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19. Subsequent Events
12 Months Ended
Dec. 31, 2014
Subsequent Events [Abstract]  
Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed financial statements, other than listed below.

 

Executive and Director Departures/Additions

 

On January 5, 2015, Kevin Richardson, II, and Greg Adams resigned from the board of directors of the Company.

 

On January 8, 2015, pursuant to a letter agreement, Mark Ethier resigned as an employee and officer of the Company, but remained as a director. The Company agreed to vest and issue to Mr. Ethier 6,000,000 shares of restricted common stock of the Company. As of the same date, the board of directors reduced its size to two seats, and appointed Shad Stastney as interim president and chief executive officer. Both Mr. Ethier and Mr. Stastney remain Company directors.

 

On May 2, 2015, the board of directors of the company, acting by unanimous written consent, expanded the size of the board of directors to 3 members, and added Fredrick Schulman to fill newly-created vacant seat. The board also appointed Mr. Schulman as chairman of audit committee, where he will be the only initial member.

 

On January 6, 2016, Jason Post accepted the position of Principal Financial and Accounting Officer.

 

Restructuring

 

On or about January 12, 2015, the Company undertook a reduction in force that eliminated 9 full time employees. The terminated employees were generally offered full pay and benefits for one month from and after January 12, 2015, and the agreements generally contained a full release of claims by the terminated employees, as well as other standard provisions.

 

On February 19, 2015, the Company entered into a mutual termination of net lease agreement with respect to the leased property at 14044 Icot Boulevard, Clearwater, Florida 33760.

 

On March 3, 2015, the Company and Oak Lawn Marketing International Inc. (“OLM”) executed the Fifth Amendment to the Exclusive Product Rights Agreement dated April 10, 2012 whereby ASTV assumed all rights and obligations under the Exclusive Product Rights Agreements, and OLM became the exclusive worldwide (including North America) distribution of the DualSaw and DualTools brands. OLM separately holds the exclusive rights to the Ronco brand internationally.

 

On June 26, 2015, the Company ceased operations at all entities and subsidiaries other than (i) As Seen on TV, Inc., and (ii) Ronco Holdings, Inc.

 

Financial Instrument Transactions

 

Warrant Extension

  

On August 25, 2015, the Company further extended the expiration dates of certain previously extended warrants to purchase up to an aggregate of 9,954,939 shares of the Company’s Common Stock to December 31, 2015.

 

On November 13, 2015, the Company extended the expiration dates of certain warrants to purchase up to an aggregate of 7,665,494 shares of the Company’s Common Stock to June 30, 2016.

 

On December 31, 2015, the Company further extended the expiration dates of certain previously extended warrants to purchase up to an aggregate of 9,954,939 shares of the company’s Common Stock to September 1, 2016.

 

On June 8, 2016, the Company issued 6,000,000 shares of Common Stock to its former Chief Operating Officer in connection with a letter agreement dated January 8, 2015.

 

On June 30, 2016, the Company extended the expiration dates of certain warrants to purchase up to an aggregate of 7,665,494 shares of the Company’s Common Stock to September 30, 2016.

 

Note Amendment

 

On March 31, 2015, the Company and MIG7 entered into Amendment No. 2 to the Note Purchase Agreement, and a Restated Senior Secured Promissory Note (the “Amended Note”). In relevant part, these amendments (a) contained a qualified forbearance of the events of default noted in the Notice Letter, (b) resulted in MIG7 lending an additional $1,900,000 of cash proceeds to the Credit Parties; (c) set the outstanding principal amount, including compounded interest through April 27, 2015, to $12,676,193; (d) capitalized all interest as of April 27, 2015, into the new principal balance referenced above, and provided that interest accrued thereafter until April 2, 2016, is payable on the Maturity Date, and accrued interest after April 2, 2016, is to be paid quarterly; and (e) extended the Maturity Date of the Note to April 3, 2017, with an extension until April 3, 2018 if the Company (i) undertakes an offering of common stock within 15 months of the date of Amendment No. 2 that results in net proceeds of at least $14 million, and (ii) at least $10,000,000 of such offering proceeds are applied to the repayment of the Note. The Amendment No. 2 also added additional terms and conditions, including an obligation to issue to MIG7 shares of convertible preferred stock of the Company to MIG7 convertible into 60% of the fully diluted shares of capital stock of the Company, to convert certain warrants of the Company into 9% of the fully diluted capital stock of the Company, and the issue to management 30% of the fully diluted capital stock of the Company. The Amendment No. 2 also added additional events of default, including certain revenue and EBITDA milestones, among others. The warrants’ expiration date of April 3, 2015 was extended until the aforementioned recapitalization is completed.

  

Other Transactions

 

On or about May 14, 2015, the Company, either directly or through its specified wholly-owned subsidiaries, (i) acquired all of the senior secured debt of Ronco Holdings, Inc., in exchange for a payment of $1,400,000 and an obligation to pay an aggregate amount of $950,000 in royalties to LV Administrative Services (“LV”) with respect to certain intellectual property, (ii) acquired 100% of the equity of Ronco Holdings, Inc. from CD3 Holdings, Inc.; (iii) caused Ronco Holdings, Inc., to enter into an agreement with P2Binvestor Incorporated, a Colorado corporation (“P2Bi”), whereby P2Bi would provide up to $3,000,000 of senior secured receivables and inventory financing to Ronco Holdings, Inc. (the “P2Bi Credit Line”), (iv) entered into an Accommodation Agreement with MIG7, certain debt holders of the Company and management of the Company whereby MIG7 subordinated its security interests to the P2Bi Credit Line, and whereby those certain debt holders and management agreed to personal guarantees of specified portions of the P2Bi Credit Line, and (v) Ronco Holdings, Inc. terminated its existing senior secured receivables financing arrangement with Farwest.

 

No payments have been made with respect to the aforementioned royalty obligation.

 

Note Issuances

 

Subsequent to December 31, 2014, the Company has sold a series of promissory notes in total of approximately $1,937,000 to an accredited investor. The notes are payable on demand and accrue interest ranging from 16% to 24% per annum. Approximately, $452,000 has been repaid along with interest of approximately $65,000.

 

Extinguishment of Debt

 

On January 11, 2015, the Company and Vicis Capital Master Fund, holder of that certain Senior Secured Note dated March 6, 2014 in the original principal amount of $11,000,000 (the “Vicis Note”), entered into a full mutual release of claims, which included the release of the Company’s obligation to pay any amounts due on the Vicis Note, whether principal or interest.

 

With respect to the third-party debt that was acquired by the Company in May of 2015 (as discussed in the Other Transaction subsection above), a gain on extinguishment of approximately $13,800,000 was recognized.

 

Legal Proceedings

 

On January 5, 2016 the Company settled an action initially filed in June 2014 by a former employee and director of the Company, in the U.S. District Court for the Eastern District of Pennsylvania based on certain stock options granted to the former employee and other matters relating to the former employee’s dismissal from the Company. The action was filed against the Company and certain of its former executive officers. Without admitting fault, liability or wrongdoing the Company and former employee agreed to settle the action in consideration of the Company tendering $30,000 to the former employee and issuing the former employee 5,000,000 shares of its common stock. In consideration of the cash payment and stock, the former employee released the Company and its affiliates, including but not limited to past and present officers and directors, from all liability relating to the action and from all other potential future claims. A loss contingency in the amount of $80,000 was recorded in the “Accrued Expenses and Other Current Liabilities” in our Consolidated Balance Sheets at December 31, 2014.

 

On February 26, 2016, ASTV was sued for an alleged breach of an employment agreement by its former CFO, who resigned in 2014, in an action filed in the Sixth Judicial Circuit in and for Pinellas County, Florida.  The Company has filed a motion to dismiss.  A loss contingency in the amount of $141,000 was recorded in the “Accrued Expenses and Other Current Liabilities” in our Consolidated Balance Sheets at December 31, 2014.

 

On April 29, 2016, the Company received notice (but not official service) that Infusion Brands, Inc., its discontinued subsidiary,  may be named as a defendant in Flint v. Infusion Brands, Inc., et al, a purported class action case filed but not yet served in federal court for the Eastern District of Michigan.  The suit alleges that the plaintiff and other similarly situated plaintiffs were damaged when Infusion Brands, Inc. ceased to sell replacement parts and accessories for a former product, the DualTools PS7000, a polisher/sander.  Lowe’s, Inc. has also sought indemnification from Infusion Brands, Inc. for its costs related to the action.  Infusion Brands, Inc., as a discontinued subsidiary, has no assets and no ability to pay any judgment that may be rendered.

 

On June 9, 2016, ASTV was sued for an alleged failure to pay for goods sold and delivered to Infusion Brands, Inc. in 2015 in an action filed in the Sixth Judicial Circuit in and for Pinellas County, Florida.   The lawsuit names AS SEEN ON TV, INC f/k/a INFUSION BRANDS, INC as defendant, although only Infusion Brands, Inc. was obligated to, or received goods from, the plaintiff, and although ASTV is not a successor-in-interest to Infusion Brands, Inc., and is not obligated in any way for its liabilities.  The Company intends to file a motion to dismiss ASTV from the litigation.  Infusion Brands, Inc., as a discontinued subsidiary, has no assets and no ability to pay any judgment that may be rendered in the event the litigation continues with respect to Infusion Brands, Inc.

 

Segments

 

Commencing January 1, 2015, the Company re-organized its business into five segments of which four are based on sales channel and one is based upon corporate financing and management, to better reflect the differing requirements and approaches of the sales efforts and buyers in each of those channels. The five segments that management defined were (1) Retail, (2) Live Shopping, (3) Direct Response, (4) International/Royalty and (5) Corporate and Other. Below is a description of each segment.

 

Retail

 

The Retail segment includes those sales efforts to and revenue from buyers who resell our products at retail, both physical (brick and mortar) and through their online portals. This segment includes customers such as Walmart, Bed Bath & Beyond, Target, and Home Depot.

 

Live Shopping

 

The Live Shopping segment includes those sales efforts to and revenue from customers who operate “Live shopping” channels, both domestic and international. This segment includes customers such as QVC, HSN, Evine, TSC (Canada), and HSE24 (Europe).

 

Direct Response

 

The Direct Response segment includes those sales efforts in and revenue from the direct response market. “Direct Response” is the process of advertising directly to customers by purchasing media, whether radio, television or online, then monetizing that media cost by direct sales to such customers prompted by that media, either by telephone or online.

 

International/Royalty

 

The International/Royalty segment includes those sales efforts to and revenue from those international (and limited domestic) sales where the Company receives its revenue as a royalty, rather than by selling product directly. The Company’s primary contracts in this area are with Oak Lawn Marketing Incorporated, which distributes the Company’s Ronco brand internationally, and its legacy DualTools and DualSaw brands worldwide.

 

Corporate and Other

 

The Corporate segment is responsible for corporate governance, compliance, strategic planning, and debt and equity capital transactions. The Corporate segment also provides funding to other operating segments when needed.