Item 1.01 Entry into a Material Definitive Agreement.
On January 11, 2021, Rapid Therapeutic Science Laboratories, Inc. (the
"Company", "we" and "us") entered into an Employment Agreement with Duane
Drinkwine, Ph.D., effective February 1, 2021 (the "Employment Agreement").
Pursuant to the Employment Agreement, Dr. Drinkwine agreed to serve as the Chief
Science Officer of the Company, a non-executive position. The Employment
Agreement has a term of one year, automatically renewable thereafter for
additional one-year periods unless terminated by either party no less than 60
days prior to such automatic renewal dates. We agreed to pay Dr. Drinkwine
$125,000 per year in cash, which amount may be increased from time-to-time in
the discretion of the management of the Company, including on an annual basis,
and that Dr. Drinkwine would be eligible for stock or cash bonuses (including
stock options), in the discretion of the management of the Company, from time to
time. As additional consideration under the agreement, we agreed that Dr.
Drinkwine could earn up to 2,000,000 shares of a to-be designated series of
preferred stock of the Company, which would have an agreed upon value of $0.80
per share, and convert into common stock of the Company on a one-for-one basis,
at any time, beginning two years after the effective date of the Employment
Agreement. A total of 500,000 shares of the new preferred stock will be due on
the six-month anniversary of the effective date, and 500,000 shares of new
preferred stock will be due thereafter on each anniversary date of the effective
date (until a total of 2 million shares are issued), subject to Dr. Drinkwine's
continued service to the Company. However, if Dr. Drinkwine's employment is
terminated for cause prior to the second anniversary of the agreement, all
shares previously earned are forfeited. Any shares of common stock issuable upon
conversion of the new preferred stock shares are subject to a trading
restriction, which prohibits Dr. Drinkwine from trading such shares until
January 1, 2023, and from not trading more than 5% of the average daily trading
volume of the Company's common stock from January 2, 2023 to October 31, 2025,
subject to certain exceptions.
The Company also agreed to provide Dr. Drinkwine the use of an apartment and a
vehicle. The agreement includes customary assignment of inventions,
non-solicitation and non-compete language, prohibiting Dr. Drinkwine from
competing against the Company or soliciting employees until the later of the
second anniversary of the termination date of his employment and the third
anniversary of the date of the Employment Agreement, subject to certain
exceptions. In the event Dr. Drinkwine's employment is terminated by the Company
other than for death, disability, non-renewal, with cause, or by Dr. Drinkwine
for good reason, Dr. Drinkwine is due 12 months of severance pay, payable in
equal monthly installments, subject to Dr. Drinkwine providing a general release
to the Company.
The description of the Employment Agreement and Trading Agreement above is not
complete, and is qualified in its entirety by the full text of such Employment
Agreement and Trading Agreement, copies of which are attached hereto as Exhibits
10.3 and 10.4, respectively and incorporated by reference into this Item 8.01.
Item 3.02 Unregistered Sales of Equity Securities.
On January 22, 2021, the Company sold an aggregate of 1,250,000 shares of
restricted common stock to an accredited investor, pursuant to subscription
agreements entered into with the investor, in a private offering, at a purchase
price of $0.40 per share (raising $500,000 in aggregate). The investor was also
granted warrants to purchase the same number of shares purchased, with an
exercise price of $0.85 per share. The warrants are exercisable for cash, or on
a cashless basis, if the shares underlying the warrants haven't been registered
with the SEC, at any time prior to January 22, 2022 (the "warrants"). The
warrants include a 4.99% ownership blocker, preventing the exercise of any
specific warrant by the holder thereof, if upon such exercise the holder would
beneficially own more than 4.99% of the Company's then outstanding common stock,
which percentage may be increased on a holder-by-holder basis, to up to 9.99%,
with 61 days prior written notice from each holder. In total, the Company
granted warrants to purchase an aggregate of 1,250,000 shares of common stock to
the investor described above, and if exercised in full, the maximum number of
shares of common stock issuable upon exercise thereof would total 1,250,000
shares of common stock. The investor also entered into a trading agreement with
the Company, whereby it agrees to not sell the shares held by such investor for
a period of time after the sales, subject in certain cases, to volume
limitations and certain other exemptions.
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The sales described above were exempt from registration pursuant to Section
4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the
foregoing sales did not involve a public offering, the recipients took the
securities for investment and not resale, we took take appropriate measures to
restrict transfer, and the recipients were "accredited investors". The
securities are subject to transfer restrictions, and the certificates evidencing
the securities contain an appropriate legend stating that such securities have
not been registered under the Securities Act and may not be offered or sold
absent registration or pursuant to an exemption therefrom. The securities were
not registered under the Securities Act and such securities may not be offered
or sold in the United States absent registration or an exemption from
registration under the Securities Act and any applicable state securities laws.
On January 11, 2021, pursuant to the terms of the Employment Agreement,
discussed above in Item 1.01, the Company agreed to issue up to 2,000,000 shares
of a to-be designated series of preferred stock to Dr. Drinkwine, subject to the
terms of the Employment Agreement, which will be issuable to Dr. Drinkwine under
certain circumstances. If earned in full and converted in full, such preferred
stock would be convertible into 2,000,000 shares of common stock. Such preferred
stock has not been designated by the Company to date, and the designation of,
and final terms of, such preferred stock, will be disclosed on a subsequent
Current Report on Form 8-K filing.
The offer of the preferred stock was exempt from registration pursuant to
Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the
foregoing offer did not involve a public offering, the recipient will take the
securities for investment and not resale, we will take appropriate measures to
restrict transfer, and the recipient was (a) an "accredited investor"; and/or
(b) had access to similar documentation and information as would be required in
a Registration Statement under the Act. The securities will be subject to
transfer restrictions, and the certificates evidencing the securities will
contain an appropriate legend stating that such securities have not been
registered under the Securities Act and may not be offered or sold absent
registration or pursuant to an exemption therefrom.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following Exhibits are filed herewith:
Exhibit
Number Description of Exhibit
10.1 * Form of Subscription Agreement $0.40 Per Share (January 2021
Private Offering)
10.2 * Form of Common Stock Purchase Warrant (January 2021 Private
Offering)
10.3 * Employment Agreement with Duane Drinkwine dated January 11, 2021
10.4 * Trading Agreement dated January 11, 2021, with Duane Drinkwine
*Filed herewith.
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