Related Party Transactions

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Text Block]

Note 10 – Related Party Transactions

Debt with Counsel

Until the second quarter of 2014, as discussed below, Counsel was the Company’s majority shareholder. Counsel remains a related party, following the distribution of its investment in HGI to Counsel shareholders, as a result of the Services Agreement discussed below. Therefore, at June 30, 2015 and December 31, 2014, the Company reported amounts owed to Counsel of $1.6 million and $3.0 million, respectively, as related party debt (see Note 8). Total interest of $0.4 million has been accrued on the debt through June 30, 2015.

Counsel Services Provided to the Company

Beginning in December 2004, HGI and Counsel entered into successive annual management services agreements (collectively, the “Agreement”). Under the terms of the Agreement, HGI agreed to pay Counsel for ongoing services provided to HGI by Counsel personnel. These services included preparation of the Company’s financial statements and regulatory filings, taxation matters, stock-based compensation administration, Board administration, patent portfolio administration and litigation matters. The Counsel employees providing the services were: 1) its Executive Vice President, Secretary and Chief Financial Officer, 2) its Tax Manager, 3) an Accounting Manager, and 4) its Accounts Payable Clerk. These employees have the same or similar positions with HGI, but none of them received compensation from HGI. Rather, Counsel allocated to HGI a percentage, based on time incurred, of the employees’ base compensation paid by Counsel. Beginning in the first quarter of 2011, additional amounts were charged to HGI for Counsel services specifically relating to the ongoing operations of HGI’s asset liquidation business. The amounts due under the Agreement were payable within 30 days following the respective year end, subject to applicable restrictions. Any unpaid amounts bore interest at 10% per annum commencing on the day after such year end.

In the first quarter of 2013, Counsel announced its plan to dispose of its interest in HGI, and on March 20, 2014, Counsel declared a dividend in kind, consisting of Counsel’s distribution of its majority interest in HGI to Counsel shareholders. The dividend was paid on April 30, 2014 to shareholders of record as of April 1, 2014.

Following this disposition, the Company and Counsel entered into a replacement management services agreement (the “Services Agreement”). Under the terms of the Services Agreement, Counsel remains as external manager and continues to provide the same services, at similar rates. The Services Agreement had an initial term of one year, with a provision for automatic renewal for successive one-year terms unless notice by either party is given within ninety days before the expiration. The Services Agreement may be terminated at any time upon mutual agreement of the Company and Counsel. Following the changes to the Company’s executive officers and directors that were effective on May 5, 2015, as described in the Current Report on Form 8-K filed with the SEC on May 7, 2015, the Company and Counsel intend to terminate the Services Agreement in the third quarter of 2015.

The amounts charged by Counsel, which have been accrued and added to the Counsel Loan balance, are detailed below (in thousands):

		Six months ended June 30,
		2015		2014
Management fees	$	180	$	180
Other charges		38		96
Total	$	218	$	276

Transactions with Other Related Parties

The Company leases office space in Foster City, CA as part of the operations of HGP. The premises are owned by an entity that is jointly controlled by senior officers of HGI. It also leases office space in Edwardsville, IL, as part of the operations of NLEX, which is owned by senior officers of NLEX. The lease amounts paid by the Company to the related parties, which are included in selling, general and administrative expenses during the six months ended June 30, 2015 and 2014, are detailed below (in thousands):

		Six months ended June 30,
Leased premises location		2015		2014
Foster City, CA	$	114	$	114
Edwardsville, IL		49		8
Total	$	163	$	122