Note 4. Related Party Transactions

Due from Shareholder/Member

The Company’s founder and then majority stockholder, Marc Schessel, had provided cash advances on an unsecured and non-interest-bearing basis, during the first few years of operation. Beginning in 2016, the founder began receiving distributions from the Company. The amounts owed to, and due from, the shareholder have been netted in the accompanying consolidated balance sheets. In January 2019, this shareholder surrendered 1,401 common shares to the Company as settlement of the balance due. As of December 31, 2019 and 2018, the net balance due from the founder was $0 and $1,409,284, respectively. The balance did not carry a maturity date and there were no repayment terms.

Due to Shareholder

In October 2016, the Company entered into an unsecured loan agreement with a minority shareholder for up to $1,000,000 of borrowings for operating expenses. In November 2016 and January 2018, the Company entered into additional note agreements with the minority shareholder to provide up to an additional $2,000,000 of aggregate borrowings for which the Company had guaranteed payment from its subsidiary if the Company was unable to repay the note. The interest rate for the notes was 10% per annum and the notes had a maturity date in January 2021. One of the notes bore interest at 10% for the first 90 days and was then adjusted to 18% per annum.

As previously disclosed, on August 20, 2018, the Company entered into a SEA with Alliance MMA, as amended on December 18, 2018, in connection therewith this minority shareholder agreed to accept shares of Series A Convertible Preferred Stock having a face value equal to the total amount owed to him of approximately $2.1 million in full satisfaction of such indebtedness (including principal and accrued interest).

As of December 31, 2019 and 2018, the notes payable - related party totaled $0 and $1,591,491 respectively. On September 30, 2019, the note holder agreed to accept 17,000 shares of the Company’s common stock in 2020 as full settlement of the remaining $192,000 of principal.

The Company incurred interest expense of $23,720 and $218,991 for the years ended December 31, 2019 and 2018, respectively, which was accrued and converted to Series A Preferred Stock in 2019.

In addition, this shareholder also provided office space to the Company at no cost through January 2019.