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15. Commitments and contingencies | 3 Months Ended
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Mar. 31, 2013
Commitments and Contingencies Disclosure [Abstract] |
NOTE 15 - Commitments and contingencies | 15. Commitments and Contingencies Office space rental On May 1, 2009, we entered into a lease for approximately 1,800 square feet of office space in Santa Barbara, California for use as our executive offices. This lease was amended on July 21, 2009 and expires on December 31, 2013 with a three-year renewal term available at an initial rent plus common area charges of $5,767 per month. This property was vacated in August 2012 and the Company has recorded a liability of approximately $139,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. The Company is in negotiations to settle the unpaid rent for a lower amount, but there can be no assurance of success in doing so. On August 1, 2011, we entered into a lease for approximately 7,000 square feet of office space in Los Angeles, California. The lease continues through November 30, 2014. Initially, the lease had a fixed monthly rent of $19,326 and is subject to annual increases of 3%. The Company was not required to pay a fixed monthly rent for months two through five. Prior to this, the Company was leasing the same office space on a month-to-month basis. This property was vacated in April 2012 and the Company recorded a liability of approximately $892,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. The Company is in negotiations to settle the unpaid rent for a lower amount, but there can be no assurance of success in doing so. On November 1, 2011, we entered into a lease for approximately 3,000 square feet of office space in Santa Barbara, California for use by our operating units. This lease expires on October 31, 2014 with two additional three-year renewal terms available. The initial rent plus common area charges were $7,157 per month. This property was vacated in June 2012 and the Company recorded a liability of $229,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. In January 2013, the landlord for this property has obtained a judgment against the Company for $74,486. The Company is in negotiations to settle the unpaid rent for a lower amount, but there can be no assurance of success in doing so. In May 2012, the Company entered into a month-to-month lease for office space for three people in Los Angeles, California. Rent for this facility is approximately $2,300 per month. We believe our existing facilities are adequate for our current needs and suitable additional or substitute space will be available as needed to accommodate expansion of our operations. Contractual obligations Set forth below is information concerning our known contractual obligations as of March 31, 2013 that are fixed and determinable by year starting with the year ending December 31, 2013.
|  |  |  |  |  |  |  |  |  |  |  |  |  | Beyond |
|  | Total |  |  | 2013 |  |  | 2014 |  |  | 2015 |  |  | 2015 |
Notes payable |  | $ | 4,224,103 |  |  | $ | 4,224,103 |  |  | $ | – |  |  | $ | – |  |  | $ | – |
Rent obligations |  |  | 1,260,645 |  |  |  | 677,738 |  |  |  | 339,958 |  |  |  | 242,948 |  |  |  | – |
Deferred salary |  |  | 1,334,488 |  |  |  | 1,334,448 |  |  |  | – |  |  |  | – |  |  |  | – |
Accrued interest |  |  | 268,206 |  |  |  | 268,206 |  |  |  | – |  |  |  | – |  |  |  | – |
Accrued dividends on preferred stock |  |  | 802,991 |  |  |  | 802,991 |  |  |  | – |  |  |  | – |  |  |  | – |
Consulting agreement |  |  | 375,000 |  |  |  | 250,000 |  |  |  | 125,000 |  |  |  | – |  |  |  | – |
Employee contracts: salary |  |  | 363,750 |  |  |  | 363,750 |  |  |  | – |  |  |  | – |  |  |  | – |
Employee contracts: other |  |  | 231,299 |  |  |  | 231,299 |  |  |  | – |  |  |  | – |  |  |  | – |
Total |  | $ | 8,860,481 |  |  | $ | 8,152,575 |  |  | $ | 464,958 |  |  | $ | 242,948 |  |  | $ | – |
Employment Agreements Effective June 28, 2012, Jerold Rubinstein was elected by the Company’s board of directors as Chairman of the Board, CEO and a director of the Company’s subsidiaries. The Board of Directors of PEI also elected him as Chairman of the Board and CEO. Under the terms of an employment agreement dated June 28, 2012, this CEO will receive an annual salary of $250,000 per year and will continue to serve on the Company’s board of directors and as Chairman of the Company’s Audit Committee and shall continue to receive his compensation for such services. The term of this agreement is six months with an automatic six month extension unless the Company provides written notice of non-renewal 30 days prior to the end of the initial six-month term. This executive was granted options to purchase 2,300,000 shares of the Company’s common stock at $0.35 per share, which was the closing price of the Company’s common stock on the day of option grant. These options vest monthly over a 12-month period. In the event the Company does not renew the second six month period, the executive resigns or the Company terminates the executive’s employment without cause, all options will immediately vest and the executive will receive all unpaid salary for the full 12 month period. On August 8, 2011, the Company entered into any employment contract with Timothy Boris as the Company’s General Counsel and Vice President of Legal Affairs at an annual salary of $180,000. In December 2011 received options to purchase 300,000 shares of common stock at $0.54 that had 100,000 shares vested upon grant, 100,000 shares vested at the end of year one and 100,000 shares vest at the end of year two. This contract expired on August 8, 2012 and was renewed under the same terms until August 8, 2013. In August 2012 Mr. Boris received options to purchase 300,000 shares of common stock at $0.38 that had 100,000 shares vest upon grant, 100,000 shares vest at the end of year one and 100,000 shares vest at the end of year two. Both of these option grants have a five-year life. On February 22, 2010, the Company entered into an employment contract with William Kelly, the Company’s former Senior Vice President and Chief Operating Officer of ProElite, and the Chief Operating Officer of the Company. This contract expired on February 22, 2012 and his employment with the Company was terminated on March 18, 2013. Under the agreement, Mr. Kelly was to receive an annual salary of $240,000 and was eligible for bonuses based on objectives established by the Company’s board of directors and Mr. Kelly’s performance against those objectives. The proposed agreement further provides that Mr. Kelly received a grant of options to purchase 1,200,000 shares of the Company’s common stock, with a five-year life, a strike price of $2.00 the following vesting schedule: 396,000 shares vested immediately, 396,000 shares vested on October 1, 2010 and 408,000 shares vested on October 1, 2011. The strike price on these options was adjusted to $0.54 in December 2011 by the Company’s Board of Directors. Such options shall terminate 45 days after the Executive’s employment with the Company is terminated if such termination is for Cause or is the result of a resignation by Executive for reasons other than Good Reason, as that term is defined in the contract. Such options shall not be assignable by Executive. Each option described above is subject to customary anti-dilution provision with respect to any stock splits, mergers, reorganizations or other such events. In connection with Mr. Kelly’s employment, the Company assumed a promissory note of $231,525 formerly owed to Mr. Kelly by ProElite, Inc. and agreed to pay the promissory note with $121,525 payable to Mr. Kelly upon the closing of the acquisition of ProElite by the Company, $55,000 due 90 days after the closing of the acquisition, and $55,000 due 180 days after the closing of the acquisition. In 2011, $176,525 of these amounts were paid to Mr. Kelly. As of March 31, 2013, Mr. Kelly was owed $55,000 under this contract. On November 1, 2010, the Company entered into an employment agreement with John Moynahan, who provided accounting and financial services to the Company as a consultant pursuant to a consulting agreement dated November 14, 2007. This agreement expired on August 1, 2012. Under the agreement, Mr. Moynahan was to receive an annual salary of $220,000 for the first year of the contract, subject to an annual increase of the Consumer Price Index plus 2%, and will be eligible for a $50,000 bonus in the first year of this contract, with bonuses thereafter based on objectives established by the Company’s board of directors and Mr. Moynahan’s performance against those objectives. Under this agreement, Mr. Moynahan received a grant of 300,000 shares and a five-year stock option grant to purchase 1,560,000 shares of common stock at $2.00 per share, with 1,040,000 shares that vested upon the signing of the agreement and 520,000 shares that will vest on September 1, 2011. The strike price on these options was adjusted to $0.54 in December 2011 by the Company’s Board of Directors. Such options shall terminate 45 days after the Executive’s employment with the Company is terminated if such termination is for cause or is the result of a resignation by Executive for reasons other than good reason. Such options shall not be assignable by Executive. Each option described above is subject to customary anti-dilution provision with respect to any stock splits, mergers, reorganizations or other such events. After a review of this contract during 2012, the Company determined that the non-salary amounts due to Mr. Moynahan were $156,358 as of December 31, 2012. Mr. Moynahan received $77,126 in non-salary payments under this contract in 2011. Consulting agreement On June 28, 2012, Paul Feller, the Company’s former Chairman of the Board and CEO, resigned from all positions with the Company and its subsidiaries, including PEI. In connection therewith, pursuant to a Separation and Release Agreement, the Company and Mr. Feller entered into a new Consulting Agreement for a term of two years at an annual compensation of $250,000, subject to the Company raising at least $2,000,000 in funding. Under the Consulting Agreement, Mr. Feller agreed to provide services in the area of business development, fund-raising and the evaluation of asset/event acquisitions to be done at the discretion of the Board of Directors. The Company has informed Mr. Feller that it reserves all rights with regards to this consulting agreement, given the events that led to his resignation on June 28, 2012.

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