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Related Party Transactions
6 Months Ended
Jun. 30, 2018
Disclosure Text Block [Abstract]  
Related Party Transactions

On March 31, 2017, the Company completed the sale of 620,000 shares of Class B Common Stock at a price of $4.00 per share for aggregate proceeds of $2,480,000 in a private placement (the “2017 Private Placement”). Also, in May 2017, the Company completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. Officers and directors of the Company acquired 175,000 shares of Class B Common Stock in the 2017 Private Placement.

A key component of the Company’s business model is to utilize regional partners in the acquisition of pre-owned vehicles as well as utilize these regional partners to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. In connection with the development of the regional partner program, the Company tested various aspects of the program by utilizing a dealership (the “Dealer”) to which Mr. Chesrown, the Company’s Chief Executive Officer, has provided financing in the form of a $400,000 promissory note. The note matures on May 1, 2019 and interest is payable monthly at 5% per annum. Revenue recognized by the Company from the Dealer for the three-month and six-month periods ended June 30, 2018 was $506,500 and $605,005 or 3.6% and 2.8%, respectively, of the Company’s total Revenue. Cost of revenue recognized by the Company from the Dealer for the three-month and six-month periods ended June 30, 2018 was $458,356 and $551,847 or 3.6% and 2.7%, respectively of the Company’s total Cost of revenue. Included in Accounts receivable at June 30, 2018 is $54,876 owed to the Company by the Dealer. Revenue recognized by the Company from the Dealer for the three-month and six-month periods ended June 30, 2017 was $1,995 and $86,329 or 1.7% and 55.6% of the Company’s total Revenue, respectively. In addition, the Company subleased warehouse space from the Dealer that was separate and distinct from the location of the dealership, on the same terms as paid by the Dealer. This subleased facility served as the northwestern regional distribution center for the Company. The lease was terminated on June 30, 2018. For the three-month and six-month periods ended June 30, 2018, the Company paid $45,000 and $90,000, respectively, in rent under the sublease. This amount is included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. There were no sublease payments for the three-month and six-month periods ended June 30, 2017.

In connection with the NextGen acquisition, the Company entered into a Services Agreement (the “Services Agreement”) with Halcyon Consulting, LLC (“Halcyon”), to provide development and support services to the Company. Mr. Kakarala, a director of the Company, currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company paid Halcyon hourly fees for specific services, set forth in the Services Agreement. The Company reimbursed Halcyon for any reasonable travel and pre-approved out-of-pocket expenses in connection with its services to the Company. The Services Agreement was terminated on March 31, 2018. For the six-month period ended June 30, 2018, the Company paid $54,159 under the Services Agreement. For the three and six-months periods ended June 30, 2017, the Company paid $266,600 and $471,966, respectively under the Services Agreement.

As of June 30, 2018, the Company had promissory notes in the aggregate principal amount of $370,556, plus accrued interest of $7,766 due (1) to an entity controlled by a director of the Company and (2) to that director. The promissory notes were issued in connection with the completion of a private placement for the sale of an aggregate of 900,000 shares of common stock of the Company at a purchase price of $1.50 per share for aggregate proceeds of $1,350,000 on March 31, 2017. These notes represent $370556 of the Private Placement Notes described in Note 5 Notes Payable Interest expense on the promissory notes for the three-month and six-month periods ended June 30, 2018 was $35,496 and $67,610, respectively, which included debt discount amortization of $27,730 and $53,904, respectively. Interest expense on the promissory notes for the three-month and six-month periods ended June 30, 2017 was $28,019, which included debt discount amortization of $22,014. The interest was charged to interest expense in the Condensed Consolidated Statements of Operations and included in accrued interest under long-term liabilities in the Condensed Consolidated Balance Sheets.