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Subsequent Events
12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
13. Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements, except as disclosed.

 

Effective January 16, 2017, Mr. Jeffrey Holtmeier, Chief Executive Officer of the Company, has left the Company to pursue other interests, and in connection with his departure, has also resigned his position as a director of the Company. On January 19, 2017, the Company and Mr. Holtmeier entered into a Separation and Release Agreement in connection with his departure.  Mr. Holtmeier will be paid his current salary for the period up to and including the day which is thirty days after the Termination Date, at the rate in effect as of the Termination Date. In addition, the Company will pay Mr. Holtmeier an annual bonus for the 2016 year of $43,750 which was accrued as of December 31, 2016. The salary (less appropriate withholding for benefits, taxes and any other required withholdings) will be made in accordance with normal Company payroll timing and practices. The bonus (less appropriate withholding for benefits, taxes and any other required withholdings) will be paid and in ten equal monthly payments, beginning February 1, 2017.  As of December 31, 2016, the Company has accrued $66,950 of costs related to Mr. Holtmeier's incurred expenses which will be paid in ten equal monthly payments during 2017.

 

On January 18, 2017, the Board of Directors of the Company appointed John C. Pauly as the Chief Operating Officer and interim President and Chief Executive Officer of the Company. Subsequently, the Company and Mr. Pauly entered into a written agreement outlining compensation and other terms of Mr. Pauly's employment by which Mr. Pauly will be paid an annual salary of $100,000.  The term of Mr. Pauly's employment with the Company shall be for a period commencing on January 18, 2017, and continuing through the close of business on December 31, 2017, unless and until terminated as provided. The agreement shall renew for subsequent one year terms unless terminated by either party.

 

On February 28, 2017, the Company and Melrose Capital Advisors, LLC (the "Lender") entered into a Fifth Amendment to Amended and Restated Promissory Note (the "Senior Note"), pursuant to which the Lender agreed to extend the maturity date of the Senior Note from February 28, 2017 to March 30, 2017.  The principal amount and all unpaid accrued interest on the Senior Note is payable on March 31, 2017, or earlier in the event of default or a sale or liquidation of the Company.  The Loan may be prepaid in whole or in part at any time by the Company without penalty.

 

On March 3, 2017, the Company and Steven Deixler entered into a Third Amendment to Promissory Note effective as October 31, 2016 which extended the maturity date of the payable from October 31, 2016 to March 31, 2017.  The Company will make monthly payments of accrued interest on the first day of every month beginning October 31, 2016, and continuing on the first day of each month thereafter. On March 31, 2017, the entire unpaid principal sum of the note and all accrued and unpaid interest shall be due and payable in full. The Company's payment and other obligations under this Note shall be unsecured.

 

On March 15, 2017, the Company entered into a settlement agreement (the "Settlement Agreement") by and between the Company and Lalit Dhadphale ("Dhadphale) relating to a claim filed by Dhadphale in Lalit Dhadphale v. Healthwarehouse.com, Inc., Boone County, Kentucky Circuit Court, Civil Action No. 16-CI-01628 (the "Complaint") alleging failure to pay certain severance payments pursuant to the employment agreement by and between the Company and Dhadphale. Pursuant to the Settlement Agreement, the Company agreed to pay Dhadphale $200,000 in return for a full release of any and all future claims and a dismissal with prejudice of the Complaint within seven business days of the execution of the Settlement Agreement.  The Company has agreed to pay Mr. Dhadphale $30,000 within sixty days of the execution of the Agreement with the remaining $170,000 payable in equal semi-monthly payments over eighteen months beginning March 15, 2017.  As of December 31, 2016, the Company had accrued $190,000 related to this liability.

 

In February 2017, the Company received a letter from a former employee asking for payment of $100,000, plus interest for the contribution of certain equipment to the Company in 2008. The Company is in the preliminary process of investigating the claim to determine the validity of the claim.