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Related Party Transactions
9 Months Ended
Sep. 30, 2011
Related Party Transactions [Abstract] 
Related Party Transactions Disclosure [Text Block]

5. RELATED PARTY TRANSACTIONS

 

The Company leases a portion of its corporate headquarters at Pacific Oaks Plaza in Escondido, California to C.I. Holding Group, Inc. and Subsidiaries (“CI”), a small shareholder in the Company that is approximately 35% owned by the Company's executive management. Total rents charged and paid by these affiliates was approximately $14,281 and $12,487 for the three months ended September 30, 2011 and 2010, respectively. Total rents charged and paid by these affiliates was approximately $42,842 and $37,460 for the nine months ended September 30, 2011 and 2010, respectively.

 

The Company has entered into a property management agreement with CHG Properties, Inc. (“CHG”), a wholly-owned subsidiary of CI, to manage all of its properties at rates up to 5% of gross income. During the three months ended September 30, 2011 and 2010, the Company paid CHG total management fees of $167,774 and $103,000, respectively. During the nine months ended September 30, 2011 and 2010, the Company paid CHG total management fees of $375,482 and $295,770, respectively.

 

During the term of the property management agreement, the Company has an option to acquire the business conducted by CHG. The option is exercisable, with the approval of a majority of the Company's directors not otherwise interested in the transaction, without any consent of the property manager, its board or its shareholders. The option price is shares of the Company to be determined by a predefined formula based on the net income of CHG during the 6-month period immediately preceding the month in which the acquisition notice is delivered.

 

In February 2010, the Company completed the DMHU acquisition as described in Note 1. Larry Dubose, a director of the Company since 2005, was founder, owner, chief executive officer and Chairman of DMHU and certain of its affiliates. Mr. Dubose will continue to serve as a director, officer and employee of the Company and certain of its affiliates.

 

In March 2011, the Company purchased 9,560 shares of its vested restricted common stock compensation from its independent Board of Directors for a total of $82,520. The purchase price of approximately $8.60 per share was determined using the same value for the shares as reported as income to state and Federal income tax authorities.