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Note 8 - Related Party Transactions
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12 Months Ended |
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Dec. 31, 2012
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| Related Party Transactions Disclosure [Text Block] |
8. RELATED
PARTY TRANSACTIONS
George
Broady, a director of the Company and owner of more than 5%
of its outstanding common stock, advanced $2,500 on January
13, 2011, and $30,000 on March 14, 2011 to settle certain
claims against the Company. The aggregate amount of
these advances, plus a $4,000 advance on December 17, 2010,
totaling $36,500 was repaid on August 8, 2011.
Additionally,
Mr. Broady advanced $100,000 to the Company on February 28,
2011 and $100,000 on March 14, 2011. The Company agreed
to pay Mr. Broady interest of 9% per annum on the aggregate
amount of the advances. The Company repaid Mr. Broady
in full, plus accumulated interest, during the third and
fourth quarters of 2011.
In
February 2013, the Company entered into a Royalty Agreement
and License with Broady Health Sciences, L.L.C.
(“BHS”) regarding the manufacture and sale of a
new product called Restor™. Under
this agreement, Company has agreed to pay BHS a royalty of
2.5% of sales revenue for this product for 2011 and
subsequent years in return for the right to manufacture (or
have manufactured), market, import, export and sell this
product worldwide, with certain rights being exclusive
outside the United States. Mr. Broady is owner of
BHS, a Texas limited liability company. During 2011 and
2012, BHS permitted the Company to manufacture (or have
manufactured), market and sell the Restor™
product. In April 2012, the Company reimbursed BHS
$42,000 in expenses incurred in 2011 to promote the Restor™
product on the Company’s behalf. To permit
the Company to continue selling Restor™
and obtain certain exclusive rights outside of the United
States, BHS requested that the Company enter into the Royalty
Agreement and License. This agreement was
reviewed, considered, authorized and approved by the sole
disinterested, non-employee member of the Board of Directors
under appointment by the full Board of Directors as an ad hoc
committee for this purpose. Upon signing this
agreement, the Company paid BHS $12,000 and $25,000 as
royalties for 2011 and 2012, respectively. The
Company is not required to purchase any product under the
agreement, and the agreement may be terminated at any time on
120 days’ notice or, under certain circumstances, with
no notice.
The
Company is considering entering into another royalty
agreement and license with BHS regarding the manufacture and
sale of a new product called Soothe™,
which the Company began selling in the fourth quarter of 2012
with the permission of BHS. To continue selling
this product, BHS has requested that the Company pay a
royalty of 2.5% of sales revenue for 2012 and subsequent
years. The Company is considering that proposal and
discussing the terms of a definitive agreement. At a
royalty of 2.5% of net sales, the Company calculates that
royalties for 2012 would be $1,200.
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