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Note 5 Related Party Transactions
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3 Months Ended | ||
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Sep. 30, 2012
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| Notes | |||
| Note 5 Related Party Transactions |
Minority Interest Fund (II), LLC (“MIF”) is party to certain convertible debentures issued by the Company (see Note 6, Convertible Debentures, below). The managing member of MIF is a relative of the Company’s former Chief Executive Officer and Chairman. The sole member of Viridis Capital, LLC is Kevin Kreisler, the Company’s former chief executive officer and chairman (see Note 7, Acquisition, below).
On April 25, 2012, we issued 20,000 shares of Series 1 Preferred Stock (the “Series 1 Shares”) of our subsidiary, Oxysonix Corporation, to Air Pure Systems, LLC (“APS”), a limited liability company formed in North Carolina, in connection with our acquisition of APS’s assets, including U.S. patent application numbered 13/057,596 and related intellectual properties involving methods and devices for increasing liquid fuel combustion efficiency (the “Technologies”). The Series 1 Shares are non-voting and non-convertible but pay a non-cumulative annual dividend equal to 5% of Oxysonix’s net sales generated from products comprised of the Technologies, which rate decreases to 3% after March 31, 2019; net sales are subject to a cap of $100 per unit sold incorporating the Technologies. 60% of APS is owned by Western Highlands Investment Group, LLC, 33.33% of which is beneficially owned family members of Frank Moody, the Chief Executive Officer of Oxysonix and 33.33% of which is beneficially owned by family members of Gary Musselman, the Controller of Oxysonix. The remaining 40% of APS is owned by Air Pure Systems, Inc., 50% of which is owned by James Fanning, the Chief Technology Officer of Oxysonix.
On April 25, 2012, Viridis Capital, LLC (“Viridis”) agreed to exchange 100% of its beneficial ownership interest for 75,000 Series D Shares. In addition, we issued 795,845 Series D Shares to CleanTech Fuels, Inc. (“CTF”) in exchange for full satisfaction of financing previously provided to the Company. The Series D Shares issued to Viridis and CTF are convertible into about 9.9% of our capital stock. At the same time, we issued a license to CTF pursuant to which CTF (and/or any of its affiliates) has the right to use any of our technologies in renewable fuels applications in exchange for a royalty equal to 3% of net income generated from products comprised of our technologies. Viridis is solely owned by Kevin Kreisler, a member of our board of directors.
On April 25, 2012, we entered into an agreement with Petrocavitation Partners, LLC (“Petro”) pursuant to which we agreed to issue Petro 450,000 shares of our Series F Shares in consideration for the assignment by Petro and its affiliates of their respective rights involving our intellectual properties. 450,000 Series F Shares corresponds to 45% of the Company’s fully diluted capital stock. The Series F Shares are convertible at any time commencing six months after the closing at a rate equal in the aggregate to 45% of the Company’s then-current shares of common stock outstanding on a fully-diluted basis. Petro additionally agreed that neither it nor any of its assignees would sell any common shares issued upon conversion of the Series F Shares at a rate greater than 5% of the then-current average daily trading volume for the Company’s common stock. A total of 35.85% of Petro is beneficially owned by various family members of Frank Moody, the Chief Executive Officer of Oxysonix, and another 35.85% of Petro is beneficially owned by family members of Gary Musselman, the Controller of Oxysonix..
On May 1, 2012, the Company entered into an agreement with Applied Combustion Research, LLC (“ACR”), pursuant to which ACR issued Oxysonix a license to a proprietary catalytic conversion technology for use in transportation applications in exchange for 339,840 Series F Shares plus a royalty equal to 3% of Oxysonix’s net sales generated from products comprised of the ACR technology. The ACR technology has been shown in prior testing to catalyze conversion of carbon emissions into fuel. On June 27, 2012, the Company and ACR entered into a subscription agreement pursuant to which ACR agreed to purchase 10,160 additional Series F Shares in exchange for $50,000 in cash which was provided to Oxysonix in July 2012. The Series F Shares issued to ACR are convertible at any time commencing six months after the closing at a rate equal in the aggregate to 35% of the Company’s then-current shares of common stock outstanding on a fully-diluted basis. ACR additionally agreed that neither it nor any of its assignees would sell any common shares issued upon conversion of the Series F Shares at a rate greater than 5% of the then-current average daily trading volume for the Company’s common stock.
The Series D Shares and the Series F Shares are mandatorily convertible into Company common stock upon the effectiveness of the Company’s pending merger with Oxysonix Corporation.
During the nine months ended September 30, 2012, Viridis paid company expenses of approximately $13,000. This amount will be repaid to Viridis. |