Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
12. COMMITMENTS AND CONTINGENCIES

 

Leases

 

The Company currently leases office space at 354 Merrimack Street, Lawrence, MA 01843 on a month to month basis. Prior to this location, we leased office space at 233 Needham Street, Newton MA 02464. This lease expired July 31, 2016 and no further obligation exists. During 2015, we leased an office located at 1750 Elm Street, Suite 103, Manchester, NH 03104. The Company abandoned the Manchester NH lease in October of 2015. In March 2016, the Company and the landlord agreed to settle the remaining lease obligation for a one-time payment of $152,000. The Company has no future obligation under the lease. The Company recognized rent expense of $4,355 and $188,938 during the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, there was $0 and $18,163, respectively, of deferred rent included in accrued expenses and other current liabilities in the accompanying balance sheets. There are no future minimum lease payments as of December 31, 2016.

 

Employment Agreement

 

The Company entered into an Employment Agreement with Carl W. Rausch pursuant to which Mr. Rausch was engaged as the Chief Executive Officer of the Company for a period of three years. Mr. Rausch was initially required to relocate from Hong Kong to the United States. However, due to his continued efforts in Hong Kong, the Company and Mr. Rausch, in March 2017, have amended the employment agreement to remove the provision requiring Mr. Rausch to relocate to the United States. Mr. Rausch received a signing bonus of $60,000 and an annual salary of $224,000, which will be increased to $264,000 upon Mr. Rausch relocating to the United States. Further, upon the Company being listed on a national exchange, Mr. Rausch’s salary will be increased by $20,000. The Company shall grant Mr. Rausch a Stock Option (the "Rausch Option") to acquire an aggregate of 6,000,000 shares of common stock of the Company, exercisable for five (5) years, subject to vesting. The Rausch Option shall be earned and vested in three equal tranches of 2,000,000 upon the Company raising $1,000,000 in financing, the Company raising $5,000,000 in financing and the Company entering into a significant corporate alliance for substantial marketing and selling of the Company’s product portfolio. The initial tranche shall be exercisable at $0.20 per share, the second tranche will be $0.40 per share and the third tranche shall be $0.60 per share, which such vesting is subject to Mr. Rausch’s continued employment as an executive with the Company as of the vesting date. In addition, as additional consideration for Mr. Rausch's commitment to the Company, the stock options previously granted to Mr. Rausch shall be amended to extend the expiration date to the ten year anniversary of signing date and such options shall be considered fully vested. Mr. Rausch shall be entitled to certain raises and milestones subject to the achievement of certain milestones to be agreed upon. In the event the Employment Agreement is terminated prior to the expiration of the term by the Company without cause or by Mr. Rausch with good reason, the Company shall pay Mr. Rausch an amount equal to Mr. Rausch’s accrued but unpaid base salary and earned but unpaid bonus prior to the termination date, reimbursement for any reimbursable business expenses and Mr. Rausch’s salary for a period of one year.