Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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Review of Related Person Transactions
The Audit
Committee has the primary responsibility for monitoring, reviewing and approving transactions with related parties. A related person is any person who is or was an executive officer of the Company, director or is a holder of more
than 5% of the Companys common stock, or their immediate family members or any entity owned or controlled by any of the foregoing persons.
The
Board has adopted a policy providing that the Audit Committee will review and approve or ratify transactions in excess of $120,000 of value in which the Company participates and in which a director, executive officer or beneficial holder of more
than 5% of any class of the Companys voting securities has or will have a direct or indirect material interest. Under this policy, the Audit Committee is to obtain all information it believes to be relevant to review and approve or ratify
these transactions.
After consideration of the relevant information, the Audit Committee is to approve only those related party transactions that the
Audit Committee believes are on their terms, taken as a whole, no less favorable to the Company than could be obtained in an arms-length transaction with an unrelated third party and that the Audit Committee determines are not inconsistent with the
Companys best interests. In particular, the Companys policy with respect to related party transactions requires the Audit Committee to consider the benefits to the Company, the impact on a directors independence
in the event the related person is a director, an immediate family member of a director or an entity in which a director has a position or relationship, the availability of other sources for comparable products or services, the terms of the
transaction and the terms available to unrelated third-parties or to employees generally.
Participation in Investor Offerings
Between May 31, 2017 and July 28, 2017, in connection with a private offering to third-party investors, the Company issued to a trust for which
Mr. Caracciolo is trustee, to Mr. Naydenov, and to Alpha Venture Capital Partners, L.P., an investment entity of which Mr. Dockery is a director and principal, respectively, $1,000,000, $100,000 and $50,000 in aggregate principal
amount of unsecured convertible promissory notes (the Convertible Notes). The offering terms for the trust, Mr. Naydenov and Alpha Venture Capital Partners, L.P. were identical to those for all other investors in the offering and
are summarized in the Form
8-K
filed with the Securities and Exchange Commission on July 31, 2017.
On
November 8, 2017, in connection with a private offering to third-party investors, the Company issued to a limited liability company in which Mr. Caracciolo holds a partial ownership interest, for a price of $0.50 per share and related
warrants, 200,000 shares of common stock and a warrant covering 200,000 shares of common stock with an exercise price of $0.75. The offering terms for the limited liability company were identical to those for all other investors in the offering and
are summarized in the Form
8-K
filed with the Securities and Exchange Commission on November 8, 2017.
On
January 31, 2018, in connection with a private offering to investors in the Convertible Notes described above, the Company issued, for a price of $0.50 per share and related warrants, (i) to the trust for which Mr. Caracciolo is
trustee, 2,093,972 shares of common stock and a warrant covering 1,333,334 shares of common stock with an exercise price of $0.75, (ii) to Mr. Naydenov, 207,248 shares of common stock and a warrant covering 133,334 shares of common stock with
an exercise price of $0.75, and (iii) to Alpha Venture Capital Partners, L.P., 103,586 shares of common stock and a warrant covering 66,667 shares of common stock with an exercise price of $0.75 per share. The common stock and warrants were
issued in full satisfaction of the Companys cash payment obligations relating to the Convertible Notes, which had matured on the same date. The offering terms for the trust, Mr. Naydenov and Alpha Venture Capital Partners, L.P. were
identical to those for all other investors in the offering and are summarized in the Form
8-K
filed with the Securities and Exchange Commission on January 31, 2018.
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