Note 15 - Related Party Transactions

On January 12, 2011, the Company entered into a consulting agreement with Nicolette Consulting Group Limited (NCG) for a period of three years under which the Company must pay NCG $27,917 per month in fees and up to $10,000 in reimbursement for monthly expenses (2014: $30,000; 2013: $110,000) for the services of Mr. Nicolette as President and Chief Executive Officer of the Company. The consulting agreement was extended through February 11, 2014 on December 23, 2013 and extended through March 31, 2014 on March 15, 2014. Mr. Nicolette resigned from the Company effective March 28, 2014.

On March 17, 2010, in exchange for an exclusive licensing agreement, ABI received a 20 percent equity stake in BreathScan International Ltd (BIL). During 2012, BreathScan International Limited changed its name to en(10) Guernsey Limited (“en(10)”). Thomas A. Nicolette, President and Chief Executive Officer of the Company, was also appointed to en(10)’s Board of Directors. The equity stake is accounted for using the equity method of accounting in accordance with the Financial Accounting Standards Board Accounting Standards Codification. The equity investment was initially recorded at cost, which was nil. During the year ended December 31, 2013 no profit or loss is recorded for en(10)’s results as en(10) recorded a net loss and the Company is not required to equity account any losses in excess of its carrying value on the books. On June 13, 2013 the Company sold its interest in en(10) to ChubeWorkx for $100,000 and Mr. Nicolette resigned from en(10)’s Board of Directors. A realized gain of $99,710 is recognized for the disposal of the investment in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2013.

On June 19, 2012, the Company entered into a 3 year exclusive License & Supply Agreement with ChubeWorkx Guernsey Limited (as successor to SONO International Limited) (“ChubeWorkx”) for the purchase and distribution of ABI’s proprietary breathalyzers outside North America. ChubeWorkx is the 80% shareholder in en(10) Guernsey Limited, described above. ChubeWorkx paid a licensing fee of $1,000,000, of which $333,333 was recognized as income for the years ended December 31, 2014 and 2013, with the deferral to be recognized over the remaining term of the agreement (Note 10).

On June 13, 2013, the Company announced an extension of the License and Supply Agreement with ChubeWorkx to include worldwide marketing and distribution of the “Be CHUBE” program using the Company’s breathalyzer.

On June 14, 2013, the Company announced that ChubeWorkx has agreed to subscribe for 512,820 new common shares in the Company for a total price of $1,600,000. The proceeds were received by the Company on June 14, 2013.

In accordance with FASB ASC 605-25, Revenue Recognition, Multiple-Element Arrangements, since the Amended License and Supply Agreement with ChubeWorkx was entered into simultaneously with the sale of the Company’s 20% interest in en(10) to ChubeWorkx and ChubeWorkx purchase of 512,820 shares of the Company’s common stock, the Company evaluated the separate agreements as a single arrangement with multiple deliverables in considering whether there were one or more units of accounting. The three arrangements were considered to be separate units of accounting since the three transactions have value to ChubeWorkx on a stand-alone basis and the transactions were consummated with no right of return. The entire consideration of the three arrangements was allocated at the inception of the arrangements on the basis of their relative selling price. The proceeds of $1,600,000 were allocated to the sale of the 80 million shares of the Company’s common stock based on third party selling price. The third party selling price was based on the selling price of the stock on the AIM Market of the London Stock Exchange on date of the arrangement. The Amended License and Supply agreement was allocated zero value based on the Company’s best estimate of the selling price for that deliverable. This best estimate was based on the fact that the Company and ChubeWorkx are in the process of developing an appropriate marketing plan for the region and that there is no current active market for the Company’s CHUBE products in the expanded region. $100,000 of the proceeds were allocated to the sale of the Company’s 20% interest in en(10) based on the Company’s best estimate of the selling price for this deliverable. This best estimate was based on the negotiation of the sale with ChubeWorkx.

On August 5, 2013, the Board of Directors appointed Gary M. Rauch, the principal of DataSys Solutions, LLC (DS), as the Corporate Treasurer. The Company entered into a consulting agreement with DS on January 1, 2011, with a term of three years, under which the Company agreed to pay $5,625 per month for Mr. Rauch’s services as Controller of the Company. On March 18, 2014, the Board of Directors approved the appointment of Mr. Rauch as Vice President of Finance, retroactive to February 2, 2014, and he became an employee of the Company.

On December 23, 2013, the Company entered into a short-term bridge loan with Nicolette Consulting Group for $307,500, payable on January 15, 2014 with a 5% per annum interest rate. The transaction was recorded as a Short-Term Notes Payable – Related Party. The loan, with interest amounting to $969, was paid in full on January 15, 2014.

On June 30, 2014, the Company recorded a sale of $864,000 to Thirty Six Strategies General Trading LLC (“36S”)(Note 3(j)). Gavin Moran, a member of the Company’s Board of Directors, has beneficial ownership in 36S. 

Trade receivables – related party as of December 31, 2014 and 2013 are amounts due from ChubeWorkx Guernsey Limited, a major shareholder of the Company of $- and $1,209,388. As of December 31, 2013, the amount due was non-interest bearing, unsecured and had a term of 90 days generally. As of December 31, 2014, the total outstanding trade receivable was converted to a note receivable (Note 5).

Product revenue – related parties for the years ended December 31, 2014 and 2013 are $766,379 and $1,719,340 from ChubeWorkx Guernsey Limited, a major shareholder of the Company.

Administrative expenses – related parties for the years ended December 31, 2014 and 2013 are $183,752 and $361,176 for Nicolette Consulting Group and $11,250 and $67,500 for DataSys Solutions.