Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
x
The aggregate market value of the voting
common stock held by non-affiliates of the registrant as of June 30, 2015 (106,718,331 shares) was approximately $26,679,583 (computed
based on the closing sale price of the common stock at $0.25 per share as of such date). Shares of common stock held by each officer
and director and each person owning more than ten percent of the outstanding common stock have been excluded in that such persons
may be deemed to be affiliates. This determination of the affiliate status is not necessarily a conclusive determination for other
purposes.
The number of shares of common stock of
the issuer outstanding as of April 22, 2016 was 286,310,744 shares.
This Amendment No. 1 to the Annual Report of Searchlight Minerals
Corp. on Form 10-K/A, or this Form 10-K/A, amends our Annual Report on Form 10-K for the year ended December 31, 2015 (the “Original
Form 10-K”), which was originally filed with the Securities and Exchange Commission (the “SEC”) on April 5, 2016.
This Form 10-K/A is being filed for the sole purpose of providing information required by Part III of Form 10-K that was not included
in the Original Form 10-K.
Except as expressly noted herein, this Form 10-K/A does not
modify or update in any way the disclosures made in the Original Form 10-K and does not reflect events occurring after the filing
of the Original Form 10-K.
As used in this Form 10-K/A, “Searchlight,” “Company,”
“we,” “us” and “our” refer to Searchlight Minerals Corp. and its consolidated subsidiaries,
principally Clarkdale Minerals LLC, a Nevada limited liability company, and Clarkdale Metals Corp., a Nevada corporation.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
General Information
The following sets forth certain information
with respect to the individuals who currently serve as members of the Board of Directors (the “Board”) of the Company
as of the date of this filing:
Our bylaws provide that the terms of office
of the members of our Board be divided into three classes, Class I, Class II and Class III, the members of which serve for staggered
three-year terms. The terms of the current Class I, Class II and Class III directors are set to expire at the next annual meeting
of stockholders for the 2017, 2016 and 2018 years, respectively. At each annual meeting of stockholders, directors chosen to succeed
those whose terms then expire are elected for a term of office expiring at the third succeeding annual meeting of stockholders
after their election or until their successors are elected and qualify, subject to their prior death, resignation or removal. Our
Board presently consists of five directors. None of our directors or executive officers is related to one another.
Our Board members are encouraged to attend
meetings of the Board and the annual meeting of stockholders. The Board held 14 meetings during 2015. Officers serve at the discretion
of the Board.
The following table sets forth certain biographical
information with respect to our directors and executive officers:
Name
|
|
Position
|
|
Age
|
|
|
|
|
|
Martin B. Oring
|
|
Director (Class III), Chairman of the Board, Chief Executive Officer and President
|
|
70
|
Carl S. Ager
|
|
Director (Class II), Vice President, Secretary and Treasurer
|
|
41
|
John E. Mack
|
|
Director (Class II)
|
|
68
|
Michael W. Conboy
|
|
Director (Class I)
|
|
40
|
Jordan M. Estra
|
|
Director (Class I)
|
|
68
|
Martin B. Oring, Director, Chairman of
the Board, President and Chief Executive Officer
. Mr. Oring has been a member of our Board since October 6, 2008 and our Chairman
of the Board, President and Chief Executive Officer since October 1, 2010. Mr. Oring has been a member of the board of directors
of Eos Petro, Inc. since October 12, 2012, and served as its Chief Executive Officer from June 2013 through January 2016. Mr. Oring,
a senior financial/planning executive, has served as the President of Wealth Preservation, LLC, a financial advisory firm that
serves high-net-worth individuals, since 2001. Since the founding of Wealth Preservation, LLC in 2001, Mr. Oring has completed
the financial engineering, structuring, and implementation of over $1 billion of proprietary tax and estate planning products in
the capital markets and insurance areas for wealthy individuals and corporations. From 1998 until 2001, Mr. Oring served as Managing
Director, Executive Services at Prudential Securities, Inc., where he was responsible for advice, planning and execution of capital
market and insurance products for high-net-worth individuals and corporations. From 1996 to 1998, he served as Managing Director,
Capital Markets, during which time he managed Prudential Securities’ capital market effort for large and medium-sized financial
institutions. From 1989 until 1996, he managed the Debt and Capital Management group at The Chase Manhattan Corporation as Manager
of Capital Planning (Treasury). Prior to joining Chase Manhattan, he spent approximately eighteen years in a variety of management
positions with Mobil Corporation, one of the world’s leading energy companies. When he left Mobil in 1986, he was Manager,
Capital Markets & Investment Banking (Treasury). Mr. Oring is also currently a director and chief executive officer of PetroHunter
Energy Corporation, and was previously a director of Parallel Petroleum Corporation, each of which is a publicly traded oil and
gas exploration and production company. He also served as a director of Falcon Oil & Gas Australia Limited, a subsidiary of
Falcon Oil & Gas Ltd., an international oil and gas exploration and production company, headquartered in Dublin, Ireland, which
trades on the TSX Venture Exchange. Mr. Oring has served as a Lecturer at Lehigh University, the New York Institute of Technology,
New York University, Xerox Corporation, Salomon Brothers, Merrill Lynch, numerous Advanced Management Seminars, and numerous in-house
management courses for a variety of corporations and organizations. He has an MBA Degree in Production Management, Finance and
Marketing from the Graduate School of Business at Columbia University, and a B.S. Degree in Mechanical Engineering from Carnegie
Institute of Technology. As a financial planner and an executive with experience in banking and finance, we believe that Mr. Oring
contributes his leadership skills, knowledge and finance background, and business experience to our Board. In addition, we believe
that Mr. Oring’s membership on our Board helps to achieve the objective that its membership be composed of experienced and
dedicated individuals with diversity of backgrounds, perspectives, skills and other individual qualities that contribute to Board
heterogeneity.
Carl S. Ager, Director, Vice President,
Secretary and Treasurer
. Mr. Ager has been a member of our Board since July 25, 2005 and our Vice President, Secretary and
Treasurer since October 7, 2005. In 1997, Mr. Ager obtained his Bachelor of Applied Sciences – Engineering Geophysics degree
from Queen’s University in Kingston, Ontario. Since January, 2003, Mr. Ager has been President of CSA Management Corp, a
private Nevada corporation which provides consulting services, including business planning and administration. However, CSA has
not had active operations since 2005. Mr. Ager also served as Vice President and a director of Nanominerals from June 2003 until
June 2007. Prior to joining Nanominerals and CSA Management, Mr. Ager’s experience included working as an investment executive
for Scotia McLeod, one of Canada’s leading full-service brokerage firms (2000-2002). As an engineer and an executive with
experience in working with natural resource companies, we believe that Mr. Ager contributes his leadership skills, knowledge, finance
and technology background, and business experience to our Board. In addition, we believe that Mr. Ager’s membership on our
Board helps to achieve the objective that its membership be composed of experienced and dedicated individuals with diversity of
backgrounds, perspectives, skills and other individual qualities that contribute to Board heterogeneity.
John E. Mack, Director.
Mr. Mack
has over 35 years of international banking and financial business management experience. From November 2002 through September 2005,
Mr. Mack served as Senior Managing Executive Officer and Chief Financial Officer of Shinsei Bank, Limited in Tokyo, Japan. Prior
to joining Shinsei Bank and for more than twenty-five years, Mr. Mack served in senior management positions at Bank of America
and its predecessor companies, including twelve years as Corporate Treasurer. Since 2006, Mr. Mack has been retired and has served
as a director in several companies. Mr. Mack is a member of the board of directors of Flowers National Bank, Incapital Holdings
LLC and Medley Capital Corporation, and is Vice-Chairman and a director of Islandsbanki hf located in Reykjavik, Iceland. Mr. Mack
holds an MBA from the University of Virginia Darden School of Business and received his bachelor's degree in economics from Davidson
College. Mr. Mack is a “Financial Expert” in accordance with SEC and exchange listing audit committee requirements.
In determining Mr. Mack’s qualifications to serve on our Board, the Board has considered, among other things, his experience
and expertise in finance, accounting and management. In addition, we believe that Mr. Mack’s membership on our Board helps
to achieve the objective that its membership be composed of experienced and dedicated individuals with diversity of backgrounds,
perspectives, skills and other individual qualities that contribute to Board heterogeneity.
Michael W. Conboy, Director
. Mr.
Conboy has been a member of our Board since October 26, 2010. Since 2003, Mr. Conboy has worked at Luxor Capital Group, LP, an
investment management firm based in New York, New York, and currently serves as its Director of Research. Luxor Capital Group,
LLC is one of the Company’s principal stockholders. From 2000-2003, Mr. Conboy worked as a distressed investments analyst
at ING in New York and London for ING’s internal proprietary desk, where he was actively involved in numerous restructurings.
Since 2010, he also has served as the Chairman of the board of directors of CML Metals Corp., which is focused on redeveloping
the Comstock/Mountain Lion iron ore mine in southwestern Utah. Mr. Conboy also serves as a director of Innovate Loan Servicing
Corporation, a finance company focused on the subprime auto loan sector. Mr. Conboy earned his B.S. in Business Administration
from Georgetown University. As an investment banker and an executive with experience in working with natural resource companies,
we believe that Mr. Conboy contributes his leadership skills, knowledge, finance and industry background, and business experience
to our Board. In addition, we believe that Mr. Conboy’s membership on our Board helps to achieve the objective that its membership
be composed of experienced and dedicated individuals with diversity of backgrounds, perspectives, skills and other individual qualities
that contribute to Board heterogeneity.
Jordan M. Estra, Director
. Mr. Estra
has been a member of our Board since March 1, 2010. Mr. Estra is also a director of Starcore International Mines and Meadow Bay
Gold, both publicly traded gold mining companies. Since July 2010, Mr. Estra has been President and Chief Executive Officer of
Ensurge, Inc., a mining investment company seeking gold mining opportunities in Brazil. He became a director of Ensurge in February
2010. From May 2009 until July 2010, Mr. Estra had been the Managing Director of Private Equity at Sutter Securities Incorporated
in San Francisco, California and Boca Raton, Florida, where he specializes in raising capital for emerging natural resource companies.
From October 2009 through December 2009, Mr. Estra served as the Chief Executive Officer of Signature Exploration and Production
Corp. From April 2007 to April 2009, Mr. Estra was a Managing Director of Investment Banking with Jesup & Lamont Securities,
Inc. Mr. Estra was a Senior Vice President of Investment Banking with Dawson James Securities, Inc. from September 2006 to March
2007 and a Managing Director of Healthcare Investment Banking with Stanford Financial Group from June 2003 to September 2006. From
1986 to 2003, Mr. Estra held senior research and/or investment banking positions with a number of brokerage and investment banking
firms. From 1971 to 1986, Mr. Estra held various positions in finance, corporate strategic planning and marketing with AMAX, Inc.,
a global natural resources leader with interests in precious metals, copper, lead, zinc, coal, oil and gas, molybdenum, tungsten
and iron ore. He served as Assistant to the Chairman and was Vice President of Marketing and Strategic Planning when he resigned
in 1986 to pursue a career on Wall Street. Mr. Estra graduated with High Distinction from Babson College with a degree in International
Economics and with Honors from the Columbia University Graduate School of Business with an MBA in Finance. He holds Series 7, 24,
63, 86 and 87 securities licenses. As an investment banker and an executive with experience in working with natural resource companies
and as an Audit Committee financial expert, we believe that Mr. Estra contributes his leadership skills, knowledge, finance and
technology background, and business experience to our Board. In addition, we believe that Mr. Estra’s membership on our Board
helps to achieve the objective that its membership be composed of experienced and dedicated individuals with diversity of backgrounds,
perspectives, skills and other individual qualities that contribute to Board heterogeneity.
Consultants
Nanominerals is a private Nevada corporation
principally engaged in the business of mineral exploration. We have engaged Nanominerals as a consultant to provide us with the
use of its laboratory, instrumentation, milling equipment and research facilities, which has allowed us to perform tests and analysis
both effectively and in a more timely manner than would otherwise be available from other such consultants. Dr. Charles A. Ager
performs the services for us in his authorized capacity with Nanominerals under our consulting arrangement with Nanominerals. Carl
S. Ager, our Vice President, Secretary and Treasurer, is the son of Dr. Ager. Dr. Ager currently is the sole officer and director
of Nanominerals, and controls its day to day operations. The following sets forth certain biographical information with respect
to Dr. Ager:
Dr. Charles A. Ager is a geophysical engineer
with approximately 40 years of experience in the areas of mining discovery and production. He is a registered geophysicist in the
State of California and a registered professional engineer and professional geoscientist in British Columbia, Canada. Dr. Ager
received a PhD degree in geophysics from the University of British Columbia in 1974 and a Master’s of Science degree from
the University of British Columbia in 1972. He received his undergraduate degree in mathematics and physics from California State
University, Sacramento in 1968. Dr. Ager has been associated with Nanominerals from 1988 until present. Dr. Ager was the Chairman
of ABM Mining Group from 1979 until 1988, when it was acquired by Northgate Mining. ABM Mining Group was involved in providing
technical and financial assistance in building and operating medium sized mining companies. Project duties included property acquisition,
exploration, permitting, development, production and finance. Dr. Ager also was the President of the Ager Group of Geotechnical
Companies from 1968 to 1979. The Ager Group of Geotechnical Companies was involved in providing technical and financial assistance
for exploration and development projects in Canada, the United States, Africa and the Far East. Project work included the use of
water, ground and air surveys in the exploration for oil and gas, coal, industrial minerals and base and precious metals. Dr. Ager
is a member of the Association of Professional Engineers and Geoscientists of British Columbia, Canada, the Society of Exploration
Geophysicists and the Society of Mining, Metallurgy and Exploration.
Director Qualifications
We believe that our directors should have
the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have
broad experience at the policy-making level in business or banking. They should be committed to enhancing stockholder value and
should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service
on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform
responsibly all director duties for us. Each director must represent the interests of all stockholders. When considering potential
director candidates, the Board also considers the candidate’s character, judgment, age and skills, including financial literacy
and experience in the context of our needs and the needs of the Board. In addition to considering an appropriate balance of knowledge,
experience and capability, the Board has as an objective that its membership be composed of experienced and dedicated individuals
with diversity of backgrounds, perspectives, skills and other individual qualities that contribute to Board heterogeneity.
Independent Directors; Review, Approval or Ratification
of Transactions with Related Persons
We currently have five members on our Board.
We believe that each of John E. Mack, Michael W. Conboy and Jordan M. Estra is independent under the criteria established by
Section 803A of the NYSE Amex LLC (“AMEX”) Company Guide for director independence, but that neither of the remaining
two members are independent. The AMEX criteria include various objective standards and a subjective test. A member of the Board
is not considered independent under the objective standards if, for example, he or she is employed by us. Mr. Oring and Mr. Ager
are not independent because they are our employees. The subjective test requires that each independent director not have a relationship
which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. We considered commercial, financial services, charitable, and other transactions and other relationships between
us and each director and his or her family members and affiliated entities.
For Messrs. Mack, Conboy and Estra, we
believe that each did not have any transactions or other relationships which would have exceeded the AMEX objective standards or
would otherwise interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
With respect to our other two directors,
we believe that we have ongoing business relationships with these directors or their affiliates which would not satisfy the AMEX
subjective standards regarding the exercise of independent judgment in carrying out the responsibilities of a director.
We have ongoing business relationships with
affiliates of our management and principal stockholders. In particular, we have continuing obligations under the agreements under
which we acquired the assets relating to our Clarkdale Slag Project. We remain obligated to pay a royalty which may be generated
from the operations of the Clarkdale Slag Project with Nanominerals, one of our principal stockholders, which is an affiliate of
a member of our executive management and Board, Carl S. Ager. In addition, Martin B. Oring, our President and Chief Executive Officer
and a member of our Board, serves as a consultant to Ireland Inc. These persons are subject to a fiduciary duty to exercise good
faith and integrity in handling our affairs. However, the existence of these continuing obligations may create a conflict of interest
between us and all of our Board members and senior executive management, and any disputes between us and such persons over the
terms and conditions of these agreements that may arise in the future may raise the risk that the negotiations over such disputes
may not be subject to being resolved in an arms’ length manner. In addition, Nanominerals’ interest in Ireland, Inc.
and its other mining related business interests may create a conflict of interest between us and our Board members and senior executive
management who are affiliates of Nanominerals.
Because we currently have only three independent
directors, the existence of these continuing obligations to our affiliates may create a conflict of interest between us and our
non-independent Board members and senior executive management, and any disputes between us and such persons over the terms and
conditions of these agreements that may arise in the future may raise the risk that the negotiations over such disputes may not
be subject to being resolved in an arms’ length manner. We intend to make good faith efforts to recruit independent persons
to our Board. We intend to evaluate the independence of each of our directors in connection with the preparation of the proxy statement
for our next annual meeting of stockholders.
Although we only have three independent
directors, the Board has adopted a written Related Person Transactions Policy, which describes the procedures used to identify,
review, approve and disclose, if necessary, any transaction or series of transactions in which: (i) we were, are or will be a participant,
(ii) the amount involved exceeds $120,000, and (iii) a related person had, has or will have a direct or indirect material interest.
There can be no assurance that the above conflicts will not result in adverse consequences to us and the interests of the other
stockholders.
Although our management intends to avoid
situations involving conflicts of interest and is subject to a Code of Ethics, there may be situations in which our interests may
conflict with the interests of those of our management or their affiliates. These could include:
|
·
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competing for the time and attention of management,
|
|
·
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potential interests of management in competing investment ventures, and
|
|
·
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the lack of independent representation of the interests of the other stockholders in connection with potential disputes or
negotiations over ongoing business relationships.
|
Committees of the Board of Directors
Audit Committee
. We have an Audit
Committee and an Audit Committee charter. Our Audit Committee is presently comprised of Michael W. Conboy, Jordan M. Estra and
John E. Mack. Mr. Mack is the Chairman of the Audit Committee. Each of Messrs. Conboy, Estra and Mack is an independent director.
We believe that each of Messrs. Estra and Mack qualifies as an “audit committee financial expert” under Item 407(d)(5)
of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”). On September 8, 2006, we adopted
a revised Audit Committee charter and a whistle blower policy. The purpose of the amendments to the Audit Committee charter is
to expand on the role of the Audit Committee’s relationship with external auditors and the primary committee responsibilities.
The purpose of the whistle blower policy is to encourage all employees to disclose any wrongdoing that may adversely impact us,
our stockholders, employees, investors, or the public at large. The policy also sets forth (i) an investigative process of reported
acts of wrongdoing and retaliation, and (ii) procedures for reports of questionable auditing, accounting and internal control matters
from employees on a confidential and anonymous basis and from other interested third parties. A copy of our Audit Committee charter
was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on September 27, 2006. Our Audit Committee is responsible
for:
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·
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selecting, hiring and terminating our independent auditors,
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·
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evaluating the qualifications, independence and performance of our independent auditors,
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approving the audit and non-audit services to be performed by our independent auditors,
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reviewing the design, implementation, adequacy and effectiveness of our internal controls and critical accounting policies,
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overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements
as they relate to financial statements or accounting matters,
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establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing
matters,
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reviewing with management and our independent auditors, any earnings announcements and other public announcements regarding
our results of operations,
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preparing the Audit Committee report that the SEC requires in our annual proxy statement,
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engaging outside advisors, and
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·
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authorizing funding for the outside auditor and any outside advisors engaged by the Audit Committee.
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Compensation Committee.
We have a
Compensation Committee and have adopted a Compensation Committee charter. Our Compensation Committee assists our Board in determining
and developing plans for the compensation of our officers, directors and employees. Specific responsibilities include the following:
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approving the compensation and benefits of our executive officers,
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·
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reviewing the performance objectives and actual performance of our officers, and
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·
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administering our stock option and other equity compensation plans.
|
Our Compensation Committee is comprised
of John E. Mack, Michael W. Conboy and Jordan M. Estra. Mr. Estra is the Chairman of the Compensation Committee. Each of Messrs.
Mack, Conboy and Estra is an independent director.
Nominating and Governance Committee.
We have a Nominating and Governance Committee and have adopted a Nominating and Governance Committee charter. Our Nominating and
Governance Committee will assist the Board by identifying and recommending individuals qualified to become members of our Board,
reviewing correspondence from our stockholders, establishing, evaluating and overseeing our corporate governance guidelines, and
recommending compensation plans for our directors. Specific responsibilities include the following:
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·
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evaluating the composition, size and governance of our Board and its committees and making recommendations regarding future
planning and the appointment of directors to our committees,
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·
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establishing a policy for considering stockholder nominees for election to our Board,
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evaluating and recommending candidates for election to our Board, and
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·
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recommending and determining the compensation of our directors.
|
Our Nominating and Governance Committee
is comprised of Martin B. Oring, John E. Mack, Michael W. Conboy, Jordan M. Estra and Carl S. Ager. Mr. Conboy is the Chairman
of the Nominating and Governance Committee. Each of Messrs. Mack, Conboy and Estra is an independent director. However, Messrs.
Oring and Ager are not independent directors.
Disclosure Committee and Charter
.
We have a Disclosure Committee and a Disclosure Committee charter. A copy of the Disclosure Committee charter was filed as an exhibit
to our Form 10-KSB filed with the SEC on April 13, 2004. The purpose of the Disclosure Committee is to provide assistance to the
Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure
of material information about us and the accuracy, completeness and timeliness of our financial reports.
Our Disclosure Committee is presently comprised
of John E. Mack, Carl S. Ager, Martin B. Oring, Michael W. Conboy and Jordan M. Estra. Mr. Mack is the Chairman of the Disclosure
Committee. Each of Messrs. Mack, Conboy and Estra is an independent director. However, Messrs. Oring and Ager are not independent
directors.
Board Leadership Structure and Risk Oversight
Our Board has an integrated structure in
which the roles of Chairman and Chief Executive Officer are combined. The Board has determined that our three non-management directors
are independent. Generally, our Board structure provides that an independent lead director presides at the executive sessions
of the non-management directors and at all Board meetings at which the Chairman is not present, serves as liaison between the Chairman
and the independent directors, frequently communicates with the Chief Executive Officer, calls meetings of the independent directors,
obtains Board member and management input, sets the agenda for the Board with the Chief Executive Officer, approves meeting schedules
to assure there is sufficient time for discussion of all agenda items, works with the Chief Executive Officer to ensure that the
Board members receive the right information on a timely basis, stays current on major risks and focuses the Board members on such
risks, molds a cohesive board, works with the Audit Committee and Compensation Committee to evaluate Board and committee performance,
facilitates communications among directors, assists in recruiting and retention for new Board members, ensures that committee structure
and committee assignments are appropriate and effective, ensures outstanding governance processes, and leads discussions regarding
Chief Executive Officer performance, personal development and compensation. Our former lead independent director, Martin B. Oring,
became our President and Chief Executive Officer in October 2010, and, therefore, no longer is an independent director. We currently
do not have a lead independent director.
The Board has had several years of successful
experience with a leadership structure in which the roles of Chairman and Chief Executive Officer are combined, and has determined
that this structure, together with a very active and involved group of independent directors, is most appropriate and effective
for us. The Board believes that this structure promotes greater efficiency, within the context of an active and independent Board,
through more direct communication of critical information from management to the Board and from the Board to management. In addition,
the Chief Executive Officer’s extensive knowledge of our business uniquely qualifies him, in close consultation with our
independent directors, to lead the Board in assessing risks and focusing on the issues that are most material to us.
The Board’s involvement in risk oversight
includes receiving regular reports from members of senior management and evaluating areas of material risk to us, including operational,
financial, legal and regulatory, and strategic and reputational risks. The Audit Committee, pursuant to its charter, is responsible
for overseeing the assessment of the business risk management process, including the adequacy of our overall control environment
and controls in selected areas representing significant financial and business risk. In carrying out this responsibility, the Audit
Committee regularly evaluates our risk identification, risk management and risk mitigation strategies and practices. In general,
the reports identify, analyze, prioritize and provide the status of major risks to us. In addition, the Compensation Committee
regularly considers potential risks related to our compensation programs. Further, the Disclosure Committee reviews the identification
and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.
Related Person Transactions Policy
On March 17, 2009, the Board adopted a written
Related Person Transactions Policy, which describes the procedures used to identify, review, approve and disclose, if necessary,
any transaction or series of transactions in which: (i) we were, are or will be a participant, (ii) the amount involved exceeds
$120,000, and (iii) a related person had, has or will have a direct or indirect material interest. Related party transactions,
which are limited to those described in this policy, are subject to the approval or ratification by the Audit Committee in accordance
with this policy.
Our Code of Ethics, which applies to our
directors and executive officers, including our Chief Executive Officer, Chief Financial Officer and all senior financial officers,
provides that all conflicts of interest should be avoided. Pursuant to Item 404 of Regulation S-K of the Securities Act, certain
transactions between the issuer and certain related persons need to be disclosed in our filings with the SEC. In addition, under
Section 78.140 of the Nevada Revised Statutes, certain transactions between us and our directors and officers may need to be approved
by our Board or a duly authorized committee of the Board. Finally, SEC rules require our Board to assess whether relationships
or transactions exist that may impair the independence of our outside directors. The policy is intended to provide guidance and
direction on related party transactions.
A “related party transaction”
is any transaction directly or indirectly involving any related party that would need to be disclosed under Item 404(d) of Regulation
S-K. Under Item 404(d), we are required to disclose any transaction occurring since the beginning of our last fiscal year, or any
currently proposed transaction, involving us where the amount involved exceeds the lesser of $120,000 or
one
percent of the average of the smaller reporting company's total assets at year end for the last two completed fiscal years
and in which any related person had or will have a direct or indirect material interest. “Related party transaction”
also includes any material amendment or modification to an existing related party transaction.
For purposes of the policy, “related
party” means any of the following:
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a director and any director nominee,
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a person known by us to be the beneficial owner of more than 5% of our common stock,
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an entity which is owned or controlled by a person listed above, or an entity in which a person listed above has a substantial
ownership interest or control of such entity, or
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a person who is an immediate family member of any of the foregoing.
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“Immediate family member” means
a child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law of such director, executive officer, nominee for director or beneficial owner, and any person (other than a tenant
or employee) sharing the household of such director, executive officer, nominee for director or beneficial owner.
All related party transactions are required
to be disclosed to the Audit Committee of the Board and any material related party transaction are required to be disclosed to
the full Board. Related party transactions will be brought to management’s and the Board’s attention in a number of
ways. Each of our directors and executive officers is instructed and periodically reminded to inform the Office of the Secretary
of any potential related party transactions. In addition, each such director and executive officer completes a questionnaire on
an annual basis designed to elicit information about any potential related party transactions. Any potential related party transactions
that are brought to our attention are analyzed by our legal department, or if none exists, our outside counsel, in consultation
with management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related party
transaction requiring compliance with the policy.
At each of its meetings, the Audit Committee
will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction,
the business purpose of the transaction, and the benefits to us and to the relevant related party. In determining whether to approve
a related party transaction, the Audit Committee will consider, among other factors, the following factors to the extent relevant
to the related party transaction:
|
·
|
whether the terms of the related party transaction are fair to us and on the same basis as would apply if the transaction did
not involve a related party,
|
|
·
|
whether there are business reasons for us to enter into the related party transaction,
|
|
·
|
whether the related party transaction would impair the independence of an outside director,
|
|
·
|
whether the related party transaction would present an improper conflict of interests for any of our directors or executive
officers, taking into account the size of the transaction, the overall financial position of the director, executive officer or
related party, the direct or indirect nature of the director’s, executive officer’s or related party’s interest
in the transaction and the ongoing nature of any proposed relationship, and
|
|
·
|
any other factors the Audit Committee deems relevant.
|
The Audit Committee will apply these factors,
and any other factors it deems relevant to its determination, in a manner that is consistent with the rules and regulations promulgated
by the SEC and the objectives of the policy. Given that this list of factors is non-exclusive and, further, that the factors have
not been assigned any particular level of importance with respect the other factors, the Audit Committee will have a certain amount
of discretion in applying these factors. The members of the Audit Committee, however, must exercise their reasonable business judgment
in making a determination regarding the transaction at issue.
As a result, the specific application of
these factors will be determined by the Audit Committee on a case-by-case basis. The Audit Committee will examine each factor,
both individually and collectively, in the context of our overall business and financial position, as well as our short-term and
long-term strategic objectives. In doing so, the Audit Committee will look at the particular facts and circumstances of the transaction
at issue, as well as the totality of the circumstances surrounding the transaction as a whole. The Audit Committee will examine
the relationship of the facts and circumstances with our overall business and financial position and strategic objectives. If,
as and when special or unique concerns must be addressed, the Audit Committee will take such concerns into account.
For example, regarding transactions that
would impair independence, if our securities become listed on a national securities exchange that requires a certain percentage
of the Board to be independent, and the Audit Committee determines that a particular transaction will impair the independence of
an outside director, potentially causing us to contradict the exchange mandated independence requirement, that particular transaction
may be rejected. However, there could arise a situation where, due to the importance of the transaction to our overall business
and financial position and strategic objectives and our ability to appoint another independent director, such a transaction might
be approved by the Audit Committee.
Any member of the Audit Committee who has
an interest in the transaction under discussion will abstain from voting on the approval of the related party transaction, but
may, if so requested by the Chairperson of the Audit Committee, participate in some or all of the Audit Committee’s discussions
of the related party transaction. Upon completion of its review of the transaction, the Audit Committee may determine to permit
or to prohibit the related party transaction.
A related party transaction entered into
without pre-approval of the Audit Committee will not be deemed to violate the policy, or be invalid or unenforceable, so long as
the transaction is brought to the Audit Committee as promptly as reasonably practical after it is entered into or after it becomes
reasonably apparent that the transaction is covered by the policy.
Under the policy, any “related party
transaction” will be consummated or will continue only if:
|
·
|
the Audit Committee shall approve or ratify such transaction in accordance with the guidelines set forth in the policy and
if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third
party,
|
|
·
|
the transaction is approved by the disinterested members of the Board, or
|
|
·
|
if the transaction involves compensation, that such transaction is approved of by our Compensation Committee.
|
Corporate Governance Guidelines
Our Board has adopted Corporate Governance
Guidelines which govern, among other things, Board member criteria, responsibilities, compensation and education, Board committee
composition and charters and management succession.
Code of Ethics
Our directors and executive officers, including
our Chief Executive Officer, Chief Financial Officer and all senior financial officers, are bound by a Code of Ethics that complies
with Item 406 of Regulation S-K of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
A Code of Ethics relates to written standards
that are reasonably designed to deter wrongdoing and to promote:
|
·
|
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and
professional relationships,
|
|
·
|
full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the
SEC and in other public communications made by an issuer,
|
|
·
|
compliance with applicable governmental laws, rules and regulations,
|
|
·
|
the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code, and
|
|
·
|
accountability for adherence to the code.
|
We will mail without charge, upon written
request, a copy of our Code of Ethics. Requests should be sent to: Searchlight Minerals Corp., 2360 W. Horizon Ridge Pkwy., Suite
100, Henderson, Nevada, 89052, Attn. Corporate Secretary.
Rule 10b5-1 Plans
The Board has authorized directors and other
executive officers who are subject to our stock-trading pre-clearance and quarterly blackout requirements, at their election, to
enter into plans, at a time they are not in possession of material non-public information, to purchase or sell shares of our common
stock that satisfy the requirements of Exchange Act Rule 10b5-1. Rule 10b5-1 permits trading on a pre-arranged, “automatic-pilot”
basis subject to certain conditions, including that the person for whom the plan is created (or anyone else aware of material non-public
information acting on such person’s behalf) not exercise any subsequent influence regarding the amount, price and dates of
transactions under the plan. Using these plans, officers and directors can gradually diversify their investment portfolios and
spread stock trades over a period of time regardless of any material, non-public information they may receive after adopting their
plans. As a result, trades under 10b5-1 plans by our directors and other executive officer may not be indicative of their respective
opinions of our performance at the time of the trade or of our potential future performance. The Board believes that it is appropriate
to permit directors and senior executives, whose ability to purchase or sell our common stock is otherwise substantially restricted
by quarterly and special stock-trading blackouts and by their possession from time to time of material nonpublic information, to
engage in pre-arranged trading in accordance with Rule 10b5-1. Trades by our directors and executive officers pursuant to Rule
10b5-1 trading plans will be disclosed publicly through Form 144 and Form 4 filings with the SEC, as required by applicable law.
Currently, we do not have any Rule 10b5-1 trading plans for any of our officers and directors.
Stockholder Communication with Our Board of Directors
Our Board has established a process for
stockholders to communicate with the Board or with individual directors. Stockholders who wish to communicate with our Board or
with individual directors should direct written correspondence to our Corporate Secretary at our principal executive offices located
at 2360 West Horizon Ridge Pkwy., Suite 100, Henderson, Nevada, 89052. Any such communication must contain:
|
·
|
a representation that the stockholder is a holder of record of our capital stock,
|
|
·
|
the name and address, as they appear on our books, of the stockholder sending such communication, and
|
|
·
|
the class and number of shares of our capital stock that are beneficially owned by such stockholder.
|
The Corporate Secretary will forward such
communications to our Board or the specified individual director to whom the communication is directed unless such communication
is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Corporate Secretary has the authority to
discard the communication or to take appropriate legal action regarding such communication.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires
our directors and executive officers and beneficial holders of more than 10% of our common stock to file with the SEC initial reports
of ownership and reports of changes in ownership and reports of changes in ownership of our equity securities. As of the date of
this Report, and based solely on our review of the copies of such reports furnished to us and written representations from the
directors and executive officers, we believe that all reports needed to be filed by current Section 16 reporting persons have been
filed in a timely manner for the year ended December 31, 2015, with the exception of the following: A Form 4 filed by Mr. Oring
on November 3, 2015, reflecting two acquisition transactions from September 18, 2015, and another Form 4 filed by Mr. Oring on
March 24, 2015, reflecting two acquisition transactions from March 18, 2015.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth all compensation
received during the two years ended December 31, 2015 by our Chief Executive Officer, former Chief Financial Officer and each of
the other most highly compensated executive officers whose total compensation exceeded $100,000 in such fiscal year. These officers
are referred to as the Named Executive Officers in this Report:
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Stock Awards
|
|
|
Option
Awards
($)
(1)
|
|
|
Non-Equity
Incentive
Plan Compensation
|
|
|
Non-qualified
Deferred Compensation Earnings
|
|
|
All Other Compensation
($)
|
|
|
Total
($)
|
|
Martin B. Oring,
|
|
2015
|
|
|
200,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
256,280
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
456,280
|
|
Director, President and CEO
(2)
|
|
2014
|
|
|
6,250
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
729,443
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,580
|
(2)
|
|
|
785,273
|
|
Carl S. Ager,
|
|
2015
|
|
|
160,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,849
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20
4,849
|
|
Director, Vice President
and Secretary
(3)
|
|
2014
|
|
|
33,327
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
332,316
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
365,643
|
|
Melvin L. Williams,
|
|
2015
|
|
|
130,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,596
|
(4)
|
|
|
210,739
|
|
Chief Financial Officer
(4)
|
|
2014
|
|
|
27,077
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
223,557
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,304
|
(4)
|
|
|
292,938
|
|
|
(1)
|
Amounts listed in this column represent the aggregate grant date fair value for grants during the fiscal year, computed in
accordance with Accounting Standards Codification 718, “Compensation—Stock Compensation,” (ASC 718), rather than
the amounts realized by the named individuals. See Note 11 to the consolidated financial statements (“Stock-Based Compensation”)
included in our Annual Report on Form 10-K for the year ended December 31, 2015 for our valuation assumptions used to calculate
the grant date fair value.
|
|
(2)
|
Mr. Oring was appointed as our President and Chief Executive Officer on October 1, 2010. Mr. Oring entered into an employment
agreement on October 1, 2010 for an annual salary of $30,000. Mr. Oring was also paid a director fee of $10,000 per month through
June 30, 2011. Mr. Oring’s director fees are included in other compensation in the above table. Effective July 1, 2011, Mr.
Oring’s total base compensation was increased to $200,000 per annum. Mr. Oring’s salary as our President and Chief
Executive Officer was unchanged but his director fees were increased to $170,000 per annum or $14,167 per month. Due to our continuing
liquidity needs, Mr. Oring received cash compensation of $47,497 and voluntarily agreed to relinquish $23,750 of salary and $120,420
of director’s fees due to him as of December 15, 2014. Mr. Oring did not receive any cash payments during the year ended
December 31, 2015. At December 31, 2015 and 2014 we had total accrued compensation payable to Mr. Oring of $208,333 and $8,333
respectively.
|
|
(3)
|
Mr. Ager was appointed as our Secretary, Treasurer and Chief Financial Officer on October 7, 2005. Mr. Ager entered into an
employment agreement on January 1, 2006 and received an annual salary of $160,000 from January 1, 2008 until September 30, 2010.
From October 1, 2010 through June 30, 2011, we agreed to reduce Mr. Ager’s annual base compensation to $120,000. Effective
July 1, 2011, the Compensation Committee approved to restore cash compensation levels for Mr. Ager to his base salary that existed
prior to the 25% reduction based on the favorable results from autoclave testing. Due to our continuing liquidity needs, Mr. Ager
received cash compensation of $26,660 and voluntarily agreed to relinquish $126,673 of salary due to him as of December 15, 2014.
Mr. Ager did not receive any cash payments during the year ended December 31, 2015. At December 31, 2015 and 2014 we had compensation
payable to Mr. Ager of $166,660 and $6,667 respectively.
|
|
(4)
|
Mr. Williams was appointed as our Chief Financial Officer on June 14, 2006. Mr. Williams entered into an employment agreement
on June 14, 2006 and received an annual salary of $130,000 from January 1, 2008 until September 30, 2010. From October 1, 2010
through June 30, 2011, we agreed to reduce Mr. Williams’ annual base compensation to $97,500. Effective July 1, 2011, the
Compensation Committee approved to restore cash compensation levels for Mr. Williams to his base salary that existed prior to the
25% reduction based on the favorable results from autoclave testing. Due to our continuing liquidity needs, Mr. Williams received
cash compensation of $21,660 and voluntarily agreed to relinquish $102,923 of accrued compensation due to him as of December 15,
2014. Mr. Williams received no cash payments during the year ended December 31, 2015. At December 31, 2015 and 2014 we had compensation
payable to Mr. Williams of $135,410 and $5,417 respectively.
|
Other compensation includes direct benefit to Mr. Williams
of $59,596 and $42,304 from fees incurred in 2015 and 2014, respectively, with Cupit, Milligan, Ogden & Williams, an affiliate
of Mr. Williams, to provide accounting support services. These amounts were based on the profit percentage derived by Mr. Williams
from the revenue earned by Cupit Milligan in the applicable period, as applied to the fees for services provided to us. As of December
31, 2015 we had outstanding fees payable to Cupit Milligan of $158,457 and $8,147 respectively.
Mr. Williams resigned as our Chief Financial Officer
effective April 8, 2016.
Outstanding Equity Awards At Fiscal Year-End
The following table provides information
concerning unexercised options for each of our Named Executive Officers outstanding as of December 31, 2015:
Name and Position
|
|
Number of
Securities
Underlying
Options
(#)Exercisable
|
|
|
Option
Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
Stock
Awards
Number
of Shares
or Units
of Stock
that Have
Not
Vested
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin B. Oring
(1)
Director, President and CEO
|
|
|
15,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.20
|
|
|
|
3/31/2016
|
(3)
|
|
|
-
|
|
|
|
|
25,714
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.70
|
|
|
|
6/30/2016
|
(3)
|
|
|
-
|
|
|
|
|
18,462
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.98
|
|
|
|
9/30/2016
|
(3)
|
|
|
-
|
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.91
|
|
|
|
10/1/2016
|
(3)
|
|
|
-
|
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.45
|
|
|
|
10/6/2016
|
(3)
|
|
|
-
|
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.91
|
|
|
|
12/22/2016
|
(3)
|
|
|
-
|
|
|
|
|
450,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.22
|
|
|
|
9/21/2016
|
|
|
|
-
|
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.45
|
|
|
|
10/6/2016
|
|
|
|
-
|
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.45
|
|
|
|
10/6/2017
|
|
|
|
-
|
|
|
|
|
3,500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.41
|
|
|
|
12/18/2019
|
|
|
|
-
|
|
|
|
|
1,154,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.50
|
|
|
|
12/23/2019
|
|
|
|
-
|
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.91
|
|
|
|
10/1/2020
|
|
|
|
-
|
|
|
|
|
2,000,000
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.50
|
|
|
|
12/19/2020
|
|
|
|
|
|
|
|
|
-
|
|
|
|
150,000
|
(1)
|
|
|
-
|
|
|
$
|
1.22
|
|
|
|
9/21/2021
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl S. Ager
Director, Vice President, Treasurer and Secretary
|
|
|
225,000
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.22
|
|
|
|
9/21/2016
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
100,000
|
(2)
|
|
|
-
|
|
|
$
|
1.22
|
|
|
|
9/21/2021
|
|
|
|
-
|
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.41
|
|
|
|
12/18/2019
|
|
|
|
-
|
|
|
|
|
1,014,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.50
|
|
|
|
12/23/2019
|
|
|
|
-
|
|
|
|
|
350,000
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.50
|
|
|
|
12/19/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melvin L. Williams
Chief Financial Officer
|
|
|
75,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1.22
|
|
|
|
7/8/2016
|
(5)
|
|
|
-
|
|
|
|
|
243,902
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.41
|
|
|
|
7/8/2016
|
(6)
|
|
|
-
|
|
|
|
|
256,098
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.41
|
|
|
|
4/8/2017
|
(7)
|
|
|
-
|
|
|
|
|
824,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.50
|
|
|
|
12/23/2019
|
|
|
|
-
|
|
|
|
|
165,000
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.50
|
|
|
|
12/19/2020
|
|
|
|
|
|
|
(1)
|
On September 21, 2011, Mr. Oring was granted options to purchase up to 600,000 shares of our common stock pursuant to a non-qualified
stock option agreement. Of the 600,000 options, 200,000 options vested on execution of the agreement. The remaining 400,000 options
vest over the term of the option in connection with the occurrence of certain events, as follows: (i) 150,000 options vested upon
completion of defined target from metallurgical tests; (ii) 150,000 will vest upon obtaining a funding commitment to construct
a gold recovery facility; and (iii) 100,000 vested upon Mr. Oring completing 30 months of service as CEO.
|
|
(2)
|
On September 21, 2011, Mr. Ager was granted options to purchase up to 325,000 shares of our common stock pursuant to a non-qualified
stock option agreement. Of the 325,000 options, 125,000 options vested on execution of the agreement. The remaining 200,000 options
vest over the term of the option in connection with the occurrence of certain events, as follows: (i) 100,000 options vested upon
completion of defined target from metallurgical tests and (ii) 100,000 will vest upon obtaining a funding commitment to construct
a gold recovery facility.
|
|
(3)
|
On March 23, 2015, our Board unilaterally determined to amend these stock options by extending their expiration dates by twelve
months.
|
|
(4)
|
On August 28, 2015 Mr. Oring, Mr. Ager and Mr. Williams were granted 2,000,000, 350,000 and 165,000 shares of our common stock
respectively, pursuant to a non-qualified option agreement. The options were fully vested at December 31, 2015.
|
|
(5)
|
The original expiration date for such options was September 21, 2016. Mr. Williams resigned effective as of April 8, 2016.
As such, all vested ISOs held by Mr. Williams pursuant to the 2009 Option Plan shall terminate three months after the date service
terminates, which is July 7, 2016.
|
|
(6)
|
The original expiration date for such options was December 18, 2019. Mr. Williams resigned effective as of April 8, 2016. As
such, all vested ISOs held by Mr. Williams pursuant to the 2009 Option Plan shall terminate three months after the date service
terminates, which is July 7, 2016.
|
|
(7)
|
The original expiration date for such options was December 18, 2019. Mr. Williams resigned effective as of April 8, 2016. As
such, all vested Non-Qualified Stock Options held by Mr. Williams pursuant to the 2009 Option Plan shall terminate one year after
the date service terminates, which is April 8, 2017.
|
Potential Payments upon Termination of Employment or a
Change of Control
We have entered into change in control agreements
with Martin B. Oring, our President and Chief Executive Officer, Carl S. Ager, our Vice President, Secretary and Treasurer, and
Melvin L. Williams, our former Chief Financial Officer, in connection with their respective employment agreements. The agreement
with Mr. Oring provides for the vesting of any unvested options granted in connection with his employment agreement in the event
of a significant corporate transaction generally resulting in a sale or change of control. The agreements for Mr. Ager and Mr.
Williams provide for payments to be made to each named executive officer upon termination of employment; however, Mr. Williams
resigned on April 8, 2016.
In the event that the agreement with Mr.
Ager is terminated by us, other than for cause, we will provide Mr. Ager with six months written notice or payment equal to six
months of his monthly salary.
The severance amounts are payable in cash,
in a lump sum. As of December 31, 2015, in the event of a qualifying termination, Mr. Ager would have been entitled to cash payments
totaling $80,000 and Mr. Williams would have been entitled to cash payments totaling $32,500.
Director Compensation
This section provides information regarding
the compensation policies for our directors and amounts paid and securities awarded to these directors in the year ended December
31, 2015.
From January 1, 2008 until September 30,
2010, we agreed to pay non-employee directors compensation of $3,000 per month in cash. From October 1, 2010 through June, 30,
2011, the directors agreed to reduce their base cash compensation by 25% to $2,250 per month. As of July 1, 2011, we agreed to
restore the base cash compensation to $3,000 per month. In addition, directors have a choice between receiving $9,000 value of
our common stock per quarter, where the appropriate number of shares to equal $9,000 is determined by the closing price of our
stock on the last trading day of each quarter, or a number of options to purchase twice the number of shares of common stock that
the director would otherwise receive if the director elected to receive shares, with an exercise price based on the closing price
of our stock on the last trading day of each quarter. Effective April 1, 2011, the Board implemented a policy whereby the number
of options granted for quarterly compensation to each director is limited to 18,000 options per quarter.
Further, our 2009 Stock Incentive Plan for
Directors (“2009 Directors Plan”) provides for grants to our directors of options to purchase shares of our common
stock, rights to receive the appreciation in value of common shares, awards of common shares subject to vesting and other restrictions
on transfer, and other awards based on common shares. The 2009 Directors Plan authorizes the issuance of up 2,750,000 shares of
common stock.
In addition, on October 6, 2010, we instituted
a form of indemnification agreement between the directors and us, whereby directors may be indemnified by us against claims brought
against them out of their services to us. All of our current directors have entered into such an indemnification agreement.
The following table summarizes the compensation
paid to our non-employee directors for the year ended December 31, 2015:
Name
|
|
Fees Earned or Paid in Cash ($)
|
|
|
Stock
Awards
($)
(1)
|
|
|
Option
Awards
($)
(2)(3)
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
All Other Compensation ($)
|
|
|
Total ($)
|
|
Robert D. McDougal
(4)
|
|
$
|
36,000
|
(8)
|
|
|
-
|
|
|
$
|
39,886
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
75,886
|
|
Jordan M. Estra
(5)
|
|
$
|
36,000
|
(8)
|
|
|
-
|
|
|
$
|
39,886
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
75,886
|
|
Michael W. Conboy
(6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
John E. Mack
(7)
|
|
$
|
36,000
|
(8)
|
|
|
-
|
|
|
$
|
39,886
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
75,886
|
|
|
(1)
|
No stock awards were granted for the year ended December 31, 2015.
|
|
(2)
|
Amounts listed in this column represent the aggregate grant date fair value for grants during the fiscal year, computed in
accordance with Accounting Standards Codification 718, “Compensation—Stock Compensation,” (ASC 718), rather than
the amounts realized by the named individuals. See Note 11 to the consolidated financial statements (“Stock Based Compensation”)
included in our Annual Report on Form 10-K for the year ended December 31, 2015 for our valuation assumptions used to calculate
the grant date fair value.
|
|
(3)
|
The following stock option awards were made to the directors in the table in 2015, as computed in accordance with ASC 718:
(i) 18,000 stock options each to Jordan M. Estra, John E. Mack and Robert D. McDougal with an exercise price of $0.33 per share
and a grant date value of $0.16 per share (March 31, 2015); (ii) 18,000 stock options each to Jordan M. Estra, John E. Mack and
Robert D. McDougal with an exercise price of $0.25 per share and a grant date value of $0.12 per share (June 30, 2015); (iii) 18,000
stock options each to Jordan M. Estra, Robert D. McDougal and John E. Mack with an exercise price of $0.22 per share and a grant
date value of $0.10 per share (September 30, 2015); (iv) 18,000 stock options each to Jordan M. Estra, John E. Mack and Robert
D. McDougal with an exercise price of $0.11 per share and a grant date value of $0.05 per share (December 31, 2015); and (v) 250,000
stock options each to Jordan M. Estra, Robert D. McDougal and John E. Mack with an exercise price of $0.50 per share and a grant
date value of $0.13 per share (August 28, 2015).
|
|
(4)
|
Mr. McDougal held 1,818,804 stock options and no unvested shares as stock awards, at December 31, 2015. We granted 322,000
stock options and no shares as stock awards to Mr. McDougal in 2015. Mr. McDougal passed away on January 15, 2016.
|
|
(5)
|
Mr. Estra held 1,849,518 stock options, and no unvested shares as stock awards, at December 31, 2015. We granted 322,000 stock
options and no shares as stock awards to Mr. Estra in 2015.
|
|
(6)
|
Mr. Conboy held no stock options and no unvested shares as stock awards, at December 31, 2015. We granted no stock options
and no shares as stock awards to Mr. Conboy in 2015.
|
|
(7)
|
Mr. Mack held 1,661,800 stock options, which included 100,000 unvested stock options, at December 31, 2015. We granted 322,000
stock options and no shares as stock awards to Mr. Mack in 2015.
|
|
(8)
|
Due to our continuing liquidity needs, Mr. McDougal, Mr. Estra and Mr. Mack each received no cash compensation during
the year ended December 31, 2015. As of December 31, 2015
amounts outstanding and owed to Mr. McDougal, Mr. Estra and Mr. Mack amounted to $37,500 respectively.
|
Limitation of Liability of Directors
Nevada Revised Statutes provide that, subject
to certain exceptions, or unless the articles of incorporation or an amendment thereto provide for greater individual liability,
a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result
of any act or failure to act in his capacity as a director or officer unless it is proven that his act or failure to act constituted
a breach of his fiduciary duties as a director or officer, and his breach of those duties involved intentional misconduct, fraud
or a knowing violation of law. Our Articles of Incorporation do not contain a provision which provides for greater individual liability
of our directors and officers.
Our Articles of Incorporation include provisions
for limiting liability of our directors and officers under certain circumstances and for permitting indemnification of directors,
officers and certain other persons, to the maximum extent permitted by applicable Nevada law, including that:
|
·
|
no director or officer is individually liable to us or our stockholders or creditors for any damages as a result of any act
or failure to act in his capacity as a director or officer, provided, that the foregoing clause will not apply to any liability
of a director or officer for any act or failure to act for which Nevada law proscribes this limitation and then only to the extent
that this limitation is specifically proscribed,
|
|
·
|
any repeal or modification of the foregoing provision will not adversely affect any right or protection of a director existing
at the time of such repeal or modification,
|
|
·
|
we are permitted to indemnify our directors, officers and such other persons to the fullest extent permitted under Nevada law.
Our current Bylaws include provisions for the indemnification of our directors, officers and certain other persons, to the fullest
extent permitted by applicable Nevada law, and
|
|
·
|
with respect to the limitation of liability of our directors and officers or indemnification of our directors, officers and
such other persons, neither any amendment or repeal of these provisions nor the adoption of any inconsistent provision of our Articles
of Incorporation, will eliminate or reduce the effect of these provisions, in respect of any matter occurring, or any action, suit
or proceeding accruing or arising or that, but for these provisions, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
|
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
The following table sets forth certain information
concerning the number of shares of our common stock owned beneficially as of April 22, 2016 by: (i) each person (including any
group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and each
of our named executive officers, and (iii) officers and directors as a group. Unless otherwise indicated, the stockholders listed
possess sole voting and investment power with respect to the shares shown and the officers, directors and stockholders can be reached
at our principal offices at 2360 West Horizon Ridge Parkway, Suite 100, Henderson, Nevada 89052:
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
|
Percentage of
Common Stock
(1)
|
|
|
DIRECTORS AND OFFICERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl S. Ager
|
|
|
23,057,576
|
(2)(9)
|
|
|
7.88
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melvin L. Williams
|
|
|
2,033,430
|
(3)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert D. McDougal
|
|
|
2,128,384
|
(4)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin B. Oring
|
|
|
17,330,934
|
(5)
|
|
|
5.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jordan M. Estra
|
|
|
1,871,519
|
(6)
|
|
|
6.65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John. E. Mack
|
|
|
1,679,800
|
(7)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael W. Conboy
|
|
|
0
|
(8)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers and directors
as a group (7 persons)
|
|
|
48,101,643
|
|
|
|
15.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
HOLDERS OF MORE THAN 5% OF OUR COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nanominerals Corp.
3500 Lakeside Court, Suite 206
Reno, Nevada 89509
|
|
|
19,868,576
|
(9)
|
|
|
6.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Charles A. Ager
17146 – 20th Avenue
Surrey, British Columbia, Canada V3S 9N4
|
|
|
20,913,766
|
(9)(10)
|
|
|
7.22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luxor Capital Group, LP
1114 Ave of the Americas
29th Floor
New York, NY 10036
|
|
|
142,665,754
|
(11)
|
|
|
49.83
|
%
|
|
* Less than 1%.
|
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days of the date of this Report, are deemed outstanding for computing the percentage
ownership of the stockholder holding the options or warrants, but are not deemed outstanding for computing the percentage ownership
of any other stockholder. Unless otherwise indicated in the footnotes to this table, we believe stockholders named in the table
have sole voting and sole investment power with respect to the shares set forth opposite such stockholder's name. Percentage of
ownership is based on 286,310,744 shares of common stock outstanding as of April 22, 2016.
|
|
(2)
|
Consists of 500,000 shares of common stock and options to acquire an additional 2,689,000 shares of our common stock (of which
100,000 may vest after 60 days following April 22, 2016) held directly by Carl S. Ager, our Vice President, Secretary and Treasurer
and a member of our Board. In addition, Mr. Ager is a 17.5% stockholder of Nanominerals, a company that owns 16,400,000 of our
outstanding shares of common stock and warrants to purchase up to 3,468,576 shares of our common stock. However, Mr. Ager does
not have any voting or investment powers over the 16,400,000 shares or the 3,468,576 warrants owned by Nanominerals. For purposes
of Rule 13d-3 of the Exchange Act, Mr. Ager may be deemed to be a beneficial owner of the 16,400,000 shares and the 3,468,576 warrants
owned by Nanominerals by virtue of his ownership interest in Nanominerals. However, for purposes of Section 13(d) of the Exchange
Act, Mr. Ager disclaims beneficial ownership of all but a number of shares not in excess of 2,870,000 of the 16,400,000 shares
and 607,000 of the 3,468,576 warrants owned by Nanominerals, which reflects his 17.5% ownership interest in Nanominerals. See footnote
(9) below.
|
|
(3)
|
Consists of 449,430 shares held directly by Melvin L. Williams and in his personal IRA, and 20,000 shares held by Cupit, Milligan,
Ogden & Williams PSP and Trust, dated 1/1/97, and options to acquire an additional 1,564,000 shares of our common stock. On
April 8, 2016, Mr. Williams resigned as the Chief Financial Officer of the Company.
|
|
(4)
|
Consists of 309,580 shares held by Robert D. McDougal as Trustee of the Robert D. McDougal and Edna D. McDougal Family Trust
Dated December 13, 2007 and options to acquire an additional 1,818,804 shares of our common stock. Mr. McDougal passed away on
January 15, 2016.
|
|
(5)
|
Consists of 305,000 shares held directly by Martin B. Oring (or jointly with his wife), 6,679,749 shares held by Martin Oring
Financial Trust dated December 20, 2006, a family trust of which Mr. Oring’s wife serves as a trustee, 2,222,921 shares held
by Wealth Preservation Defined Benefit Plan and options and warrants to acquire an additional 8,123,264 shares of common stock
(of which 150,000 may vest after 60 days following April 22, 2016) held by Mr. Oring and his affiliated entities.
|
|
(6)
|
Consists of an aggregate of 4,000 shares held directly by Jordan M. Estra (jointly with his wife) and in his personal IRA,
and options to acquire an additional 1,867,519 shares of our common stock held by Mr. Estra and his affiliated entities.
|
|
(7)
|
Consists of options to acquire 1,679,800 shares of our common stock (of which 50,000 may vest after 60 days following April
22, 2016) held by John Mack.
|
|
(8)
|
Michael Conboy is employed by Luxor Capital Group, LP as the Director of Research. However, for
purposes of Section 13(d) of the Exchange Act, Mr. Conboy disclaims beneficial ownership of all shares beneficially owned by Luxor
Capital Group, LP. See footnote (11) below
.
|
|
(9)
|
Nanominerals is a privately held Nevada corporation which owns 16,400,000 shares of our common
stock and warrants to purchase up to 3,468,576 shares of common stock. Carl S. Ager, one of our officers and directors, owns 17.5%
of the issued and outstanding shares of Nanominerals. Dr. Charles A. Ager, the sole director and officer of Nanominerals, and his
wife, Carol Ager, collectively own 35% of the issued and outstanding shares of Nanominerals. Further, Mr. Ager has given an irrevocable
proxy to Dr. Ager to vote his shares of Nanominerals during the time that Mr. Ager serves as one of our directors or executive
officers. Dr. Ager has sole voting and investment powers over the 16,400,000 shares and the 3,468,576 warrants owned by Nanominerals.
A group of additional shareholders of Nanominerals, none of whom is an officer or director of Searchlight or Nanominerals, collectively
own 47.5% of the outstanding shares of Nanominerals
.
|
|
(10)
|
These shares include the 16,400,000 shares and warrants to purchase up to 3,468,576 shares of
common stock owned by Nanominerals. Pursuant to a Schedule 13D filed by Dr. Ager, Dr. Ager and his wife, Carol Ager, collectively
own 35% of the outstanding shares of Nanominerals. Dr. Ager is the sole director and officer of Nanominerals. Further, Mr. Ager
has given an irrevocable proxy to Dr. Ager to vote his shares of Nanominerals during the time that Mr. Ager serves as one of our
directors or executive officers. Dr. Ager has sole voting and investment powers over the 16,400,000 shares and the 3,468,576 warrants
owned by Nanominerals. See footnote (9) above. In addition, Dr. Ager’s affiliate, Geotech Mining Inc., owns 140,000 shares
of common stock. Further, Mrs. Ager owns 765,190 shares in her own name, and her affiliate, Geosearch Inc., owns an additional
140,000 shares
.
|
|
(11)
|
Luxor Capital Group, LP (“Luxor Capital Group”) acts as the investment manager of
Luxor Capital Partners, LP, Luxor Spectrum, LLC, Luxor Wavefront, LP, Luxor Capital Partners Offshore Master Fund, LP, Luxor Capital
Partners Offshore, Ltd., Luxor Spectrum Offshore Master Fund, LP, Luxor Spectrum Offshore, Ltd. and Thebes Offshore Master Fund,
LP and to an account it separately manages (collectively, the “Luxor Reporting Entities”). The Luxor Reporting Entities
beneficially own an aggregate of 142,665,754 shares of common stock and warrants to purchase up to an additional 16,532,789 shares
of common stock. All 16,532,789 warrants, however, are not exercisable until September 18, 2016. Luxor Management, LLC (“Luxor
Management”) is the general partner of Luxor Capital Group. Christian Leone is the managing member of Luxor Management. Luxor
Capital Partners Offshore Master Fund, LP is a subsidiary of Luxor Capital Partners Offshore, Ltd., and Luxor Spectrum Offshore
Master Fund, LP is a subsidiary of Luxor Spectrum Offshore, Ltd. LCG Holdings, LLC (“LCG Holdings”) serves as the general
partner or the managing member of certain of the Luxor Reporting Entities. Mr. Leone is the managing member of LCG Holdings. Luxor
Capital Group, Luxor Management and Mr. Leone may each be deemed to be the beneficial owner of the 142,665,754 shares and 16,532,789
warrants beneficially owned by the Luxor Reporting Entities
.
|
Item 13. Certain Relationships and Related Transactions,
and Director Independence
General
We have ongoing business relationships with
affiliates of our management and principal stockholders. In particular, we have continuing obligations under the agreements under
which we acquired the assets relating to our Clarkdale Slag Project. We remain obligated to pay a royalty which may be generated
from the operations of the Clarkdale Slag Project to Nanominerals, one of our principal stockholders, which is an affiliate of
one member of our executive management and Board, Carl S. Ager. We also have engaged Nanominerals as a paid consultant to provide
technical services to us. Further, our President and Chief Executive Officer and a member of our Board, serves as a consultant
to Ireland Inc., a publicly traded, mining related company. We also rent office space from Ireland Inc. under a sublease agreement.
These persons are subject to a fiduciary duty to exercise good faith and integrity in handling our affairs. However, the existence
of these continuing obligations may create a conflict of interest between us and our Board members and senior executive management,
and any disputes between us and such persons over the terms and conditions of these agreements that may arise in the future may
raise the risk that the negotiations over such disputes may not be subject to being resolved in an arms’ length manner. In
addition, Nanominerals’ interest in Ireland Inc. and its other mining related business interests may create a conflict of
interest between us and our Board members and senior executive management who are affiliates of Nanominerals.
Although our management intends to avoid
situations involving conflicts of interest and is subject to a Code of Ethics, there may be situations in which our interests may
conflict with the interests of those of our management or their affiliates. These could include:
|
·
|
competing for the time and attention of management,
|
|
·
|
potential interests of management in competing investment ventures, and
|
|
·
|
the lack of independent representation of the interests of the other stockholders in connection with potential disputes or
negotiations over ongoing business relationships.
|
We believe that all transactions with our
affiliates have been entered into on terms no less favorable to us than could have been obtained from independent third parties.
We intend that any transactions with officers, directors and 5% or greater stockholders will be on terms no less favorable to us
than could be obtained from independent third parties.
We currently have three independent directors
and the existence of these continuing obligations to our affiliates may create a conflict of interest between us and certain of
our Board members and senior executive management, and any disputes between us and such persons over the terms and conditions of
these agreements that may arise in the future may raise the risk that the negotiations over such disputes may not be subject to
being resolved in an arms’ length manner. We intend to make good faith efforts to recruit additional independent persons
to our Board. We intend that any transactions with our affiliates will be approved by a majority of our independent, disinterested
directors and will comply with the Sarbanes Oxley Act and other securities laws and regulations.
Although we only have three independent
directors, the Board has adopted a written Related Person Transactions Policy, which describes the procedures used to identify,
review, approve and disclose, if necessary, any transaction or series of transactions in which: (i) we were, are or will be a participant,
(ii) the amount involved exceeds $120,000, and (iii) a related person had, has or will have a direct or indirect material interest.
There can be no assurance that the above conflicts will not result in adverse consequences to us and the interests of the other
stockholders.
Prior to the adoption of the Related Person
Transactions Policy on March 17, 2009, related party transactions were subject to our Code of Ethics, which was adopted July 18,
2006, and an unwritten policy that any transactions with related persons would be approved of by a majority of our independent,
disinterested directors, and would comply with the Sarbanes Oxley Act and other securities laws and regulations. However, we did
not have any independent directors until October 2008. At any point at which we did not have independent directors on our Board,
any transactions with related persons were approved of by a majority of our then disinterested directors.
The following is a description of related
party transactions in the two most recent fiscal years ended December 31, 2015.
Transactions with Nanominerals Corp. and Affiliates
General.
Nanominerals is a
private Nevada corporation principally engaged in the business of mineral exploration. Nanominerals does not have any employees
and relies on third party consultants for the provision of services. Nanominerals is one of our principal stockholders. Dr. Ager
and Mrs. Ager, collectively own 35% of the outstanding common stock of Nanominerals. One of our executive officers and directors,
Carl S. Ager, and our former President and Chief Executive Officer, Ian R. McNeil, are stockholders of Nanominerals, but neither
currently serves as an officer, director or employee of Nanominerals. Messrs. Ager and McNeil each owns 17.5% of the issued and
outstanding shares of common stock of Nanominerals, representing an aggregate of 35% of the outstanding common stock of Nanominerals.
Dr. Ager currently is the sole officer and director of Nanominerals, and controls its day to day operations. Further, Mr. Ager
has given an irrevocable proxy to Dr. Ager to vote his shares of Nanominerals during the time that Mr. Ager serves as one of our
directors or executive officers. Dr. Ager has sole voting and investment powers over the 16,400,000 shares and 3,468,576 common
stock purchase warrants owned by Nanominerals. Messrs. Ager and McNeil are the son and son-in-law, respectively, of Dr. Ager and
Mrs. Ager. Dr. Ager, Mr. Ager and Mr. McNeil may be considered promoters of the Company by virtue of their positions in the Company
and Nanominerals. Nanominerals is the principal stockholder of another publicly traded mining company (Ireland Inc.) and has other
mining related business interests which may create a conflict of interest between us and our Board members and senior executive
management who are affiliates of Nanominerals.
Consulting Arrangement with Nanominerals
.
Nanominerals provides us with the use of its laboratory, instrumentation, milling equipment and research facilities which has allowed
us to perform tests and analysis both effectively and in a more timely manner than would otherwise be available from other such
consultants. We believe that Nanominerals’ knowledge and understanding of the science and technology in our business, along
with its understanding of how to implement our business plan in a practical manner, has made Nanominerals an important part of
our technical team. Dr. Ager performs the services for us in his authorized capacity with Nanominerals under our consulting arrangement
with Nanominerals. Nanominerals also engages the services of outside technical consultants to perform the services for us, depending
on the specific goal of a particular project. Some of our consultants have worked directly with Nanominerals in an ongoing manner
and performed day-to-day work and tests. The consulting services provided by Nanominerals are highly specialized and unique to
the mineral exploration industry, and there is a limited number of experts that can perform these types of services. We currently
do not rely solely on Nanominerals to provide us with technical expertise to guide the project technically. However, Nanominerals
continues to be an important consultant to assist us with our technical challenges.
The services provided by Nanominerals include:
|
·
|
SEM/EDS Studies
: Nanominerals uses SEM/EDS to identify the minerals (gold, silver, copper and zinc) in the slag material
and understand the physical make-up of the slag. This information has provided us with an understanding how to potentially liberate
the minerals from the slag material by mechanical methods (grinding). This type of work is highly specialized and very unique to
the mineral exploration industry.
|
|
·
|
Grinding Studies
: Looking at the ground material again using SEM/EDS, Nanominerals has assisted us in testing a number
of different grinders and variables (size of material fed to grinder, grinding time, etc.) to find the best way to mechanically
liberate and expose the minerals within the slag material. Without mechanical liberation, the chemicals used in the extraction
process (leaching) cannot perform. Therefore, grinding is a crucial step in the overall processing of the slag material. The unique
nature of the slag material (i.e. it is very hard and abrasive and the minerals are entombed within the slag) makes the proper
grinding of the slag material very difficult. Grinding and crushing are commonly used in the mining industry.
|
|
·
|
Analytical and Extraction Studies
: Nanominerals has provided us the use of its laboratory, instrumentation, milling
equipment and research facilities and has performed (and continues to perform) analytical and extraction studies for the presence
of gold, silver, copper and zinc in the slag material. Nanominerals has tested different variables (chemicals, pH, ORP, machines,
instruments, etc.) to attempt to determine the most effective methods to analyze and extract the desired metals.
|
|
·
|
Flow Sheet Development
: Nanominerals, in conjunction with our technical team and consultants, helps to developed a flow
sheet for the Clarkdale Project to attempt to determine methods to process the slag material on a large scale, and continues to
assist us in determining the most effective methods used in the process of extracting metals from the slag material.
|
|
·
|
Financings
: Nanominerals has introduced us to investors and potential investors which have led to participation in our
previous financings. Nanominerals has also provided assistance to us when potential financiers performed technical due diligence
on our projects, including making technical presentations to potential investors. We have not provided special fees to Nanominerals
in connection with such financings.
|
We commenced our consulting arrangement
with Nanominerals in 2005 following the completion of the Assignment Agreement relating to the Clarkdale Slag Project. In 2005,
we only reimbursed Nanominerals for technical expenses. However, in 2006, we began to pay Nanominerals the $30,000 monthly fee,
plus expense reimbursement due to the significant amount of work that Nanominerals was performing for us. This consulting arrangement
was approved by the Board, including our former director K. Ian Matheson, who has never had a direct or indirect financial interest
in Nanominerals.
The Board initially determined that $30,000
per month fee was a reasonable rate for Nanominerals based on several factors:
|
·
|
the technical services provided by Nanominerals were highly specialized and required scientists with significant experience
in mining, metallurgy and chemistry.
|
|
·
|
we required a significant amount of time to be devoted to our projects (most importantly at Clarkdale). Nanominerals was available
to us nearly every day (at least 100 hours per month).
|
|
·
|
Nanominerals had available resources, such as outside scientific contacts whom the consultant could use to perform specific
work (i.e. SEM specialists, metallurgists in certain specialized fields, etc.).
|
|
·
|
Nanominerals had instrumentation and laboratory facilities at its disposal, either to be able to prepare or provide technical
presentations and coordinate technical due-diligence presentations to prospective investors.
|
|
·
|
Nanominerals was willing to provide the services to us on a month-to-month with the ability to terminate at any time.
|
Given the time commitment that we required
and the general market rate for qualified consultants of approximately $500 per hour, anticipated monthly fees for the services
that Nanominerals was to perform were estimated to be a minimum of $50,000. Given these criteria, we believe that engaging Nanominerals
to perform these services at the $30,000 monthly rate, plus expense reimbursement, has provided an advantage to us over other technical
consultants. Until August 31, 2010, we paid Nanominerals a $30,000 per month fee, together with expense reimbursement and some
expenses, to cover their services. The monthly fee was reduced to $17,500 on September 1, 2010, and was further reduced to $15,000
on October 1, 2010. Effective January 1, 2011, we agreed to replace the monthly fee with an advance royalty payment of $15,000
per month and to reimburse Nanominerals for actual expenses incurred.
During the years ended December 31, 2015
and 2014, we utilized the services of Nanominerals to provide technical assistance and financing related activities primarily to
the Clarkdale Slag Project. In addition, Nanominerals provided us with the use of its laboratory, instrumentation, milling equipment
and research facilities. For the year ended December 31, 2015, we incurred total advanced royalty payments, consulting fees and
reimbursement of expenses to Nanominerals of $180,000 and $45,000 and $360, respectively. $188,725 was due to Nanominerals as of
December 31, 2015.
For the year ended December 31, 2014, we
incurred total advanced royalty payments, consulting fees and reimbursement of expenses to Nanominerals of $180,000, $120,400 and
$7,008, respectively. $13,365 was due to Nanominerals as of December 31, 2014.
During the year ended December 31, 2014,
Nanominerals paid $100,000 of our expenses and, additionally, on December 18, 2014, relinquished $242,428 of amounts due to them.
Such amounts were recorded as contributions to capital.
On December 23, 2014, we granted warrants
for the purchase of 1,940,000 shares of common stock at $0.50 per share to Nanominerals. The warrants were granted in part to incentivize
their continued efforts and support. The warrants expire on December 23, 2019.
On November 11, 2014, we granted warrants
for the purchase of 1,000,000 shares of common stock at $0.30 per share to Nanominerals. The warrants were granted for investor
relations, are fully vested and expire on November 11, 2019.
Transactions with Verde River Iron Company and Harry B.
Crockett
Under the terms of a letter agreement, dated
November 22, 2006 and as amended on February 15, 2007, with VRIC, Harry B. Crockett and Gerald Lembas, and an Agreement and Plan
of Merger with VRIC and Transylvania, dated and completed on February 15, 2007, we acquired all of the outstanding shares of Transylvania
from VRIC through the merger of Transylvania into our wholly-owned subsidiary, Clarkdale Minerals LLC, a Nevada limited liability
company. VRIC is an affiliate of one of our principal stockholders, Marcia Crockett, who is the widow of one of our former Board
members, Harry B. Crockett. As a result of the merger, we own title to the approximately 200-acre property underlying a slag pile
located in Clarkdale, Arizona from which we are seeking to recover base and precious metals through the reprocessing of slag material,
approximately 600 acres of additional land adjacent to the project property and a commercial building in the town of Clarkdale,
Arizona. In accordance with the terms of these agreements, we: (i) paid $10,100,000 in cash to VRIC, and (ii) issued 16,825,000
shares of our common stock to Harry B. Crockett and Gerald Lembas, the equity owners of VRIC, and certain designees of VRIC under
the agreements, who are not our affiliates. The $10,100,000 cash payment to VRIC consisted of (i) $9,900,000 in connection with
the acquisition of Transylvania and (ii) $200,000 paid to VRIC for an option to enter into the reorganization with Transylvania.
Under the terms of our 2007 agreements to
acquire Transylvania with VRIC, we have the following continuing obligations:
|
·
|
we agreed to continue to pay VRIC $30,000 per month (which amount we had previously paid to VRIC under the Joint Venture Agreement
since June 2005) until the earlier of: (i) the date that is 90 days after we receive a bankable feasibility study, or (ii) the
tenth anniversary of the date of the execution of the letter agreement,
|
|
·
|
we have agreed to pay VRIC $6,400,000 within 90 days after we receive a bankable feasibility study,
|
|
·
|
we have agreed to pay VRIC a minimum annual royalty of $500,000, commencing 90 days after we receive a bankable feasibility
study, and an additional royalty consisting of 2.5% of the “net smelter returns” on any and all proceeds of production
from the Clarkdale Slag Project. The minimum royalty remains payable until the first to occur of: (1) the end of the first calendar
year in which the percentage royalty equals or exceeds $500,000, or (2) February 15, 2017. In any calendar year in which the minimum
royalty remains payable, the combined minimum royalty and percentage royalty will not exceed $500,000, and
|
|
·
|
we have agreed to pay VRIC an additional amount of $3,500,000 from the net cash flow of the Clarkdale Slag Project after such
time that we have constructed and are operating a processing plant or plants that are capable of processing approximately 2,000
tons of slag material per day at the Clarkdale Slag Project. The acquisition agreement does not include a specific provision with
respect to the periods at the end of which “net cash flow” is measured, once the production threshold has been reached.
Therefore, the timing and measurement of specific payments may be subject to dispute. The parties intend to negotiate a clarification
of this provision in good faith before the production threshold has been reached.
|
We have recorded a liability for the $30,000
monthly payment commitment using imputed interest based on our best estimate of our incremental borrowing rate. The effective interest
rate used was 8.00%, resulting in an initial present value of $2,501,187 and a debt discount of $1,128,813. The expected term used
was ten years, which represents the maximum term the VRIC liability is payable if the Project Funding Date does not occur by the
tenth anniversary of the date of the execution of the letter agreement. We paid $2,610,000 to VRIC from February 15, 2007 (the
acquisition date) through December 31, 2014, which included $1,591,226 of principal and $1,018,774 of interest. To address liquidity
constraints, we deferred payment of the VRIC payable effective May 1, 2014. On December 18, 2014, VRIC relinquished $255,000 of
payments due to them. The relinquishment was recorded as a contribution of capital.
During the year ended December 31, 2015,
we made no payments related to the pursuant to the deferral recorded effective May 1, 2014.
At December 31, 2015, the balance of the
principal obligation owing under the letter agreement was $698,144. Actual payments made or relinquished under the letter agreement
from January 1, 2014 through December 31, 2015 were as follows:
|
|
Total Payments
and
Relinquishments
|
|
|
Amount
Applied to
Interest
|
|
|
Amount
Applied to
Principal
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 12/31/13:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,272,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 3/31/14
|
|
|
90,000
|
|
|
|
19,615
|
|
|
|
70,385
|
|
|
|
1,207,050
|
|
Quarter Ended 6/30/14
|
|
|
90,000
|
|
|
|
18,198
|
|
|
|
71,802
|
|
|
|
1,140,751
|
|
Quarter Ended 9/30/14
|
|
|
90,000
|
|
|
|
16,753
|
|
|
|
73,247
|
|
|
|
1,073,117
|
|
Quarter Ended 12/31/14
|
|
|
105,000
|
|
|
|
14,457
|
|
|
|
90,543
|
|
|
|
1,004,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Totals
|
|
$
|
375,000
|
|
|
$
|
69,023
|
|
|
$
|
305,977
|
|
|
$
|
698,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 3/31/15
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
698,144
|
|
Quarter Ended 6/30/15
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
698,144
|
|
Quarter Ended 9/30/15
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
698,144
|
|
Quarter Ended 12/31/15
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
698,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Totals
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
698,144
|
|
Other than the total $30,000 monthly payment,
which includes imputed interest as set forth in the table above, we have accounted for the payments that are dependent upon future
events as contingent payments. Upon meeting the contingency requirements described above, the purchase price of the Clarkdale Slag
Project will be adjusted to reflect the additional consideration.
Transactions with Affiliate of Chief Financial Officer
During the years ended December 31, 2015
and 2014, we utilized the accounting firm of Cupit, Milligan, Ogden & Williams, an affiliate of Melvin L. Williams, our former
Chief Financial Officer, to provide accounting support services.
We incurred total fees to Cupit, Milligan
of $175,283 and $145,875 for the years ended December 31, 2015 and 2014, respectively. On December 23, 2014, our Board approved
of entering into an exchange agreement with Cupit, Milligan which provided for issuance of 359,430 shares of our common stock directly
to Mr. Williams for the balance due to Cupit Milligan of $115,018 as of November 30, 2014. The price of $0.32 per share used in
the exchange was the closing market price of the Company’s common stock on the agreement date. At December 31, 2015 and 2014,
we had outstanding balances due to the firm of $158,457 and $8,174, respectively.
These accounting support services included
bookkeeping input for Clarkdale facility, assistance in preparing working papers for quarterly and annual reporting, and preparation
of federal and state tax filings. These expenses do not include any fees for Mr. Williams’ time in directly supervising the
support staff. Mr. Williams’ compensation has been provided in the form of salary. The direct benefit to Mr. Williams of
the above Cupit, Milligan fees was $59,596 and $42,304 for the years ended December 31, 2015 and 2014, respectively.
Effective April 8, 2016, Mr. Williams resigned
as our Chief Financial Officer.
Transactions with Ireland Inc.
We lease corporate office space under a
sublease agreement with Ireland Inc. (“Ireland”). NMC is a shareholder in both the Company and Ireland. Additionally,
our CEO provides consulting services to Ireland. The lease agreement commenced September 1, 2013, was for a two-year period and
required monthly lease payments of $2,819 for the first year and $1,667 for the second year. The lease agreement was renewed on
September 1, 2015 on a month-to-month basis for a period of 12 months, with $1,734 monthly lease payments. The lease agreement
did not require payment of a security deposit.
Total rent expense incurred under this sublease
agreement was $20,772 and $29,220 for the years ended December 31, 2015 and 2014, respectively. No amounts were due to Ireland
as of December 31, 2015 or 2014.
Transactions with Luxor Capital Group, L.P.
On September 18, 2013, we completed a private
placement (the “Offering”) of secured convertible notes (the “Notes”) to certain investors (collectively,
the “Purchasers”), resulting in aggregate gross proceeds to us of $4,000,000. We did not pay any commissions or brokers’
fees in connection with the Offering. The Notes were issued in reliance on exemptions from registration pursuant to Section 4(a)(2)
of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D thereunder.
Luxor Capital Group, LP and certain of its
associates and affiliates (collectively, “Luxor”) purchased $2,600,000 of the Notes in the Offering. Luxor and certain
other funds managed by Luxor are principal stockholders of the Company, and Michael Conboy, one of our directors, currently serves
as Luxor’s Director of Research.
In connection with the Offering, we entered
into certain agreements, including a Secured Convertible Note Purchase Agreement, a Registration Rights Agreement and a Pledge
and Security Agreement (the “Security Agreement”), each dated September 18, 2013, with the Purchasers. Our two wholly-owned
subsidiaries, Clarkdale Metals Corp. and Clarkdale Minerals, LLC, agreed to guarantee the obligations underlying the Notes. We
and our subsidiaries granted a first priority lien in all of our assets pursuant to the terms of the Security Agreement. The Bank
of Utah has agreed to act as the collateral agent under the Security Agreement.
The Notes contain the following terms and
conditions: (i) the Notes are due five (5) years from the date of issuance, provided that the Purchasers have a put option with
respect to the Notes, on the second anniversary of the issuance date and every six (6) months thereafter, at par plus accrued and
unpaid interest; (ii) the Notes may not be prepaid without the consent of the holders of the majority-in-interest of the Notes;
(iii) the Notes have customary provisions relating to events of default; (iv) interest on the Notes accrues at a rate of 7% per
annum, which will be payable in cash semi-annually; (v) following and during the continuance of an event of default, the Notes
will bear interest at a rate per annum equal to the rate otherwise applicable thereto, plus an additional 2% per annum; and (vi)
each Note is convertible at any time while the Note is outstanding, at the option of the holder, into shares of our common stock,
at $0.40 per share. The Notes have customary anti-dilution provisions, including, without limitation, provisions for the adjustment
to the exercise price based on certain stock dividends and stock splits. In addition, the conversion price of the Notes may require
adjustment upon the issuance of equity securities (including the issuance of debt convertible into equity) by us at prices below
the then existing conversion price, subject to certain exempt issuances which will not result in an adjustment to the exercise
price.
The Notes are secured by a first priority
lien on all of our assets and our two subsidiaries in favor of the Purchasers. However, we have the right to cause defeasance of
the liens and to reduce the interest rate on the Notes to 4% per annum, if, at any time, we deposit additional collateral and other
agreements, satisfactory to the holders of the majority-in-interest of the Notes, with the collateral agent. We have agreed not
to incur any (a) additional secured indebtedness, or (b) indebtedness of any kind (unsecured or secured) with a maturity of less
than 5 years from the issuance date of the Notes, in each case, without the written consent of the holders of the majority-in-interest
of the Notes, except for purposes of defeasance or trade payables in the ordinary course of business.
In connection with the Offering, our Board
agreed to waive certain provisions of our Rights Agreement, dated November 12, 2009 (the “Rights Agreement”), including
the 15% limitation currently in the Rights Agreement with respect to Luxor, and to allow Luxor to become the beneficial owners
of up to 22% of the shares of our common stock, without being deemed to be an “acquiring person” under the Rights Agreement.
Following demand by Luxor of the repayment
of the amount of all of the outstanding principal and interest owing on their Notes, we, lacking sufficient funds to make such
repayment, agreed to allow Luxor to convert such amount into shares of our restricted common stock at a rate of $0.035 per share.
On March 18, 2016, Luxor provided the Company with Conversion Notices consistent with such terms and conditions. In the aggregate,
Luxor converted $2,691,000 owing on their Notes in exchange for 76,885,714 shares of the Company’s common stock. The Company
has subsequently cancelled Luxor’s Notes.
The Company also agreed to sell to Luxor
42,857,143 shares of our common stock, at a purchase price of $0.035 per share, for a total consideration of $1,500,000. On March
18, 2016, we completed a private placement (the “2016 Offering”) of our securities to Luxor on such terms and conditions.
The securities were issued in reliance on exemptions from registration pursuant to Section 4(a)(2) of the Securities Act and Rule
506 of Regulation D thereunder. We intend to use the net proceeds from the 2016 Offering for general working capital purposes.
In connection with the 2016 Offering, we entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”)
and a Registration Rights Agreement, each dated March 18, 2016, with Luxor. The Common Stock Purchase Agreement contains representations
and warranties of the Company and Luxor that are customary for transactions of the type contemplated in connection with the 2016
Offering.
Luxor also agreed, as a condition of the
2016 Offering, that all of its 16,532,789 currently owned warrants shall not be exercisable until at least September 18, 2016.
In addition, in connection with the 2016 Offering, our Board agreed to waive certain provisions of the Rights Agreement with respect
to accounts managed by Luxor. In particular, we agreed to further waive all of the existing limitations under the Rights Agreement
so that Luxor would not an “acquiring person” under the Rights Agreement under any circumstance. Following the 2016
Offering, Luxor became the beneficial owner (as defined in Rule 13d-3 of the Exchange Act of approximately 49.83% of our common
stock.
The Board also authorized, subject to stockholder
approval, certain amendments to our Articles of Incorporation and Amended and Restated Bylaws that, among other things, would eliminate
a classified Board of Directors and increase the number of authorized shares of our capital stock. The Board of Directors will
call for an annual meeting of our stockholders and will nominate five designees, three of which shall be designees of Luxor, for
election as directors at such meeting.
In addition, pursuant to a letter agreement
between us and Luxor, dated March 18, 2016 (the “Letter Agreement”), Luxor agreed that it, or its designees, will invest
up to an additional $1,250,000 in to be issued shares of our common stock, at a purchase price of $0.045 per share, upon the completion
of certain milestones. The securities will be issued in reliance on exemptions from registration pursuant to Section 4(a)(2) of
the Securities Act and Rule 506 of Regulation D thereunder. We intend to use the net proceeds from such sales for general working
capital purposes. In connection with the additional investment described in the Letter Agreement, we entered into a common stock
purchase agreement, dated March 18, 2016 (the “Second Common Stock Purchase Agreement”) with Luxor Capital Group, LP,
an affiliate of Luxor (“Luxor Capital”), which, among other things, sets forth the milestones and contains customary
representations and warranties of the Company and Luxor Capital. In addition, upon the completion of certain milestones set forth
in the Second Common Stock Purchase Agreement, we will enter into a Registration Rights Agreement with Luxor Capital or its designees.
Item 14. Principal Accountant Fees and Services
The following table shows the fees paid
by us or billed or expected to be billed for the audit and other services provided by BDO USA, LLP, our independent auditors for
the years ended December 31, 2015 and 2014:
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Audit Fees
|
|
$
|
132,228
|
|
|
$
|
124,852
|
|
Audit-Related Fees
|
|
|
-
|
|
|
|
-
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
All Other Fees
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
132,228
|
|
|
$
|
124,852
|
|
As defined by the SEC, (i) “audit
fees” are fees for professional services rendered by our principal accountant for the audit of our annual financial statements
and review of financial statements included in our Form 10-Q, or for services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal years, (ii) “audit-related fees” are fees for
assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review
of our financial statements and are not reported under “audit fees,” (iii) “tax fees” are fees for professional
services rendered by our principal accountant for tax compliance, tax advice, and tax planning, and (iv) “all other fees”
are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,”
“audit-related fees,” and “tax fees.”
Under applicable SEC rules, the Audit Committee
is required to pre-approve the audit and non-audit services performed by the independent auditors in order to ensure that they
do not impair the auditors’ independence. The SEC’s rules specify the types of non-audit services that an independent
auditor may not provide to its audit client and establish the Audit Committee’s responsibility for administration of the
engagement of the independent auditors.
Consistent with the SEC’s rules, the
audit committee charter requires that the Audit Committee review and pre-approve all audit services and permitted non-audit services
provided by the independent auditors to us or any of our subsidiaries. The Audit Committee may delegate pre-approval authority
to a member of the Audit Committee and if it does, the decisions of that member must be presented to the full Audit Committee at
its next scheduled meeting.