| Commitments and Contingencies |
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16.
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Commitments and Contingencies
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Operating Lease Obligations
The
Company leases office facilities and equipment under noncancelable
operating leases expiring in various years through 2014.
Following is a summary of future minimum payments under initial
terms of leases as of:
| Year Ending March 31, |
|
|
|
|
|
2013 |
|
$ |
32 |
|
|
2014 |
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$ |
5 |
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| Total minimum
lease payments |
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$ |
37 |
|
These
amounts do not reflect future escalations for real estate taxes and
building operating expenses. Rental expense for
continuing operations amounted to $170 and $291, respectively, for
the years ended March 31, 2012 and 2011.
Other Obligations
As of
March 31, 2012, the Company was obligated for payments under
various distribution agreements, equipment lease agreements,
employment contracts and consulting agreements with initial terms
greater than one year at March 31, 2012. Annual payments
relating to these commitments at March 31, 2012 are as follows:
| Year Ending March 31, |
|
|
|
|
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2013 |
|
$ |
1,108 |
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| Total minimum
payments |
|
$ |
1,108 |
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On
December 28, 2011, the Company entered into an employment agreement
with Peter Adderton to serve as the Company’s Chief Executive
Officer and as a member of the Company’s Board of
Directors. The term of the agreement is one year.
Pursuant to the agreement, the Company agreed to the following:
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Annual Fees: For all services rendered by the Chief Executive
Officer under this agreement, the Company shall pay the Executive
an aggregate fee of four hundred fifty thousand dollars ($450,000)
per annum. |
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Special Incentive Bonus: Mr. Adderton is to receive
a bonus of $250,000 payable (A) 50% upon completion of a $5 million
financing(s) during the two years following the date of the
employment agreement (“Measurement Period”) and
(B) the remaining $125,000 upon the successful completion of
additional debt or equity financing(s) during the Measurement
Period, which, when aggregated with any prior financings during the
Measurement Period, result in the Company realizing at least $10
million of gross proceeds. |
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Annual Bonus: Mr. Adderton shall be entitled to be paid
an annual incentive bonus in cash in an amount of up to 100% of his
salary based upon satisfaction of performance-related milestones.
The performance-related milestones shall be mutually determined by
the Board of Directors and Mr. Adderton within sixty (60) days of
the effective Date of the employment agreement. |
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Restricted Stock Grant: The Company granted Mr. Adderton
9,037,500 shares of the Company’s restricted common stock,
subject to the certain terms and conditions specified in the
restricted stock agreement, which shall vest as follows: (i) one
third (1/3) shall vest immediately upon the completion of one or
more debt or equity financings during the Measurement Period in
favor of the Company of gross proceeds of at least $5
million; (ii) one third (1/3) shall vest immediately if on any date
during the Measurement Period the Company’s total enterprise
value (computed by multiplying the number of outstanding shares of
the Employer’s common stock on a fully diluted (taking into
account only those stock options that are in-the-money on such
date), as-converted basis by the average daily trading price for
the Company’s common stock for the thirty (30) trading day
period immediately preceding the date of determination) equals or
exceeds $100 million; and (iii) one third (1/3) shall vest
immediately if on any date during the Measurement Period the
Company’s total enterprise value (calculated as set forth in
clause (ii) above) equals or exceeds $200 million; provided ,
however , that all unvested shares of restricted common stock shall
vest immediately upon the sale of all or substantially all of the
assets of the Company, upon the merger or reorganization of the
Company following which the equity holders of the Company
immediately prior to the consummation of such merger or
reorganization collectively own less than 50% of the voting power
of the resulting entity, or upon the sale of equity securities of
the Company representing 50% or more of the voting power of the
Company or 50% or more of the economic interest in the Company in a
single transaction or in a series of related transactions (i.e., a
“Change of Control”). All shares shall be subject to a
one (1) year lock-up following the vesting of such shares. |
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Additional Performance Bonuses: Mr. Adderton shall be
entitled to payment of (i) a performance bonus equal to $2.5
million in cash or registered and freely tradable stock of the
Company, at Mr. Adderton’s choice, if, on any date during the
Measurement Period the Company’s total enterprise value
(calculated as set forth in Section 4(e)(ii) above) equals or
exceeds $150 million; and (ii) payment of a performance bonus equal
to $10 million in cash or registered and freely tradable stock of
the Company, at Mr. Adderton’s choice, if, on any date
during the Measurement Period, the Company’s total enterprise
value (calculated as set forth in Section 4(e)(ii) above) equals or
exceeds $1 billion. Any bonus payable under this subsection (f)
shall vest upon the achievement of the specified criteria and shall
be paid on or within thirty (30) days of such vesting date. |
The
Company entered into an agreement with Robert Ellin to serve as the
Company’s Executive Chairman. The term of the
agreement is one year. Pursuant to the agreement, the Company
agreed to the following:
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Annual Fees: For all services rendered by the Chairman under
this agreement, the Company shall pay the Chairman an aggregate fee
of four hundred fifty thousand dollars ($450,000) per annum. |
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Annual Bonus: Mr. Ellin shall be entitled to be paid an
annual incentive bonus in cash in an amount of up to 100% of his
salary based upon satisfaction of performance-related milestones.
The performance-related milestones shall be mutually determined by
the Board of Directors and Mr. Ellin within sixty (60) days of the
effective Date of the employment agreement. |
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Restricted Stock Grant: The Company granted Mr. Ellin 3,400,000
shares of the Company’s restricted common stock, subject to
the certain terms and conditions specified in the restricted stock
agreement, which shall vest as follows: (i) one third (1/3) shall
vest immediately upon the completion of one or more debt or equity
financings during the Measurement Period in favor of the
Company of gross proceeds of at least $5 million; (ii) one
third (1/3) shall vest immediately if on any date during the
Measurement Period the Company’s total enterprise value
(computed by multiplying the number of outstanding shares of the
Employer’s common stock on a fully diluted (taking into
account only those stock options that are in-the-money on such
date), as-converted basis by the average daily trading price for
the Company’s common stock for the thirty (30) trading day
period immediately preceding the date of determination) equals or
exceeds $100 million; and (iii) one third (1/3) shall vest
immediately if on any date during the Measurement Period the
Company’s total enterprise value (calculated as set forth in
clause (ii) above) equals or exceeds $200 million; provided ,
however , that all unvested shares of restricted common stock shall
vest immediately upon the sale of all or substantially all of the
assets of the Company, upon the merger or reorganization of the
Company following which the equity holders of the Company
immediately prior to the consummation of such merger or
reorganization collectively own less than 50% of the voting power
of the resulting entity, or upon the sale of equity securities of
the Company representing 50% or more of the voting power of the
Company or 50% or more of the economic interest in the Company in a
single transaction or in a series of related transactions (i.e., a
“Change of Control”). All shares shall be subject to a
one (1) year lock-up following the vesting of such shares. |
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· |
Additional Performance Bonuses: Mr. Ellin shall be
entitled to payment of (i) a performance bonus equal to $1.5
million in cash or registered and freely tradable stock of the
Company, at Mr. Ellin’s choice, if, on any date during the
Measurement Period the Company’s total enterprise value
(calculated as set forth in Section 4(e)(ii) above) equals or
exceeds $150 million; and (ii) payment of a performance bonus equal
to $3.3 million in cash or registered and freely tradable stock of
the Company, at Mr. Ellin’s choice, if, on any date
during the Measurement Period, the Company’s total enterprise
value (calculated as set forth in Section 4(e)(ii) above) equals or
exceeds $1 billion. Any bonus payable under this subsection (f)
shall vest upon the achievement of the specified criteria and shall
be paid on or within thirty (30) days of such vesting date. |
Litigation
Twistbox’s wholly owned subsidiary, WAAT Media Corp.
(“WAAT”) and General Media Communications, Inc.
(“GMCI”) were parties to a content license agreement
dated May 30, 2006, whereby GMCI granted to WAAT certain exclusive
rights to exploit GMCI branded content via mobile devices. GMCI
terminated the agreement on January 26, 2009 based on its claim
that WAAT failed to cure a material breach pertaining to the
non-payment of a minimum royalty guarantee installment in the
amount of $485. On or about March 16, 2009, GMCI filed a complaint
seeking the balance of the minimum guarantee payments due under the
agreement in the approximate amount of $4,085. WAAT counter-sued
claiming GMCI was not entitled to the claimed amount and that it
had breached the agreement by, among other things, failing to
promote, market and advertise the mobile services as required under
the agreement and by fraudulently inducing WAAT to enter into the
agreement based on GMCI’s repeated assurances of its
intention to reinvigorate its flagship brand. GMCI filed a demurrer
to the counter-claim. WAAT subsequently filed an amended
counter-claim. On August 16, 2011, the LA Superior Court ruled in
favor of WAAT’s Summary Judgment Motion. As a result,
GMCI’s potential damages were limited to the amount of
minimum royalty installments that accrued prior to termination of
the content license agreement in the amount of approximately $800.
Trial had been scheduled for April 16, 2012, however on December
22, 2011 the parties agreed to a settlement of $300 in favor of
GMCI, pursuant to which WAAT will be required to pay GMCI $300 over
a 30 month period, beginning December 28, 2011. As of March 31,
2012 the Company has accrued $260, which is included in Accounts
Payable on the balance sheet.
On
March 6, 2012 the Company received a notice of levy in the amount
of $73 pertaining to a dispute with a service provider. The Company
has recorded the full amount in Accounts Payable on the
consolidated balance sheet.
On May
4, 2012 the Company received notice of a judgment in the amount of
£23 pertaining to a dispute with a previous employee. The
Company has recorded the full amount in Accrued Compensation on the
consolidated balance sheet.
The
Company is subject to various claims and legal proceedings arising
in the normal course of business. Based on the opinion of the
Company’s legal counsel, management believes that the
ultimate liability, if any in the aggregate of other claims will
not be material to the financial position or results of operations
of the Company for any future period; and no liability has been
accrued.
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