Note 7 - Related Party Transactions

6 Months Ended

Sep. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

7.     Related Party Transactions

Certain Broadview University students received funding toward the cost of their education from Myhre Investments, LLC, an entity owned by Mr. Myhre. Myhre Investments, LLC had $1,394,974 and $1,337,256 in loans outstanding to University students at September 30, 2014 and March 31, 2014.

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, including Company Chief Executive Officer (“CEO”) Jeffrey 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 $36,400 and an initial security deposit of $32,500. Broadview Institute, Inc. guaranteed the lease. Rent expense for the Layton facility was $109,200 and $218,400 for each of the three and six month periods ended September 30, 2014 and 2013.

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 $51,400 and an initial security deposit of $48,100. Broadview Institute, Inc. guaranteed the lease. Rent expense for the Orem facility was $154,200 and $308,400 for the three and six months ended September 30, 2014, and $150,900 and $295,200 for the three and six months ended September 30, 2013.

Broadview University is a party to 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 each of the three and six month periods ended September 30, 2014 and 2013.

Mr. Myhre has personal guarantees on Broadview University’s facility leases for its West Jordan campus. The total amount of remaining rental payments due under the leases as of September 30, 2014 was approximately $2,736,000.

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 and CEO Jeffrey 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 incurs a monthly management fee payable to GU/MSB under the terms of the SLA. This fee is negotiated based on analysis of the cost and scope of services provided. Such analysis is performed as deemed necessary by either party, or annually at a minimum. The Company’s Board of Directors approves any changes to the monthly fee. The monthly management fee was established at $50,000 effective October 2, 2012. 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.

The Company, GU and MSB also may reimburse each other for miscellaneous expenditures made by one entity on another entity’s behalf that are outside the scope of the SLA disclosed above. 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.

The Company utilizes the same third-party provider as GU and MSB for student book sales. MSB is invoiced for books purchased by MSB, GU and Broadview students using financial aid vouchers. Commission payments are remitted by the third-party provider to MSB for all textbook sales. The Company then reimburses MSB for the Company’s net liability.

During the year ended March 31, 2014, the Company began purchasing digital learning content, including electronic learning devices, through the same vendors as GU and MSB. Payments to the vendors are made by MSB, and the Company reimburses MSB for such purchases made on the Company’s behalf.

The following table summarizes the related party transactions with MSB for the three and six months ended September 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	September 30,			September 30,			September 30,			September 30,
	2014			2013			2014			2013
Balance due to MSB - beginning of period	$	63,752		$	1,011,476		$	134,802		$	674,465
Management fees charged by MSB		150,000			150,000			300,000			300,000
Benefit claims paid by MSB		136,750			137,826			293,166			335,259
Textbook purchases by MSB		4,414			98,726			6,401			161,978
Digital learning resources purchased by MSB		168,070			520,875			303,012			520,875
Textbook commissions received by MSB		(1,139	)		(19,078	)		(2,811	)		(55,079	)
Other miscellaneous transactions, net		(6,028	)		(28,508	)		(24,273	)		(66,181	)
Company payments to MSB, net		(366,310	)		(1,360,954	)		(860,788	)		(1,360,954	)
Balance due to MSB - end of period	$	149,509		$	510,363		$	149,509		$	510,363

On July 2, 2014, the Company advanced $1,900,000 to MSB. MSB reimbursed the Company $250,000 on September 9, 2014, and on September 29, 2014, MSB reimbursed the Company $1,283,690. The net balance of these advances and reimbursements is included on the previous page as the Company’s net payments to MSB for the three months ended September 30, 2014.

The following table summarizes the related party transactions with GU for the three and six months ended September 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	September 30,			September 30,			September 30,			September 30,
	2014			2013			2014			2013
Balance due from GU - beginning of period	$	-		$	803		$	-		$	-
Miscellaneous transactions, net		(898	)		1,685			(4,818	)		2,488
Company payments (from) to GU		898			(2,488	)		4,818			(2,488	)
Balance due from GU - end of period	$	-		$	-		$	-		$	-