|Related Party Transactions
13. Related Party Transactions
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During the third quarter of Fiscal Year 2015, Mr. Folkson began accruing
a consulting fee of $6,000 per month which the aggregate of $18,000 and $54,000 is reflected in professional fees for the
three- and nine-months periods ending March 31, 2023. At March 31, 2023 and June 30, 2022 respectively, Mr. Folkson was owed $21,000 and
$0 in unpaid consulting fees which amounts are included on the balance sheets in accrued expenses- related party.
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On January 20, 2023, the Company entered into the Lock-Up Agreement with Mr. Folkson. For purposes of the Lock-Up Agreement, Mr. Folkson is the direct or indirect owner of 16,776,591 shares of the Company’s common stock (the “Shares”), and Mr. Folkson has agreed to not transfer, sell, or otherwise dispose of any Shares through February 4, 2023. The Lock-Up Agreement is substantially similar to, and serves as an extension of, the lock-up agreement previously in place between the Company and Mr. Folkson, which expired in accordance with its terms on February 4, 2022.
The Lock-Up Agreement further provides, in exchange for the agreement to lock up the Shares, that Mr. Folkson shall receive warrants to acquire 400,000 shares of Company common stock at an exercise price of $0.30 per share, which warrants carry a twelve month term and a cashless provision, and will expire if not exercised within the twelve month term.
On December 8, 2017, Mr. Folkson purchased Warrants, at a cost of $0.15 per Warrant, to acquire up to 80,000 additional shares of Company stock at a strike price of $0.20, and with a term of three years from the date of said agreement. This purchase resulted in a reduction in the accrued consulting fees due him by $12,000. Those warrants were not exercised during that timeframe and have expired. During the second quarter 2019 Mr. Folkson purchased 400,000 shares of stock at a price of $0.30 per share, valued at $120,000 which was charged to his accrual.
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In addition, the Company has made bonuses available to Mr. Folkson upon the Company hitting certain revenue milestones of $1,000,000 in a quarter, $3,000,000 in a quarter, and $5,000,000 in a quarter. Achieving those milestones would earn Mr. Folkson warrants with a $0.50 and $1.00 strike price which would need to be exercised within 90 days of the respective quarterly or annual filing. As of March 31, 2023, those conditions were not met and therefore nothing was accrued related to this arrangement.
7, 2023, Sean Folkson, the Chairman and CEO of the Company, loaned $40,000 to the Company, which was evidenced by a promissory note
(the “Folkson Note”). The maturity date under the Folkson Note is February 7, 2024. The Folkson Note bears interest at
a fixed rate of 12.0% per annum, and shall be payable on the maturity date. Notwithstanding the foregoing, the Company shall not
make any payment to Mr. Folkson under the Folkson Note, whether of principal or interest, and whether or not on the maturity date when
due and payable, unless and until all indebtedness of the Company owed or owing to each of Mast Hill, Puritan Partners and Verition has
been repaid in full. The Folkson Note has customary events of default.
intends to use the proceeds from the Folkson Note for working capital.
| ||● ||In addition, at March 31, 2023 and 2022, respectively, there was $18,000 and $0 in unpaid directors fees which amounts are included on the balance sheets as accrued expenses- related party.