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Strategic Alliance with Alticor Inc.
9 Months Ended
Sep. 30, 2011
Strategic Alliance with Alticor Inc.
Note 5—Strategic Alliance with Alticor Inc.
 
Since March 2003, the Company has maintained a broad strategic alliance with several affiliates of the Alticor family of companies. The alliance previously included an equity investment, a multi-year research and development agreement, a licensing agreement with royalties on marketed products, the deferment of outstanding loan repayment and the refinancing of bridge financing obligations. Pyxis Innovations, Inc., an affiliate of Alticor, is the Company’s largest shareholder and is the holder of the Company’s debt.
 
In October 2009, the Company entered into a Merchant Network and Channel Partner Agreement with Amway Corp., d/b/a/ Amway Global (“Amway Global”) a subsidiary of Alticor Inc. Pursuant to this Agreement, Amway Global sells the Company’s Inherent Health® brand of genetic tests through its e-commerce website via a hyperlink to our e-commerce site. We paid Amway Global $762,000 and $263,000 in commissions for the nine months ended September 30, 2011 and 2010, respectively, and $219,000 and $95,000, respectively, for the three months ended September 30, 2011 and 2010, respectively, representing a percentage of net sales to their customers.
 
On April 15, 2011, the Company entered into a contract services agreement with Alticor Corporate Enterprises Inc. and Amway International Inc. (collectively, “Alticor”). Pursuant to this agreement, the Company provided marketing, promotional and training services to Alticor in connection with its marketing of the Company’s weight management genetic test. Upon execution of the agreement on April 15, 2011, the agreement received retroactive effect as of October 15, 2010 and the initial term expired on October 14, 2011. The Company is currently in discussions with Alticor for a possible extension of the agreement. The Company received approximately $143,000 for its services under the agreement for the initial term. The agreement may be renewed for successive one-year periods upon mutual written agreement by the parties. Alticor has the right to designate which personnel of the Company perform services under the agreement. Alticor may terminate the agreement at any time if the Company fails to perform the services in a timely, diligent, workmanlike or acceptable manner or with anyone other than the Company’s personnel specified by Alticor, or in the event that the Company becomes insolvent. The Company may terminate the agreement if Alticor defaults under the agreement. The agreement also contains standard confidentiality, ownership and restrictions on the transfer of intellectual property covenants. As of September 30, 2011, the Company has received $107,232 under the agreement and recorded an unbilled receivable for $29,844 representing amounts due under the agreement at September 30, 2011.