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Re: Atlanta1 post# 1402

Wednesday, 04/18/2018 4:05:23 PM

Wednesday, April 18, 2018 4:05:23 PM

Post# of 1765
Item 5.02 (b). Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers



In May, 2017, the Staff issued a Wells Notice stating its preliminary determination to recommend an enforcement action against the Company and our CEO, Mr. Kandalepas, based on possible violations of Section 17(a) of the Securities Act, Sections 15 (a) and 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The Staff would allege, among other things, that periodic reports issued during 2013 and 2014 were misleading because they failed to disclose or mischaracterized as “salary”, “prepayments” or “loans,” several payments totaling $450,000 made to our CEO during those years without prior Board approval; that two press releases issued in 2015 touted shipments of several Psoria-Light devices that were not closed sales; and that we used an unregistered broker-dealer to identify and solicit potential investors during 2013, 2015 and 2017.



Subsequent discussions resulted in our submission of an Offer of Settlement (“Settlement”) through an administrative cease and desist action on November 17, 2017, which was accepted by the SEC on April 12, 2018. Pursuant to the Settlement, we neither admit nor deny any of the proposed allegations, but are enjoined from violating the above-referenced Sections and Rule. The Settlement imposes no financial penalties or sanctions against the Company. On April 13, 2018, the SEC filed a separate complaint against our CEO in the U.S. District Court for the Northern District of Illinois. It asserts the allegations noted above, as well as allegations that he manipulated the price of company shares through undisclosed trading, realizing more than $130,000 from such trading. The SEC seeks a permanent injunction, disgorgement including prejudgment interest, a civil penalty, an officer-and-director bar, and a penny stock bar.



Mr. Kandalepas intends to contest the allegations against him. He has voluntarily resigned as an officer and director. He has agreed to provide transition services to Calvin R. O’Harrow and Roy M. Harsch, who have been appointed to serve as CEO and Chairman, respectively, from the date of Mr. Kandalepas’ resignation and until appointment of permanent successors, and upon such compensation and other terms are determined by the board, in its reasonable discretion. Mr. Kandalepas will remain with the Company to serve as Executive Director of Corporate Business Development.