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Note 5 - Related Party Transactions
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3 Months Ended | ||
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Mar. 31, 2013
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| Related Party Transactions Disclosure [Text Block] |
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, the 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. George Broady, a director of the
Company and owner of more than 5% of its outstanding
common stock, 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. Royalties
accrued, but unpaid for the first three months of 2013
are approximately $7,000. 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 and the first
three months of 2013 would total approximately
$2,400.
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