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Related Party Transactions
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

22. Related Party Transactions

 

On April 4, 2017, the Company completed a private placement of its common stock, selling 3,765,000 shares at $1.00 per share, for total gross proceeds of $3,765,000. In connection with the offering, the Company paid $188,250 in cash and issued 162,000 shares of its common stock to MDB, which acted as placement agent.

 

On October 19, 2017, the Company completed a private placement of its common stock, selling 2,391,304 shares at $1.15 per share, for total gross proceeds of $2,750,000. In connection with the offering, the Company issued 119,565 shares of its common stock and warrants to purchase 119,565 shares of its common stock to MDB, which acted as placement agent.

 

On January 4, 2018, the Company completed a private placement of its common stock, selling 1,200,000 shares at $2.50 per share, for total gross proceeds of $3,000,000. In connection with the offering, MDB, which acted as placement agent, was entitled to 60,000 shares of its common stock and warrants to purchase 60,000 shares of its common stock.

 

On June 15, 2018, four investors invested a total of $4,775,000 in a 10% convertible debt offering. Included in the total was an investment of $3,000,000 by Strome who beneficially owns more than 10% of the shares of the Company’s common stock, $1,000,000 by the Company’s then Chief Executive Officer, James C. Heckman, and $25,000 from the Company’s then President, Joshua Jacobs, totaling $4,025,000. Interest was payable on the convertible debt at the rate of 10% per annum, payable in cash semi-annually on December 31 and June 30, and on maturity, beginning on December 31, 2018, and the convertible debt was due and payable on June 30, 2019. The 10% convertible debt was converted on August 10, 2018, as described below, where the investors received additional interest payments to provide the investor with a 20% annual internal rate of return. Upon conversion, Strome received $600,000, James C. Heckman received $200,000, and Joshua Jacobs received $5,000 in satisfaction of the 20% annual internal rate of return by issuing additional shares of the Series H Preferred Stock.

 

On June 15, 2018, the Company also modified two previous securities purchase agreements dated January 4, 2018 and March 30, 2018 with Strome to eliminate a true-up provision entered into on March 30, 2018 under which the Company was committed to issue up to 1,700,000 shares of the Company’s common stock in certain circumstances. As consideration for such modification, the Company issued a warrant to Strome to purchase 1,500,000 shares of the Company’s common stock, exercisable at an initial price of $1.19 per share for a period of 5 years.

 

On August 10, 2018, the Company closed on a securities purchase agreement with certain accredited investors, pursuant to which it issued an aggregate of 19,400 shares of Series H Preferred Stock at a stated value of $1,000, initially convertible into 58,787,879 shares of its common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of $19,399,250. Of the shares of Series H Preferred Stock issued, Strome received 3,600, James C. Heckman, or an affiliated entity, received 1,200, and Joshua Jacobs received 30 shares upon conversion of the 10% convertible debt.

 

On August 10, 2018, B. Riley FBR, acted as placement agent for the Series H Preferred Stock financing, and was paid in cash $575,000, for its services as placement agent, and issued 669 shares (stated value of $1,000 per share) of Series H Preferred Stock.

 

On October 18, 2018, the Company entered into a securities purchase agreement with two accredited investors, B. Riley and an affiliated entity of B. Riley, pursuant to which it issued to the investors the 10% OID Convertible Debentures resulting in net proceeds of $3,285,000. B. Riley’s legal fees and expenses of $40,000 were netted from the proceeds received by them. The Company issued warrants to B. Riley to purchase up to 875,000 shares of the Company’s common stock in connection with this securities purchase agreement.

 

On December 12, 2018, the Company converted the 10% OID Convertible Debentures to the 12% Convertible Debentures under a securities purchase agreement with three accredited investors, for aggregate proceeds of $3,551,528, which included principal and interest of the 10% OID Convertible Debentures. Upon conversion, interest of $82,913 was recorded for the 10% OID Convertible Debentures held by B. Riley. The Company received net proceeds from B. Riley or its affiliated entities of $8,950,000 under 12% Convertible Debentures. The Company paid B. Riley FBR cash of $540,000 as placement agent in the offering. B. Riley’s legal fees and expenses of $50,000 were netted from the proceeds received by them. The 12% Convertible Debentures are due and payable on December 31, 2020. Interest accrues at the rate of 12% per annum, payable on the earlier of conversion or December 31, 2020. The Company’s obligations under the 12% Convertible Debentures are secured by a security agreement, dated as of October 18, 2018.

 

Board of Directors and Finance Committee

 

During September 2018, John A. Fichthorn joined the Company’s Board and during November 2018 he was elected as Chairman of the Company’s Board and Chairman of the Company’s Finance Committee. Until March of 2020, Mr. Fichthorn served as Head of Alternative Investments for B. Riley Capital Management, LLC, which is an SEC-registered investment adviser and a wholly-owned subsidiary of B. Riley. During September 2018, Todd D. Sims joined the Company’s Board and is also a member of the board of directors of B. Riley. Mr. Sims serves on the Company’s Board as a designee of B. Riley. Since August 2018, B. Riley FBR has been instrumental in raising debt and equity capital for the Company to support its acquisitions and for refinancing and working capital purposes (as described in Note 2).

 

Mr. Christopher Marlett was a director of the Company until February 1, 2018. Mr. Marlett is the Chief Executive Officer of MDB. Mr. Gary Schuman, who was the Chief Financial Officer of the Company until May 15, 2017, is the Chief Financial Officer and Chief Compliance Officer of MDB. The Company compensated Mr. Schuman for his services at the rate of $3,000 per month until his resignation. Mr. Robert Levande was a director of the Company until July 5, 2017. Mr. Levande is a senior managing director of MDB.

 

Service Contracts

 

Ms. Rinku Sen joined the Company’s Board in November 2017 and has provided consulting services and operates a channel on the Company’s platform. During the years ended December 31, 2018 and 2017, the Company paid Ms. Sen $15,521 and $15,000, respectively, for these services.

 

Effective on September 20, 2017, the Company entered into a six-month contract, with automatic renewals unless cancelled, with a company located in Nicaragua that is owned by Mr. Christopher Marlett, a then member of the Company’s Board, to provide content conversion services. During the years ended December 31, 2018 and 2017, the Company paid $76,917 and $11,700, respectively, for these services.

 

Officer Promissory Notes

 

In May 2018, the Company’s then Chief Executive Officer began advancing funds to the Company in order to meet minimum operating needs. Such advances were made pursuant to promissory notes that were due on demand, with interest at the minimum applicable federal rate, which was approximately 2.34% as of December 31, 2018. At December 31, 2018, the total principal amount of advances outstanding, including accrued interest of $12,574, was $680,399.