Related-Party Transactions

9 Months Ended

Sep. 28, 2014

Related Party Transactions [Abstract]

Related-Party Transactions

Note 12.  Related-Party Transactions

In June 2007, the Company entered into a license agreement with Moose River, which is wholly owned by Michael Rosenberger, pursuant to which the Company licensed the U.S. registered trademarks “Dick’s Wings,” “Dick’s Wings & Grill” and design, and “Dick’s Wings Express” and design, and the Florida registered trademark “Dick’s Wings” and design.  The Company paid Moose River $100 as consideration for the license.  The license agreement was for a term of 50 years and was renewable for an additional term of 50 years.  Mr. Rosenberger served as the Company’s Chief Executive Officer, Chief Financial Officer and Secretary, and as a member of the Company’s board of directors, at the time the parties entered into the agreement and throughout the duration of the license agreement. In July 2013, Mr. Rosenberger assigned all of the trademarks to the Company.  A description of the trademark assignment is set forth herein under Note 6. Commitments and Contingencies – Employment Agreements.

In October 2008, the Company entered into a loan agreement with Bank of America for an original principal amount of $338,138.  The loan accrued interest at a rate of 7% per annum, was secured by substantially all of the Company’s assets, and was guaranteed by Michael Rosenberger, Rosalie Rosenberger and Hot Wings Concepts.  Mr. Rosenberger served as the Company’s Chief Executive Officer, Chief Financial Officer and Secretary, and as a member of the Company’s board of directors, when the loan agreement was executed and throughout the duration of the loan agreement.  In March 2013 the Company entered into a settlement and release agreement with Bank of America pursuant to which the Company paid $50,000 in full and final settlement of all outstanding principal, accrued but unpaid interest, and all other claims and amounts owed to Bank of America under the loan agreement.  A description of the loan agreement and the settlement and release agreement is set forth herein under Note 8. Debt Obligations.

In January 2012, the Company entered into an employment agreement with Michael Rosenberger, who served as the Company’s Chief Executive Officer, Chief Financial Officer and Secretary, and as a member of the Company’s board of directors, from April 25, 2000 to July 31, 2013.  In July 2013, the Company entered into a separation agreement and consulting agreement with Mr. Rosenberger in connection with his resignation from all such positions with the Company and as a member of the Company’s board of directors.  A description of the employment agreement, separation agreement and consulting agreement is set forth herein under Note 6. Commitments and Contingencies – Employment Agreements.

In January 2013, the Company entered into an employment agreement with Richard W. Akam in connection with his appointment as the Company’s Chief Operating Officer.  Mr. Akam currently serves as the Company’s Chief Executive Officer, Chief Operating Officer and Secretary.  A description of the employment agreement is set forth herein under Note 6. Commitments and Contingencies – Employment Agreements.

In July 2013, the Company entered into a sponsorship agreement with the Jacksonville Jaguars, LLC and, in connection therewith, in August 2013, entered into a subcontractor concession agreement with Levy Premium Foodservice Limited Partnership.  The Company subsequently assigned all of its rights and obligations under the concession agreement to DWG Acquisitions in return for a fee of $2,000 per month for each full or partial month during which the concession agreement is in effect.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and all of the equity interests in DWG Acquisitions.  He also serves as the President, Treasurer and Secretary, and sole member, of DWG Acquisitions.  The Company generated revenue of $6,000 and $18,000 from DWG Acquisitions during the three- and nine-month periods ended September 28, 2014, of which $6,000 was reflected in accounts receivable at September 28, 2014.

In September 2013, the Company entered into a loan agreement with Blue Victory pursuant to which Blue Victory agreed to extend a revolving line of credit facility to the Company for up to $1 million.  The credit facility is unsecured, accrues interest at a rate of 6% per annum, and will terminate upon the earlier to occur of the fifth anniversary of the loan agreement or the occurrence of an event of default.  Blue Victory has the right, at any time on or after September 13, 2013, to convert all or any portion of the outstanding principal of the credit facility, together with accrued interest payable thereon, into shares of the Company’s common stock.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and 90% of the equity interests in Blue Victory.  He also serves as the President, Treasurer and Secretary, and as the sole member of the board of directors, of Blue Victory.  Fred Alexander serves as a member of the Company’s board of directors and as an executive officer of Blue Victory, and Daniel Slone serves as the Company’s Chief Financial Officer and as the controller of Blue Victory.  The Company had total loans of $24,952 outstanding under the credit facility as of September 28, 2014.  A description of the credit facility is set forth herein under Note 8. Debt Obligations. 

In October 2013, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in the Nocatee development in Ponte Vedra, Florida.  In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company.  The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees, except that the Company did not require DWG Acquisitions to pay a franchise fee to the Company.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and all of the equity interests in DWG Acquisitions.  He also serves as the President, Treasurer and Secretary, and sole member, of DWG Acquisitions.  The Company generated a total of $13,060 and $37,486 in royalties from DWG Acquisitions during the three- and nine-month periods ended September 28, 2014.

In December 2013, the Company loaned $6,000 to DWG Acquisitions.  The loan was interest free and payable on demand.  The loan was paid off in full by Blue Victory during the nine-month period ended September 28, 2014.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and all of the equity interests in DWG Acquisitions.  He also serves as the President, Treasurer and Secretary, and sole member, of DWG Acquisitions.  A description of the loan is set forth herein under Note 7. Notes Receivable.

In December 2013, the Company borrowed $5,000 from Star Brands II, LLC, a Louisiana limited liability company (“Star Brands II”).  The loan was interest free and payable on demand.  The loan was paid off in full by Blue Victory during the nine-month period ended September 28, 2014.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and 70% of the equity interests in Star Brands II.  He also serves as the Manager of Star Brands II.  A description of the loan is set forth herein under Note 8. Debt Obligations.

In February 2014, the Company entered into a securities purchase agreement with Seenu G. Kasturi pursuant to which Mr. Kasturi agreed to purchase 206,061 shares of the Company’s common stock for $340,000.  The price per share of common stock paid by Mr. Kasturi was equal to the closing price of the Company’s common stock on the OTCQB on the day immediately preceding the date the transaction was completed.  Mr. Kasturi paid for the shares through the issuance of a promissory note in favor of the Company in the amount of $340,000.  The promissory note is unsecured, accrues interest at a rate of 6% per annum, and has a maturity date of March 31, 2015.  The principal and interest are payable in four equal quarterly installments of $85,000 beginning June 30, 2014.  Mr. Kasturi owns approximately 8.8% of the Company’s common stock and 90% of the equity interests in Blue Victory.  He also serves as the President, Treasurer and Secretary, and as the sole member of the board of directors, of Blue Victory.

In May 2014, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located on Youngerman Circle in Argyle Village in Jacksonville, FL.  In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company.  The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees, except that the Company did not require DWG Acquisitions to pay a franchise fee to the Company.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and all of the equity interests in DWG Acquisitions.  He also serves as the President, Treasurer and Secretary, and sole member, of DWG Acquisitions.  The Company generated a total of $10,128 and $30,641 in royalties from DWG Acquisitions during the three- and nine-month periods ended September 28, 2014.

Between April and June 2014, the Company loaned $17,952 to DWG Acquisitions.  The loan was interest free and payable on demand.  Seenu G. Kasturi owns approximately 8.8% of the Company’s common stock and all of the equity interests in DWG Acquisitions.  He also serves as the President, Treasurer and Secretary, and sole member, of DWG Acquisitions.  A description of the loan is set forth herein under Note 7. Notes Receivable.