Related Party Transactions

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

7. RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2015 and 2014, the Company sold products to companies affiliated with its Chairman, President and Chief Executive Officer. The affiliated companies distribute the products outside of the United States and Canada. The Company also provides administrative services to these companies. Sales to the affiliated companies aggregated approximately $198,000 and $466,000 during the three months ended September 30, 2015 and 2014, respectively, and approximately $1,416,000 and $1,474,000 for the nine months ended September 30, 2015 and 2014, respectively.  Administrative fees aggregated approximately $112,000 and $143,000 during the three months ended September 30, 2015 and 2014, respectively, and approximately $381,000 and $382,000 for the nine months ended September 30, 2015 and 2014, respectively. The Company had accounts receivable from the affiliated companies in connection with the product sales and administrative services aggregating approximately $468,000 and $715,000 at September 30, 2015 and December 31, 2014, respectively. Transactions with the affiliated companies were made in the ordinary course of business.   While the terms of sale to the affiliated companies differed from the terms applicable to other customers, the affiliated companies bear their own warehousing, distribution, advertising, selling and marketing costs, as well as their own freight charges (the Company pays freight charges in connection with sales to its domestic customers on all but small orders).  Moreover, the Company does not pay sales commissions with respect to products sold to the affiliated companies.  As a result, the Company believes its profit margins with respect to sales to the affiliated companies are similar to the profit margins with respect to sales to its larger domestic customers.  Management believes that the sales transactions did not involve more than normal credit risk or present other unfavorable features.

A subsidiary of the Company currently uses the services of an entity that is owned by its Chairman, President and Chief Executive Officer to conduct product research and development and to assist in the production of television commercials.  Under this arrangement, the Company paid the entity $10,500 for each of the three month periods ended September 30, 2015 and 2014, and $31,500 for each of the nine month periods ended September 30, 2015 and 2014, for research and development services. In addition, during the year ended December 31, 2014, the Company made a $40,000 prepayment to this entity for the production of television commercials, which was included in prepaid expenses and other current assets in the Company’s balance sheet at December 31, 2014. During the three and nine months ended September 30, 2015, the entity provided the services covered by the prepayment, and the $40,000 is included in advertising and promotion expenses in the Company’s condensed consolidated statement of operations for those periods.

The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer.  The Company believes that the rental payments are below market rates.  See Note 8 for a description of the lease terms.

A director of the Company is Regional Executive Vice President of an entity from which the Company sources most of its insurance needs at an arm’s length competitive basis.  During the three months ended September 30, 2015 and 2014, the Company paid an aggregate of approximately $490,000 and $203,000, respectively, and during the nine months ended September 30, 2015 and 2014, the Company paid an aggregate of approximately $883,000 and $518,000, respectively in insurance premiums on policies obtained through the entity. The increase in 2015 is primarily attributable to the Company’s prepayment of the entire annual premium for its general liability policy rather than paying the premium in installments.