Annual report pursuant to Section 13 and 15(d)

RELATED PARTY TRANSACTIONS

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RELATED PARTY TRANSACTIONS
12 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS
7. RELATED PARTY TRANSACTIONS

Notes: Conversion of Notes

 

Between September 22, 2014, and August 16, 2016, the Company raised an aggregate principal amount of $6.0 million in Notes, which along with $317,000 of interest thereon, were converted on September 21, 2016 into 1,263,406 shares of Common Stock at $5.00 per share. Of the $6.0 million of Notes sold by the Company, $5.3 million were purchased by directors, an officer and greater than 5% shareholders of the Company and converted into shares as follows.

 

   

Principal Investment

in Convertible Notes 

 

Interest Earned

At conversion

 

Shares Issued

on conversion

RSJ (1) $ 2,100,000     122,200     444,454  
John Pappajohn (2)   1,600,000     52,500     290,498  
Tierney Family Trust (3)   640,000     46,600     137,328  
Follman Family Trust (4)   550,000     20,400     114,074  
Robin Smith MD (5)   100,000     3,900     20,776  
Geoffrey Harris (6)   10,000     300     2,058  
George Carpenter (7)   100,000     1,300     20,254  
Oman Ventures (8)   200,000     20,400     44,089  
    $ 5,300,000     267,600     1,073,531  

 

  (1) RSJ is a greater than 10% shareholder. Michal Votruba, a Director for Life Sciences for the RSJ/Gradus Fund, joined our Board on July 30, 2015.

  (2) John Pappajohn is a member of the Board. He purchased $1,600,000 of Notes of which $200,000 were assigned to four accredited investors on September 6, 2015. Approximately $10,400 of the total interest was attributable to such transferred Notes, resulting in an aggregate of 42,084 shares being issued upon the conversion of such transferred Notes.

  (3) Thomas Tierney is a trustee of the Tierney Family Trust. Mr. Tierney was a member of our Board between September 2016 and July 2017, and prior to that, between February 2013 and May 2015. The Tierney Family Trust is a greater than 5% shareholder of the Company.

  (4) Robert Follman is a trustee of the Follman Family Trust and was a member of the Board through July 2017.

  (5) Dr. Robin Smith is the Chairman of the Board.

  (6) Geoffrey Harris is a member of the Board and Chairman of the Audit Committee.

  (7) George Carpenter is the CEO of the Company.

  (8) Mark & Jill Oman are the beneficial owners of Oman Ventures and were greater than 5% shareholders of the Company.

 

Cancellation of Warrants

 

In connection with the issuance of Notes, the Company also issued Warrants to the purchasers of the Notes, including the affiliates referenced above under “— Notes; Conversion of Notes “. Upon conversion of the Notes on September 21, 2016, the Company also cancelled all Warrants issued in connection with such Notes. See Note 3, Stockholders Equity—Common and Preferred Stock— Conversion of Notes and Cancellation of Warrants”, for additional detail.

 

Transactions with RSJ, Greater than 5% Stockholder

 

RSJ participated in the Convertible Debt Financing. Please see “—Issuance and Mandatory Conversion of Senior Convertible Notes” and “—Cancellation of Warrants” above for more information. 

 

On March 20, 2017, the Company entered into a subscription agreement (the “Subscription Agreement”) pursuant to which it sold and issued an aggregate of 160,000 shares of Common Stock, at a price of $6.25 per share, in a private placement to RSJ, for which the Company received gross cash proceeds of $1,000,000. RSJ is a greater than 10% shareholder. Michal Votruba, a Director for Life Sciences for the RSJ/Gradus Fund, joined our Board on July 30, 2015. Pursuant to the Subscription Agreement, the private placement is not subject to a minimum or maximum amount, and the Company cannot provide any assurances that it will receive any additional amount of proceeds in the private placement. The subscription also provided for the grant to RSJ by the Company of a right of first refusal through June 30, 2018, to license or to have distribution rights in Europe with respect to any of the Company’s technology and/or intellectual property.

 

Transactions with John Pappajohn, Director

 

Mr. Pappajohn participated in the Convertible Debt Financing. Please see “—Issuance and Mandatory Conversion of Senior Convertible Notes” and “—Cancellation of Warrants” above for more information.

 

On November 30, 2016, December 29, 2016, February 10, 2017 and March 21, 2017 the Company sold and issued in aggregate 120,000 shares of its Common Stock, at a per share price of $6.25, in private placements to Mr. Pappajohn, who purchased common stock for $200,000, $100,000, $200,000 and $250,000 respectively resulting in gross cash proceeds to the Company of $750,000.  

  

Transactions with George Carpenter, President and Chief Executive Officer

 

Mr. Carpenter participated in the Convertible Debt Financing. Please see “—Issuance and Mandatory Conversion of Senior Convertible Notes” and “—Cancellation of Warrants” above for more information.

 

On September 25, 2013, the Board approved a consulting agreement effective May 1, 2013, for marketing services provided by Decision Calculus Associates (“DCA”), an entity operated by Mr. Carpenter’s spouse, Jill Carpenter. Effective August 2015, DCA was engaged at a fee of $10,000 per month, from August 2015 through February 2017. Effective March 1, 2017, DCA’s contract was renewed at $3,000 a month. For the fiscal years ended September 30, 2017 and 2016 DCA was paid $71,000 and $120,000 respectively.

  

Transactions with Tierney Family Trust, Greater than 5% Stockholder

 

The Tierney Family Trust participated in the Convertible Debt Financing. Please see “—Issuance and Mandatory Conversion of Senior Convertible Notes” and “—Cancellation of Warrants” above for more information.

 

Mr. Tierney resigned from the Board as a Director in July 2017. Mr. Tierney is a trustee of the Thomas T. and Elizabeth C. Tierney Family Trust (the “Tierney Family Trust”), which is a greater than 5% stockholder.

 

On November 30, 2016, the Company sold and issued 32,000 shares of its Common Stock, at a per share price of $6.25, in a private placement to the Tierney Family Trust, resulting in gross cash proceeds of $200,000.

  

Transactions with Robin L. Smith MD, Chairman of the Board

 

Dr. Smith participated in the Convertible Debt Financing. Please see “—Issuance and Mandatory Conversion of Senior Convertible Notes” and “—Cancellation of Warrants” above for more information.

 

On November 30, 2016, the Company sold and issued a 16,000 shares of its Common Stock, at a per share price of $6.25, in a private placement to Dr. Smith resulting in gross cash proceeds of $100,000. 

 

Transactions with Geoffrey E. Harris, Director

 

Mr. Harris participated in the Convertible Debt Financing. Please see “—Issuance and Mandatory Conversion of Senior Convertible Notes” and “—Cancellation of Warrants” above for more information.

 

On March 3, 2017, the Company sold and issued a 5,000 shares of its Common Stock, at a per share price of $6.25, in a private placement to Mr. Harris resulting in gross cash proceeds of $31,250.

  

Hooper Holmes Agreement

  

In 2016, we entered into an agreement with Hooper Holmes Inc, in which Dr. Smith, our Chairman of the Board, became an advisory member of its board as of March 16, 2017, and in which Mr. Pappajohn, our director, has participated in equity raises to become the beneficial owner of a greater than 10% interest. Hooper Holmes performs EEG’s nationwide to patients who wish to obtain a PEER report. The Company paid $20,300 and $0 for these services during the fiscal years September 30, 2017 and 2016 respectively.

 

Investment in Arcadian

 

On April 1, 2017, the Company entered into a Master Purchase and Option Agreement with Arcadian Telepsychiatry LLC (“Arcadian”), a Pennsylvania based Limited Liability Company and Mr. Robert Plotkin. Consideration paid for a 10% equity interest in Arcadian was in the form of (i) a $100,000 capital contribution to Arcadian and (ii) the issuance of 1,000 shares of Common Stock to Mr. Plotkin. On June 19, 2017, the Company made an additional $20,000 capital contribution to Arcadian. From July 6, 2017 through September 30, 2017 the Company made an additional $70,000 capital contribution to Arcadian. As of September 30, 2017 the Company’s cumulative equity interest in Arcadian is 19%.

 

Loan to Mr. Plotkin

  

As of September 30, 2017, Mr. Plotkin, President of Arcadian Telepsychiatry, had a personal loan with the Company with an outstanding balance of $297,000. Upon the subsequent acquisition of Arcadian on November 13, 2017, the loan was forgiven in its entirety.