XML 32 R17.htm IDEA: XBRL DOCUMENT v3.6.0.2
Related Party Transactions
12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
11. Related Party Transactions

Effective September 4, 2014, the Company entered into a consulting agreement with Dr. Bruce Bedrick, a stockholder, to provide consulting services related to business development and marketing activities for the Company and other duties as agreed to by management.   The Company was required to pay the related party a monthly fee of $10,000 plus expense reimbursement.  Subsequent to the effective date, the related party agreed to defer the payment of the monthly fee for a period of four months beginning with the November 4, 2014 payment.  The deferred fees were to be payable on the earlier of the termination date or the second anniversary of the effective date.  The consulting agreement had an initial term of one year and could be automatically renewed for a one-year period unless terminated by either party.  The Agreement could be terminated by the Company by providing a sixty-day notice prior to the first anniversary of the effective date.  On July 6, 2015, the Company notified the related party of its intent to terminate the contract effective September 4, 2015.  During the year ended December 31, 2015, the Company incurred and paid consulting and other expenses of $100,000 related to the consulting agreement.

 

In March 2013, the Company converted a $40,000 advance from a related party to a note payable with a maturity date of December 31, 2013 with the principal balance of the note due at maturity with no interest.  The Company made principal payments of $31,000 and $5,000 during the years ended December 31, 2015 and 2014, respectively, and the note has been repaid in full as of December 31, 2015.  Imputed interest expense on this note was de minimis.

 

On August 15, 2013, the Company was advanced $56,000 from a related party. Subsequently, $7,000 of that advance was repaid and the Company issued a promissory note for the remaining balance of $49,000 (the "Original Note"). The Original Note had an interest rate of 10% per annum and a maturity date of November 7, 2013. The Company made payments on the note and in November 2013, the remaining $42,095 balance of the Original Note was replaced by another note (the "Replacement Note"). The Replacement Note waived any existing default under the Original Note and had a maturity date of May 31, 2014 with all other terms of the Replacement Note and Original Note remaining the same.  Effective July 23, 2015, the Company reached a settlement agreement with the related party whereby the Company agreed to pay twelve monthly payments of $4,099 on the first of each month starting on August 1, 2015 to fully satisfy its obligations under the note payable.  During the years ended December 31, 2016 and 2015, the Company made principal payments of $23,889 and $18,206, respectively, and recorded interest expense on this note of $702 and $2,868, respectively. The note was repaid in full in July 2016. On October 3, 2016, the Company reached a settlement with the same related party in regards to certain balances of accounts receivables from and accounts payable to the related party.  The Company agreed to pay $77,606, payable in twenty-four monthly payments of $3,234, beginning October 15, 2016The agreement resulted in the Company recognizing a $44,343 gain which is included in Selling, General and Administrative Expenses for the year ended December 31, 2016.

 

In the fourth quarter of 2016, the Company entered into a master services agreement for information technology and marketing analytics projects with a company that Mr. Jeff T. Holtmeier, the Company's President and Chief Executive Officer, holds a minority ownership interest and was chairman of its board of directors.  During 2016, the Company incurred $49,376 of costs under the agreement of which $13,700 was capitalized as web development costs.

 

In 2016, the Company entered into an Exchange Agreement with Dellave Holdings LLC (See Note 8 – Stockholders' Deficiency) which the Company issued the Company's common stock in exchange for the extinguishment of accounts payable balances held by Dellave.  Mr. Tim Reilly, a significant stockholder of the Company, is the single member of both Dellave and Melrose Capital Advisors, LLC, the Company's senior lender (See Note 6 – Notes Payable).