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Commitments And Contingencies
3 Months Ended
Mar. 31, 2014
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

NOTE 4: COMMITMENTS AND CONTINGENCIES

 

 

Operating Leases

 

During the three month period ended March 31, 2014, there were no changes in any existing commitments, contingencies or borrowings related to operating leases involving the Company’s U.S. or Canadian operations.

 

Rent expense under the operating leases was $88 for the three months ended March 31, 2014, compared to $88 for the same period in the prior year. 

 

Litigation

 

The Company was not party to any material legal proceedings as of May 15, 2014, and there were no such proceedings pending during the period covered by this report.

 

 

Plan of Merger and Reorganization

 

On March 5, 2014, we entered into a non-binding Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Broadcast Acquisition Co., a wholly owned subsidiary of RNIN (“Merger Sub”), and Broadcast International, Inc.  Broadcast International is a provider of managed video solutions, including digital signage, OTT (Over the Top) networks, IPTV, and live/on-demand content distribution for the enterprise. 

The Merger Agreement contemplates a reverse triangular merger with Broadcast International surviving the merger with Merger Sub and thereby becoming a wholly owned operating subsidiary of Wireless Ronin (the “Merger”).   As a result of the Merger, the holders of Broadcast International common stock and securities convertible or exercisable into shares of Broadcast common stock outstanding immediately prior to the effective time of the Merger (the “Effective Time”), will be entitled to receive a number of shares of Wireless Ronin common stock (together with securities issuable for shares of Wireless Ronin common stock) equivalent to approximately 36.5% of Wireless Ronin common stock outstanding immediately after the Merger, calculated on a modified fully diluted basis.

The completion of the Merger is contingent upon customary closing conditions in addition to (i) the approval of Merger by the shareholders of Broadcast International, (ii) subject to certain materiality-based exceptions, the accuracy of the representations and warranties made by, and the compliance or performance of the obligations of, each of Wireless Ronin and Broadcast International set forth in the Merger Agreement, and (iii) the declaration of the effectiveness by the Securities and Exchange Commission of a Registration Statement on Form S-4 to be filed by Wireless Ronin in connection with the Merger.

 

The Merger Agreement contains customary representations, warranties and covenants, including covenants obligating each of Wireless Ronin and Broadcast International to continue to conduct their respective businesses in the ordinary course, and to provide reasonable access to each other’s information.  

 

 

Revolving Line-of-Credit

 

In March 2010, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (the “Loan and Security Agreement”), which was most recently amended effective March 12, 2014.  The Loan and Security Agreement provides the Company with a revolving line-of-credit at an annual interest rate of prime plus 1.5%, the availability of which is the lesser of (a) $1,500, or (b) the amount available under the Company’s borrowing base (75% of the Company’s eligible accounts receivable plus 50% of the Company’s eligible inventory) minus (1) the dollar equivalent amount of all outstanding letters of credit, (2) 10% of each outstanding foreign exchange contract, (3) any amounts used for cash management services, and (4) the outstanding principal balance of any advances.  In connection with the July 2010 lease amendment for the Company's corporate offices, Silicon Valley Bank issued a letter of credit that as of September 30, 2013 was in the amount of $180, along with a letter of credit issued to a vendor for $50. 

 

On March 6, 2014, we entered into a seventh amendment to our loan and security agreement with Silicon Valley Bank, effective as of March 12, 2014.  The amendment extended the maturity date of our line of credit to July 15, 2014.  Starting with the month ending March 31, 2014, our new tangible net worth requirement has been reduced to $150,000 as of the end of each month and, commencing with the quarter ending March 31, 2014, the minimum tangible net worth requirement increases, commencing with the quarter ending March 31, 2014 and each quarter thereafter, by the sum of (a) fifty-percent (50%) of our quarterly net income (without reduction for any losses) for such quarter, plus (b) fifty-percent (50%) of all proceeds received from the issuance of equity during such quarter and/or the principal amount of all subordinated debt incurred during such quarter.  We must comply with this tangible net worth minimum in order to draw down on such line of credit and also while there are outstanding credit extensions (other than our existing lease letter of credit).    

 

As of March 31, 2014, the Company was not in compliance with the tangible net worth requirement and therefore not eligible to draw down on the line of credit. The Company had no outstanding balance under this loan agreement (other than our letter of credits) as of March 31, 2014.

 

Under the Loan and Security Agreement, the Company is generally required to obtain the prior written consent of Silicon Valley Bank to, among other things, (a) dispose of assets, (b) change its business, (c) liquidate or dissolve, (d) change CEO or COO (replacements must be satisfactory to the lender), (e) enter into any transaction in which the Company’s shareholders who were not shareholders immediately prior to such transaction own more than 40% of the Company’s voting stock (subject to limited exceptions) after the transaction, (f) merge or consolidate with any other person, (g) acquire all or substantially all of the capital stock or property of another person, or (h) become liable for any indebtedness (other than permitted indebtedness). The line of credit is secured by all assets of the Company.

 

Convertible Debt

 

In January 2014, the Company received exercise notices from various holders of the convertible notes payable electing to convert the notes payable into common stock. The total principal amount was $250, including $1 of accrued interest, which converted into 501 shares of the Company's common stock.