ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION.
In connection with the entry into the License Agreement described in Item 8 below, the Company borrowed CAD $79,106 (the “Loan”) from an Ontario corporation owned in equal thirds by John Bentivoglio, Nicholas Bozza and Frank Sgro, all of whom are affiliates of the Company. The Loan is to be repaid on December 1, 2015, together with interest at the rate of 12 % per annum. As additional consideration for the making of the Loan, the Company agreed to cause its Subsidiary (as defined in Item 8.01) to enter into a Sublicense agreement with the Lender whereby the Lender will be granted the exclusive rights to distribute the BreastCare DTS™ product in Canada with royalties payable at the rate of 5.5% of net sales, as to be defined in the Sublicense Agreement.
Shortly after entering into the License Agreement the Subsidiary entered into release agreements (the “Releases”) with certain creditors (the “Creditors”) of Life Medical Technologies, Inc. which held judgments against Life Medical in the aggregate amount of approximately $501,000. Pursuant to the Release Agreements, the Subsidiary agreed to pay the Creditors an aggregate of $501,000, of which $125,000 is to be paid in cash and the balance of which is to be satisfied by the issuance of shares of common stock of the Company valued at $376,000. The recipients of shares valued at $70,000 are also to be paid, at the option of the Company, in cash or shares of common stock, an amount equal to the excess, if any, of $70,000 over the value of such shares as of December 12, 2015.
ITEM 3.02 UNREGISTERED SALE OF EQUITY SECURITIES.
As described more fully in Items 2.03 and 8.01, on October 22 and October 23, 2014, shortly after the receipt of a License Agreement from Life Medical, the Subsidiary of the Company entered into Release Agreements with certain creditors of Life Medical. Pursuant to such Agreements the Subsidiary has agreed to cause the Company to issue to certain creditors shares of common stock of the Company valued at $376,000. Such shares represent a portion of the consideration to be paid to the Creditors for the release of certain judgments they hold against Life Medical which aggregate approximately $501,000. The Company believes that the issuance of the Shares is exempt under Section 4(2) of the Securities Act in that the issuances were the result of individual negotiations with the Creditors and that there are no more than three creditors which will receive the Shares. Further, the certificates to be issued to represent the shares will have affixed thereon a restrictive “Securities Act” legend.
