Commitments and Contingencies |
12 Months Ended | |||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||
Commitments And Contingencies | ||||||||||||||||||||||||||
Note 9. Commitments and Contingencies | Legal Matters
On January 27, 2014, M. Richard Cutler and Cutler Law Group, P.C. (the "Plaintiffs") filed a complaint in the District Court of Harris County, Texas, 2014-03355, against Fuse, Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and Golf Rounds.com, Inc. (the "Defendants"). On April 21, 2014, the complaint was dismissed for "want of prosecution." The Plaintiffs had 30 days from April 21, 2014 to file a motion to reinstate the case and no timely action was taken by the Plaintiffs. However, the Plaintiffs did file a motion to reinstate on May 22, 2014 and it was granted. The Defendants argued a Motion to Dismiss before the court on July 25, 2014 and, on July 28, 2014, the court granted the motion and dismissed the Plaintiffs' (i) breach of fiduciary duty claim against all Defendants, (ii) suit on sworn account claim against all Defendants except Fuse, and (iii) quantum meruit claim against all Defendants except Fuse. The Defendants were also awarded attorneys' fees in the amount of $4,343. Discovery in the case ended on March 25, 2015 and Plaintiffs failed to file any discovery requests during the period or seek an extension of the period. On April 27, 2015, Defendants filed a motion for summary judgment in this matter for failure to prosecute and on the grounds that the claims were not legally viable. On April 28, 2015, Plaintiffs filed a Notice of Non-Suit, which effectively withdrew the lawsuit against the Defendants without prejudice to Plaintiffs' right to refile the lawsuit at any time subject to the applicable statute of limitations.
On September 18, 2015, Plaintiffs refiled a complaint in the District Court of Harris County, Texas, Cause No. 2015-55652 and added PH Squared, LLC as an additional Plaintiff. Thereafter, the term "Plaintiffs" collectively refers to M. Richard Cutler, Cutler Law Group, P.C. and PH Squared, LLC. The new complaint asserts essentially the same claims as the original nonsuited complaint: (i) suit on sworn account against Fuse; (ii) fraud against all Defendants; and (iii) breach of contract against all Defendants for allegedly violating a non-circumvention/non-disclosure agreement. Richard Cutler is the sole principal of Cutler Law Group, P.C., which provided legal representation to its clients, Craig Longhurst and PH Squared, LLC d/b/a PharmHouse Pharmacy ("Cutler's Client"), during a failed merger attempt between Fuse and Golf Rounds.com, Inc. (the "Failed Transaction"). The Plaintiffs have alleged that the Failed Transaction failed to materialize notwithstanding the efforts of Mr. Cutler, his law firm and PH Squared, LLC. The Plaintiffs have further alleged that the Defendants continued to pursue a similar transaction without Cutler's Client or the Plaintiffs. The Plaintiffs claim that the Defendants are responsible for damages in the amount of $46,465 plus interest for the breach of contract claim because Plaintiffs were not paid their legal fees by Cutler's Client and Plaintiffs did not receive equity in the merged company that would have resulted from the Failed Transaction. Plaintiffs are also asking for undisclosed damages related to the fraud and breach of contract claims, and are asking for exemplary damages as a result of allegedly intentional fraud that some or all of the Defendants allegedly committed. Plaintiffs also seek their attorneys' fees and costs for having brought the action. On November 18, 2015, Fuse filed a counterclaim against PH Squared, LLC for breach of contract and further asserted a counterclaim and third party claim against PH Squared, LLC's principle, Craig Longhurst, for fraud in the inducement. Fuse also seeks a declaratory judgment on the intended third party beneficiary status of Plaintiffs Cutler and Cutler Law Group related to a non-circumvention/non-disclosure agreement.
The parties are currently conducting discovery to determine the viability of the Plaintiff's claims, although the Defendants continue to believe that the lawsuit is completely without merit and will vigorously contest it and protect their interests. However, the outcome of this legal action cannot be predicted.
Operating Leases
The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2015:
Commencing January 1, 2013 through January 31, 2014, the Company occupied office space on a month-to-month basis for its corporate headquarters for $500 a month from Crestview Farm, an entity controlled by an individual that was a former director and Chief Executive Officer of the Company. The individual serves as the Manager of Crestview Farm. Rent expense for these facilities was $500 for the year ended December 31, 2014 (See Note 13).
Effective February 1, 2014, the Company entered into a two-year lease agreement expiring January 31, 2016 for its corporate headquarters in Fort Worth, Texas. The lease agreement required base rent payments of $2,489 per month plus common area maintenance. On September 1, 2015, the Company entered into an Assignment and Assumption of Lease Agreement (the "Agreement") whereby the Company assigned the operating lease for its corporate headquarters to an entity controlled by an individual that was a former director and Chief Executive Officer of the Company. Under the Agreement, which was cosigned by the landlord, the entity to which the lease was assigned assumed all further obligations under the lease (See Notes 5 and 13).
During the period from April 1, 2014 through November 30, 2014, the Company reimbursed a former officer on a month-to-month basis for the occasional use of this individual's apartment located in Fort Worth, Texas. The payments for the apartment included payments of $2,060 per month plus common area maintenance and utilities as incurred.
Effective September 1, 2015, the Company began occupying space at its new corporate headquarters in Fort Worth, Texas on a month-to-month basis at the rate of $3,822 per month. Effective December 31, 2015, the Company entered into a sublease agreement expiring September 30, 2018 (the "Initial Term") for this space. The sublease agreement renews automatically for additional one-year periods unless written notice of the intent to not renew is provided at least 60 days prior to the end of the Initial Term. Notwithstanding, the sublease shall not extend beyond September 30, 2020 unless the sublessor extends its lease and the parties enter into a written agreement to extend the duration of the sublease. The sublease agreement requires base rent payments of $3,822 per month through September 30, 2016; $3,906 per month through September 30, 2017 and $3,990 per month through September 30, 2018, plus a pro rata share of electricity and common area maintenance. Rent for one month shall be abated when the Company performs its initial improvements to the subleased premises. The sublease includes a relocation and surrender clause whereby the sublessor has the right to cause the Company to surrender: (i) with at least 30 days notice: (a) one of the offices for a corresponding 15% reduction in rent; or (b) two of the offices for a corresponding 30% reduction in rent (either (a) or (b) deemed a partial surrender); or (ii) with at least 6 months notice, all of the office space in which sublessor shall reimburse the Company for all relocation costs not to exceed $5,000.
Rent expense was $33,791 and $44,859 for the years ended December 31, 2015 and 2014, respectively.
Consulting Agreements
On May 1, 2014, the Company entered into a one-year consulting agreement with an individual who is a director of the Company whereby the individual shall be a Medical Director and shall receive compensation of $9,000 per month. Effective September 1, 2015, the compensation to this individual was reduced to $0 per month (See Note 13).
On July 1, 2014, the Company entered into a five-year consulting agreement with an individual whereby the individual shall be the Company's General Counsel and shall receive compensation of $25,000 per month as well as a signing bonus of $61,000. On July 17, 2015, the General Counsel resigned (See Note 10). |