| Subsequent Events | Note 14 — Subsequent Events Subsequent to the period June 30, 2017, the Company entered into the following acquisition agreements: Slacker Agreement • October 17, 2017 and October 23, 2017, $500,000. The Company agreed to use reasonable best efforts to obtain a representations and warranties insurance policy prior to the closing of the transaction with a coverage limit of $5,000,000, the insurance premium and other costs and expenses of which shall be included in the transaction expenses and calculation of net working capital at the closing of the transaction and borne by Slacker up to $225,000. The Slacker Acquisition is subject to certain closing conditions and there can be no assurance that the Slacker Acquisition will be consummated on the terms described herein or at all. SNAP Agreement • pursuant to Employment Agreements Andy Schuon In September 2017, the Company entered into an employment agreement with Mr. Schuon for a term of three years at a monthly rate of $25,000 from the effective date of his employment agreement to the date immediately prior to the closing of the Company’s public offering. Following the closing of the offering, Mr. Schuon’s annual salary shall be at a rate no less than $500,000. Mr. Schuon shall also receive a $250,000 cash bonus within thirty days after such closing. Such bonus shall be considered an advance against, and prepayment of, any Performance Bonus (as defined therein). The Performance Bonus shall be equal to 100% of his base salary and payable in accordance with the annual bonus plan applicable to the Company’s senior executives to be established following the closing of the offering. Mr. Schuon was also granted options to purchase 3,000,000 shares of the Company’s common stock at a price of $0.55 per share (the “Schuon Options”). The Schuon Options were granted pursuant to the Company’s 2016 Plan. The first tranche of 2,500,000 shares underlying the Schuon Options shall vest in one-twelfth increments every three months from the effective date through the end of the three-year term of his employment agreement (the “Service Options”). Such tranche of shares shall become exercisable on the earlier of (i) one year after the date such tranche shall vest, (ii) the second anniversary of the effective date of his employment agreement, or (iii) the earliest date vested equity awards become exercisable or transferable for similarly situated executives of the Company. In the event of a Change of Control (as defined in his employment agreement), any unvested portion of the shares subject to the Service Options shall vest and become exercisable effective immediately prior to such event. The second tranche of 500,000 shares underlying the Schuon Options shall 100% vest if prior to the third anniversary of the effective date of his employment agreement the shares of the Company’s common stock shall have traded at a price of $10.00 per share or more for a period of ninety consecutive trading days during which an average of at least 500,000 shares are traded per day (the “Performance Options”). Such tranche of shares shall become exercisable on the earlier of (i) one year after the vesting date, (ii) the second anniversary of the effective date of his employment agreement, or (iii) the earliest date vested equity awards become exercisable or transferable for similarly situated executives of the Company. In the event of a Change of Control, if the performance criteria has been achieved prior to such date or if the share value achieved in the Change of Control event is at least $10.00 per share, the Performance Options will vest and become exercisable effective immediately prior to such event. Each tranche of the Schuon Options and the shares underlying such options is subject to a lock-up restriction for a period of 12 months from the date that such tranche of the options vests; provided, that such restriction period shall terminate with respect to all Schuon Options and the shares underlying such options 24 months from the effective date of his employment agreement. If Mr. Schuon’s employment is terminated by us without “Cause” or by Mr. Schuon for “Good Reason” (each as defined in his employment agreement, subject to the Company’s right to cure), he will be entitled to termination benefits, pursuant to which (i) the Company will pay Mr. Schuon certain accrued obligations and prior year bonus amounts, if any; and (ii) subject to timely execution and non-revocation of a release as provided in his employment agreement, (u) the Company will continue to pay Mr. Schuon his base salary for a period from the termination date through the lesser of twelve months or the period through and inclusive of the last day of the three-year term of his employment agreement; (v) unvested Schuon Options (other than the Performance Options) and Other Equity Awards (as defined in his employment agreement) shall automatically accelerate and become vested and exercisable for a period of twelve months from the termination date or the date the award first becomes vested and exercisable, but in all events no later than the applicable term for each such award; (w) the Performance Options will continue to vest for a twelve-month period following the termination date; (x) any such his dependents continued participation in the Company’s medical plans from the termination date through and inclusive of the lesser of twelve months or the period through the date on which he obtains other coverage. Mr. Schuon’s employment agreement contains covenants for the benefit of the Company relating to non-competition during the term of his employment and protection of the Company’s confidential information, customary representations and warranties and indemnification obligations. Jerome Gold In September 2017, the Company the the the Company’s If Mr. Gold’s employment is terminated by the Company without “Cause” or by Mr. Gold for “Good Reason” (each as defined in his employment agreement, subject to the Company’s the Company the Company the Company the Company’s employment and protection of the Company’s Robert Ellin In September 2017, the Company entered into an employment agreement with Mr. Ellin for a term of five years at an annual salary of $650,000 payable commencing on the day of the closing of the Company’s public offering. Mr. Ellin shall be eligible to receive an annual Performance Bonus (as defined in his employment agreement) in accordance with the Company’s annual bonus plan applicable to its senior executives. The Performance Bonus shall be equal to 100% of Mr. Ellin’s average annualized base salary during the fiscal year for which the Performance Bonus is earned and payable in accordance with the annual bonus plan applicable to the Company’s senior executives to be established following the closing of the offering. Mr. Ellin was also granted options to purchase 3,500,000 shares of the Company’s common stock at a price equal to the public offering price set forth on the cover of this prospectus or, if higher, the fair market value of the shares of the Company’s common stock on the date of grant (the “Ellin Options”). The Ellin Options were granted pursuant to the Company’s 2016 Plan. The first tranche of 2,000,000 shares underlying the Ellin Options (the “Ellin Service Options”) shall vest in one-twelfth increments every three months for a three year period from the effective date of his employment agreement. Each tranche of the Ellin Service Options shall become exercisable one year after the date such tranche shall vest. In the event of a Change of Control (as defined in his employment agreement), any unvested portion of the Ellin Service Options shall vest and become exercisable effective immediately prior to such event. The second tranche of 1,500,000 shares underlying the Ellin Options shall 100% vest if prior to the third anniversary of the effective date of his employment agreement the shares of the Company’s common stock shall have traded at a price of $10.00 per share or more for a period of 90 consecutive trading days during which an average of at least 500,000 shares are traded per day (the “Ellin Performance Options”). The Ellin Performance Options shall become exercisable one year after the vesting date, provided that, in the event of a Change of Control, if the Ellin Performance Options have vested prior to such date, they shall be immediately exercisable upon such event. Each tranche of the Ellin Options and the shares underlying such options is subject to a lock-up restriction for a period of 12 months from the date that such tranche of the options vests; provided, that such restriction period shall terminate with respect to all Ellin Options and the shares underlying such options 24 months from the effective date of Mr. Ellin’s employment agreement. If Mr. Ellin’s employment is terminated by the Company without “Cause” or by Mr. Ellin for “Good Reason” (each as defined in his employment agreement, subject to the Company’s right to cure), he will be entitled to termination benefits, pursuant to which (i) the Company will pay Mr. Ellin certain accrued obligations and prior year bonus amounts, if any; and (ii) subject to timely execution and non-revocation of a release as provided in his employment agreement, (u) the Company will pay Mr. Ellin a one-time payment of $10,000,000; (v) unvested Ellin Options (other than the Ellin Performance Options) and Other Equity Awards (as defined in his employment agreement) shall automatically accelerate and become vested and exercisable for a period of 12 months from the termination date or the date the award first becomes vested and exercisable, but in all events no later than the applicable term for each such award; (w) the Ellin Performance Options shall continue to vest if, and only if, the performance criteria specified above for the vesting of the Ellin Performance Options are satisfied during the twelve-month period following the termination date; (x) any such accelerated Ellin Service Options, Ellin Performance Options and Other Equity Awards will remain outstanding and be exercisable, to the extent applicable, for a period of twelve months from the later of the termination date or the date the award first becomes vested and exercisable, but in all events no later than the applicable term for each such award; (y) all restrictions on the Other Equity Awards that are vested on the terminate date (or during the twelve-month period following the termination date) shall automatically and immediately lapse; and (z) the Company will continue to cover costs for Mr. Ellin and his dependents continued participation in the Company’s medical plans from the termination date through and inclusive of the lesser of twelve months or the period through the date on which he obtains other coverage. Mr. Ellin’s employment agreement contains covenants for the benefit of the Company relating to non-competition during the term of Mr. Ellin’s employment and protection of the Company’s confidential information, customary representations and warranties and indemnification obligations. Until the date that the offering is completed, the Company agreed to the offering is completed. Issuance of Common Stock to Consultants for Services Subsequent to June 30, 2017, the Company issued 147,123 shares of its common stock valued at $245,695 to various consultants. The Company valued these shares at $1.67 per share, the most recent price of the sale of its common stock near the date of grant. Reverse Stock Split In September 2017, the Company’s Board of Directors declared a 1-for-3 reverse stock split of the Company’s issued and outstanding common stock, which will be effectuated prior to the effectiveness of the Company’s registration statement on Form S-1, as amended. All shares and per-share amounts have not been restated to reflect the reverse stock split. Co-Existence Agreement On September 23, 2017 the Company entered into a Co-Existence Agreement with Monday Sessions Media, Inc. D/B/A Live X (“Live X”), where the Company consented to Live X’s use and registration of the name and mark Live X and have agreed to not challenge, dispute or contest Live X’s rights in such mark. Pursuant to this agreement, the Company agreed to not offer certain production services to third party businesses in connection with its mark LIVEXLIVE and that the Company will use commercially reasonable efforts to afford Live X opportunities to bid on production or streaming service opportunities. Russ Gilbert Option Award On September 29, 2017, the Company granted Mr. Russ Gilbert options to purchase 250,000 shares of the Company’s common stock at an exercise price equal to $0.55 per share in connection with his employment. Such options shall vest as to one-third of the shares underlying the options twelve months after the date of grant, and as to an additional one-third of the shares underlying the options on such date every twelfth month thereafter through the date three years after the date of grant. Each tranche of shares subject to the options shall become exercisable on the earlier of (i) one year after the date such tranche shall vest, (ii) the second anniversary of the date of grant, or (iii) the earliest date vested equity awards become exercisable or transferable for similarly situated executives of the Company. | Note 14 — Subsequent Events Unsecured Convertible Notes Payable Subsequent to the period ended March 31, 2017 the Company issued eight, 6% unsecured note payables to investors for total cash principal of $1,595,000. These notes are due between April 2018 and May 2018. The noteholders shall in their sole discretion have the option to convert all outstanding principal and interest into the Company’s Common Stock before the maturity date at a conversion price per share based upon the Company’s current valuation, as determined by the board of directors. If the Company raises a minimum of $5,000,000 (excluding the amount converting pursuant to the note) of aggregate gross proceeds from an equity financing in one or more closings prior to the maturity date, the noteholders will have the right to convert all outstanding note principal and interest into the same equity securities issued in such equity financing at 75% of the issuance price of the securities issued in such financing. In addition, the noteholders received warrants to purchase an aggregate of 797,500 shares of the Company’s common stock at an exercise price of $0.01 per share with a relative fair value of $723,533. As of the issuance dates of these notes, the effective conversion price was $0.91, and the market price of the shares on the date of conversion was approximately $1.67 per share. As such, the Company expects to recognize a beneficial conversion feature of $723,533. As a result, the Company expects to record a note discount of $1,447,066 to account for the relative fair value of the warrants and the notes’ beneficial conversion features which will be amortized as interest expense over the term of the notes. Employment Agreements In April and May 2017, the Company entered into employment agreements with two officers for a term of two years at an annual salary of $120,000 and $180,000 respectively. In addition, one of the officers was granted 300,000 shares of the Company’s common stock valued at $501,000 that will vest in equal tranches over the 24-month term of the employment agreement. The officer will also receive a bonus of $100,000 upon the closing of an underwritten public offering of the Company’s common stock. The other officer was granted 400,000 shares of the Company’s common stock valued at $668,000 that will vest in increments, with the first tranche of 200,000 shares vesting 12 months from the effective date and the remaining number of shares vesting monthly thereafter, with 100% vesting over the 24-month term of the employment agreement. Wantickets Acquisition On May 5, 2017, LiveXLive Tickets, Inc., (“LXL Tickets”) a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (“APA”) with Wantickets and certain other parties, whereby the Company purchased certain operating assets of Wantickets for total consideration of 2,000,000 shares of common stock of the Company valued at $3,340,000 ($1.67 per share) and the assumption of certain liabilities of Wantickets. The Company is in the process of completing the allocation of the purchase price to the assets and liabilities acquired. In connection with the transaction, LXL Tickets entered into employment agreements with key employees of Wantickets for a term of two years each. One officer, Joe Schnaier, the Chief Executive Officer of Wantickets, will receive an annual salary of
$220,000 and a bonus of 2,000,000 shares of common stock if LXL Tickets earns net income of $3 million in the twelve months following the effective date of his employment agreement or net income of $4 million in the twelve months thereafter. The other officer will receive an annual salary of $160,000 and receive a number of shares of the Company’s common stock equal to $15,000 each year. In addition, pursuant to the APA and the Letter Agreement, dated as of May 5, 2017 (the “Letter Agreement”), entered into among the Company, LXL Tickets and Mr. Schnaier, the parties agreed that, commencing May 5, 2017, Mr. Schnaier will promptly pay for all of LXL Tickets’ net losses of its business for each calendar month (or pro rata thereof), up to a total of $100,000 per month, and for any liabilities exceeding $100,000 in the aggregate that arose from April 1, 2017 to May 5, 2017 (inclusive), until the earlier of (x) such time as a public offering is consummated or (b) May 5, 2018 (such earlier date as between clause (x) and (y), the “Funding End Date”), and that any salaries or other payments or amounts due to under the employment agreements described above shall be included in the calculation of the net loss for the applicable period (collectively, the “JS Payment Obligation”). Pursuant to the Letter Agreement, the parties further agreed that all payments made by Mr. Schnaier as part of the JS Payment Obligation shall be deemed to be a loan by Mr. Schnaier to LXL Tickets (the “Loaned Funds”), and that the Company and LXL Tickets shall repay to Mr. Schnaier the total amount of the Loaned Funds within five business days after the Funding End Date; provided that the Company and LXL Tickets may prepay or repay in full the Loaned Funds at any time prior to the Funding End Date without any penalty. An unaudited pro forma balance sheet as of March 31, 2017 as if the acquisition had occurred as of that date is as follows: March 31, 2017 (unaudited) Current Assets Cash and cash equivalents $ 1,477,229 Prepaid expense 21,569 Total Current Assets 1,498,798 Other Assets Property and equipment, net 175,407 Intangibles 3,222,000 Total Assets $ 4,896,205 Liabilities and Stockholders’ Deficit Current Liabilities: Accounts payable and accrued liabilities $ 542,035 Note payable 277,270 Note payable, shareholder 3,603,446 Current portion of unsecured convertible notes, net of discount 67,858 Services payable, related party 239,080 Total Current Liabilities 4,729,689 Unsecured convertible notes - related party, net of discount 11,668 Unsecured convertible notes, net of discount and current portion 220,540 Total Liabilities 4,961,897 Stockholders’ Deficit: Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued or — Common stock, $0.001 par value; 500,000,000 shares authorized; 105,996,974 shares issued and outstanding. 105,997 Additional paid in capital 27,924,201 Accumulated deficit (28,095,890 ) Total stockholders’ deficit (65,692 ) Total Liabilities and Stockholders’ Deficit $ 4,896,205 Unaudited pro forma results of operations for the years ended March 31, 2017 and 2016 as if the acquisition has occurred as of the earliest dates presented are as follows: For the Year For the Year (unaudited) (unaudited) Revenue $ 3,972,000 $ 5,744,000 Cost of revenue 1,147,000 2,052,000 Gross profit 2,825,000 3,692,000 Operating expenses: Selling, general and administrative 9,479,801 7,297,000 Related party expenses 360,000 360,000 Total operating expenses 9,839,801 7,657,000 Loss from operations (7,014,801 ) (3,965,000 ) Other income (expense) Interest expense, net (497,152 ) (218,498 ) Other income 6,667 — Fair value of warrants issued for note extension and inducement to convert (2,002,977 ) — Earnings from investment in
OCHL 132,832 410,553 Fair value of warrants and beneficial conversion feature on debt conversion (3,248,948 ) — Fair value of beneficial conversion feature (136,936 ) — Impairment of note receivable - related party (213,331 ) — Loss on sale of investment in OCHL (2,790,073 ) — Total other income (expense) (8,749,918 ) 192,055 Net loss $ (15,764,719 ) $ (3,772,945 ) Net Loss per common share – basic and diluted $ (0.16 ) $ (0.04 ) Weighted average common shares – basic and diluted 99,596,206 92,082,796 Promotional Rights Subsequent to March 31, 2017, the Company entered into license, production and/or distribution agreements to make guaranteed payments as follows: $210,000 for the fiscal year ended March 31, 2018, $190,000 for the fiscal year ended March 31, 2019, and $25,000 for the year ended March 31, 2020. One of the agreements also provides for a revenue share of 50% of net revenues. If the events do not occur as planned and/or the Company does not undertake production of such events, or if the revenue from these events does not allow the Company to recover its production costs, no additional liability for additional payments or promotional right will remain. Equity Issuances Subsequent to March 31, 2017, the Company issued an aggregate of 947,500 shares of its common stock to investors in consideration of an aggregate of $9,475 as a result of the exercise of 947,500 warrants at an exercise price of $0.01 per share. Subsequent to March 31, 2017, the Company issued an aggregate of 737,500 shares of its common stock valued at $1.67 per share as fees to the Company’s employees, directors, advisors and consultants. |
