Note 5 – Commitments and Contingencies

Godfrey Settlement Agreement

In November 2004, we commenced an action against John C. Godfrey, Nancy Jane Godfrey, and Godfrey Science and Design, Inc. (together the “Godfreys”) for injunctive relief regarding the ownership of the Cold-EEZE^® trademark. The Godfreys subsequently asserted against us counterclaims and sought monetary damages and injunctive and declaratory relief relative to the Cold-EEZE^® trademark and other intellectual property.

On December 20, 2012, we and the Godfreys, including the Estate of Nancy Jane Godfrey, entered into a Settlement Agreement and Mutual General Release (the “Godfrey Settlement Agreement”), pursuant to which we resolved all disputes, including claims asserted by us and counterclaims asserted against us in the action. Pursuant to the terms of the Godfrey Settlement Agreement, we paid the Godfreys $2.1 million in December 2012 and we agreed to make four additional annual payments of $100,000 due in December of each of the next four years. Each annual payment in the amount of $100,000 will accrue interest at the per annum rate of 3.25%. The second annual installment of $100,000 plus accrued interest of $10,000 was paid in December 2014. Under the Godfrey Settlement Agreement, the Godfreys assigned, transferred and conveyed to us all of their right, title, and interest in U.S. Trademark Registration No. 1,838,542 for the trademark Cold-EEZE^®, among other intellectual property associated with such trademark. At each of June 30, 2015 and December 31, 2014, other current liabilities and other long term obligations include $100,000 and $100,000, respectively, for the two remaining annual installment payments.

Direct Response Contract

On June 30, 2015, we and Pacific Custom Video Productions Inc. (“PCV”) executed a Direct Response Production Agreement (“DRPA”) to produce a series of direct response television commercials for certain dietary supplement products currently in development by the Company. The estimated cost of the commercial development is $300,000. In addition, the Company has agreed to pay to PCV a performance incentive in the form of a royalty or commission of 3% of net sales collected, as defined in the agreement, of certain dietary supplement products to be marketed and promoted with PCV. The marketing and promotion of certain dietary supplement products with PCV are projected to commence late in the fourth quarter of Fiscal 2015 or the first quarter of Fiscal 2016 based upon product availability and other factors. As of June 30, 2015, there were no performance incentive payments earned under the DRPA. 

We have estimated future minimum obligations over the next five years, including the remainder of Fiscal 2015, as follows (in thousands):