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Related Party Transactions

12 Months Ended

Dec. 31, 2018

Note 5 - Related Party Transactions

Advances from Related Parties

From time to time, stockholders of the Company advance funds to the Company for working capital purposes. Those advances are unsecured, non-interest bearing and due on demand.

As of December 31, 2018 and December 31, 2017, the outstanding amounts of the advances from related parties was approximately $36,000 and $308,000, respectively. For the year ended December 31, 2018, the Company repaid $15,000 in advances to Jerome Feldman and $7,000 to Steven Fludder, our former Chief Executive Office, and $250,000 was converted into preferred stock. See Note 6 for more details on advances converted to preferred stock.

Appointment of Chief Financial Officer

On February 23, 2017, the Board of Directors of the Company appointed Nathan Wasserman to become Chief Financial Officer of the Company, effective as of March 1, 2017. Pursuant to a term sheet dated February 27, 2017, Mr. Wasserman agreed to serve as the Company’s Chief Financial Officer for an initial term of three years. The Company granted Mr. Wasserman stock options to purchase a total of 500,000 shares of common stock at an exercise price of $1.10 per share, of which 150,000 vested immediately, 150,000 vested in his second year of service and 200,000 will vest in his third year of service. Mr. Wasserman receives salary of $5,000 per month.

Appointment of Chief Executive Officer

On November 11, 2017, the Company appointed Sam Pitroda to serve as the Company’s new Chief Executive Officer. Since that time, Mr. Pitroda has served as CEO without an employment agreement. The Company and Mr. Pitroda are in discussions to finalize the terms of the employment agreement, although there can be no assurances that an agreement will be reached. On May 31, 2018, the board of directors approved to grant Mr. Pitroda an option to purchase 7,000,000 shares of the Company’s common stock at an exercise price of $2.08 per share. The option expires seven years from the option grant date. The stock subject to the option will vest upon the earlier to occur of (1) the five-year anniversary of the option grant date or (2) the achievement of certain stock price and volume milestones, which are as follows:

Common stock price closes at or above		For 20 consecutive business days, with average daily volumn in excess of		Total option shares that become vested on satisfaction of conditions
$	3.00		20,000	2,000,000 (28.5%)
$	6.00		40,000	4,000,000 (51.7%)
$	11.00		60,000	7,000,000 (100.0%)

The total fair value of this option award on the grant date was approximately $7.6 million. The fair value of the option award was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 2.7%, volatility – 78.0%, expected term – 4 years and dividends– N/A. The Company will amortize the option over its service period of 4.09 years which was derived from a Monte Carlo simulation. Stock-based compensation expense for this option recognized for the year ended December 31, 2018 was $1.1 million.

On February 8, 2018, Sam Pitroda through Pitroda Group LLC invested $500,000 and the Company issued 500 Series A Preferred Stock and 250,000 warrants to purchase the Company’s common stock. The warrants have a 5-year term and an exercise price of $2.00.

On September 1 2017, Steven Fludder, former CEO, resigned from the Company. On June 22, 2018, the Company vested 150,000 stock options that would have been forfeited. The Company recorded additional stock compensation expense of $234,000 related to this stock option modification.