Note 6 - Related Party Transactions

6 Months Ended

Sep. 30, 2011

Related Party Transactions Disclosure [Text Block]

6.           Related Party Transactions

Certain University students received funding toward the cost of their education from Myhre Investments, LLC, an entity owned by Mr. Myhre.  Myhre Investments, LLC had $1,729,522 and $1,758,512 in loans outstanding to University students at September 30, 2011 and March 31, 2011.

The Company utilizes executive, administrative, accounting and consulting services provided by Globe University (“GU”) and the Minnesota School of Business (“MSB”) (collectively “GU/MSB”), companies owned by Mr. Myhre, pursuant to a Service Level Agreement (the “SLA”) between the Company and GU/MSB.  Some of the services provided by GU/MSB under this arrangement include chief financial and chief executive officer services, information technology support, finance and accounting services, human resources support, student financial aid consulting and curriculum consulting.  The SLA automatically renews for one-year periods every July, but may be terminated by either party upon 30 days notice.

The Company’s expenses for services under the SLA were $225,000 and $450,000 for each of the three and six month periods ended September 30, 2011 and 2010.  Management believes the monthly charges under the SLA are competitive with, or less than, what the Company would have to pay to provide these services or to obtain them from another third party.

Broadview University is a party to a lease agreement with Myhre Holdings-Utah, LLC, an entity wholly-owned by Myhre Holdings, Inc., which is owned by the heirs of Mr. Myhre. Under the agreement, the University leases a 31,200 square foot building located in Layton, Utah. The lease is for an initial period of ten years with two additional five-year renewal options. The agreement is a “triple net” lease with monthly base rent of $32,500 and an initial security deposit of the same amount.  Broadview Institute, Inc. guaranteed the lease. Rent expense for the Layton facility was $97,500 and $195,000 for each of the three and six month periods ended September 30, 2011 and 2010.

Broadview University is a party to a lease agreement with Myhre Holdings-Orem, LLC, an entity wholly-owned by Myhre Holdings, Inc.  Under the agreement, the University leases a 31,200 square foot building located in Orem, Utah.  The lease is for an initial period of ten years with two additional five-year renewal options.  The agreement is a “triple net” lease with monthly base rent of $48,100 and an initial security deposit of the same amount.  Broadview Institute, Inc. guaranteed the lease.  Rent expense for the Orem facility was $144,300 and $288,600 for each of the three and six month periods ended September 30, 2011 and 2010.

Effective January 1, 2011, Broadview University entered into a lease agreement with Myhre Holdings-Meridian, LLC, an entity wholly-owned by Myhre Holdings, Inc.  Under the agreement, the University leases a 31,200 square foot building located in Boise, Idaho.  The lease is for an initial period of ten years with two additional five-year renewal options.  The agreement is a “triple net” lease with monthly base rent of $39,000.  Rent expense for the Boise facility was $117,000 and $234,000 for the three and six month periods ended September 30, 2011.

The Company participates in employee benefit plans, including a self-insured health plan, that are administered by the same service providers as GU and MSB.  Claim and benefit payments for the Company’s employees under these plans are made by MSB to the service providers and the Company reimburses MSB for payments made on the Company’s behalf.  Total payments made to MSB for these items were $151,660 and $457,973 during the three and six month periods ended September 30, 2011.  Payments for these items were $496,144 during the three and six month periods ended September 30, 2010.

Effective July 2011, the Company began utilizing the same third-party provider as GU and MSB for the outsourcing of textbook sales to University students.  Under the arrangement, this third-party bills MSB for all textbooks purchased by MSB, GU and Broadview University students who use school-issued financial aid vouchers.  Total payments to MSB for such activity were $232,650 and $251,172 during the three and six month periods ended September 30, 2011.  Commission payments are remitted to GU for all textbook sales to these three entities.  Commissions earned by the Company that were remitted to GU totaled $50,512 and $56,756 for the three and six month periods ended September 30, 2011.

The Company also may reimburse GU and MSB for other miscellaneous expenditures made by GU and MSB on the Company’s behalf that are outside the scope of the SLA disclosed above.  Total payments to MSB for these items were $28,636 and $103,850 during the three and six month periods ended September 30, 2011.  Total payments to MSB for these items were $46,316 for the three and six month periods ended September 30, 2010.  No payments were made to GU during the three and six month periods ended September 30, 2011 and 2010.

The Company had a due to affiliate balance for MSB of $275,451 and $113,903 at September 30, 2011 and March 31, 2011.  The Company had a due from affiliate for GU of $42,469 at September 30, 2011 and a due to affiliate balance for GU of $2,215 at March 31, 2011.