NOTE 14. RELATED PARTY TRANSACTIONS

Through April 2014, we leased our prior offices located on O’Bannon Drive in Las Vegas from the Saucier Business Trust, an entity that is related to our CEO.  The lease was entered into effective September 1, 2010 for a period of two years requiring a monthly rental payment of $10,360. Our lease expired at the end of August 2012 and then converted to a term of month-to-month. Total payments made were $0 and $37,296 in 2015 and 2014, respectively.

On December 31, 2007, as a part of our acquisition of assets from GGLLC, an entity formerly controlled by our CEO, we acquired a note receivable from Abyss Group, LLC (“Abyss”), an entity that was formerly related to the wife of our CEO.  Subsequently, Abyss assigned the note to Carpathia Associates, LLC (“Carpathia”), an entity controlled by our CEO.  The note receivable was a ten-year unsecured note with a 6% fixed interest rate, monthly principal and interest payment of $6,598 with the unpaid principal and interest due in February 2017.  The terms of the note were amended whereby the monthly principal and interest payment was reduced to $3,332 and the unpaid principal and interest was to be due August 2015.

As part of the acquisition of assets from GGLLC in 2007, we entered into a note payable to GGLLC.  Subsequently, GGLLC assigned the note payable to Carpathia. The note payable originally required monthly principal and interest payments of $9,159 at a fixed interest rate of 7.3% through February 2017, at which time a balloon payment of $1,003,000 would be due.  The note payable between GGLLC and Bank of America was the subject of litigation and was settled in February 2014.  See Note 12 for further details regarding the settlement with Bank of America.

On August 10, 2015, our Board of Directors approved an agreement of offset (the “Offset Agreement”) between the Company and Carpathia.  The Offset Agreement amended the terms of a note receivable and note payable previously entered into between the parties which offsets the note receivable and note payable between the two parties.  The effective result is that the balloon payment of $437,313, due in August 2015 under the original terms of the note receivable from Carpathia, will be applied to the outstanding note payable due to Carpathia.  The Board believes that the Company benefits from the arrangement as the Offset Agreement extends the note payable’s balloon payment from February 2017 to December 2018.  The balloon payment due in December 2018 will be $354,480.

The balance of the note receivable from Carpathia was $0 and$383,298 at December 31, 2015 and 2014, respectively. Interest income associated with this note receivable was $13,443 and $21,772 for December 31, 2015 and 2014, respectively.

The balance of the note payable to Carpathia was $579,083 and $1,065,324 at December 31, 2015 and 2014, respectively.  Interest expense associated with this note payable was $60,985 and $80,054 for December 31, 2015 and 2014, respectively.

On October 26, 2015 we entered into a Promissory Note (the “Saucier Note”) with Robert Saucier, Chief Executive Officer, pursuant to which the Company has agreed to repay a loan of $500,000 made by Mr. Saucier to the Company.  Under the terms of the Saucier Note, $590,000 shall be due on or before one year from the Effective Date, unless we pay Mr. Saucier $535,000 on or before six months from the Effective Date, in which case we will have fulfilled all of our obligations under the Note.