Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transaction, Due from (to) Related Party [Abstract]

Related Party Transactions

Related Party Transactions

As discussed in Note 2 to the Consolidated Financial Statements, the acquisition of ViSalus in October 2008 involved related parties. At the time of the acquisition in October 2008, ViSalus was owned in part by RAM, which owned a significant noncontrolling interest in ViSalus. In September 2012, RAM distributed its interest in ViSalus to its members, including: Robert B. Goergen, Chairman of the Board and Chief Executive Officer of the Company; Robert B. Goergen, Jr., President and Chief Operating Officer of the Company and President, PartyLite Worldwide; and Todd A. Goergen, son of Robert B. Goergen and Pamela Goergen, a director of the Company, and brother of Robert B. Goergen, Jr. Robert B. Goergen, the Company’s Chairman and Chief Executive Officer, beneficially owns approximately 35.9% of the Company’s outstanding common stock (according to Amendment No. 4 to Schedule 13D filed by Mr. Goergen with the Securities and Exchange Commission on April 8, 2013), and together with members of his family, owns substantially all of RAM.

In August 2012, Todd Goergen became the Chief Strategy Officer of ViSalus. Mr. Goergen's base salary is $500,000 and he has an annual target bonus opportunity equal to 100% of his base salary (with a maximum annual bonus opportunity equal to 200% of his base salary). In May 2013, Todd A. Goergen was issued 507,375 RSUs and 620,125 nonqualified stock options under the ViSalus Plan. Todd A. Goergen is also a member of the Board of Directors of ViSalus.

On July 25, 2012, ViSalus and the Company entered into a management services agreement whereby the Company will provide certain administrative support services to ViSalus for what is believed to be an arm's length price for such services. The basis for determining the price for the services is on a cost recovery basis and requires ViSalus to pay for such services within 30 days of receipt of the invoice. The agreement terminates on December 31, 2015 but can be amended by either party. The estimated cost of services to be provided in the current calendar year will be approximately $0.9 million.

In April and July 2013, ViSalus paid cash dividends to its shareholders, including $1.5 million to Ryan Blair, $0.6 million to Robert B. Goergen, $0.2 million to Todd A. Goergen and $23.0 thousand to Robert B. Goergen, Jr. ViSalus has adopted a dividend policy and will declare and pay dividends out of available cash, subject to appropriate reserves. Ryan Blair will receive 4.6%, Robert B. Goergen will receive 1.8%, Todd A. Goergen (and trusts affiliated with him) will receive 0.6% and Robert B. Goergen, Jr. will receive 0.1% of the ViSalus future dividend payments, consistent with their ownership interests.

As discussed in Note 4 to the Consolidated Financial Statements, ViSalus owns a 2.6% minority interest in a company that sells software licensing and other services to the direct selling industry, which involves related parties. RAM holds an approximately 5.5% interest in the company and the founders of ViSalus own approximately 7.1% of the company. In addition to this interest, RAM also has a significant influence on the management of the investee and representation on its Board of Directors. Fees paid to the company for software licensing and other services for the three and nine months endedSeptember 30, 2013 were $0.5 million and $1.3 million, respectively. Fees paid to the company for software licensing and other services for the three and nine months endedSeptember 30, 2012 were $0.4 million and $1.4 million, respectively.

ViSalus entered into an agreement with FragMob LLC in October 2011 that extended to December 31, 2012 and was renewable. FragMob agreed to provide ViSalus with software development and hosting services for a mobile phone application that allowed ViSalus's promoters to access their ViNet distributor account information on their smart phones. In March 2012, ViSalus added a second application, a credit card swiper for mobile phones, to the services provided by FragMob pursuant to the agreement. On September 1, 2012, ViSalus and FragMob entered into a new revised agreement which extended the term to December 31, 2014 and revised certain terms of the agreement. Fees paid to FragMob for the three and nine months endedSeptember 30, 2013 for both services were $0.5 million and $1.4 million, respectively. Fees paid to FragMob for the three and nine months endedSeptember 30, 2012 for both services were $0.9 million and $2.1 million, respectively. ViSalus also purchased approximately $1.2 million of mobile credit card swiper devices from FragMob in 2012. FragMob is owned in part by RAM and the three founders of ViSalus.

For the nine months endedSeptember 30, 2013 RAM paid the Company $129.1 thousand to sublet office space, which we believe approximates the fair market rental for the rental period.