13.  RELATED PARTY TRANSACTIONS:

Consulting arrangements

In November 2014, the Company entered into a consulting arrangement with Heather Kearns, the former Interim Chief Financial officer and incurred consulting fees of $73,000 and $18,000 during the years ended December 31, 2015 and 2014, with $19,600 in current liabilities owed to her as of December 31, 2015.

On July 15, 2014, the Company terminated the Consulting Agreement with Mr. Richard Giles, a founder, stockholder, and former director of the Company. The Company paid consulting fees of $69,800 to Mr. Giles during the year ended December 31, 2014.  The Company had a Senior Subordinated note payable with Mr. Richard Giles, during the year ended December 31, 2014, the Company made the final required principal payments totaling $500,000 and paid interest of $7,500.

Share activity

Justin Yorke is the manager of the JMW Fund, LLC, the San Gabriel Fund, LLC, the Richland Fund, LLC, and the Arroyo Fund, LLC; and was a director from April 2011 until June 2012.  Mr. McGrain, our Interim Chief executive officer and Interim Chief financial officer is also a member of the JMW Fund, LLC, the San Gabriel Fund, LLC, the Richland Fund, LLC, and the Arroyo Fund, LLC. During the year ended 2014 Mr. Yorke, as the manager, was issued 83,330 Series D preferred shares and warrants to purchase 41,665 common shares. Mr. Yorke, as the manager, converted 166,660 Series D preferred shares into 285,700 common shares and warrants to purchase 142,850 common shares as part of the Private equity offering dated October 1, 2014.  Mr. Yorke, as the manager, accrued dividends from preferred stock in 2014 totaling $27,725.  During 2014, Mr. Yorke, as the manager, was issued unsecured notes payable in the aggregate principal amount of $1,729,003, bearing interest at 12% per annum and granted warrants to purchase 576,327 common shares in connection with the Company’s $1 million and $3 million note offerings.  In October 2014, Mr. Yorke, as the manager, was issued a short-term unsecured loan in the amount of $75,000, bearing interest at 12% per annum.  Mr. Yorke, as the manager, converted an aggregate amount or $1,926,537 unsecured notes payable and accrued interest into 1,100,876 common shares and was granted warrants to purchase 550,438 common shares in the Private equity offering dated October 1, 2014.  As of December 31, 2014 the Company had an unsecured note payable with Mr. Yorke, as the manager, in the amount of $20,000; a secured note payable in the amount of $160,000, and an outstanding balance of $138,000 on the revolving line of credit.  Mr. Yorke, as the manager, received or has accrued interest payments from loans payable in 2014 totaling $105,275.  During the year ended December 31, 2015 Mr. Yorke, converted the $20,000 and $160,000 unsecured notes payable into senior secured notes payable. As of December 31, 2015, Mr. Yorke has secured notes outstanding totaling $947,361, and was paid or has accrued interest totaling $120,565 in 2015.  In addition Mr. Yorke was issued warrants to purchase 2,857 common shares as part of the Private equity offering dated October 1, 2014, during 2015.

During the year ended December 31, 2014, Mr. Gus Blass III, a former member of our board of directors and a stockholder whom resigned September 15, 2015, was issued 16,666 Series D preferred shares and warrants to purchase 8,333 common shares.  During the years ended December 31, 2015 and 2014 Mr. Blass III received or had accrued dividends from preferred stock totaling $24,000 and $22,355, respectively.  In addition, Mr. Gus Blass II, a former member of our board of directors and father to Mr. Gus Blass III, was issued an unsecured note payable in the amount of $250,000 during 2014, paying interest at 12% per annum with a maturity date of January 6, 2016.  Mr. Gus Blass II was granted warrants to purchase 83,333 common shares in connection with the unsecured note payable in 2014, and expired in October 2015 unexercised.  Mr. Blass II, received or had accrued interest payments of $30,000 and $29,507 for the years ended December 31, 2015 and 2014, respectively.

During the year ended December 31, 2014, Reginald Greenslade, a former member of our board of directors and a stockholder, who resigned August 1, 2015; was issued 16,659 Series D preferred shares and warrants to purchase 8,329 common shares.  Mr. Greenslade converted 16,659 Series D preferred shares into 28,487 common shares and warrants to purchase 14,279 common shares in the Private equity offering dated October 1, 2014.  Mr. Greenslade received or had accrued dividends from preferred stock totaling $2,180 in 2014.  On January 1, 2014 as part of the Dr. Pave, LLC acquisition, the Company assumed an outstanding balance of $45,980 on the revolving line of credit to Mr. Greenslade.  Mr. Greenslade received or had accrued interest totaling $5,519 and $5,518 for the years ended December 31, 2015 and 2014, respectively

During the year ended 2014, the Company issued 1,500 Series D preferred shares and warrants to purchase 750 common shares to David Dworsky, the former Chief Executive Officer and  board member of the Company, whom resigned his Officer position effective April 30, 2015 and his board position effective August 31, 2015.  Mr. Dworsky received or has accrued dividends totaling $360 and $213 for the years ended December 31, 2015 and 2014, respectively.

Dr. Pave Acquisition

On January 7, 2014, the Company entered into an Agreement and Plan of Reorganization (the “Acquisition Agreement”) dated January 8, 2014 with Dr. Pave, LLC, a California limited liability company.  Dr. Pave, LLC was controlled by David Dworsky, the former Chief Executive Officer of the Company.  The Company acquired all of the outstanding membership interests in Dr. Pave for 58,333 shares of common stock of the Company at a value of $3.00 per share for total consideration in the amount of $175,000. The consideration included the issuance of 41,668 shares to Dworsky Partners, LLC, an entity in which David Dworsky owned 80% of the ownership interest, and 3,333 shares to Reginald Greenslade, a former member of our board of directors.  During 2015, the company ceased operations of Dr. Pave, LLC.  The related accounting results are reflected in the discontinued operations lines within the financial statements for the years ended December 31, 2015 and 2014. See Note 5 above for additional information.