CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The Governance Committee has responsibility for reviewing and, if appropriate, for approving any related party transactions that would be required to be disclosed pursuant to applicable SEC rules.
As previously disclosed in our Current Report on Form 8-K filed with the SEC on January 1, 2023, we entered into a securities purchase agreement (“SPA”) with certain accredited investors, pursuant to which we agreed to issue and sell to the investors in a private placement transaction (i) up to $15,000,000 in aggregate principal amount of senior secured promissory notes (the “Senior Secured Notes”), and (ii) warrants (the “Related Warrants”) to purchase up to an aggregate of 7,500,000 shares of our common stock. In connection with the initial closing on January 18, 2023, the Company issued $12,500,000 in aggregate principal amount of Senior Secured Notes and Related Warrants to purchase 6,250,000 shares of common stock, resulting in proceeds to the Company of $12,500,000 before reimbursement of expenses. We have a material relationship with two of the investors, (i) Robert A. Berman, our Chief Executive Officer and Chairman, and (ii) Arctis Global Master Fund Limited (“Arctis”), an affiliate of Arctis Global, LLC, a 11.4% holder of our common stock based on its Schedule 13G/A filed with the SEC on February 14, 2024. Mr. Berman and Arctis invested $2,000,000 and $6,500,000, respectively, in connection with the $12,500,000 initial closing of the private placement. Mr. Davenport serves as Chief Operating Officer for Arctis Global, LLC, the manager of Arctis. On March 4, 2024, the Company early redeemed all $12,500,000 of its outstanding Senior Secured Notes and no longer has any obligations thereunder. On June 20, 2024, the Company entered into a Warrant Exercise Agreement (the “Agreement”) with certain holders of the January 2023 Warrants (each an “Exercising Holder” and collectively, the “Exercising Holders”), pursuant to which the Exercising Holders have agreed to exercise their January 2023 Warrants in-full for cash, in exchange for shares of Common Stock underlying the Warrants (the “Warrant Shares”) for $1.40 per share, reflecting a premium to the last reported trading price per share of $1.36 on The Nasdaq Capital Market on June 20, 2024. In consideration for the Company’s agreement to reduce the exercise price of the January 2023 Warrants by forty percent (40%), the Exercising Holders agreed to a concomitant reduction in the number of shares into which the January 2023 Warrants are exercisable, from 5,250,000 to 3,675,000. The Warrant Shares will be issued to each Exercising Holder upon receipt by the Company of payment in cash of the aggregate exercise price for the Exercising Holder’s January 2023 Warrants.
On May 16, 2024, Mr. Mehta was appointed to the Board. In connection with his appointment, Mr. Mehta was provided a one-time grant of 72,000 restricted stock units on May 31, 2024, in addition to customary Board compensation, in consideration of certain oversight tasks that were completed by Mr. Mehta in 2024.
Other than as described above, since January 1, 2022, there have been no transactions to which the Company was a party in which:
• | The amounts involved exceeded or will exceed the lower of either $120,000 or 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years; and |
• | A director, executive officer, holder of more than 5% of the outstanding capital stock of the Company, or any member of such person’s immediate family had or will have a direct or indirect material interest. |
Review and Approval, or Ratification of Transactions with Related Parties
Under our Code of Conduct, all Company personnel are required to seek review of and obtain approval or ratification of any Company transaction which involves them or certain family members or businesses they have economic interests in. The Charter of our Governance Committee also requires that any transaction with a related person that must be reported under applicable rules of the SEC must be reviewed and either approved, disapproved or ratified by our Governance Committee.
In February 2020, to further implement these requirements, the Board of Directors adopted a Conflict of Interest and Related Parties Transaction Policy upon the recommendation of the Governance Committee. In the case of all directors and senior officers, this policy requires review and approval of such transactions to be obtained by a subcommittee of the Governance and Nominations Committee that consists entirely of directors without any personal, business or family interest in the transaction.
