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Related Party Transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

17. Related Party Transactions

Beginning on March 28, 2002, the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1 million. Under the terms of the agreements, the Company can draw amounts as needed to fund operations. Amounts drawn bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points (3.88% and 3.62% per annum at December 31, 2018 and 2017, respectively), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or consummation of any other financing over $7.0 million. Beginning in March 2006, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007, to December 31, 2018. On May 9, 2018, our Executive Chairman extended the due date of the funding commitment to December 31, 2019).


On March 25, 2019 we entered into a note exchange agreement with our Executive Chairman pursuant to which he exchanged $7,989,622 of principal and $395,510 of accrued interest which would have been due on December 31, 2019 under an unsecured loan for a secured promissory note in the principal amount of $8,385,132. The secured note which matures on December 31, 2021, and bears interest at 4% per annum, payable monthly, is secured by a first position security interest in our assets.


In March 2019, the Company entered into a note exchange agreement with him whereby he agreed to extend the due date of these obligations to December 31, 2021 and granted him a first position security interest in our assets. (Refer to Note 12.)


During the year ended December 31, 2019, we borrowed an additional $833,000 from our Executive Chairman, together under a demand note not covered by this line of credit. During the year ended December 31, 2018, we borrowed an additional $26,273 from our Executive Chairman, together with $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of December 31, 2019 and December 31, 2018 we owed him an aggregate of $9,543,132 and $8,314,622, respectively, which represented approximately 74% and 76% of our total liabilities, respectively.


On January 7, 2019, the Company received an additional loan in the amount of $25,000 from a stockholder and former member of the Board of Directors. On November 19, 2019, the Company received an additional loan in the amount of $25,000 from the same stockholder and former member of the Board of Directors. The loan bears interest at a rate of 5% per annum and is due on January 7, 2020 and on November 18, 2020, respectively. On April 13, 2020, the maturity date for loan received on January 7, 2019 was extended to December 31, 2020.


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.


In November 2017, the Company received an additional loan in the amount of $25,000 from a stockholder and former member of the Board of Directors. The loan bears interest at a rate of 5% per annum and is due December 31, 2018. During the year ended December 31, 2018 the Company recorded interest expense of $1,092. On November 16, 2018 the former member of the Board of Directors forgave the loan and the accrued interest amounting to $26,250 and recorded the amount as a capital contribution.


On April 12, 2018, the Company granted officers and directors options to purchase 2,050,000 shares of the Company’s common stock, at exercise prices ranging from $0.0189 to $0.208 per share. The options vest over a three-year period and expire April 12, 2028. The fair value of the options totaled $36,806 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.64%; ii) expected life of 5 years; iii) dividend yield of 0%; iv) expected volatility of 217%. On April 30, 2018 our Executive Chairman and former CEO voluntarily cancelled the grant on April 12, 2018 of options awarded him to purchase an aggregate of 1,400,000 shares of the common stock.


On May 18, 2018, Mr. Edward S. Vittoria was appointed Chief Executive Officer of the Company and as a member of its Board of Directors. Immediately prior to such appointment, Mr. Joseph V. Vittoria resigned from his position as Chief Executive Officer and has been appointed Executive Chairman of the Board of Directors. Prior to his appointments, Mr. Edward Vittoria had been providing advisory services to us beginning in December 2017.


On May 18, 2018, the Company, upon recommendation and approval by the compensation committee of the Board of Directors, granted its new Chief Executive Officer options to purchase 6,500,000 shares of the Company’s common stock, at an exercise price of $0.017 per share. The options vest over a three-year period and expire May 18, 2028.


On August 26, 2019, the Company granted one director options to purchase 5,000 shares of the Company’s common stock, at an exercise price of $0.030 per share. The options vest over a two year period and expire August 25, 2024. The quoted market price of the common stock at the time of issuance of the options was $0.030 per share. The fair value of the options totaled $164 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 1.43%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 255%.


On August 24, 2018, the Company granted one director options to purchase 5,000 shares of the Company’s common stock, at an exercise price of $0.045 per share. The options vest over a two year period and expire August 25, 2023. The quoted market price of the common stock at the time of issuance of the options was $0.045 per share.


On October 20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract remains in effect until terminated by either party providing 30 days written notice. During each of 2019 and 2018 we recorded consulting fees for Boxwood Associates, Inc. $24,000 and $24,000, respectively, under this agreement. A former member of our board of directors is President of Boxwood Associates, Inc.