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13. Commitments
 3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
13. Commitments

Note 13 Commitments

 

(A) Operating Lease

 

In January 2014, the Company executed a 39 month lease for a corporate headquarters. The Company paid a security deposit of $27,020.

 

In October, 2014, the Company executed a 53 month lease for a new corporate headquarters with a base rent of $97,266 escalating annually through 2019. The Company paid a security deposit of $1,914.

 

In October, 2014, the Company entered into a sublease agreement to sublease its previous office space through March 2017. In connection with the sublease, the Company collected $34,981as a security deposit.

 

The minimum rent obligations are approximately as follows:

 

    Minimum   Sublease   Net
Year   Obligation   Rentals   Obligation
  2016     $ 54,876     $ 43,398       11,478  
  2017       46,568       22,263       24,305  
  2018       25,154       —         25,154  
  2019       8,615       —         8,615  
                             
  Total     $ 135,213     $ 65,661     $ 69,552  

 

(B)  Employment Agreement – Chief Executive Officer

 

In November 2014, the Company entered into an employment agreement with its new Chief Executive Officer. In addition to salary, the agreement provided for the issuance of 750,000 restricted shares to him, vesting as follows: 250,000 after the first 6 months of employment and 500,000 additional shares at December 31, 2015. Under terms of the agreement the executive would receive additional compensation in the form of stock options to purchase shares of Company stock equal to one half of one percent (0.5%) of quarterly net income. The strike price of the options will be established at the time of the grant. The options will vest in twelve months and expire after sixty months. In addition to the stock options compensation, the executive will receive cash compensation equal to one half of one percent (0.5%) of annual sales up to $20 million and one quarter of one

percent (0.25%) for annual sales $20 million and 3% of annual net income. For the three months ended March 31, 2016 and 2015, the Executive earned $8,740 and $7,096, respectively, under this agreement. No stock or options have been issued.

 

(C) Consulting Agreement

 

The Company has a 3 year consulting agreement with a director which expires in November 2016, and carries an annual payment of $150,000 cash, stock or 5 year options equal to one half of one percent (0.5%) of the Company’s annual net sales. For the three months ended March 31, 2016 and 2015, the Executive earned $8,740 and $7,096, respectively, under this agreement. No stock or options have been issued.

 

(D) Advances from Related Party

 

A shareholder of the Company provided a 120 non-interest bearing advance of $500,000 during the three months ended March 31, 2016. The amount was to be repaid through subsequent equity offerings.