Quarterly report pursuant to Section 13 or 15(d)

RELATED PARTY TRANSACTIONS

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RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 7 – RELATED PARTY TRANSACTIONS

 

The Company loaned the CEO $20,500 during the year ended December 31, 2013. The note and interest were paid in full during the year ended December 31, 2017. The Company recorded interest income of $64 for the three months ended March 31, 2017.

 

During the three months ended March 31, 2018 and the year ended December 31, 2017, our CEO (stockholder) paid expenses of the Company and accounts payable on behalf of the Company (see Note 4). As of March 31, 2018, and December 31, 2017, the Company owed the CEO $151,639 and $138,637, respectively, which is included in Advances payable, stockholders on the condensed consolidated balance sheet included herein.

 

During the three months ended March 31, 2018, and the year ended December 31, 2017, our Chairman (stockholder) paid expenses of the Company and accounts payable on behalf of the Company (see Note 4). As of March 31, 2018, and December 31, 2017, the Company owed the Chairman $36,121 and $38,201, respectively, which is included in Advances payable, stockholders on the condensed consolidated balance sheet included herein.

Pursuant to a Marketing Agreement (cancelled August 5, 2016), the Company provided marketing programs to promote and sell hearing aid instruments and related devices to Moore Family Hearing Company (“MFHC”). MFHC owned and operated retail hearing aid stores. Based on common control of MFHC and the Company, all transactions with MFHC are classified as related party transactions. On August 8, 2016, in consideration of $128,000 (the “Cancellation Fee”), MFHC and the Company agreed to cancel the Marketing Agreement as a result of the sale by MFHC of substantially all of their assets. On August 11, 2016, MFHC paid $229,622 to the Company (inclusive of the balance owed as of June 30, 2016, the Cancellation Fee and other related party activity).

 

Pursuant to the Marketing Agreement, beginning in January 2014, the monthly fee was increased from $2,500 to $3,200 per retail location. For the year ended December 31, 2016 (through August 5, 2016), there were 20 stores resulting in revenue of $458,667. The Company has offset the accounts receivable owed from MFHC for expenses of the Company that have been paid by MFHC. As a result of these payments, in addition to MFHC’s payments to the Company through December 31, 2016, the balance due to MFHC as of March 31, 2018, and December 31, 2017, was $22,548, which is included in Accounts payable, related party, on the condensed consolidated balance sheet included herein.

 

On April 1, 2013, the Company entered into a five-year sublease agreement with MFHC to sublease approximately 729 square feet of office space for $1,500 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services provided to MFHC. For the three months ended March 31, 2017, the Company expensed $1,500 related to this lease.

 

Effective August 1, 2016, the Company agreed to compensation of $225,000 and $125,000 per year for the Company’s CEO and CFO, respectively. On November 15, 2016, the Company entered into employment agreements with its CEO and CFO, which includes their annual base salaries of $225,000 and $125,000, respectively. For the three months ended March 31, 2018, and 2017, the Company recorded expenses to its officers in the following amounts:

 

    Three months ended
March 31,
    2018   2017
  CEO     $ 56,250     $ 56,250  
  CFO       30,289       31,250  
  Total     $ 86,538     $ 87,500  

 

As of March 31, 2018, the Company owes the CEO and CFO $38,324 and $56,868, respectively, and as of December 31, 2017, the Company owed the CEO and CFO $4,327 and $40,385, respectively for accrued and unpaid wages. These amounts are included in Officer salaries payable on the balance sheets included herein.

 

In September 2016, the officers and directors of the Company formed a California Limited Liability Company (“LLC1”), for the purpose of acquiring commercial real estate and other business activities. On December 24, 2016, LLC1 acquired two retail stores from the buyer of the MFHC stores. On March 1, 2017, the Company entered into a twelve-month Marketing Agreement with each of the stores to provide telemarketing and design and marketing services for $2,500 per month per store, resulting in $15,000 and $5,000 of revenues for the three months ended March 31, 2018, and 2017, respectively. Additionally, for the three months ended March 31, 2018, the Company invoiced LLC1 $12,421 for the Company’s production, printing and mailing services and $1,275 for sale of products. As of March 31, 2018, and December 31, 2017, LLC1 owes the Company $97,804 and $73,996, respectively. On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party (see Note 8). On June 14, 2017, the Company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000. For the three months ended March 31, 2018, the Company expensed $36,000 related to this lease and is included in Rent, related party, on the condensed consolidated statement of operations, included herein.

 

In November 2016, the Company’s Chairman formed a California Limited Liability Company (“LLC2”), for the purpose of providing consulting services to the Company. The Company entered into an agreement with LLC2, and paid LLC2 $375,000 during the year ended December 31, 2016, for services performed and to be performed. Of the $375,000 amount paid, $241,667 was recognized as consulting fees- stockholder for the year ended December 31, 2016, and the remaining $133,334 was recorded as deferred commissions- stockholder as of December 31, 2016. For the three months ended March 31, 2017, the Company paid the LLC an additional $771,000 and expensed $300,000 ($60,000 as commissions and $240,000 as other expense) for services performed. As of December 31, 2017, the deferred commissions-stockholder is $-0-, as the Company wrote off $508,334 during the remainder of 2017, due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017.

 

On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company paid for their building interest by delivering cash at closing of $209,971 and being a co-borrower on a note in the amount of $2,057,000, of which the Company has agreed with LLC1 to pay $1,007,930 (see Note 8).