Quarterly report pursuant to sections 13 or 15(d)

Related Party Transactions

Related Party Transactions
3 Months Ended
Jun. 30, 2013
Related Party Transactions
  12. Related Party Transactions

The Company engages in various business relationships with shareholders and officers and their related entities. The significant relationships are disclosed below.

On September 14, 2006, the Company entered into a five year management agreement (“Agreement”) with Trinad Management, the manager of Trinad Capital Master Fund, which is one of our principal stockholders. In addition, Robert Ellin, our director, is the managing director of and portfolio manager for Trinad Management. Pursuant to the terms of the Agreement, Trinad Management provided certain management services, including, without limitation, relating to the sourcing, structuring and negotiation of a potential business combination transaction involving the Company in exchange for a fee of $90 per quarter, plus reimbursements of all related expenses reasonably incurred. The Agreement expired on September 14, 2011, but was extended to December 31, 2011. During the three month periods ended June 30, 2013 and March 31, 2013, the Company did not incur management fees under the agreement. At June 30, 2013 and March 31, 2013, there was no amount payable to Trinad Management.

On December 28, 2011, we entered into an executive chairman agreement with Mr. Ellin. Mr. Ellin’s executive chairman agreement provides for a one-year term and an annual fee of $450,000, half of which was deferred until certain debt and/or equity financings were consummated. Such financings were consummated, and Mr. Ellin has received his full fee since April 1, 2012 and received a lump sum payment for the portion of his fee that was deferred from December 28, 2011 to March 31, 2012 on April 6, 2012. Mr. Ellin was eligible to receive an annual incentive bonus in cash in an amount of up to one hundred percent (100%) of the annual fee based upon satisfaction of performance-related milestones to be agreed upon between Mr. Ellin and the other members of our board of directors. Mr. Ellin was also reimbursed for the annual fee of a personal assistant of up to $80,000 during the term of this executive chairman agreement. On December 18, 2012, the agreement with Mr. Ellin expired naturally. The Company continued to retain Mr. Ellin on the same cash terms, on an at-will basis, since the expiration. On April 15, 2013 Mr. Ellin no longer serves as Executive Chairman and such at-will cash retention ended. Mr. Ellin remains on the Board of Directors and is entitled to the same compensation that may be offered to other non-management directors.

Mr. Ellin also received three grants totaling 1,600,000 shares of our restricted common stock that vest as follows:



The first grant of 680,000 was granted under the executive chairman agreement and vests as follows: (i) one third vested upon the completion our most recent equity financing; (ii) one third vested on July 3, 2013 when the Company’s total enterprise value equals or exceeds $100,000; and (iii) one third shall vest immediately if on any date during the term or within 12 months following the term our total enterprise value equals or exceeds $200,000; provided, however, that all unvested shares of restricted common stock shall vest immediately change of control. These shares may not be transferred for a period of one year from the vesting date.



The second grant of 720,000 shares was granted on December 28, 2011 and vested fully on the date of the grant. These shares may not be transferred for a period of two years from the date of grant.



The third grant of 200,000 shares was granted on December 28, 2011 and vest one year from the date of grant. These shares may not be transferred for a period of one year from the vesting date.


Mr. Ellin is also entitled to receive additional performance bonuses, in cash or shares of common stock at Mr. Ellin’s election, upon our achievement of certain higher total enterprise values.

During the three month period ended June 30, 2013, we did not grant Mr. Ellin any additional stock options or warrants.