|9 Months Ended
Sep. 30, 2018
|Subsequent Events [Abstract]
9. Subsequent Events
On October 5, 2018, the Company’s Board of Directors and majority stockholder approved an amendment to the Company’s articles of incorporation to increase the number of authorized common shares available for issuance to 500,000,000. The amendment to the Company’s articles of incorporation will be effective upon the filing of a Certificate of Amendment with the Nevada Secretary of State, which is expected to occur on or about November 14, 2018.
2014 Plan and Stock Option Awards
On October 5, 2018, the Company amended the 2014 Plan to increase the number of shares reserved for issuance to equal 10% of the number of issued and outstanding shares of common stock of the Company. On October 16, 2018, the Company filed a registration statement on Form S-8 to register the additional shares of common stock authorized for issuance under the 2014 Plan, as amended.
On October 5, 2018, the Company granted 350,000 options to purchase shares of common stock with an exercise price of $0.26 under the 2014 Plan to a member of management. The options vest 25% upon the date of grant and 1/36th on each of the next thirty-six months thereafter.
On October 10, 2018, the Company granted a total of 1,400,000 non-qualified stock options to purchase shares of common stock to the Directors of the Company under the 2014 Plan. The options have an exercise price of $0.305 per share and vest in equal monthly installments over a one-year period commencing on the date of grant.
Multi-Draw Credit Agreement and Issuance of Warrants
On October 5, 2018, the Company entered into a Multi-Draw Credit Agreement (the “Credit Agreement”) with Emerald, a related party. The Credit Agreement provides for a credit facility to the Company of up to $20,000,000 and is unsecured. Advances under the Credit Agreement bear interest at an annual rate of 7% (payable quarterly in arrears) and mature on October 5, 2022. At Emerald’s election, advances and unpaid interest may be converted into Common Stock at a fixed conversion price of $0.40, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc. The net proceeds of each advance shall be used for general corporate purposes and are subject to approval by the Company’s Board of Directors.
The Credit Agreement provides for customary events of default which may result in the acceleration of the maturity of the advances in addition to, but not limited to, cross acceleration to certain other indebtedness of the Company or a change in control. In the case of an event of default arising from specified events of bankruptcy or insolvency or reorganization, all outstanding advance will become due and payable immediately without further action or notice. If any other event of default under the Credit Agreement occurs or is continuing, Emerald may, by written notice, terminate its commitment to make any advances and/or declare all the advances with any other amounts payable due and payable immediately. If any amount under the Credit Agreement is not paid when due, such overdue amount shall bear interest at an annual default interest rate of the applicable rate plus 10%, until such amount is paid in full.
In connection with each advance under the Credit Agreement, the Company has agreed to issue Emerald warrants to purchase shares of common stock in an amount equal to 50% of the number of shares of common stock that each advance may be converted into. The warrants have an exercise price of $0.50 per share, a term of five years and will be immediately exercisable upon issuance. The exercise price is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events or upon any distributions of assets, including cash, stock or other property to the Company’s shareholders.
On November 1, 2018, the Company effected an initial draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.
On October 5, 2018, the Board appointed Dr. Avtar Dhillon, the Chairman, Chief Executive Officer and President of Emerald, as the Executive Chairman of the Company’s Board of Directors.
On October 10, 2018, the Company amended its policy for the compensation of its non-employee directors as follows:
Non-employee directors who serve as members of special committees of the Board will receive additional compensation as follows: