RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2014

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

Related Party Management Agreement with AMHC Managed Services

Effective September 1, 2011, the Company entered into a management agreement (the "Management Agreement") with AMHC Managed Services, Inc. ("AMMS"), a subsidiary of AMAC. The Company's Chairman of the Board of Directors and officers of the Company are also officers/board members of AMAC. The significant terms of the Management Agreement provide for monthly payments to AMMS in exchange for the ability of the Company to fully utilize the management expertise, financial and accounting expertise, support staff and location of AMMS, including the expertise of the position of AMMS' Chief Financial Officer and necessary support for compliance under the securities laws with respect to any private or public reports or registration statements the Company may file. The Management Agreement term was 12 months, and required the Company to pay AMMS a monthly fee equal to $35,000 per month. Additionally, under the Management Agreement, the Company granted AMMS a warrant to purchase 330,184 shares of Company's common stock exercisable at $0.0007 per share, exercisable for a three-year term. The value of the warrant was determined to be approximately $49,700. The amount was recorded as a prepaid asset and was amortized over the one-year term of the Management Agreement as services are performed. AMMS exercised the warrant in full in July 2012.

The Management Agreement was renewed in October 2012 for an additional one-year period with terms similar to those of the 2011 Management Agreement. In connection with the renewed Management Agreement, the Company issued an additional warrant in October 2012 to AMMS to purchase 330,184 shares of the Company's common stock at $0.0007 per share for a three-year term.  The value of the warrant was determined to be approximately $49,700. The amount was recorded as a prepaid asset and is being amortized over the one-year term of the Management Agreement as services are performed, of which approximately $39,400 and $10,300 was expensed in the years ended December 31, 2013 and 2012. AMMS exercised the warrant in full in October 2012. On May 17, 2013, the Company amended its terms with AMMS so that AMMS would no longer be the "Acting CFO" nor provide senior financial management services for the Company effective the same date. Further, on June 26, 2013, the Company notified AMMS that it would terminate the Management Agreement effective July 31, 2013. These functions were handled by the interim CEO and interim CFO for the remainder of 2013.

The Company also paid rent and rent-related expenses to Accredited Members Acquisition Corporation ("AMAC"), a related party, on a month-to-month basis for office space at the AMAC corporate headquarters in Colorado Springs, Colorado. This arrangement began in October 2011 and terminated July 31, 2013, as the Management Service Agreement terminated. Base rental payments were approximately $3,500 per month. Related party rent expense was approximately nil for the three and nine months ended September 30, 2014 and $14,300 and $28,600 for the three and nine months ended September 30, 2013.

In addition to the management fee and the rent discussed above, the Company paid AMMS for reimbursable expenses and payments made to third parties on behalf of the Company. During the three and nine months ended September 30, 2014, the Company paid reimbursable expenses of nil with $16,300 and $40,000 paid for the three and nine months ended September 30, 2013, respectively.

In July 2013, the Company repurchased 33,334 common shares owned by AMMS for $1.50 per share for a total price of $50,000. These shares were cancelled by the Company in July 2013. The difference between the $1.50 per share and the fair value of the shares at the transaction date of $0.75 per share ($25,000) was recorded as an expense to related party management fees.