Related Party Transactions | NOTE 8 - RELATED PARTY TRANSACTIONS Compensation Related UBIQUITY, INC. SC Business, Inc. SC Business, Inc. (“SC”) is an entity owned by the Company’s CFO, Brenden Garrison. At times SC charges Ubiquity for tax/consulting work. In order to assist the Company in accessing its credit card lines (as provided by the Carmichael family – see “Loans Payable – Related Parties” below), SC Business periodically charges the Company’s credit cards and remits the related funds, net of fees, back to Ubiquity or to SME. The following is a summary of the transactions between the parties during the years ended December 31, 2015 and 2014: 2015 2014 Receivable from SC Business, beginning of the year $ 1,279,681 $ 437,812 Amount charged on Ubiquity Credit Cards by SC Business $ 4,628,579 $ 2,619,267 Amounts remitted back to Ubiquity (3,842,503 ) (1,673,407 ) Amounts retained by SC for settlements of Brenden Garrison’s accrued salary and reimbursements(2015) and amounts due SC (2014) (191,796 ) (28,758 ) PayPal and other fees incurred by SC Business (166,327 ) (75,233 ) Receivable from SC Business (1) $ 1,707,634 $ 1,279,681 (1) Amounts remitted to SME $ 426,787 $ 609,897 (2) (1) The substance of this receivable is that it is due from SME based on the balance being related to amounts remitted from Ubiquity to SME. Accordingly, such amounts are eliminated in the consolidation of SME. (2) Net of approximately $232,000 of amounts owed to SC Business. Max Gan Max Gan was an employee of the Company. In prior years Max Gan loaned the company money periodically and also assisted the Company in accessing its credit card lines. Max Gan then remitted the related amount charged, net of fees, back to Ubiquity. The following is a summary of the transactions between the parties during the year ended December 31, 2015 and 2014: 2015 2014 Receivable from Max Gan, beginning of year $ 247,461 $ 125,920 Amount charged on Ubiquity Credit Cards $ 718,124 $ 574,040 Amounts remitted back to Ubiquity (642,079 ) (393,405 ) PayPal and other fees incurred (13,876 ) (42,185 ) Interest Service fees charged $ 0 $ (16,909 ) Allowance for bad debt (309,630 ) Receivable from Max Gan,net, end of period $ 0 $ 247,461 Nicholas Mitsakos Nicholas Mitsakos was the Company’s Co-Chairman of the Board. The Company entered into a directors retention agreement with Mitsakos on March 22, 2013 for the issuance of 250,000 shares of common stock and amended in July 2013 for the issuance of an additional 250,000 shares of common stock. Finally, the agreement was amended in December 2013, which calls for monthly payments of $25,000 beginning in January 2014. During the years ended December 31, 2015 and 2014, the Company recorded expense of $300,000 and $150,000, respectively, under the contract. As of December 31, 2015 and December 31, 2014, the cash amounts owed under the contract were $450,000 and $150,000, respectively. Subsequent to year end, the amounts due were settled with the issuance of 1,986,439 common shares see Note 14. Carmichael Enterprises This entity is owned by Al Carmichael, who is the father of our CEO, Chris Carmichael. Al Carmichael is the signor for the Company’s business credit cards. In exchange for providing the Company with the access to the related credit lines, the Company pays him a monthly fee of $2,500 per month. During the years ended December 31, 2015 and 2014, the Company expensed $30,000 and $30,000 in consulting fees of which $0 and $0 was due, respectively. In addition, the Company owed him $16,000 and $10,000, in reference to a note payable at December 31, 2015 and 2014, respectively. On October 24, 2016, Albert Carmichael filed a UCC-1 financing statement for amounts owed relating to a personal loan to the Company as well as certain credit being secured for the Company listing the Company’s fixed assets as collateral. Brittany Carmichael Brittany Carmichael is the daughter of our CEO, Chris Carmichael and provided secretarial, administrative, and marketing support for the Company. The Company expensed approximately $69,753 and $27,012 related to her salary, reimbursed expenses, and beneficial payments charged against her salary during the years ended December 31, 2015 and 2014, respectively. Effective November 30, 2016 Brittany no longer provided services to the Company. Cameron Carmichael Cameron Carmichael is the son of our CEO, Chris Carmichael, and provided studio related services to the Company. The Company expensed approximately $33,526 and $31,375 related to his salary, reimbursed expenses, and beneficial payments against his salary during the years ended December 31, 2015 and 2014, respectively. Effective March 1, 2017 Cameron no longer provided services to the Company. Shane Carmichael Shane Carmichael is the son of our CEO, Chris Carmichael, and provided studio related services to the Company. The Company expensed approximately $72,084 and $66,737 related to his salary, reimbursed expenses, and beneficial payments charged against his salary during the years ended December 31, 2015 and 2014, respectively. Effective December 31, 2016 Shane no longer provided services to the Company. Christopher Carmichael & Connie Jordan The following is a summary of compensation paid and amounts payable to Christopher Carmichael and Connie Jordan for the years ended December 31, 2015 and 2014: Christopher Christopher Carmichael Carmichael Connie Jordan Connie Jordan 2015 2014 2015 2014 Beginning Accrued Balance $ 2,705,365 $ 1,053,398 $ 1,199,523 $ 181,241 Add SME <FN 6> - January 1, 2014 0 1,220,863 0 971,065 Annual Salary - Ubiquity, Inc. 532,200 539,400 264,400 264,400 Annual Salary - Sponsor Me, Inc. 0 200,000 0 180,000 Annual Director Fees - - - - Bonus 13,467 403,010 3,634 120,943 Other Reimbursements (3) 73,929 14,994 63,539 5,957 Subtotal 3,324,961 3,431,665 1,531,096 1,723,606 Payments (505,352 )(2) (726,300 )(2) (270,084 )(2) (524,083 )(2) SME Amounts Forgiven in Share Exchange Agreement(4) (1,470,863 ) - (1,198,565 ) - Option Exchange Forgiveness of Salary (1,000,000 )(1) Accrual - Ending December 31 $ 348,746 $ 2,705,365 $ 62,448 $ 1,199,523 (1) Salary and bonuses forgiven for the exchange to purchase options, see Note 6. (2) Payments do not include amounts SME paid an aggregate of approximately $62,573 and $61,875 in benefits for the years ended December 31, 2015 and 2014, respectively. (3) Other income primarily relates to the benefit of using American Express points. (4) See Note 6. For the year ended December 31, 2015, Chris Carmichael loaned Ubiquity $1,204,905 and at December 31, 2015 was owed $605,172. The loans are memorialized by contracts bearing 8% interest annually. On June 9, 2016, Christopher Carmichael filed a UCC-1 financing statement for his amounts owed as an officer director and loans to the Company totaling over $2,000,000 owed at the time, listing the Company’s intellectual property and other fixed assets as collateral. Chris Carmichael had previously loaned the Company $14,571,612 through personal loans and amounts secured by his family for business expenses for the two years ended December 31, 2015 and 2014 respectively, including $8,065,771 for the year ended December 31, 2015. Annual Salary On December 20, 2013, effective January 1, 2014, the Board of Directors approved to increase Christopher Carmichael, the Company’s CEO, annual salary from $420,000 to $525,000. Additionally, the CEO receives and accrues a medical allowance of $1,200 per month. In addition, the CEO receives an annual grant of 300,000 options prior to January 1, 2014 and 600,000 subsequently. On December 20, 2013, effective January 1, 2014, the Board of Directors approved to increase the Company’s CFO’s annual salary from $150,000 to $225,000 and an annual option grant of 150,000 shares. The Company’s Senior Executive Vice President, Connie Jordan, received an annual salary of $250,000 during the years ended December 31, 2015 and 2014. Additionally, the Senior Executive Vice President receives and accrues a medical allowance of $1,200 per month and an annual option grant of 200,000 prior to January 1, 2014 and 300,000 subsequently. Bonus During the years ended December 31, 2015 and 2014, the CEO earned bonuses of $13,467 and $403,010, respectively, in connection with the bonus provisions of his related employment agreement (see Note 10). During the years ended December 31, 2015 and 2014, the Senior Executive Vice President earned bonuses of $3,634 and $120,943, respectively, in connection with the bonus provisions of her related employment agreement (see Note 10). The Company accounts for the bonuses as payroll expense. Accrued Amounts Payable to CEO and Senior Executive Vice President As of December 31, 2015 and 2014, amounts payable to the CEO related to the items discussed above were $348,746 and $2,705,365, respectively. See Note 6 for discussion related to $1,000,000 of salary and bonus payable to the CEO exchanged for options to purchase shares of the Company’s common stock. As of December 31, 2015 and 2014, amounts payable to the Senior Executive Vice President related to the items discussed above were $241,925 and $1,199,523, respectively. Board of Director Fees Effective July 1, 2014, the Company revised its policy for providing compensation to members of the board of directors. Each independent board member receives an annual fee off$25,000 payable annually and additional compensation annually ranging from $5,000 - $10,000 depending on the board members participation in the Company’s various committees. In addition, effective July 1, 2014, the Company officers who also reside on the board of directors do not receive compensation. During the years ended December 31, 2015 and 2014, the Company accrued $85,000 And $32,500 respectively, in connection with amounts due to non-officer board of director members. As of December 31, 2015 and 2014, $217,500 and $132,500 was included in accrued expenses in the accompanying consolidated balance sheets, respectively. On June 9, 2016, Christopher Carmichael filed a UCC-1 financing statement for his amounts owed as an officer director and loans to the company totaling over $2,000,000 owed at the time, listing the Company’s intellectual property and other fixed assets as collateral. Chris Carmichael had previously loaned the company $14,571,612 through personal loans and amounts secured by his family for business expenses for the years ended December 31, 2015 and 2014 respectively, including $8,065,771 for the year ended December 31, 2015. UBIQUITY, INC. The Carmichael Family has personally guaranteed two Company credit cards and has allowed the Company use of their personal credit cards as needed. Total lines of credit personally guaranteed by the Carmichael family are up to $800,000 per month and is memorialized in a formal loan agreement. Of which a total loaned from the use of these guaranteed cards was $6,824,866 and $6,280,841 during the years ended December 31, 2015 and 2014, respectively. See Note 9 for discussion of options granted during the year ended December 31, 2015 in connection with this guarantee. The Company benefited from the use of American Express points totaling approximately $70,000 in cash value. The Company used these points to pay for business expenses, to pay down the business card, and other expenses. The Company had certain notes payable outstanding to related parties as of December 31, 2015 and 2014. During the years ended December 31, 2015 and 2014, the Company borrowed $1,204,905 and $225,000 from Chris Carmichael for which payments were made of $599,732 and $225,000, respectively. As of December 31, 2015 and 2014, Christopher Carmichael was owed $605,172 and $0, respectively. The amounts were unsecured, incurred interest at 8% per annum and due on demand. During the year ended December 31, 2015, the Company recorded accrued interest of $10,100. The proceeds were used for operations. Albert Carmichael, a family member of the Company’s CEO, was owed $16,000 and $10,000 as of December 31, 2015 and 2014, respectively. The amounts are unsecured, non-interest bearing and due on demand. The proceeds were used for operations. Employees, consultants or shareholders of the Company were owed $74,394 and $18,489 as of December 31, 2015 and 2014, respectively. The amounts are unsecured, non-interest bearing and due on demand. However, the Company is recording interest at 8% per annum which is consistent with other related party loans, for a total accrued interest of $7,500 as of December 31, 2015. The proceeds were used for operations. In addition, during the year ended December 31, 2015, the Company issued 736,834 shares of common stock in settlement of $57,500 in principal balance. The Company valued the shares of common stock at $81,032 based upon the closing market price on the date of issuance. The excess fair market value of the common stock over the amount relieved of $23,532 was recorded as interest expense. As of December 31, 2015, one of the notes representing $20,000 is convertible into shares of common stock at a rate of $.08 per share. In February 2014, the Company received a $50,000 loan from a shareholder. The proceeds from the loan were used for operations and were due on demand. No formal terms were ever entered into in connection with the loan. During the year ended December 31, 2014, the Company repaid the $50,000 loan and an additional $5,000 which was accounted for as interest expense. |