UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 2020
HANNOVER HOUSE, INC.
(Exact name of registrant as specified in its charter)
| Wyoming | 000-28723 | 91-1906973 | ||
| (State
or other jurisdiction of incorporation) |
(Commission
File Number) |
(IRS
Employer Identification No.) |
| 355 N. College Ave | ||
| Fayetteville, AR | 72701 | |
| (Address of principal executive offices) | (Zip Code) |
| 818-481-5277 |
| (Registrant’s telephone number, including area code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
As of the date of this filing, Issuer Hannover House, Inc. (symbol OTC: HHSE) has not yet registered its securities. The company’s stock shares are currently being traded on the OTC Markets Pinksheets Exchange. Issuer is in the process of completing the filing of a Form 10 Registration imminently, after which time, the company’s shares will become registered with the Securities and Exchange Commission.
Section 1 - Registrant’s Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
A). Theatrical Distribution Pact with Snowy Morning, Inc. – On November 15, 2019, Company entered into an agreement with Snowy Morning, Inc. regarding the licensing of the North American distribution rights to the motion picture “WILDFIRE,” now in production. Over the course of the next six months, Company shall advance or cause to be paid on behalf of Snowy Morning, Inc. sums not to exceed one-hundred-fifty-thousand dollars (USD $150,000) as a recoupable advance against theatrical releasing revenues otherwise due to Snowy Morning, Inc. under the distribution pact with Company. As of the date of this filing, Company has provided $41,641 to Snowy Morning, Inc. to assist with the ongoing production and post production of the film “WILDFIRE.” Hannover House, Inc. CEO Eric Parkinson has been providing services on a non-exclusive, work-for-hire basis to Snowy Morning, Inc. regarding Parkinson’s services in co-writing, co-producing and directing of this feature film. Company shall not be responsible for any of the other costs or obligations of Snowy Morning, Inc. as a result of Company’s agreement to advance recoupable sums to Snowy Morning, Inc. for the completion of “WILDFIRE.” Snowy Morning, Inc. shall retain all other distribution and intellectual property rights (including international, home video, streaming and television), but Hannover House, Inc. shall retain a lien against any other domestic revenues in the event that net theatrical collections from the release of the film to theatres in North America are not sufficient to pay to Hannover House it’s applicable fees, plus recoupment of marketing and releasing costs, plus recoupment of advances paid to Snowy Morning, Inc. by Hannover House, Inc. under this agreement.
B). Engagement of M2 Compliance for S.E.C. Reporting and Filing – In anticipation of the Company’s filing of the Form 10 Registration Statement (and a separate filing for an additional registration of securities), Company has engaged M2 Compliance for the formatting, XBRL Conversion work and direct submissions to the S.E.C. Edgar Database. The initial term of the engagement for M2 Compliance is one (1) year.
C). Engagement of Interim Chief Financial Officer – Company has entered into an agreement with CPA and financial services executive Randall Blanton, to perform work for the Company as interim C.F.O., including recent and ongoing assistance with the preparation and review of Company reports and documents for the Form 10 Registration and the required audits for the Form 10. After Company’s registration with the S.E.C. is approved, Company intends to purchase “Directors and Officers Liability Insurance Coverage” for all principal managers and board members. Mr. Blanton’s initial commitment is for the interim period of ninety (90) days; however, Blanton has expressed his willingness to join Hannover House, Inc. on a full-time basis at such time that the Directors and Officers Liability Insurance Coverage is in place.
Item 1.02 Termination of a Material Definitive Agreement.
NOT APPLICABLE
Item 1.03 Bankruptcy or Receivership.
NOT APPLICABLE
Item 1.04 Mine Safety – Reporting of Shutdowns and Patterns of Violations.
NOT APPLICABLE
Section 2 - Financial Information
Company’s balance sheet and notes as of the 12-month period ending Dec. 31, 2019 are included in this information filing under Section 9 below.
Item 2.01 Completion of Acquisition or Disposition of Assets.
SEE ITEM 1.01-A above.
Item 2.02 Results of Operations and Financial Condition.
SEE SECTION 9
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
NOT APPLICABLE
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
NOT APPLICABLE
Item 2.05 Costs Associated with Exit or Disposal Activities.
NOT APPLICABLE
Item 2.06 Material Impairments.
NOT APPLICABLE
Section 3 - Securities and Trading Markets
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
NOT APPLICABLE
Item 3.02 Unregistered Sales of Equity Securities.
NOT APPLICABLE
Item 3.03 Material Modification to Rights of Security Holders.
NOT APPLICABLE
Section 4 - Matters Related to Accountants and Financial Statements.
NOT APPLICABLE
Item 4.01 Changes in Registrant’s Certifying Accountant.
NOT APPLICABLE
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
NOT APPLICABLE
Section 5 - Corporate Governance and Management Item 5.01 Changes in Control of Registrant.
NOT APPLICABLE
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
NOT APPLICABLE
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The Company has amended its Bylaws to include a Corporate Code of Ethics, attached hereto as Exhibit “A.”
Item 5.04 Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans.
NOT APPLICABLE
Section 5.06 -Change in Shell Company Status.
NOT APPLICABLE
Item 5.07 Submission of Matters to a Vote of Security Holders.
NOT APPLICABLE
Item 5.08 Shareholder Director Nominations
NOT APPLICABLE
Section 6 -Asset-Backed Securities.
NOT APPLICABLE
Item 6.01 ABS Informational and Computational Material.
NOT APPLICABLE
Item 6.02 Change of Servicer or Trustee.
NOT APPLICABLE
Item 6.03 Change in Credit Enhancement or Other External Support.
NOT APPLICABLE
Item 6.04 Failure to Make a Required Distribution.
NOT APPLICABLE
Item 6.05 Securities Act Updating Disclosure.
NOT APPLICABLE
Item 6.06 Static Pool.
NOT APPLICABLE
Section 7 - Regulation FD
NOT APPLICABLE
Item 7.01 Regulation FD Disclosure.
NOT APPLICABLE
Section 8 - Other Events
Item 8.01 Other Events.
Section 9 - Financial Statements and Exhibits
A). Financial Results are listed in item 9.01 below and included in the following pages;
B). Company Code of Ethics addendum to Corporate Bylaws are attached as Exhibit “A” following officer signature.
Item 9.01 Financial Statements and Exhibits.
| EX 1 | SEE COMPANY BALANCE SHEET, NOTES AND INCOME STATEMENTS FOR THE 12-MONTH PERIOD ENDING DEC. 31, 2019 ON THE FOLLOWING PAGES. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HANNOVER HOUSE, INC. | ||
| (Registrant) | ||
| Date: March 02, 2020 | ||
| /s/ Eric F. Parkinson | ||
| By: | ERIC F. PARKINSON | |
| Chairman, C.E.O. & Secretary | ||
Exhibit 1
HANNOVER HOUSE, INC.
Consolidated Balance Sheet / As of December 31, 2019 (Unaudited)
| 9/30/2019 | 12/31/2019 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash & Cash Equivalents | 522 | 294 | ||||||
| Accounts Receivable, Net | 501,487 | (1) | 282,652 | |||||
| Prepaid Wages | - | - | ||||||
| Merchandise Inventory | 100,704 | 100,704 | ||||||
| Prepaid Advertising | 765,000 | 765,000 | ||||||
| Prepaid Producer Royalties | 2,447,674 | 2,454,674 | ||||||
| Producer Marketing Recoupment | 3,016,762 | 3,016,762 | ||||||
| Film Distribution Rights | 1,996,379 | 1,996,379 | ||||||
| Film Production Investments | 469,389 | 469,389 | ||||||
| Notes Receivable and Net Recoupment | - | (2) | 41,641 | |||||
| TOTAL CURRENT ASSETS | 9,297,917 | 9,127,495 | ||||||
| PROPERTY & EQUIPMENT | ||||||||
| Office Furnishings, Equip. & Film Gear | 154,725 | 154,725 | ||||||
| Less Accumulated Depreciation | (37,164 | ) | (37,164 | ) | ||||
| Vehicles | - | - | ||||||
| Less Accumulated Depreciation | - | - | ||||||
| Real Property | - | - | ||||||
| TOTAL PROPERTY & EQUIPMENT | 117,561 | 117,561 | ||||||
| OTHER ASSETS | ||||||||
| FILM & TV LIBRARY (incl. VODWIZ)* | 27,413,517 | 27,413,517 | ||||||
| TOTAL OTHER ASSETS | 27,413,517 | 27,413,517 | ||||||
| 36,828,995 | 36,658,573 | |||||||
HANNOVER HOUSE, INC.
Consolidated Balance Sheet / As of December 31, 2019 (Unaudited) – CONTINUED
| 6/30/2019 | 6/30/2019 | |||||||
| LIABILITIES & SHAREHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | 26,545 | 27,545 | ||||||
| Accrued Royalties | 94,065 | 94,065 | ||||||
| Acquisition Advances Due | 285,399 | 285,399 | ||||||
| Accrued Wages | 122,182 | 122,182 | ||||||
| Payroll Taxes Payable | - | - | ||||||
| Deferred Income Tax Payable | - | - | ||||||
| NB Cal AFIL P&A Loan | 80,000 | 80,000 | ||||||
| Hounddog P&A Note (EFG) | 331,025 | 331,025 | ||||||
| Interest on Hounddog Note | 399,774 | 399,774 | ||||||
| Shuttlewood Investments | - | (3) | - | |||||
| Interest on Shuttlewood Note | - | - | ||||||
| Graham Financial Services Note | 85,000 | (4) | 85,000 | |||||
| Interest on Graham Note | 4,200 | |||||||
| Short Term Notes (Various) | 552,885 | 562,385 | ||||||
| Interest on Short Term Notes | 40,495 | 45,750 | ||||||
| Bank of Fayetteville Note | 15,000 | 15,000 | ||||||
| Interest on B.O.F. Note | - | - | ||||||
| TOTAL CURRENT LIABILITIES | 2,036,570 | 2,048,125 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-Term Payables | 1,017,667 | 1,033,382 | ||||||
| Executive Salary Deferrals | 766,415 | 766,415 | ||||||
| Lewin Foreign Judgment | 1,629,442 | (5) | 1,629,442 | |||||
| Contingent Legal Liabilities | 727,022 | (6) | 727,022 | |||||
| Officer Notes Payable | 115,670 | 115,670 | ||||||
| TOTAL LONG-TERM LIABILITIES | 4,256,216 | 4,271,931 | ||||||
| TOTAL OF ALL LIABILITIES | 6,292,786 | 6,320,056 | ||||||
| SHAREHOLDER’S EQUITY | ||||||||
| Common Stock | 26,665,505 | 26,518,209 | ||||||
| Retained Earnings | 3,870,704 | 3,820,308 | ||||||
| TOTAL SHAREHOLDER’S EQUITY | 30,536,209 | 30,338,517 | ||||||
| 36,828,995 | 36,658,573 | |||||||
Additional Footnotes to Balance Sheet
(for the three-month and twelve-month period ending December 31, 2019)
| (1) | Accounts Receivable has been adjusted to include mark-downs for DVD price reductions, as well as other reconciliation activities relating to the application of credits for returns and other payment credits. |
| (2) | Notes Receivable includes a loan made by the company to Snowy Morning, Inc. in the amount of $41,641 to assist with production costs for the film “WILDFIRE,” which loan is to be considered as a fully-recoupable advance against Snowy Morning’s share of theatrical revenues in the film. Company holds a lien against other revenue sources, in the event that the producer’s share of net theatrical revenues from “WILDFIRE” is not sufficient to fully repay the loan. |
| (3) | Mutual Agreement made during Q3 (2018) (for Hannover House to waive its ongoing distribution rights to the film “Daisy Winters” in satisfaction of the Shuttlewoods P&A note) has come into question in the timeframe following the close of this reporting period. In late April (2019) company was made aware of a lawsuit filed in Orange County, California, seeking to enforce payment of the P&A note, despite the prior agreement to rescind distribution rights to the film, “Daisy Winters.” Company will respond to this filing, first with a motion to dismiss based on the clear jurisdiction in the two agreements specifying disputes be heard in Washington County, Arkansas. If the lawsuit proceeds, Company will move to dismiss based on the settlement agreement; as well as the clear integration of rights being granted to Hannover House in the film as being required consideration for the acceptance of the P&A repayment obligations. If this dispute proceeds, Hannover House will issue applicable cease-and-desist letters to all subsequent distributors and sublicensors of the film, in order to protect the potential obligation of Hannover House to repay the P&A loan, should the producers of “Daisy Winters” prevail. Hannover House implemented a theatrical release of the film onto 95 theatres on Dec. 1, 2017, the box office results for which did not meet the producer’s expectations. Despite successfully placing the film for home video release through Sony (and streaming via Netflix), the producers of the film requested that Hannover House terminate the future distribution rights to the film and in consideration, the P&A notes were to be waived. Hannover House is confident that it would be easy to generate $330,000 in revenues from the film, should the distribution rights revert back, and the obligation to pay the P&A notes be restored. |
| (4) | Company executed two new notes with Graham Financial Services, Inc., in the amounts of $55,000 on Nov. 18, 2019 and $31,400 on Nov. 28. 2019. The prior Graham notes were sold to a non-affiliate, eligible party for conversion into shares, as per the terms of the note and assignment options. As of the date of this filing, conversion shares have not been issued. |
| (5) | Company has engaged counsel to move to set-aside this foreign judgment and locally filed writ, on the basis of fraud, personal jurisdiction and subject matter jurisdiction. The absence of an agreement between Company and Lewin, as well as the additional prohibition on HHSE officers from issuing “personal guarantees” as represented by Plaintiff Lewin, will support the motion for dismissal. |
| (6) | Upon advice of counsel, Company is also reserving an additional amount of $727,722 regarding three foreign cases, as the potential liability that could occur should the Company not prevail in actions for dismissal or adjudication in Arkansas. |
STATEMENT OF INCOME – for the Three and Twelve Month Periods ending December 31, 2019
| Q1 | Q2 | Q3 | Q4 | Y/E | ||||||||||||||||
| 2019 | 2019 | 2019 | 2019 | 12/31/2019 | ||||||||||||||||
| REVENUES (all media, fees & licenses) | $ | 36,471 | $ | 53,044 | $ | 11,644 | $ | 8,516 | $ | 109,675 | ||||||||||
| Net, Collected Revenues | 36,471 | 15,545 | 11,644 | 8,516 | 72,176 | |||||||||||||||
| Additional Invoiced Sales | 78,460 | 78,460 | ||||||||||||||||||
| Reserve for Potential Returns | - | - | - | - | - | |||||||||||||||
| ADJUSTED REVENUES FOR PERIOD | 114,931 | 53,044 | 11,644 | 8,516 | 188,135 | |||||||||||||||
| - | ||||||||||||||||||||
| COST OF SALES | - | |||||||||||||||||||
| Commissions | - | - | - | - | - | |||||||||||||||
| Sales and Marketing | 7,006 | - | - | - | 7,006 | |||||||||||||||
| Video Mfg & Releasing Costs | - | - | - | - | - | |||||||||||||||
| Film & Book Royalties | 440 | - | - | - | 440 | |||||||||||||||
| Freight | 1,009 | - | - | - | 1,009 | |||||||||||||||
| Other Expenses (Ads, PR, Publicity) | 3,452 | - | - | - | 3,452 | |||||||||||||||
| - | ||||||||||||||||||||
| TOTAL COST OF SALES | 11,906 | - | - | - | 11,906 | |||||||||||||||
| GROSS PROFIT | 103,025 | 53,044 | 11,644 | 8,516 | 176,229 | |||||||||||||||
| - | ||||||||||||||||||||
| GENERAL AND ADMINISTRATIVE EXP. | 42,692 | 16,614 | 10,075 | 45,381 | 114,762 | |||||||||||||||
| - | ||||||||||||||||||||
| INCOME FROM OPERATIONS | 60,333 | 36,430 | 1,569 | (36,865 | ) | 61,467 | ||||||||||||||
| - | ||||||||||||||||||||
| INTEREST EXPENSES | 12,099 | 11,574 | 22,848 | 13,531 | 60,052 | |||||||||||||||
| - | ||||||||||||||||||||
| OTHER EXPENSES (SALARY DEFERRALS) | - | - | - | - | - | |||||||||||||||
| - | ||||||||||||||||||||
| INCOME BEFORE TAXES | 48,234 | 24,856 | (21,279 | ) | (50,396 | ) | 1,415 | |||||||||||||
| - | ||||||||||||||||||||
| PROVISION FOR INCOME TAXES | - | - | - | - | - | |||||||||||||||
| - | ||||||||||||||||||||
| NET INCOME | $ | 48,234 | $ | 24,856 | (21,279 | ) | (50,396 | ) | $ | 1,415 | ||||||||||
| RETAINED EARNINGS (Beginning of Period) | 3,818,893 | 3,867,127 | 3,891,983 | 3,870,704 | ||||||||||||||||
| RETAINED EARNINGS (End of Period) | 3,867,127 | 3,891,983 | 3,870,704 | 3,820,308 | ||||||||||||||||
EXHIBIT INDEX
| Exhibit A | Description | |
| Adherence to Code of Ethics (addendum to Corporate Bylaws) |
EXHIBIT “A” TO CORPORATE BYLAWS
ADHERENCE TO CODE OF ETHICS STANDARDS
Pursuant to 17 C.F.R. § 229.406, promulgated by the Securities and Exchange Commission to implement section 406 of the Sarbanes-Oxley Act of 2002, a company subject to reporting requirements under the Securities Exchange Act of 1934 must disclose whether or not it has adopted a written code of ethics applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and if no such code has been adopted, why not.
The Company believes that this Code of Ethics is reasonably designed to deter wrongdoing and to promote the purposes set forth in 17 C.F.R. § 229.406. The Company also believes that this Code of Ethics promotes an atmosphere of self-awareness and prudent conduct by encouraging and protecting the reporting of questionable behavior in accordance with OTC Market Guidelines. As used herein, “Company” means Hannover House, Inc. and its subsidiaries Medallion Releasing, Inc. and Bookworks, Inc.
A. Scope.
This Code of Ethics applies to all directors, officers and employees of the Company.
B. Purpose.
The Company is proud of the values with which it conducts business. It has and will continue to uphold the highest levels of business ethics and personal integrity in all types of transactions and interactions. To this end, the Company’s Code of Ethics serves to (1) emphasize the Company’s commitment to ethics and compliance with the law; (2) set forth the Company’s basic standards of ethical and legal behavior for its directors, officers and employees; (3) elaborate reporting mechanisms for known or suspected ethical or legal violations and for other questionable behavior; and (4) deter and detect wrongdoing.
Given the variety and complexity of ethical questions that may arise in the course of the Company’s business, this Code of Ethics serves only as a rough guide. Confronted with ethically ambiguous situations, all directors, officers and employees should remember the Company’s commitment to the highest ethical standards and seek independent advice, where necessary, to ensure that all actions they take on behalf of the Company honor this commitment.
C. Ethical Standards.
1. Honest and Ethical Conduct.
All directors, officers and employees shall behave honestly and ethically at all times and with all people. They shall act in good faith, with due care, and shall engage only in fair and open competition, by treating ethically competitors, suppliers, customers and colleagues. They shall not misrepresent facts or engage in illegal, unethical, or anti-competitive practices for personal or professional gain. No director, officer or employee may offer or accept bribes, kickbacks or substantial gifts either directly or through another party.
This fundamental standard of honest and ethical conduct extends to the handling of conflicts of interest. All directors, officers and employees shall avoid any actual, potential, or apparent conflicts of interest with the Company and any personal activities, investments or associations that might give rise to such conflicts. They shall not use the Company for personal gain, self-deal, compete with the Company or take advantage of corporate opportunities other than on behalf of the Company. They shall act on behalf of the Company free from improper influence or the appearance of improper influence on their judgment or performance of duties. There is a likely conflict of interest if, for example, a director, officer or employee causes the Company to engage in business transactions with relatives or friends; receives loans or guarantees of obligations from the Company (or a third party because of his or her relationship to the Company); has more than a modest financial interest in the Company’s competitors, suppliers, or customers; or uses non-public information for personal gain or for gain by relatives or friends.
If a director, officer or employee involved in a particular decision has a relationship—business, financial, or otherwise—with a competitor, supplier, customer, candidate for employment or other person, that might impair or appear to impair his or her independence in making that decision, he or she shall disclose such relationship to the Chairman of the Audit Committee. No action may be taken with respect to the transaction or party giving rise to the actual, potential or apparent conflict unless and until such action has been approved by the Audit Committee.
2. Timely and Truthful Disclosure.
In reports and documents filed with or submitted to the Securities and Exchange Commission and other regulators, and in other public communications made by the Company, the Company’s directors, officers and employees involved in the preparation of such reports, documents and communications shall make disclosures that are full, fair, accurate, timely and understandable. Such disclosures shall contain thoroughly and accurately reported financial and accounting data. No director, officer or employee shall knowingly conceal or falsify information, misrepresent material facts or omit material facts necessary to avoid misleading the Company’s independent public auditor or the public.
3. Legal Compliance.
In conducting the business of the Company, all directors, officers and employees shall comply with applicable governmental laws, rules and regulations at all levels of government in the United States and in any non-U.S. jurisdiction in which the Company does business. If a director, officer or employee is unsure whether a particular action would violate an applicable law, rule, or regulation, he or she should seek the advice of the Company’s outside counsel before undertaking it. It is always illegal to trade in the Company’s securities while in possession of material, non-public information, and it is also illegal to communicate or “tip” such information to others.
4. Confidentiality.
The Company’s directors, officers and employees shall take all reasonable steps to protect the confidentiality of non-public information about the Company and its customers and to prevent the unauthorized disclosure of such information unless required by applicable law or regulation or legal or regulatory process.
5. Conflicts of Interest.
The Company’s directors, officers and employees shall take all reasonable steps to avoid any and all forms of “conflict of interests” which either directly or indirectly benefit the individual over the Company, or which appear to conflict with the impartial and objective performance of an individual’s duty to the Company. A conflict of interest shall include any situation under which a director, officer, or employee takes actions or has interests that may make it difficult to perform his or her work on behalf of the Company in an objective and effective manner. Conflicts of interest may also arise when a director, officer, or employee, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. Loans to, or guarantees of obligations of, employees and their immediate family members shall also constitute an unacceptable conflict of interest.
D. Violations of Ethical Standards.
1. Reporting Known or Suspected Violations.
The Company’s directors and executive officers shall promptly report any known or suspected violations of this Code of Ethics and any other questionable behavior to the Chairman of the Audit Committee. No retaliatory action of any kind will be permitted against anyone making such a report, and the Audit Committee will strictly enforce this prohibition.
Upon learning of any unethical business conduct, or dishonest or illegal acts, the Audit Committee shall investigate the report as it deems appropriate and provide feedback to the reporting party (unless such party is anonymous) as to the result of its investigation.
2. Accountability for Adherence.
If the Audit Committee determines that this Code of Ethics has been violated directly or by failure to report a violation, withholding information related to a violation or taking prohibited retaliatory action against someone who reported questionable behavior, it may discipline the offending director, officer or employee for non-compliance with penalties up to and including removal from office or dismissal. Such penalties may include, depending upon the severity of the infraction, oral or written reprimands, the withholding of bonuses, the deduction of some or all of the person’s earned deferred management compensation, the forfeiture of director stipends, removal from committees of the Board of Directors and, if warranted, termination. In addition, violations may result in criminal penalties and/or civil liabilities for the offending director, officer or employee and/or the Company.
E. Waivers
Excepting as may be prohibited under regulations or procedures as set forth by the Securities and Exchange Commission, the Company’s Board of Directors, in its discretion, may grant a waiver of a provision of this Code of Ethics to any director, officer or employee. If the waiver is granted for a director or executive officer, a current report on Form 8-K must be filed with the Securities and Exchange Commission in accordance with the applicable rules and regulations of the Commission and the OTCQB Market.