suite 216,
Great Neck, NY 11021 (the "Buyer").
WHEREAS:
A. The Company and the Buyer are
executing and delivering
this Agreement in reliance upon the exemption from
securities
registration afforded by
the rules and
regulations
as promulgated by the United States Securities and Exchange Commission (the "SEC) under the Securities Act of
1933, as amended (the "1 33 Act");and
B. Buyer desires
to purchase and the
Company desires to issue and sell,
upon the terms and conditions set forth in this
Agreement, 62,000 shares of Series
G Preferred Stock of
the Company ("Series G Shares") with the rights and preferences as
set forth on the Certificate
of Designation of the
Series G Preferred Stock attached hereto as
Exhibit A ("Certificate of Designation").
NOW THEREFORE, in
consideration of the mutual covenants and agreements
contained herein, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer severally (and
not jointly) hereby agree as follows:
1.
Purchase and Sale of Series G Shares.
a. Purchase of Series G Shares. On the Closing
Date (as defined below), the Company shall issue
and sell to the
Buyer and
the Buyer agrees to purchase
from the Company 62,000 Series G Shares
with the
rights and preferences as set forth in the Certificate of
Designation.
b. Form of Payment. On the Closing Date
(as defined below), (i) the Buyer shall pay $53,50
.00 for
the Series G Shares to be issued
and sold to it at the Closing (as defined below)
(the "Purchase Price")
by wire transfer of immediately
available funds to the Company, in accordance
with the Company's written wiring instructions, against delivery of
the Series G Shares, and (ii) the Company shall
deliver such duly executed and
authorized Series G Shares on behalf of the Company, to the Buyer,
against delivery of
such Purchase
Price.
c. Closing Date. Subject to the satisfaction (or
written waiver) of the conditions set forth in
Section 6 and Section 7 below, the date
and time of the issuance and sale of the
Series G Shares pursuant to this Agreement (the "Closing Date")
shall be 12:00 noon, Eastern Standard Time on or about
February 3, 2021,
or such other
mutually agreed upon time. The closing of
the transactions contemplated by this Agreement
(the "Closing") shall
occur on the Closing
Date at such
location
as may be
agreed to by the
parties.
2. Buyer's Representations and Warranties. The Buyer represents and warrants to the Company
that:
a. The Buyer
has full power and
authority to
enter into this Agreement, the execution and
delivery of which
has been duly authorized and this Agreement constitutes a valid
and legally binding
obligation of the
Buyer, except as may be
limited by bankruptcy, reorganization, insolvency,
moratorium and similar
laws of general application relating
to or affecting
the enforcement of rights of creditors, and
except as enforceability of the
obligations hereunder
are subject to
general principles of equity
(regardless of whether such
enforceability is
considered in a
proceeding in equity or
law).
b. The
Buyer acknowledges its understanding that the offering and sale of
the Series G Shares and
the shares
of common stock issuable
upon conversion of the Series G Shares
(such shares
of common stock being
collectively referred to herein as the "Conversion Shares" and, collectively with the
Series G Shares,
the "Securities") is intended to
be exempt from registration under the 1933 Act, by
virtue of Rule 06(b) promulgated under the Securities Act of
1933, as amended, and the
provisions of Regulation D promulgated thereunder. In furtherance
thereof, the Buyer represents and warrants to the Company and its
affiliates as
follows:
i. The Buyer realizes that the basis for the
exemption from registration ma ynot be available if,
notwithstanding the Buyer's representations contained herein, the Buyer is merely
requiring the Securities for a fixed or determinable period
in the future, or
for a market rise, or for
sale if the market does not rise. The
Buyer does not have any
such intention.
ii. The
Buyer realizes that the basis
for exemption
would not be available if the
offering is part of a plan or scheme to evade registration provisions of the 1933 Act
or any applicable state
or federal securities
laws, except sales
pursuant to a
registration statement or sales that are exempted
under the 1933 Act.
iii. The Buyer is acquiring the
Securities solely
for the Buyer's own beneficial account, for investment purposes, and not with a view towards, or
resale in connection with, any distribution of the Securities.
iv. The Buyer has the financial
ability to bear the economic risk
of the Buyer's investment, has adequate means
for providing for its current needs and contingencies, and has
no need
for liquidity with
respect to an investment in the Company.
v.
The Buyer and the ·Buyer's attorney, accountant, purchaser representative and/or tax advisor, if
any (collectively, the "Advisors") has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks
of a prospective investment
in the Securities. The Buyer also represents it has not been organized
solely for the
purpose of acquiring
the Securities.
vii. The Buyer (together with its Advisors,
if any) has received all documents requested by the
Buyer, if any, and has
carefully reviewed them and understands the information
contained therein, prior to
the execution of this Agreement.
c. The Buyer is not relying on the Company or
any of its employees, agents, sub-agents or
advisors with respect to the legal, tax,
economic and related considerations involved in this investment. The
Buyer has relied on the advice
of, or has consulted with, only
its Advisors.
d. The Buyer has carefully considered the
potential risks relating to the Company and al1purchase of the
Securities, and fully understands that the Securities are a
speculative investment that involves a high
degree of risk of loss of the Buyer's entire investment. Among
other things, the Buyer has carefully
considered each of the risks described under the
heading "Risk Factors" in the Company's SEC
filings.
e. The
Buyer will not sell or otherwise
transfer any Securities without registration under the 1933
Act or an exemption therefrom, and fully
understands and
agrees that the Buyer must bear
he economic risk of its purchase because, among other
reasons, the Securities have not been registered
under the 1933 Act or under the securities laws of any state and,
therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless they are subsequently registered under the 1933 Act and
under the applicable securities laws of such states, or an exemption from such
registration is available. In particular, the Buyer is aware that
the Securities are “restricted securities," as such
term is defined in Rule 144,
and they may not be sold pursuant
to Rule 144 unless all of the conditions of Rule 144 are met.
The Buyer also understands that the
Company is under no obligation to register the Securities on behalf
of the Buyer. The Buyer understands that any sales or transfers of
the Securities are further restricted by state securities laws and the provisions of this Agreement.
f. The Buyer and its
Advisors, if any, have had a reasonable opportunity to ask
questions of and receive answers from a
person or persons acting on behalf of the Company concerning the
offering and the business, financial condition, results of
operations and prospects of the Company, and all
such questions have been
answered to the full satisfaction of the Buyer and its Advisors, if
any.
g. The Buyer represents and warrants that: (i) the
Buyer was contacted regarding the sale of
the Securities by the Company (or an authorized agent or representative thereof) with whom the Buyer had a
prior substantial
pre-existing relationship;and (ii) no Securities were offered or
sold to it by means of any
form of general solicitation
or general advertising, and in connection
therewith, the Buyer did not: (A) receive or review any
advertisement, article, notice or other communication published in a newspaper or magazine
or similar media or broadcast over television or radio,
whether closed circuit, or generally available;or
(B) attend any seminar meeting or industry investor conference whose
attendees were invited by any general solicitation or general advertising; or (C) observe any website or filing of the
Company with the SEC in which any offering
of securities by the Company was described
and as a result learned of any offering of securities by
the Company.
h. The Buyer has
taken no action that would give rise to any claim by
any person for brokerage
commissions, finders'
fees or the like relating to
this Agreement or the transactions contemplated hereby.
i. The Buyer is an "accredited investor" as that term is defined in Rule 501(a)
of Regulation D.
j. Legends. The Buyer
understands that until such time as
the Securities have been
registered under the 1933 Act or may be
sold pursuant to an
applicable exemption from
registration, the Securities shall
bear a
restrictive legend in
substantially the following form:
“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY
STATE SECURITIES LAWS, AND MAY NOT
BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (2)
THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO
THE ISSUER'S TRANSFER AGENT, THAT SUCH SECURITIES MAY
BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED OR
OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT
,UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS."
The legend set forth
above shall be removed
and the Company
shall issue a certificate without such legend to
the holder of any
Security upon which it is
stamped, if, unless otherwise required by applicable
state securities laws,
(a) such Security is registered
for sale under an effective registration
statement filed under
the 1933 Act or otherwise may be sold pursuant
to an exemption
from registration without
any restriction as to the number of securities as
of a particular date that can then be immediately
sold, or (b) such
holder provides
the Company with
an opinion of counsel. in
form, substance
and scope customary for
opinions of counsel in comparable transactions, to the effect
that a public sale or
transfer of such Security
may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the
sale or transfer is
affected. The Buyer agrees to
sell all Securities, including those represented by a
certificate(s) from which the legend
has been removed, in
compliance with applicable prospectus delivery requirements, if any. In the event that
the Company does not accept the
opinion of counsel
provided by the Buyer with respect
to the transfer of Securities pursuant to an
exemption from registration,
such as Rule 144, at the Deadline (as defined
in the Certificate of Designation), it
will be considered
an Event of Default (as defined in the Certificate of
Designation).
3. Representations and Warranties of the Company. The
Company represents and warrants to the Buyer
that:
a.
Organization and Qualification. The
Company and each of its Subsidiaries (as defined below), if
any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and
conducted. "Subsidiaries" means any corporation or other
organization,
whether incorporated or
unincorporated, in which the Company owns, directly
or indirectly, any equity or other ownership
interest.
b. Authorization; Enforcement. (i) The Company has
all requisite corporate power and auth9rity to
enter into and perform this Agreement and to consummate the
transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the
issuance of the Series G Shares and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or
exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent authorization
of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been
duly executed and delivered by the Company by its authorized
representative, a such authorized
representative is the true and official representative with
authority to sign this Agreement and the other documents executed
in connection herewith and bind the Company accordingly, and
·iv) this Agreement
constitutes, and upon execution and delivery by the Company of the
Series G shares, each of such instruments
will constitute, a legal, valid and binding obligation of the
Company enforceable against
the Company in accordance with its terms except as may be limited
by bankruptcy, reorganization, insolvency,
moratorium and similar laws of general application relating to or
affecting the enforcement of
rights of creditors, and except as enforceability of the
obligations hereunder are subject to general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in
equity or law).
c. Capitalization. As of the date hereof, the
authorized common stock of the Company consists of 3,000,000,000
authorized shares of common stock, $0.001 par value
per share, of which 13,180, 417 shares are issued and
outstanding and 5,000,000 shares of preferred
stock, par value $0.001 per share of which the Company
designated 525,000 shares of preferred stock redeemable convertible
preferred stock, none of which remain outstanding, 33,000 shares of
preferred stock as Series B Preferred Stock, none of
which remain outstanding, 9,000 shares of preferred stock as Series
C Convertible preferred Stock,
of which 286 are issued and outstanding; 20,250 shares of preferred
stock as Series Cl Preferred Stock, of which 1,050 shares are
issued and outstanding; 5,000 shares of preferred stock as Series
C2 Preferred Stock, of which 3,62.25 shares are issued and
outstanding; 6,000 shares of preferred stocks Series D
Preferred Stock, of which 763 shares are issued and
outstanding; and 5,000 shares of preferred stock as
Series E Preferred Stock, of which 1,636.50 shares are
issued and outstanding ; . On or prior to the
Closing Date, the Certificate of
Designation shall be filed with the Delaware Secretary of State
authorizing 1,500,000
Series G Shares. All of such outstanding shares of capital stock
are duly authorized, validly issued, fully
paid and non-assessable.
d. Issuance of Securities. The Securities upon issuance will be
validly issued,
fully paid and non-assessable, and free from
all taxes, liens, claims and
encumbrances with
respect to the issue thereof and
shall not be subject to
preemptive rights or other
similar rights
of shareholders of the Company and
will not impose personal liability upon the holder thereof.
e. No
Conflicts. The execution, delivery and performance of this Agreement
by the Company and the
consummation by
the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the
Securities and
reservation for issuance
of the Conversion
Shares) will not (i)
conflict with
or result in a violation of any
provision of the Articles of Incorporation, as amended
or By-laws, or (ii)
violate or conflict with, or
result in a breach of
any provision of, or constitute
default (or an event which
with notice or
lapse of time or
both could become a default)
under, or give
t6 others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities
laws and regulations
and regulations of any self-regulatory organizations to which the
Company or its
securities are subject) applicable to the Company or
any of its Subsidiaries or by
which any property or asset of the
Company or any of its
Subsidiaries is bound or affected
(except for such
conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect (as
defined herein)). The businesses of the Company and its Subsidiaries, if any, are
not being conducted,
and shall not be
conducted so long
as the Buyer owns
any of the Securities, in
violation of any law, ordinance or
regulation of any
governmental
entity. "Material Adverse Effect" means any
material adverse effect
on the business, operations, assets or
financial condition
of the Company or its Subsidiaries, if any,
taken as a whole, or
on the transactions contemplated hereby or by the agreements or instruments to
be entered into in
connection herewith.
f. SEC Documents;Financial Statements. The
Company has filed all reports, schedules,
form, statements and
other documents required to be
filed by it with the SEC
pursuant to the reporting
requirements of
the Securities Exchange Act of 1934, as
amended (the
"1934 Act") (all of the
foregoing filed prior
to the date hereof and all
exhibits included therein and
financial statements and
schedules thereto and
documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). Upon written request the Company will deliver to the
Buyer true and complete copies
of the SEC Documents,
except for such
exhibits and
incorporated documents.
As of their respective dates or if amended, as of the dates of the amendments, the SEC
Documents complied
in all material
respects with the requirements of the 1934 Act and the
rules and regulations
of the SEC promulgated thereunder applicable
to the SEC Documents, and none of
the SEC Documents,
at the time they were
filed with the SEC, contained
any untrue statement of a
material fact or omitted to
state a material fact required
to be stated
therein or
necessary in order
to make the statements therein,
in light of the circumstances under which they were made, not misleading.
None of the statements made in any such
SEC Documents
is, or has been, required to
be amended or
updated under applicable law
(except for such statements
as have been
amended or updated in subsequent filings prior the date
hereof). As of their respective dates or if
amended, as of the dates of the amendments,
the financial statements of
the Company included in the SEC Documents complied as
to form in all material respects with
applicable accounting requirements and the published rules
and regulations
of the SEC with respect thereto. Such
financial statements have been
prepared in accordance with United States
generally accepted accounting principles,
consistently applied,
during the periods involved and
fairly present in all material respects the consolidated
financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows
for the periods then ended
(subject, in
the case of unaudited
statements, to normal
year-end audit adjustments). The
Company is subject to the reporting requirements of the 1934
Act.
g. Absence of Certain Changes. Since
September 30,
2020, except as set
forth in the SEC Documents, there has been no material
adverse change and no material adverse development in the
assets, liabilities, business,
properties, operations, financial condition, results of operations,
prospects or 1934 Act reporting status of the Company
or any of its Subsidiaries.
h. Absence of Litigation. Except as set forth in the SEC Documents, there is
no action, suit, claim,
proceeding, inquiry or
investigation before or by any court,
public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of
its subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or
directors in their capacity as such, that could have a Material
Adverse Effect. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give
rise to any of the foregoing.
i. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any
security under circumstances that would require registration
under the 1933 act of the issuance
of the Securities to
the Buyer. The issuance of the Securities to
the Buyer will not be integrated with any other
issuance of the Company's securities (past, current or future) for
purposes of any shareholder
approval provisions
applicable to the Company or its
securities.
j. No Investment Company. The Company is
not, and upon the issuance and sale of the Securities
as
contemplated by this Agreement will not be an
"investment company" required to be registered under
the Investment
Company, except
with the
prior
written consent of the
Buyer.
f. Breach of
Covenants. If the Company breaches any of the covenants set
forth in this
Section 4, and in
addition to any other remedies available to the Buyer pursuant to this Agreement,
it will be considered an event of default under the Certificate of Designation.
g. Failure to Comply with
the 1934 Act. So long as the Buyer beneficially owns any Series G
Shares, the Company shall comply with the reporting
requirements of the
1934 Act and the
Company shall continue to
be subject to the
reporting requirements
of the 1934 Act; any breach of
the foregoing shall be
considered an event of default under the Certificate of Designation.
h. Trading Activities. Neither the Buyer nor its
affiliates has
an open short position
in the common stock of the Company
and the Buyer agrees that it shall
not, and that it will
cause its affiliates not to, engage in
any short sales of
or hedging transactions
with respect to the common
stock of the company.
i. The
Buyer is Not a
"Dealer". The Buyer and the
Company hereby acknowledge and agree that the Buyer has
not: (i) acted as an underwriter; (ii)
acted as a
market maker
or specialist;(iii)
acted as "de facto"
market maker; or (iv)
conducted any other
professional market
activities such as providing investment
advice, extending credit and lending
securities in connection;and
thus that the Buyer is not
a "Dealer" as such
term is defined in the 1934
Act.
5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer
age t to issue
certificates,
registered
in the name of the Buyer or
its nominee, for the Conversion
Shares in such amounts as specified
from time to time by the
Buyer to the Company upon conversion
of the Series G
Shares in accordance with the terms of
the Certificate of Designation (the "Irrevocable Transfer
Agent Instructions").
In the event that the Company proposes
to replace its transfer agent, the company shall
provide, prior to the effective date of such replacement, a
fully executed Irrevocable Transfer Agent Instructions in
a form as
initially delivered pursuant to this Agreement (including
but not
limited to the provision to
irrevocably reserve
shares of common stock in the Reserved
Amount (as defined in the Certificate of Designation) signed
by the successor transfer agent to Company and the
Company. Prior to registration of the
Conversion Shares under the 1933 Act or the date on
which the Conversion Shares may be sold
pursuant to an exemption from
registration, all
such certificates shall
bear the restrictive
legend specified in Section 2(j} of this
Agreement. The
Company warrants that: (i) no instruction
other than the Irrevocable Transfer Agent Instructions
referred to in
this Section 5,
will be given
by the Company to its
transfer agent and
that the Securities shall
otherwise be freely
transferable on the books any records of the
Company as and to the
extent provided in
this Agreement and the Certificate
of Designation;(ii)
it will not direct its transfer
agent not to transfer
or delay, impair, and/or hinder its
transfer agent in
transferring (or issuing)(electronically or in certificated form) any certificate for Conversion shares to be
issued to the Buyer upon conversion of or otherwise pursuant to the
Certificate of Designation or
this Agreement as and
when required by
thereby;and (iii) it will
not fail to remove (or
direct its transfer
agent not to
remove or impair, delay, and/or hinder
its transfer
agent from removing) any
restrictive legend (or to withdraw
any stop transfer instructions in respect
thereof) on any certificate for any Conversion Shares issued
to the Buyer upon
conversion of the Series G Shares of
or otherwise
pursuant
to the Certificate of Designation
or this Agreement as and when
required thereby. If the Buyer provides the
Company and the Company's transfer, at
the cost of the
Buyer, with an opinion of counsel in form,
substance and
scope customary for opinions in comparable
transactions, to the
effect that a
public sale or
transfer of such
Securities may be made
without registration under the 1933 Act, the Company
shall permit the transfer,
and, in the case of the
Conversion Shares, promptly instruct
its transfer agent to
issue one or more
certificates,
free from restrictive legend,
in such name and
in such denominations as specified by
the Buyer. The Company
acknowledges that a breach by
it of its obligations hereunder will cause
irreparable harm to the Buyer, by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company
acknowledges that the remedy at law
for a breach of its
obligations under
this Section
5 may be inadequate
and agrees,
in the event of a breach or threatened breach by
the company of the provisions of
this Section
5, that the Buyer shall be entitled, in addition to all other
available remedies,
to an injunction restraining any breach and requiring
immediate transfer,
without the necessity of
showing economic loss
and without any bond or
other security being required.
6. Conditions to
the Company's
Obligation to Sell. The
obligation of the
Company hereunder to issue and
sell the
Series G Shares to the Buyer at the Closing is
subject to the
satisfaction, at m before the
Closing Date of each
of the following
conditions thereto, provided that
these conditions
are for
the Company's sole
benefit
and may be
waived by the Company
at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and delivered the
same to the Company.
b. The
Buyer shall have delivered
the Purchase Price in accordance with Section l (b)
above.
c. The
representations and
warranties
of the Buyer
shall be
true and correct in all
material respects
as of the
date when made and as of the Closing
Date as though
made at that time
(except for
representations
and warranties that speak
as of a specific date), and the
Buyer shall have
performed, satisfied and
complied in
all material respects with
the covenants,
agreements and
conditions required by this Agreement to be
performed, satisfied
or complied with by the Buyer at or prior
to the Closing
Date.
d. No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall
have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over the matters
contemplated hereby
which prohibits the consummation of
any of the transactions contemplated by this
Agreement.
7. Conditions to
The Buyer's Obligation to Purchase.
The obligation of the Buyer hereunder to purchase the
Series G Shares at the
Closing is subject to the satisfaction, at or before the Closing Date of
~ach of the following conditions, provided that these
conditions are for the Buyer's sole benefit and may
e waived by the Buyer
at any time in its sole discretion:
a.
The Company shall have executed this
Agreement and
delivered the same to the
Buyer.
b.
The Company shall have
delivered to the Buyer the Series G
Shares by way as confirmed by the Company's transfer agent in
accordance with Section l(b) above.
c.
The Irrevocable Transfer Agent
Instructions, in form and substance satisfactory to the Buyer,
shall have been
delivered to
and acknowledged in
writing by the Company's Transfer Agent.
d.
The representations and warranties
of the Company shall be
true and correct in
all material respects as of the
date when made and as
of the Closing Date as though made
at such time
(except for representations and
warranties that speak
as of a specific date) and the Company shall have
performed, satisfied and
complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be
performed, satisfied
or complied with by the Company at or
prior to the Closing
Date. The Buyer
shall have received a certificate or certificates, executed by
the chief executive officer of the Company, dated
as of the Closing Date, to the foregoing effect and as
to such other
matters a may be reasonably
requested by the Buyer including, but
not limited to certificates with respect to the Board of Directors'
resolutions relating to the transactions contemplated hereby.
e.
No litigation, statute, rule, regulation,
executive order, decree, ruling
or injunction shall have been
enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction
or any self-regulatory
organization having authority over the
matters contemplated hereby which
prohibits the
consummation of
any of the transactions contemplated by
this Agreement.
f.
No
event shall have
occurred which
could reasonably be expected to
have a Material Adverse Effect on the
Company including,
but not limited,
to a change in
the 1934 Act
reporting status
of the Company or the failure of
the Company to be timely in its 1934 Act
reporting obligations.
g.
The
Company's transfer agent shall be
engaged to act as
the transfer agent for the Series G Preferred Shares.
h
.The
Certificate of Designation
shall be properly
authorized and filed with
the Secretary of
·State of
the State of
Delaware and declared
effective.
8. Governing Law; Miscellaneous.
a.
Governing Law. This
Agreement shall be governed by and construed in
accordance with the
laws of the
State of New York without regard to principles of
conflicts of
laws. Any
action brought by
either party against the other concerning the transactions contemplated by this Agreement shall be brought
only in the state courts of New York or in the federal
courts located in the Eastern District of New York. The
parties to this
Agreement hereby irrevocably waive any objection to jurisdiction
and venue of any
action instituted
hereunder and
shall not
assert any defense based on
lack of jurisdiction or venue
or based upon forum non
conveniens.
The Company and
Buyer waive trial by jury.
The prevailing Party
shall be entitled to recover from the
other party its reasonable attorney's fees and
costs. In the event that
any provision of this
Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule
of law, then
such provision shall be
deemed in0gerative to the
extent that it may conflict therewith
and shall be deemed modified to conform with such statute
or rule of
law. Any such provision
which may prove invalid
or unenforceable under
any law shall not affect the
validity or enforceability of any
other provision of any
agreement. Each party hereby
irrevocably waives personal service
of process and
consents to process being
served in any suit,
action or proceeding in
connection with
this Agreement, the Series
G Shares, the Certificate of Designation or any related
document or agreement by
mailing a copy thereof
via registered or certified
mail or
overnight delivery (with evidence of delivery)
to such party at the
address in effect for notices to it under this
Agreement and
agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing
contained herein shall be deemed
to limit in any
way any right to serve
process in any other
manner permitted by law.
b.
Counterparts. This Agreement may be
executed in one
or more counterparts, each of which shall be deemed an original but all
of which
shall constitute one and
the same agreement and
shall become
effective when counterparts have been signed by each party
and delivered to the
other party,
c.
Headings. The
headings of this
Agreement are for convenience of reference
only and shall not form
part of, or affect
the interpretation of, this Agreement.
d.
Severability. In the event that any provision
of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such
provision shall be
deemed inoperative to
the extent that it may
conflict therewith and shall be
deemed modified to conform with
such statute or rule of law.
Any provision hereof which may prove
invalid or unenforceable under any law
shall not
affect the validity or
enforceability of any other
provision hereof.
e.
Entire
Agreement;Amendments.
This Agreement and the
instruments referenced
herein contain the entire
understanding of
the parties with respect to
the matters
covered herein and therein and,
except as specifically set forth herein or therein, neither the
Company nor the Byer makes
any representation, warranty,
covenant or
undertaking with respect to such matters. No provision
of this Agreement may
be waived or amended other than by an
instrument in writing signed
by the parties hereto.
f.
Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted
hereunder shall
be in writing
and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air
courier service with charges prepaid, or (iv) transmitted by
hand delivery,
telegram, email, or facsimile,
addressed as set forth below or
to such other address as such
party shall have specified most
recently by written notice. Any notice
or other communication required or permitted to be given
hereunder shall
be deemed effective (a)
upon hand delivery or delivery by
facsimile, with accurate
confirmation generated by the
transmitting facsimile machine, at the address
or number designated below (if delivered on
a business day during normal business
hours where
such notice is
to be received), or the first (1st) business day
following such
delivery (if delivered
other than on a business day during normal
business hours where such
notice is to be received) or (b) on the second (2nd)
business day following the date of mailing by express
courier service,
fully prepaid, addressed to
such address, or upon actual receipt of
such mailing,
whichever shall
first occur. The addresses
for such communications shall be as set
forth in the heading of this Agreement
with a copy by fax only to (which copy
shall not constitute notice) to Naidich Wurman LLP, 111 Great Neck
Road, Suite 214, Great Neck,1
NY 11021, Attn: Allison
Naidich, facsimile: 516-466-3555, e-mail:
allison@nwlaw.com. Each party
shall provide notice to
the other party of any change in
address.
g.
Successors and Assigns. This
Agreement shall be
binding upon and inure
the parties and their
successors and assigns. Neither the Company nor the
Buyer shall meant
or any rights or obligations hereunder without the prior
written consent
of the other.
h.
Survival and Indemnification. The representations
and warranties and the agreements and covenants set forth in
this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the either
party. The Company agrees 0
indemnify and hold harmless the Buyer and all their
officers, directors, employees
and agents for
loss o~
damage arising
as a result of or related to
any breach or alleged breach by the Company of any of
its representations, warranties and covenants set forth in
this Agreement or
any of its covenants and
obligations under
this Agreement,
including advancement of
expenses as they are incurred. The
Buyer agrees to indemnify and hold harmless the Company and all
their officers, directors, employees and agents for loss of damage
arising as a
result of or related
to any breach or
alleged breach by the Buyer of any of its
representations, warranties and covenants set forth in
this Agreement or any of its covenants and obligations under
this Agreement,
including advancement of expenses as
they are incurred.
i.
Further
Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and
things, and shall
execute and deliver all
such other agreements, certificates, instruments and
documents, as
the other party may reasonably request
in order to carry out the intent and
accomplish the purposes of
this Agreement and the
consummation of the transactions contemplated
hereby.
j.
No Strict Construction. The language
used in this
Agreement
will be deemed to be the language
chosen by the parties to
express their mutual intent,
and no rules of
strict construction
will be applied
against any
party.
k.
Remedies.
Each party acknowledges
that a breach by it
of its obligations hereunder
will cause irreparable harm
to the other party by vitiating the intent
and purpose of the
transaction contemplated hereby. Accordingly,
each party acknowledges
that the remedy at
law for a breach of its obligations under
this Agreement will be
inadequate and agrees, in
the event of a breach or
threatened breach by the
other party of the provisions of this Agreement, that
the non-breaching party shall be
entitled in
addition to all other available remedies at law
or in equity, and in
addition to the
penalties assessable
herein, to an
injunction or injunctions
restraining,
preventing or curing
any breach of this Agreement and
to enforce specifically
the terms and provisions hereof, without the necessity of
showing economic
loss and without
any bond or other
security being required.
IN WITNESS WHEREOF, the undersigned
Buyer and the Company have caused
this Agreement to be duly executed as of
the date
first above
written.
GUIDED THERAPEUTICS INC.
By:
/s/ Gene S.
Cartwright
Title:
CEO & President
POWER UP LENDING GROUP LTD.
By: /s/
Curt Kramer
Title: Chief Executive Officer
AGGREGATE SUBSCRIPTION AMOUNT:
Number of series G
Preferred Shares purchased 62,000
Aggregate purchase Price:
$53,500.00
EXHIBIT
A
Certificate
of Designation
See
attached.
THIS AGREEMENT is dated March.10, 2021 (the
"Effective Datel')
BETWEEN:
Guided Therapeutics. Inc. ("GTI" or
lithe
Company"), a US registered public
company incorporated in the State of Delaware with a registered and
records office at 5835 Peachtree Corners East,·Suite B,
Peachtree Corners, GA 30092.
AND:
Richard
P. Blumberg an Individual with an address at 2356 Hobart Ave. SW,
Seattle, WA 98116 ("Blumberg").
WHEREAS
there have been 3 prior agreements between the parties on the
matters dealing with this agreement (Finder's Agreement dated
4/25/19, an agreement contained in emails dated 4/18/19 and
agreement dated July 24, 2019) whose terms are to remain in
effect;
WHEREAS in the, 2019-2020 time period GTI has been
involved in three financing efforts. If successful, its current
financing effort will result in "the recovery-of its Intellectual
Property and a reduction of its stated liabilities of $5-$7
million, but needs additional capital to do so;
WHEREAS
Blumberg has worked closely with Mark Faupel in strategizing the
financings and putting the materials used in raising such funds
which, including the current effort, amount t, upwards of$4
million, without which the company would have ceased to
operate;
WHEREAS
Blumberg has substantially participated in these financings, and,
in addition, has provided several loans to GTl, all of which have
been exchanged into equity in order to keep GTI
operating.
WHEREAS
Blumberg has a consulting contract with GTI which provides for the
payment of $88,000 over time, which payments have not
occurred;
WHEREAS
GTI needs operational funds until it achieves its refinancing goals
without which it will likely cease operations and fail to achieve
the refinancing;
WHEREAS
even with these additional funds for operations there are
substantial risks of refinancing failure, including promised
capital not materializing and other known and unknown
risks;
WHEREAS
Blumberg is intimately familiar with the technology of the Company
and its business plan and has consulted closely with GTI in both of
these aspects;
WHEREAS
GTI wants Blumberg to continue to be involved in the planning and
operations of the company in the future;
WHEREAS,
despite the non-payment of any funds under his consulting agreement
Blumberg is willing to provide continuing consulting service on the
terms and conditions set forth herein;
IT
IS AGREED BY THE PARTIES AS FOLLOWS:
1.
Blumberg will continue to provide consulting services to GTI both
now and immediately after the closing of the Series F refinancing
(“Closing Date"} and provide operating funds as set forth in
2 below, for which he will receive what s set forth in 3
below.
2.
In addition to the consulting services, Blumberg will provide up to
$350,000 in nonrefundable operating funds to the Company. In return
for the consulting services and operating funds he shall receive
what is set forth in 3 below.
3.
For each $100,000 provided to the Company by Mr. Blumberg (or pro
rata portion thereof) the Company will issue to Blumberg a total of
900,000 warrants (or pro rata portion} and 400,000 shares (or pro
rata portion) in four equally divided tranches, based on the
following -schedule: '
(a)
30% (900,000 warrants per $100,000 Invested) issued and exercisable
no earlier I than six months after the close of Series F Unit
offering plus 400,000 shares. This tranche of warrants shall have
an exercise price of 30 cents at three (3) year term after
issuance;
(b)
30% (900,000 warrants per $100,000 invested) issued and exercisable
no earlier than twelve months after the close of Series F Unit
offering, plus 400,000 shares. This tranch of warrants shall have a
strike price of 40 cents and a three (3) year term after
Issuance;
(c)
30% (900,000 warrants per $100,000 invested) issued and exercisable
no earlier than eighteen months after the close of Series F Unit
offering plus 400,000 shares. This tranche of warrants shall have a
strike. price of 50 cents and a three (3) year term after
issuance;
and
(d)
10% (450,000 warrants per $50,000 invested) issued and exercisable
no earlier than twenty-four months after the close of Series F Unit
offering, plus 200,000 Shares. This tranche of warrants shal1 have
a strike price of 60 cents and a three (3) year term after
issuance;
4.
All warrants will expire three years after their scheduled issuance
date if the pricing threshold for that tranche of warrants is not
reached.
5.
All warrants set forth herein shall be specified (JS and are fully
transferrable.
6.
The warrants previously issued to Blumberg under his existing
consulting agreement will be extended one (1) additional
year.
7. Blumberg
agrees to a 20% blocker such that at any single point in time
Blumberg cannot owe more than 20% of the total number of
outstanding shares of the Company.
8. No
other compensation or reimbursement of expenses shall be paid to
Blumberg.
9. Starting in April 2021, the
$88,000 due to Blumberg based on his current consulting agreement
shall 'be paid in monthly installments at a rate of $4,000 per
month. Blumberg shall spend a minimum of 40 hours per month
consulting for the Company.
10. Taxation.
Blumberg shall pay all taxes due in respect of the compensation set
forth herein and shall indemnify and hold harmless the Company from
and against all tax assessments.
11. Expenses.
The Company shall not reimburse Blumberg for any expenses except
travel approved in writing by the Company in advance.
12. The
term of this Agreement (“Term") shall commence on the
Effective Date and shall continue until 3 years after the. Closing
Date of the Series F Financing.
13. The
Company will reserve sufficient shares to issue the agreed upon
shares and warrants.
14. To
the best of the Company's knowledge the Company is in compliance
with applicable laws and regulations in the Jurisdictions in which
it carries on business and the Company does not know of, nor has
reasonable grounds to know of, any facts that could give rise to
any no-compliance.
15. These
warranties and representations are true and correct and will remain
so on ,the Closing Date.
16. Blumberg
is: an "accredited investor" for the purposes of National
Instrument 45106 - Prospectus and Registration Exemptions, and will
duly complete, sigh and .return both accredited investor forms
attached hereto as Schedule “A" and Schedule “B" 'prior
to being issued any shares or warrants.
17. Blumberg
has good and sufficient right and authority to enter into this
Agreement on the terms and conditions set forth
herein.
18. The
Company and Blumberg agree that the relationship created by this
Agreement shall be that of independent contractors, and that there
is no agreement, commitment, arrangement or understanding between
the parties pursuant to which the Blumberg shall act as an advisor,
agent or underwriter or member of a selling group in respect of any
subsequent offering of the securities of the Company.
19. Blumberg
shall strictly limit access to Confidential Information to other
people and entities for the Term except for those parties and
entities to which the Company. in writing, permits such disclosure.
In this Agreement, "Confidential Information" includes all,
information or knowledge including, without limitation: any
discovery, document, material, presentation, report, record, copy,
email and legal agreement that: (1) relates to the Company or the
business or affairs of the Company, or to this Agreement/and is
(ii) not generally known or available to the public.
20. Blumberg
herby acknowledges the Company’s right to possession of the
Confidential Information. Upon the termination of this Agreement,
the Finder shall immediately return all Confidential Information
'to the Company.
21. The
Company shall not take steps to defeat or which are intended to
defeat or circumvent the rights of Blumberg to receive compensation
under this Agreement. Blumberg represents it is the party solely
entitled to any compensation in connection with the services he is
providing and further agrees that no other party will look to the
Company in connection with any other compensation in connection
,with the consulting services nor will Blumberg look to any other
party in connection with further compensation in connection with
the services he is providing.
22.
Blumberg acknowledges that the Company's counsel has acted as
counsel only to the Company and the Finder acknowledges and
confirms that it has been advised to, seek and has sought or has
otherwise waived independent tax and legal advice with respect to
this Agreement and the documents delivered pursuant thereto and
that the Company' s counsel is not protecting the rights and
interests of the Finder.
23. This Agreement constitutes, the entire
agreement between the parties with respect to subject matter and
shall supersede and replace any other agreement or
arrangement, whether oral or written, heretofore existing between the
parties in respect of the Services or the subject matter of this
Agreement.
24. Each
of the parties to this Agreement $halt from time to time execute
and deliver all such further documents and instruments and do all
acts and things as the other party may reasonably require carrying
out the full intent and meaning of this Agreement.
25. Each
of the parties to this Agreement may only assign its rights
hereunder with the express written consent of the other
party.
26. This
Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted
assigns.
27. Any
amendment to this Agreement must be made in writing and signed by
each of the parties hereto. :
28. This
Agreement shall be governed by and construed in accordance with the
laws of the State of Washington and applicable therein without
giving effect to the conflicts of laws principles thereof. and that any dispute or
question, either of fact or of law which arises out
of this Agreement, shall be
resolved solely by reference to the
laws of the State of Washington.
29. Any
notice given in connection with this Agreement shall be given in
writing and may be given by personal delivery, by courier, or
by registered
or certified mail, return receipt
requested, addressed to the recipient at the addresses set
out on the first page of this Agreement or such other address as either party
may designate by providing notice to the other
party in the manner specified herein.
All notices shall be effective and shall be
deemed delivered: (a) if by
personal delivery
or courier, on the date of delivery if delivered
during normal business hours, and, if not delivered during normal
business hours, on
the next business day following
delivery, or (b) if by registered or certified mail,
three business days following such mailing.
30. This
Agreement may be signed in counterparts, each of which so signed shall be
deemed to be an original, and such counterparts together
shall constitute one and the same instrument.
An electronic
copy of an originally
executed copy of this Agreement shall be accepted as an
original.
IN WITNESS
WHEREOF this Agreement has
been executed by the parties on
the Effective Date.
GTI
By:
/Gene S. Cartwrigth/
Name:
Gene S. Cartwright
Blumberg
By: /Richard Blumberg/
Name:
Richard Blumberg
Exhibit 10.67
EXCHANGE AGREEMENT
This
EXCHANGE AGREEMENT (this "Agreement") is made and entered into
effective as of the ____day of March, 2021 by and between GUIDED
THERAPEUTICS, INC.,
a
Delaware corporation (the "Company") and the undersigned creditor
of the Company (the "Creditor").
W I T N E S S E T H :
WHEREAS, the Creditor is the payee of certain
obligations owed to the Creditor by the Company as set forth
on Exhibit A hereto (the "Obligations");
NOW,
THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties
hereto, being duly sworn, do covenant, agree and certify as
follows:
1. Recitals. The
parties hereto acknowledge and agree that the foregoing recitals
are true and accurate and constitute part of this Agreement to the
same extent as if contained in the body hereof.
2. Exchange
and Satisfaction. The Obligations are hereby surrendered by the
Creditor and exchanged for the Note and other considerations
according to the following terms and
conditions.
a.
The
Creditor is or has been an executive or consultant of the Company
and both parties wish to continue their relationship under mutually
agreeable terms.
b.
The
Creditor resigned as a Corporate Secretary of the Company but
provides consulting services to the Company.
c.
The
Creditor shall receive full remuneration of all expenses accrued in
the amount of $4,325.42. This amount shall be due and paid in full
upon execution of this Agreement.
d.
The Company is in default to the Creditor on two
Notes in the amounts of $12,500.00 and $13,900.00 dated December
21, 2016 and January 19, 2017, respectively. As of Dec 31, 2020,
the balances of principal and interest of those Notes were
$21,518.00 and $23,600.00, respectively. The Notes will accrue at an interest rate of 6%
(18% in the event of default) annual interest to be executed within
30 days of the signing of this Agreement and payable in full within
one year in monthly payments of at least $3,850.00 (Annex A).
Payments are due on the 15th
of each month and will be in default
if not paid by the 20th
of the month.
e.
The
Company owes the Creditor as of Dec. 31, 2020 deferred salary in
the amount of $412,624.00 with accrued interest of $133,590.00 for
a total of $546,214.00. In lieu of agreeing to dismiss the majority
of what he is currently owed by the Company, the Creditor agrees to
accept:
i.
50
Series F Preferred Shares convertible into 200,000 of the
Company’s Common Shares (see attached executed Stock Purchase
Agreement, equivalent to an exchange of $50,000 into the Series F
Preferred Financing.
ii.
Cash payments over time in the amount of
$150,000.00 (One Hundred Fifty Thousand Dollars and Zero Cents) in
the form of an unsecured note with the Company. This Note is to be
executed within 30 days of the signing of this Agreement and
payable in full within four years from the date of the first
payment, in monthly installments of at least $3,600.00. The Note
will accrue at a rate of 6% (18% in the event of default) annual
interest, starting one year from execution on the Note Agreement.
Each monthly payment will include the past months interest and a
principal payment. Payments will begin March 15th,
2022 are due on the 15th
of each month and will be in default
if not paid by the 20th
of the month.
f.
The total amount of forgiveness by Creditor of $346,214.00 shall be
prorated according to the amount of funds paid to Creditor,
including the $50,000 exchanged into the Series F financing by the
creditor (see 2(e)(i)). Therefore, once the Creditor receives his
Series F Preferred Shares, 25% of the total forgiven amount, or
$86,553.50, shall have been deemed as forgiven. Subsequently, for
each month’s timely payment of $3,600.00 on the $150,000.00
long-term unsecured note (2(e)(ii)), the Creditor shall forgive
proportional amount of debt (Annex B). Once all funds as described
in Sections 2(c) to 2(e) above have been paid to Creditor, then the
terms and conditions of this Agreement shall have been deemed fully
satisfied and no additional funds shall be owed to the
Creditor.
g.
The Company will include Creditor under its health insurance
program until the Creditor is enrolled in MediCare, or until
December 31, 2021, whichever is earliest.
3.
For
the purpose of this agreement, the beginning balances are defined
in Section 2 of this document.
4.
Successors and Assigns. This
Agreement is binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and
assigns.
5.
Counterparts. This
Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which, when taken together,
shall constitute one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have affixed their hands and
seals by signing this Agreement as of the day and year first above
written.
[Signatures
on Following Page]
Company:
GUIDED
THERAPEUTICS, INC.
By:_______________________________
Name:
Mark L. Faupel
Title:
Founder and COO
Creditor:
__________________________________
Name:
Richard Fowler
Exhibit 10.68
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as
of July 1, 2020, between Guided Therapeutics, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Certificate of Designation (as defined herein),
and (b) the following terms have the meanings set forth in this
Section 1.1:
“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.7.
“Action” shall have the
meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board Appointee” shall
have the meaning ascribed to such term in Section
4.13.
“Board of Directors” means
the board of directors of the Company.
“Business Day” means 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.
“Certificate of
Designation” means the Certificate of Designation to
be filed prior to the Closing by the Company with the Secretary of
State of Delaware, in the form of Exhibit A attached
hereto.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Company Counsel” means
Ellenoff Grossman & Schole LLP, with offices located at 1345
Avenue of the Americas, New York, New York 10105.
“Conversion Price” shall
mean $0.25, subject to adjustment as set forth under the
Certificate of Designation.
“Conversion Shares” shall
have the meaning ascribed to such term in the Certificate of
Designation.
“Disclosure
Schedules” shall have the meaning ascribed to such
term in Section 3.1.
“Effective Date” means the
earliest of the date that all of the Underlying Shares have been
sold pursuant to Rule 144 or may be sold pursuant to Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 and without
volume or manner-of-sale restrictions, (c) following the one year
anniversary of the Closing Date provided that a holder of the
Underlying Shares is not an Affiliate of the Company or (d) all of
the Underlying Shares may be sold pursuant to an exemption from
registration under Section 4(1) of the Securities Act without
volume or manner-of-sale restrictions and Company Counsel has
delivered to such holders a standing written unqualified opinion
that resales may then be made by such holders of the Underlying
Shares pursuant to such exemption which opinion shall be in form
and substance reasonably acceptable to such holders.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(s).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“FDA” shall have the
meaning ascribed to such term in Section 3.1(ll).
“FDCA” shall have the
meaning ascribed to such term in Section 3.1(ll).
“GAAP”
shall have the meaning ascribed to such term in Section
3.1(h).
“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(bb).
“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(o).
“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(c).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material
Adverse Effect” shall have the meaning assigned to
such term in Section 3.1(b).
“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(m).
“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Pharmaceutical Product”
shall have the meaning ascribed to such term in Section
3.1(ll).
“Preferred
Stock” means the shares of the Company’s Series
E Preferred Stock issued hereunder having the rights, preferences
and privileges set forth in the Certificate of Designation, in the
form of Exhibit A
hereto.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“Purchaser Party” shall
have the meaning ascribed to such term in Section
4.10.
“Required
Approvals” shall have the meaning ascribed to such
term in Section 3.1(e).
“Required Minimum” means,
as of any date, the maximum aggregate number of shares of Common
Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable
upon exercise in full of all Preferred Stock ignoring any
conversion or exercise limits set forth therein.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(h).
“Securities” means
Preferred Stock and the Underlying Common Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shareholder Approval”
means such approval as may be required by Delaware General
Corporation Law from the shareholders of the Company with respect
to effecting a reverse stock split.
“Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include locating and/or borrowing shares of Common
Stock).
“Stated Value” means
$1,000 per share of Preferred Stock as converted.
“Subscription Amount”
means, as to each Purchaser, the
aggregate amount to be paid for
Preferred Stock purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and
next to the heading “Subscription Amount,” in United
States dollars and in immediately available
funds.
“Subsidiary” means any
subsidiary of the Company as set forth in the SEC Reports and
shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date
hereof.
“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).
“Transaction
Documents” means this Agreement, the Certificate of
Designation, and all exhibits and schedules thereto and hereto and
any other documents or agreements executed in connection with the
transactions contemplated hereunder
.
“Transfer Agent” means
Computershare, the current transfer agent of the Company, and any
successor transfer agent of the Company.
“Underlying Shares” means
the Shares, issuable pursuant to the terms of the Certificate of
Designation, including without limitation, shares of Common Stock
that may be issued as dividends on the Preferred Stock, in each
case without respect to any limitation or restriction on the
conversion of Preferred Stock.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
the Purchasers, severally and not jointly, agree to purchase, up to
an aggregate of $2,000,000 in Stated Value of Preferred Stock. Each
Purchaser shall deliver to the Company, via wire transfer or a
certified check, immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature
page hereto executed by such Purchaser, and the Company shall
deliver to each Purchaser its respective shares of Preferred Stock,
Shares, as determined pursuant to Section 2.2(a), and the Company
and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
(i)
this Agreement duly
executed by the Company; and
(ii) a
number of shares of Preferred Stock equal to such Purchaser’s
Subscription Amount divided by the Stated Value. To be clear, for
each $1,000 invested, the Subscriber shall receive Preferred Shares
convertible at the Conversion Price into 4,000 shares of the
Company’s Common Stock.
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company, the following:
(i)
this Agreement duly
executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer to the
account specified in writing by the Company; and
(iii) if
such Purchaser is a Canadian Purchaser, the Subscription for Units
required pursuant to Section 3.2(h).
2.3 Closing
Conditions.
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i) the accuracy in all
material respects on (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect,
in all respects) the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the SEC Reports or
Disclosure Schedules attached hereto, which shall qualify any
representations or warranties of the Company otherwise made herein,
the Company hereby makes the following representations and
warranties to each Purchaser:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth in the SEC
Reports. The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be
disregarded.
(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material
Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.6 of this Agreement, (ii) (iv) the
filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws, and (v)
Shareholder Approval (collectively, the “Required
Approvals”).
(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying
Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date
hereof.
(g) Capitalization. The
capitalization of the Company is as set forth on Exhibit B shall also include
the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of the date hereof. The
Company has not issued any capital stock since its most recently filed periodic report under the
Exchange Act, other than pursuant to the exercise of stock
options under the Company’s stock option plans, the issuance
of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding
as of the date of the most recently filed periodic report under the
Exchange Act. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities,
there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into
or exercisable or exchangeable for, or giving any Person any right
to subscribe for or acquire any shares of Common Stock or the
capital stock of any Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents or capital stock of any
Subsidiary. The issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common
Stock or other securities to any Person (other than the Purchasers)
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
any of such securities. There are no outstanding securities or
instruments of the Company or any Subsidiary that contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to redeem a security of the
Company or such Subsidiary. The Company does not have any stock
appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. All of the outstanding
shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board
of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company’s
stockholders.
(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports (2019
10-K attached herein as Exhibit C), (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made
with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this
Agreement, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to
occur or exist with respect to the Company or its Subsidiaries or
their respective businesses, prospects, properties, operations,
assets or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the
time this representation is made or deemed made that has not been
publicly disclosed at least 1 Trading Day prior to the date that
this representation is made.
(j) Litigation. There is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor to the
Company’s knowledge any director or officer thereof, is or
has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l) Compliance. Neither the Company
nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute,
rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and
labor matters, except in each case as could not have or reasonably
be expected to result in a Material Adverse Effect.
(m) Environmental Laws. The Company
and its Subsidiaries (i) are in compliance with all federal, state,
local and foreign laws relating to pollution or protection of human
health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws
relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations, issued, entered, promulgated
or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required
of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms
and conditions of any such permit, license or approval where in
each clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(n) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
(o) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.
(p) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
necessary or required for use in connection with their respective
businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise)
that any of, the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included
within the SEC Reports, a written notice of a claim or otherwise
has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(q) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.
(r) Transactions with Affiliates and
Employees. The Company’s knowledge none of the
officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or
any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(s) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the
Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms.
To the Company’s knowledge, the
Company’s certifying officers have evaluated the
effectiveness of the disclosure controls and procedures of the
Company and the Subsidiaries as of the end of the period covered by
the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of
the Company and its Subsidiaries.
(t) Certain Fees. Commission fees
shall be paid by the Company to entities listed below for
parties introduced to the Company by said parties within five
(5) business days of Closing the Series E Preferred Share
Financing (“2020 Financing”) according to the
following schedule:
● For FCMI, Ironstone Capital or
Other: Up to five percent (5%) in aggregate of proceeds
from the 2020 Series E Preferred Share financing (which
amounts to $100,000 based on gross proceeds of $2 million),
and 2% to for FCMI from the 2019 Series D financing (which
amounts to $15,260 based on gross proceeds of
$763,000).
● For K2 Medical LLC: Two percent
(2%) commission for the Series D and 2020 Series E Financing
due K2 pursuant to its commission agreements
with GTI;
(u) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(v) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(w) Listing and Maintenance
Requirements. The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements. The Common Stock is currently eligible
for electronic transfer through the Depository Trust Company or
another established clearing corporation and the Company is current
in payment of the fees to the Depository Trust Company (or such
other established clearing corporation) in connection with such
electronic transfer. Notwithstanding the foregoing, the Company
represents that it shall make reasonable efforts to uplist first to
the OTC: Bulletin Board and then to Nasdaq, so long as they meet
the requirements of these stock exchanges.
(x)
Application of Takeover
Protections. The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(y) Disclosure. Except with
respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during
the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(z) No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(aa) Indebtedness.
The SEC Reports set forth as of the date thereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than accounts payable incurred in the
ordinary course of business), (y) all guaranties, endorsements and
other contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(bb) Tax
Status. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and its
Subsidiaries each (i) has made or filed all United States federal,
state and local income and all foreign income and franchise tax
returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations and
(iii) has set aside on its books provision reasonably adequate for
the payment of all material taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and to the Company’s
knowledge, the officers of the Company or of any Subsidiary know of
no basis for any such claim.
(cc) No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.
(dd) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law or (iv) violated in any material respect any
provision of FCPA.
(ee) Accountants.
The Company’s accounting firm is UHY LLC. To the knowledge
and belief of the Company, UHY (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall
express its opinion with respect to the financial statements to be
included in the Company’s Annual Report for the fiscal year
ending December 31 (Attached as Exhibit C).
(ff) Seniority.
As of the Closing Date, no Indebtedness or other claim against the
Company is senior to the Securities in right of payment, whether
with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests and capital lease obligations (which is senior
only as to the property covered thereby).
(gg) No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.
(hh) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(ii) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding (except for Sections 3.2(g) and
4.13 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to
agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and
(z) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(jj) Regulation
M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company, other than, in the
case of clauses (ii) and (iii), compensation paid to the
Company’s placement agent in connection with the placement of
the Securities.
(kk) FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA. The Company has not been informed by
the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the Company.
(ll) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(mm) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(nn) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.
(oo) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(pp) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no Action or Proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.
(qq) No
Disqualification Events. With respect to the Securities to
be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any
affiliated issuer, to the Company’s knowledge any director,
executive officer, other officer of the Company participating in
the offering hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any of the "Bad Actor" disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a
“Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder.
(rr) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any
Securities.
(ss) Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer
Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer
Covered Person.
3.2 Representations and Warranties of the
Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of
such date):
(a) Organization; Authority. Such
Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is an “accredited investor” as defined
in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act.
(d) Experience of Such Purchaser.
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.
(e) General Solicitation. Such
Purchaser is not, to such Purchaser’s knowledge, purchasing
the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or, to the knowledge of such
Purchaser, any other general solicitation or general
advertisement.
(f) Access to Information. Such
Purchaser acknowledges that it has had the opportunity to review
the Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment. Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent has provided such Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired. Neither the
Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired
non-public information with respect to the Company which such
Purchaser agrees need not be provided to it. In connection
with the issuance of the Securities to such Purchaser, neither the
Placement Agent nor any of its Affiliates has acted as a financial
advisor or fiduciary to such Purchaser.
(g) Certain Transactions
and Confidentiality. Other than
consummating the transactions contemplated hereunder, such
Purchaser has not, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short
Sales, of the securities of the Company during the period
commencing as of the time that such Purchaser first received
a term sheet (written or oral) from the Company or any other Person
representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to
the execution hereof.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the representation set
forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement or to such Purchaser’s
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a representation or warranty
against, or a prohibition of, any actions with respect to the
borrowing of, arrangement to borrow, identification of the
availability of, and/or securing of, securities of the Company in
order for such Purchaser (or its broker or other financial
representative) to effect Short Sales or similar transactions in
the future.
(h) Canadian Purchaser
Representations. In the event that such Purchaser resides in
or is a citizen of Canada, such Purchaser shall complete, execute
and deliver the Subscription For Units attached hereto as
Annex A
concurrently with the execution of this Agreement, which document
shall be incorporated by reference under this Section 3.2 as if
made hereunder.
The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transactions contemplated hereby. Notwithstanding the
foregoing, for the avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any
actions, with respect to locating or borrowing shares in order to
effect Short Sales or similar transactions in the
future.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights and
obligations of a Purchaser under this Agreement.
(b) The Purchasers
agree to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following
form:
[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [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, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER
LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof):
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144), without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent or the Purchaser if required by the
Transfer Agent to effect the removal of the legend hereunder, or if
requested by a Purchaser, respectively. If all or any portion of
the Preferred Stock is converted or if such Underlying Shares may
be sold under Rule 144 without the requirement for the Company to
be in compliance with the current public information required under
Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions or if such legend is not otherwise
required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by
the staff of the Commission) then such Underlying Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c), it will, no later than the earlier of
(i) two (2) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period (as defined below)
following the delivery by a Purchaser to the Company or the
Transfer Agent of a certificate representing Underlying Shares, as
applicable, issued with a restrictive legend (such date, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section
4. Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime
broker with the Depository Trust Company System as directed by such
Purchaser. As used herein, “Standard Settlement
Period” means 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 a certificate representing
Underlying Shares, as applicable, issued with a restrictive
legend.
(d) Each Purchaser,
severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant
to Rule 144 of the Securities Act and they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth by Rule 144 and
in this Section 4.1 is predicated upon the Company’s reliance
upon this understanding.
4.2 Acknowledgment of Dilution. The
Company acknowledges that the issuance of the Securities may result
in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the
Transaction Documents, including, without limitation, its
obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.
4.3 Furnishing of Information; Public
Information. The Common Stock is not intended to be
registered under Section 12(b) or 12(g) of the Exchange Act on the
date hereof and the Company shall not be obligated to cause the
Common Stock to be registered under Section 12(g) of the Exchange
Act on or before any date following the date hereof.
4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.
4.5 Securities Laws Disclosure;
Publicity. The Company shall file a Current Report on Form
8-K, including the Transaction Documents as exhibits thereto, with
the Commission within the time required by the Exchange Act. From
and after the issuance of such press release, the Company
represents to the Purchasers that it shall have publicly disclosed
all material, non-public information delivered to any of the
Purchasers by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the issuance of such press
release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether
written or oral, between the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates on the one hand, and any of the Purchasers or any of
their Affiliates on the other hand, shall terminate. The Company
and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which
consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing
party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with
the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (a) as required
by federal securities law in connection with the filing of final
Transaction Documents with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations,
in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause
(b).
4.6 Shareholder Rights Plan. No
claim will be made or enforced by the Company or, with the consent
of the Company, any other Person, that any Purchaser is an
“Acquiring
Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover plan or arrangement in effect
or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement,
by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the
Purchasers.
4.7 Non-Public Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.6, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless prior thereto
such Purchaser shall have consented to the receipt of such
information and agreed with the Company to keep such information
confidential. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.8 Use of Proceeds (Attached as part of
Exhibit D, Term Sheet). Company shall use the net proceeds
from the sale of the Securities hereunder as set forth in Exhibit
D.
4.9 Indemnification of Purchasers.
Subject to the provisions of this Section 4.10, the Company will
indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is solely based upon a material breach of such Purchaser
Party’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such
Purchaser Party may have with any such stockholder or any
violations by such Purchaser Party of state or federal securities
laws or any conduct by such Purchaser Party which is finally
judicially determined to constitute fraud, gross negligence or
willful misconduct). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company
has failed after a reasonable period of time to assume such defense
and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material
issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section
4.10 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when
bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to
law.
4.10 Reservation
and Listing of Securities.
(a) The Company shall
maintain a reserve of the Required Minimum from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may then be required to fulfill its
obligations in full under the Transaction Documents.
(b) If, on any date,
the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall use commercially reasonable
efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued
shares of Common Stock to at least the Required Minimum at such
time, as soon as possible and in any event not later than the 75th
day after such date.
(c) The Company shall,
if applicable: (i) in the time and manner required by the principal
Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares
of Common Stock at least equal to the Required Minimum on the date
of such application, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing or quotation on
such Trading Market as soon as possible thereafter, (iii) provide
to the Purchasers evidence of such listing or quotation and (iv)
maintain the listing or quotation of such Common Stock on any date
at least equal to the Required Minimum on such date on such Trading
Market or another Trading Market. The Company agrees to maintain
the eligibility of the Common Stock for electronic transfer through
the Depository Trust Company or another established clearing
corporation, including, without limitation, by timely payment of
fees to the Depository Trust Company or such other established
clearing corporation in connection with such electronic
transfer.
4.11 Certain
Transactions and Confidentiality. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales of any of
the Company’s securities during the period commencing with
the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.6. Each Purchaser, severally and not jointly with
the other Purchasers, covenants that neither it, nor any Affiliate
acting on its behalf or pursuant to any understanding with it will
execute any Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement
and ending on the earlier of (a) such time as none of the
Purchasers hold any of the Preferred Stock and (b) the two-year
anniversary of the Closing Date. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time
as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as
described in Section 4.6, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.
4.12 Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence
of such actions promptly upon request of any
Purchaser.
4.13 Board
Designee. After the Closing Date, the Company agrees that it
will appoint to its Board of Directors one new director designated
in writing by FCMI (such designee and as such designee may be
replaced as provided herein, the “Designees”) within 60
days of such designation. The Company further agrees that it
will not take action to remove, or recommend the removal of, the
Designees without cause therefore. Upon any removal or resignation
of a Designee, the Company shall, within 60 days of the receipt of
written notice from FCMI of the identification of a replacement
designee, appoint to fill the vacancy so created with such
replacement designee subject to the paragraph below. Each Designee,
once a Director of the Company, shall be entitled to all of the
rights enjoyed by other non-employee Directors of the Company,
including receipt of information, reimbursement of expenses and
coverage under applicable director and officer insurance policies.
Further, FCMI agrees that it will not propose any individual as a
Designee to be a member of the Company’s Board of Directors
whose background does not comply with or would disqualify the
Company from complying with (i) applicable securities laws and (ii)
contractual obligations to and rules of Trading Market, and will
not disqualify the Company from being able to conduct any public
offering or private placement pursuant to either Rule 506 (b) or
(c) and any “bad boy“ provisions of any state
securities laws. To the extent that any Designee who becomes
a director and does not satisfy the conditions of the preceding
sentence, that person will immediately resign, and FCMI will have
the right to propose a replacement person to fill such vacancy
otherwise in accordance with the terms of this
Agreement.
ARTICLE
V.
MISCELLANEOUS
5.1 Termination. This
Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before July 6, 2020; provided, however, that no such
termination will affect the right of any party to sue for any
breach by any other party (or parties).
5.2 Fees and Expenses. Except as
expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or
exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.
5.3 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number or email attachment at the email address as set
forth on the signature pages attached hereto at or prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number or email
attachment as set forth on the signature pages attached hereto on a
day that is not a Trading Day or later than 5:30 p.m. (New York
City time) on any Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto. To the extent that any notice
provided pursuant to any Transaction Document constitutes, or
contains, material, non-public information regarding the Company or
any of the Subsidiaries, the Company shall simultaneously file such
notice with the Commission pursuant to a Current Report on Form
8-K.
5.5 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and Purchasers which purchased at least
50.1% in interest of the shares of Preferred E Stock (The
Securities)., if any and as applicable, based on the initial
Subscription Amounts hereunder or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought, provided that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required. No
waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such right. Any
proposed amendment or waiver that disproportionately, materially
and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other
Purchasers shall require the prior written consent of such
adversely affected Purchaser. Any amendment effected in accordance
with this Section 5.5 shall be binding upon each Purchaser and
holder of Securities and the Company.
5.6 Headings. The headings herein
are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
5.7 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by
merger). Any Purchaser may assign any or all of its rights under
this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8 No Third Party Beneficiaries.
The Placement Agent shall be the third party beneficiary of the
representations and warranties of the Company in Section 3.1 and
the representations and warranties of the Purchasers in Section
3.2. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10
and this Section 5.8.
5.9 Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
Proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Action or
Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action or Proceeding is
improper or is an inconvenient venue for such Proceeding. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If any party shall commence an Action or
Proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section
4.10, the prevailing party in such Action or Proceeding shall be
reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Action or
Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its
future actions and rights; provided, however, that, in the case of a
rescission of a conversion of Preferred Stock, the Purchaser shall
be required to return any shares of Common Stock subject to any
such rescinded conversion.
5.14 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16 Payment
Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by any Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.18 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any
Proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in its review and negotiation of the
Transaction Documents. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the
Company and a Purchaser, solely, and not between the Company and
the Purchasers collectively and not between and among the
Purchasers.
5.19 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.
5.20 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 not be a Business Day, then such
action may be taken or such right may be exercised on the next
succeeding Business Day.
5.21 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
5.22 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
|
GUIDED
THERAPEUTICS, INC.
|
Address
for Notice:
5835
Peachtree Corners East
Suite
B
Norcross,
Georgia 30092
|
|
By: /G.
Cartwirght/
Name:
Gene cartwirght
Title:CEO
With a
copy to (which shall not constitute notice):
|
Email:
Fax:
|
|
|
|
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR
PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO GTHP SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
________________________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory:
____________________________________________________
Title
of Authorized Signatory:
_____________________________________________________
Email
Address of Authorized Signatory:
_____________________________________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription
Amount: $_____________
Shares
of Preferred Stock:____________
Shares
of Common Stock if all Preferred Shares are
converted:_____________
EIN
Number: _______________________
Exhibit
A
(see
attached)
Exhibit 10.69
SECURITIES
PURCHASE AGREEMENT
This Securities Purchase Agreement
(this “Agreement”) is dated as
of December 23, 2020, between Guided Therapeutics, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Certificate of Designation (as defined herein),
and (b) the following terms have the meanings set forth in this
Section 1.1:
“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.7.
“Action” shall have the
meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board Appointee” shall
have the meaning ascribed to such term in Section
4.13.
“Board of Directors” means
the board of directors of the Company.
“Business Day” means 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.
“Certificate of
Designation” means the Certificate of Designation to
be filed prior to the Closing by the Company with the Secretary of
State of Delaware, in the form of Exhibit A attached
hereto.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Company Counsel” means
Ellenoff Grossman & Schole LLP, with offices located at 1345
Avenue of the Americas, New York, New York 10105.
“Conversion Price” shall
mean $0.25, subject to adjustment as set forth under the
Certificate of Designation.
“Conversion Shares” shall
have the meaning ascribed to such term in the Certificate of
Designation.
“Disclosure
Schedules” shall have the meaning ascribed to such
term in Section 3.1.
“Effective Date” means the
earliest of the date that all of the Underlying Shares have been
sold pursuant to Rule 144 or may be sold pursuant to Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 and without
volume or manner-of-sale restrictions, (c) following the one year
anniversary of the Closing Date provided that a holder of the
Underlying Shares is not an Affiliate of the Company or (d) all of
the Underlying Shares may be sold pursuant to an exemption from
registration under Section 4(1) of the Securities Act without
volume or manner-of-sale restrictions and Company Counsel has
delivered to such holders a standing written unqualified opinion
that resales may then be made by such holders of the Underlying
Shares pursuant to such exemption which opinion shall be in form
and substance reasonably acceptable to such holders.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(s).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“FDA” shall have the
meaning ascribed to such term in Section 3.1(ll).
“FDCA” shall have the
meaning ascribed to such term in Section 3.1(ll).
“GPB” means GPB
Holdings.
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(bb).
“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(o).
“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(c).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material
Adverse Effect” shall have the meaning assigned to
such term in Section 3.1(b).
“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(m).
“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Pharmaceutical Product”
shall have the meaning ascribed to such term in Section
3.1(ll).
“Preferred
Stock” means the shares of the Company’s Series
F Preferred Stock issued hereunder having the rights, preferences
and privileges set forth in the Certificate of Designation, in the
form of Exhibit A
hereto.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“Purchaser Party” shall
have the meaning ascribed to such term in Section
4.10.
“Required
Approvals” shall have the meaning ascribed to such
term in Section 3.1(e).
“Required Minimum” means,
as of any date, the maximum aggregate number of shares of Common
Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable
upon exercise in full of all Preferred Stock ignoring any
conversion or exercise limits set forth therein.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(h).
“Securities” means
Preferred Stock and the Underlying Common Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shareholder Approval”
means such approval as may be required by Delaware General
Corporation Law from the shareholders of the Company with respect
to effecting a reverse stock split.
“Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include locating and/or borrowing shares of Common
Stock).
“Stated Value” means
$1,000 per share of Preferred Stock as converted.
“Subscription Amount”
means, as to each Purchaser, the
aggregate amount to be paid for Preferred Stock purchased hereunder
as specified below such Purchaser’s name on the signature
page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.
“Subsidiary” means any
subsidiary of the Company as set forth in the SEC Reports and
shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date
hereof.
“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).
“Transaction
Documents” means this Agreement, the Certificate of
Designation, and all exhibits and schedules thereto and hereto and
any other documents or agreements executed in connection with the
transactions contemplated hereunder.
“Transfer Agent” means
Computershare, the current transfer agent of the Company, and any
successor transfer agent of the Company.
“Underlying Shares” means
the Shares, issuable pursuant to the terms of the Certificate of
Designation, including without limitation, shares of Common Stock
that may be issued as dividends on the Preferred Stock, in each
case without respect to any limitation or restriction on the
conversion of Preferred Stock.
ARTICLE II.
PURCHASE
AND SALE
2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
the Purchasers, severally and not jointly, agree to purchase, up to
an aggregate of $2,200,000 in Stated Value of Preferred Stock,
excluding any exchanges of debt into Series F Preferred Shares
(1). Each Purchaser shall deliver to the Company, via wire
transfer or a certified check, immediately available funds equal to
such Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by such Purchaser, and the Company
shall deliver to each Purchaser its respective shares of Preferred
Stock, as determined pursuant to Section 2.2(a), and the Company
and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of
the covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.
1)
Pursuant to
an certain exchange agreements approved by the
Company’s board, the total number of Series F Preferred
Shares, including those both purchased and exchanged, shall not
exceed 4,700 Series F Preferred Shares.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
(i)
this Agreement duly executed by the Company; and
(ii) a
number of shares of Preferred Stock equal to such Purchaser’s
Subscription Amount divided by the Stated Value. To be clear, for
each $1,000 invested, the Subscriber shall receive Preferred Shares
convertible at the Conversion Price into 4,000 shares of the
Company’s Common Stock.
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company, the following:
(i)
this Agreement duly executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer to the
account specified in writing by the Company; and
(iii) if
such Purchaser is a Canadian Purchaser, the Subscription for Units
required pursuant to Section 3.2(h).
2.3 Closing
Conditions.
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i) the accuracy in all
material respects on (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect,
in all respects) the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the SEC Reports or
Disclosure Schedules attached hereto, which shall qualify any
representations or warranties of the Company otherwise made herein,
the Company hereby makes the following representations and
warranties to each Purchaser:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth in the SEC
Reports. The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be
disregarded.
(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material
Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.6 of this Agreement, (ii) (iv) the
filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws, and (v)
Shareholder Approval (collectively, the “Required
Approvals”).
(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying
Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date
hereof.
(g) Capitalization. The
capitalization of the Company is as set forth on Exhibit B shall also include
the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of the date hereof. The
Company has not issued any capital stock since its most recently filed periodic report under the
Exchange Act, other than pursuant to the exercise of stock
options under the Company’s stock option plans, the issuance
of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding
as of the date of the most recently filed periodic report under the
Exchange Act. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities,
there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into
or exercisable or exchangeable for, or giving any Person any right
to subscribe for or acquire any shares of Common Stock or the
capital stock of any Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents or capital stock of any
Subsidiary. The issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common
Stock or other securities to any Person (other than the Purchasers)
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
any of such securities. There are no outstanding securities or
instruments of the Company or any Subsidiary that contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to redeem a security of the
Company or such Subsidiary. The Company does not have any stock
appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. All of the outstanding
shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board
of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company’s
stockholders.
(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports (2019
10-K attached herein as Exhibit C), (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made
with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this
Agreement, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to
occur or exist with respect to the Company or its Subsidiaries or
their respective businesses, prospects, properties, operations,
assets or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the
time this representation is made or deemed made that has not been
publicly disclosed at least 1 Trading Day prior to the date that
this representation is made.
(j) Litigation. There is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor to the
Company’s knowledge any director or officer thereof, is or
has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l) Compliance. Neither the Company
nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute,
rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and
labor matters, except in each case as could not have or reasonably
be expected to result in a Material Adverse Effect.
(m) Environmental Laws. The Company
and its Subsidiaries (i) are in compliance with all federal, state,
local and foreign laws relating to pollution or protection of human
health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws
relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations, issued, entered, promulgated
or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required
of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms
and conditions of any such permit, license or approval where in
each clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(n) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
(o) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.
(p) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
necessary or required for use in connection with their respective
businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise)
that any of, the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included
within the SEC Reports, a written notice of a claim or otherwise
has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(q) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.
(r) Transactions with Affiliates and
Employees. The Company’s knowledge none of the
officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or
any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(s) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the
Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms.
To the Company’s knowledge, the
Company’s certifying officers have evaluated the
effectiveness of the disclosure controls and procedures of the
Company and the Subsidiaries as of the end of the period covered by
the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of
the Company and its Subsidiaries.
(t) Certain Fees. The Company shall
pay certain entities listed below which fees and commissions are in
consideration for certain introductions to the Company. The Company
is required to pay such amounts within five (5) business days of
the Closing Date:
(i) Ironstone Capital, K2 or Other:
Up to 5% in commission fees payable to in connection with the
Company’s issuance of its Series F Convertible Preferred
Stock.
(u) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(v) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(w) Listing and Maintenance
Requirements. The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements. The Common Stock is currently eligible
for electronic transfer through the Depository Trust Company or
another established clearing corporation and the Company is current
in payment of the fees to the Depository Trust Company (or such
other established clearing corporation) in connection with such
electronic transfer. Notwithstanding the foregoing, the Company
represents that it shall make reasonable efforts to uplist first to
the OTC: Bulletin Board and then to Nasdaq, so long as they meet
the requirements of these stock exchanges.
(x) Application of Takeover
Protections. The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(y) Disclosure. Except with
respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during
the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(z) No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(aa) Indebtedness.
The SEC Reports set forth as of the date thereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than accounts payable incurred in the
ordinary course of business), (y) all guaranties, endorsements and
other contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(bb) Tax
Status. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and its
Subsidiaries each (i) has made or filed all United States federal,
state and local income and all foreign income and franchise tax
returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations and
(iii) has set aside on its books provision reasonably adequate for
the payment of all material taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and to the Company’s
knowledge, the officers of the Company or of any Subsidiary know of
no basis for any such claim.
(cc) No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.
(dd) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law or (iv) violated in any material respect any
provision of FCPA.
(ee) Accountants.
The Company’s accounting firm is UHY LLC. To the knowledge
and belief of the Company, UHY (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall
express its opinion with respect to the financial statements to be
included in the Company’s Annual Report for the fiscal year
ending December 31 (Attached as Exhibit C).
(ff) Seniority.
As of the Closing Date, no Indebtedness or other claim against the
Company is senior to the Securities in right of payment, whether
with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests and capital lease obligations (which is senior
only as to the property covered thereby).
(gg) No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.
(hh) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(ii) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding (except for Sections 3.2(g) and
4.13 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to
agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and
(z) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(jj) Regulation
M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company, other than, in the case of
clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the
Securities.
(kk) FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA. The Company has not been informed by the
FDA that the FDA will prohibit the marketing, sale, license or use
in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the Company.
(ll) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(mm) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(nn) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.
(oo) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(pp) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no Action or Proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.
(qq) No
Disqualification Events. With respect to the Securities to
be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any
affiliated issuer, to the Company’s knowledge any director,
executive officer, other officer of the Company participating in
the offering hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any of the "Bad Actor" disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a
“Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder.
(rr) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any
Securities.
(ss) Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer
Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer
Covered Person.
3.2 Representations and Warranties of the
Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of
such date):
(a) Organization; Authority. Such
Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is an “accredited investor” as defined
in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act.
(d) Experience of Such Purchaser.
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.
(e) General Solicitation. Such
Purchaser is not, to such Purchaser’s knowledge, purchasing
the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or, to the knowledge of such
Purchaser, any other general solicitation or general
advertisement.
(f) Access to Information. Such
Purchaser acknowledges that it has had the opportunity to review
the Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment. Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent has provided such Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired. Neither the
Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired
non-public information with respect to the Company which such
Purchaser agrees need not be provided to it. In connection with the
issuance of the Securities to such Purchaser, neither the Placement
Agent nor any of its Affiliates has acted as a financial advisor or
fiduciary to such Purchaser.
(g) Certain Transactions
and Confidentiality. Other than
consummating the transactions contemplated hereunder, such
Purchaser has not, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales,
of the securities of the Company during the period commencing as
of the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing
the Company setting forth the material terms of the transactions
contemplated hereunder and ending immediately prior to the
execution hereof.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the representation set
forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement or to such Purchaser’s
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a representation or warranty
against, or a prohibition of, any actions with respect to the
borrowing of, arrangement to borrow, identification of the
availability of, and/or securing of, securities of the Company in
order for such Purchaser (or its broker or other financial
representative) to effect Short Sales or similar transactions in
the future.
(h) Canadian Purchaser
Representations. In the event that such Purchaser resides in
or is a citizen of Canada, such Purchaser shall complete, execute
and deliver the Subscription for Units attached hereto as
Annex A
concurrently with the execution of this Agreement, which document
shall be incorporated by reference under this Section 3.2 as if
made hereunder.
The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transactions contemplated hereby. Notwithstanding the
foregoing, for the avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any
actions, with respect to locating or borrowing shares in order to
effect Short Sales or similar transactions in the
future.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights and
obligations of a Purchaser under this Agreement.
(b) The Purchasers
agree to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following
form:
[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [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, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER
LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof):
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144), without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent or the Purchaser if required by the
Transfer Agent to effect the removal of the legend hereunder, or if
requested by a Purchaser, respectively. If all or any portion of
the Preferred Stock is converted or if such Underlying Shares may
be sold under Rule 144 without the requirement for the Company to
be in compliance with the current public information required under
Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions or if such legend is not otherwise
required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by
the staff of the Commission) then such Underlying Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c), it will, no later than the earlier of
(i) two (2) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period (as defined below)
following the delivery by a Purchaser to the Company or the
Transfer Agent of a certificate representing Underlying Shares, as
applicable, issued with a restrictive legend (such date, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section
4. Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime
broker with the Depository Trust Company System as directed by such
Purchaser. As used herein, “Standard Settlement
Period” means 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 a certificate representing
Underlying Shares, as applicable, issued with a restrictive
legend.
(d) Each Purchaser,
severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant
to Rule 144 of the Securities Act and they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth by Rule 144 and
in this Section 4.1 is predicated upon the Company’s reliance
upon this understanding.
4.2 Acknowledgment of Dilution. The
Company acknowledges that the issuance of the Securities may result
in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the
Transaction Documents, including, without limitation, its
obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.
4.3 Furnishing of Information; Public
Information. The Common Stock is not intended to be
registered under Section 12(b) or 12(g) of the Exchange Act on the
date hereof and the Company shall not be obligated to cause the
Common Stock to be registered under Section 12(g) of the Exchange
Act on or before any date following the date hereof.
4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.
4.5 Securities Laws Disclosure;
Publicity. The Company shall file a Current Report on Form
8-K, including the Transaction Documents as exhibits thereto, with
the Commission within the time required by the Exchange Act. From
and after the issuance of such press release, the Company
represents to the Purchasers that it shall have publicly disclosed
all material, non-public information delivered to any of the
Purchasers by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the issuance of such press
release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether
written or oral, between the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates on the one hand, and any of the Purchasers or any of
their Affiliates on the other hand, shall terminate. The Company
and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which
consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing
party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with
the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (a) as required
by federal securities law in connection with the filing of final
Transaction Documents with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations,
in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause
(b).
4.6 Shareholder Rights Plan. No
claim will be made or enforced by the Company or, with the consent
of the Company, any other Person, that any Purchaser is an
“Acquiring
Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover plan or arrangement in effect
or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement,
by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the
Purchasers.
4.7 Non-Public Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.6, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless prior thereto
such Purchaser shall have consented to the receipt of such
information and agreed with the Company to keep such information
confidential. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.8 Use of Proceeds (Attached as part of
Exhibit D, Term Sheet). Company shall use the net proceeds
from the sale of the Securities hereunder as set forth in Exhibit
D.
4.9 Indemnification of Purchasers.
Subject to the provisions of this Section 4.10, the Company will
indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is solely based upon a material breach of such Purchaser
Party’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such
Purchaser Party may have with any such stockholder or any
violations by such Purchaser Party of state or federal securities
laws or any conduct by such Purchaser Party which is finally
judicially determined to constitute fraud, gross negligence or
willful misconduct). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company
has failed after a reasonable period of time to assume such defense
and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material
issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section
4.10 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when
bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to
law.
4.10 Reservation
and Listing of Securities.
(a) The Company shall
maintain a reserve of the Required Minimum from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may then be required to fulfill its
obligations in full under the Transaction Documents.
(b) If, on any date,
the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall use commercially reasonable
efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued
shares of Common Stock to at least the Required Minimum at such
time, as soon as possible and in any event not later than the 75th
day after such date.
(c) The Company shall,
if applicable and as described in the Term Sheet (Exhibit D): (i)
in the time and manner required by the principal Trading Market,
prepare and file with such Trading Market an additional shares
listing application covering a number of shares of Common Stock at
least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing or quotation on such
Trading Market as soon as possible thereafter, (iii) provide to the
Purchasers evidence of such listing or quotation and (iv) maintain
the listing or quotation of such Common Stock on any date at least
equal to the Required Minimum on such date on such Trading Market
or another Trading Market. The Company agrees to maintain the
eligibility of the Common Stock for electronic transfer through the
Depository Trust Company or another established clearing
corporation, including, without limitation, by timely payment of
fees to the Depository Trust Company or such other established
clearing corporation in connection with such electronic
transfer.
4.11 Certain
Transactions and Confidentiality. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales of any of
the Company’s securities during the period commencing with
the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.6. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that neither it, nor any Affiliate
acting on its behalf or pursuant to any understanding with it will
execute any Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement
and ending on the earlier of (a) such time as none of the
Purchasers hold any of the Preferred Stock and (b) the two-year
anniversary of the Closing Date. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time
as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as
described in Section 4.6, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.
4.12 Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence
of such actions promptly upon request of any
Purchaser.
4.13 Piggyback
Registration Rights. If, at any time after the Closing Date, the
Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its account or
the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act), or their then equivalents relating to
equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable
in connection with the stock option or other employee benefit
plans, the Company shall send to each Purchaser a written notice of
such determination and if, within 15 calendar days after the date
of such notice, the Purchaser (or any permitted successor or
assign) shall so request in writing, the Company shall include in
such registration statement all or any part of the Conversion
Shares that such Purchaser requests to be registered; provided,
however, that the Company shall not be required to register any
Conversion Shares pursuant to this Section 4.7 that are eligible
for resale pursuant to Rule 144 under the Securities Act. Further,
in the event that the offering is a firm-commitment underwritten
offering, the Company may exclude the Conversion Shares if so
requested in writing by the lead underwriter of such offering. If
less than all of the Conversion Shares are required to be excluded,
then such cutbacks shall be allocated pro-rata among the Purchasers
requesting to be included. In the case of inclusion in a
firm-commitment underwritten offering, the Purchasers must sell
their Conversion Shares on the same terms set by the underwriters
for shares of Common Stock to be sold for the account of the
Company.
ARTICLE
V.
MISCELLANEOUS
5.1 Termination. This Agreement may
be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been
consummated on or before March 31, 2021; provided, however, that no such
termination will affect the right of any party to sue for any
breach by any other party (or parties).
5.2 Fees and Expenses. Except as
expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or
exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.
5.3 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number or email attachment at the email address as set
forth on the signature pages attached hereto at or prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number or email
attachment as set forth on the signature pages attached hereto on a
day that is not a Trading Day or later than 5:30 p.m. (New York
City time) on any Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto. To the extent that any notice
provided pursuant to any Transaction Document constitutes, or
contains, material, non-public information regarding the Company or
any of the Subsidiaries, the Company shall simultaneously file such
notice with the Commission pursuant to a Current Report on Form
8-K.
5.5 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and Purchasers which purchased at least
50.1% in interest of the shares of Preferred E Stock (The
Securities)., if any and as applicable, based on the initial
Subscription Amounts hereunder or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought, provided that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required. No
waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such right. Any
proposed amendment or waiver that disproportionately, materially
and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other
Purchasers shall require the prior written consent of such
adversely affected Purchaser. Any amendment effected in accordance
with this Section 5.5 shall be binding upon each Purchaser and
holder of Securities and the Company.
5.6 Headings. The headings herein
are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
5.7 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by
merger). Any Purchaser may assign any or all of its rights under
this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8 No Third Party Beneficiaries.
The Placement Agent shall be the third party beneficiary of the
representations and warranties of the Company in Section 3.1 and
the representations and warranties of the Purchasers in Section
3.2. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10
and this Section 5.8.
5.9 Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
Proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Action or
Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action or Proceeding is
improper or is an inconvenient venue for such Proceeding. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If any party shall commence an Action or
Proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section
4.10, the prevailing party in such Action or Proceeding shall be
reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Action or
Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its
future actions and rights; provided, however, that, in the case of a
rescission of a conversion of Preferred Stock, the applicable
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice
concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares.
5.14 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16 Payment
Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by any Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.18 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any
Proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in its review and negotiation of the
Transaction Documents. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the
Company and a Purchaser, solely, and not between the Company and
the Purchasers collectively and not between and among the
Purchasers.
5.19 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.
5.20 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 not be a Business Day, then such
action may be taken or such right may be exercised on the next
succeeding Business Day.
5.21 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
5.22 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
|
GUIDED
THERAPEUTICS, INC.
|
Address
for Notice:
5835
Peachtree Corners East
Suite
B
Peachtree
Corners, Georgia 30092
|
|
By:__________________________________________
Name:
Gene S. Cartwright
Title:CEO
With a
copy to (which shall not constitute notice):
|
Email:
Fax:
|
|
|
|
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR
PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO GTHP SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
________________________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory:
____________________________________________________
Title
of Authorized Signatory:
_____________________________________________________
Email
Address of Authorized Signatory:
_____________________________________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription
Amount: $_____________
Shares
of Preferred Stock:____________
Shares
of Common Stock if all Preferred Shares are
converted:_____________
EIN
Number: _______________________
Exhibit
23.1
12900
Hall Road, Suite 500
Sterling
Heights, MI 48313-1153
Telephone
586-254-1040
Fax
586-254-1805
Web
www.uhy-us.com
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby consent to the incorporation by reference in the
Registration Statements on Forms S-8 (No. 333-63758, 333-81326,
333-128082, 333-178261 and 333-183312) of Guided Therapeutics, Inc.
and Subsidiary of
our report dated May 2, 2019, relating to the consolidated
financial statements, which appears in this Form 10-K for the year
ended December 31, 2020.
|
/s/ UHY LLP
|
|
UHY
LLP
|
|
|
Sterling Heights,
Michigan
|
|
April
5, 2021
|
|
|
Exhibit
31
Rule
13a-14(a)/15(d)-14(a) Certifications
I, Gene
Cartwright, certify that:
1.
I have reviewed
this annual report on
Form 10-K of Guided Therapeutics, Inc.;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f) for the registrant and
have:
(a)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, 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;
(c)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant ‘s internal control over financial
reporting.
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
(b)
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
April 5, 2021
|
/s/ Gene
Cartwright
Gene
CartwrightPresident, Chief Executive Officer and
Acting
Chief Financial Officer
|
|
|
|
Exhibit
32
SECTION
1350 CERTIFICATION
In
connection with the Annual Report of Guided Therapeutics, Inc. (the
“Company”) on Form 10-K for the year ended December 31,
2020, as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Gene Cartwright,
President, Chief Executive Officer and Acting Chief Financial
Officer of the Company, certify, pursuant to 18
U.S.C. Sec. 1350, as adopted pursuant to Sec 906 of
the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(1) the
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Date:
April 5, 2021
/s/ Gene
Cartwright
Name:
Gene Cartwright
Title:
President, Chief Executive Officer and
Acting
Chief Financial Officer
