13. Commitments and Contingencies |
9 Months Ended | ||||||||||||||||||||||||||||||
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Sep. 30, 2014 | |||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Commitments and Contingencies |
Lease Agreements
The Company, as lessee, has entered into various operating lease agreements for office and warehouse space. Future minimum gross rental payments relating to these lease agreements subsequent to September 30, 2014 are as follows:
Rent expense for the three and nine month periods ended September 30, 2014 was approximately $100,000 and $350,000, respectively. Rent expense for the three and nine month periods ended September 30, 2013 was approximately $186,000 and $57,000, respectively.
Registration Rights
Under the terms of a 2010 private placement, ASTV provided that it would use its best reasonable efforts to cause the related registration statement to become effective within 180 days of the termination date, July 26, 2010, of the offering. ASTV failed to comply with this registration rights provision and is obligated to make pro rata payments to the subscribers under the 2010 private placement in an amount equal to 1% per month of the aggregate amount invested by the subscribers up to a maximum of 6% of the aggregate amount invested by the subscribers. The maximum amount of penalty to which ASTV may be subject is $156,000. The Company has a related accrued liability of $156,000 at September 30, 2014.
Litigation
From time to time, we are periodically a party to or otherwise involved in legal proceedings arising in the normal and ordinary course of business. As of the date of this report, except as otherwise disclosed below, we are not aware of any proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.
On July 17, 2014, Ronco settled a pending lawsuit relating to a claim for breach of contract arising from the failure of Ronco to pay for goods tendered. The amount sought in the lawsuit was approximately $258,000, and Ronco had asserted various counterclaims. However, Ronco agreed to make an immediate $70,000 settlement payment to avoid potential lengthy and costly litigation.
On February 26, 2016, ASTV was sued for an alleged breach of an employment agreement by its former CFO, who resigned in 2014. The Company has filed a motion to dismiss. A loss contingency in the amount of $158,000 has been recognized as of September 30, 2014.
On January 5, 2016, ASTV settled an action filed in June 2014 by a former employee and director of the Company without admitting fault, liability or wrongdoing, and agreed to tender $30,000 and 5,000,000 shares of its restricted common stock, in consideration for a full release of the Company and its affiliates from all liability relating to the action and from all other potential future claims. As of January 5, 2016, the Company’s stock was trading for $0.01. A loss contingency in the amount of $80,000 was recognized as of September 30, 2014.
On June 26, 2015, the Company ceased operations at all entities and subsidiaries other than As Seen on TV, Inc. and Ronco Holdings, Inc. From time-to-time, the Company receives payment demands and threatened litigation from certain of its unsecured creditors at those discontinued subsidiaries. We do not believe any liabilities at those discontinued subsidiaries are collectible due to lack of assets, and we do not believe any of those liabilities are legally collectible against either As Seen On TV, Inc. or Ronco Holdings, Inc.
Sales Tax
Included in accrued sales taxes are sales taxes collected from customers that have not yet been remitted to taxing authorities. This accrual as of September 30, 2014 includes estimates for interest and penalties for non-payments. Accrued sales taxes at September, 30, 2014 are approximately $383,000 and are included in “accrued expenses and other current liabilities” in our condensed consolidated balance sheets. |