Centre Lane Senior Secured Credit Facility | NOTE 10 – CENTRE LANE SENIOR SECURED CREDIT FACILITY Effective June 1, 2020, the Company entered into a membership interest purchase agreement to acquire 100 % of Wild Sky Media, a subsidiary of the Company (the “Purchase Agreement”). To finance this acquisition, the Company obtained a first lien senior secured credit facility from Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane Partners”) in the amount of $ 16.5 million, comprised of $ 15.0 million of initial indebtedness, repayment of Wild Sky’s existing accounts receivable factoring facility of approximately $ 900,000 and approximately $ 500,000 of expenses. On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Partners, pursuant to which they would provide financing in the form of a senior secured credit facility for the acquisition of the Big Village Entities. On April 20, 2023, the Company and its subsidiaries entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”) with Centre Lane Partners. The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $ 26.3 million to, among other things, finance the Big Village Acquisition. This term loan, which was provided by BV Agency, LLC, matures on April 20, 2026 and was issued at a discount of 5 % or $ 1.3 million. Interest of 15 % payable under the note is payable-in-kind in lieu of cash payment up to April 30, 2024, then 5 % payable quarterly in cash and 10 % payable-in-kind in lieu of cash payment until maturity of April 20, 2026. As a result of the Twentieth Amendment (as described below), interest payable on the loans under the Seventeenth Amendments from April 2024 until June 30, 2025 was converted from a combination of cash and PIK to solely PIK at the rate of 15 %, with an option to maintain such terms after June 30, 2025 in exchange for an additional 2 % PIK fee or to transition to payments made 10 % PIK and 5 % in cash. As part of the Seventeenth Amendment, the Company is required to pay an amendment fee of 2 % of the principal amount of the existing initial principal plus amendments one to eight ("First In Last Out Loans") and amendments nine to sixteen ("Last In First Out Loans"), totaling $ 706,000 , additionally, an exit fee of $ 18,000 of the loan to finance the Big Village Acquisition. The outstanding principal on these at April 20, 2023 was $ 31.0 million and $ 4.3 million, respectively. These fees total $ 724,000 and are due and payable at maturity. Additionally, the maturity dates were extended to April 20, 2026. Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners. The shares were valued at $ 1.9 million, based on a per share price of $ 0.09 , which was the closing price of the Company’s common stock at close of market on April 19, 2023. As of September 30, 2024 , BV Agency, LLC, and Centre Lane Partners own approximately 12.4 % and 8.8 % of the Company’s outstanding common stock, respectively. On July 28, 2023, the Company and its subsidiaries entered into the Nineteenth Amendment to the Credit Agreement (the “Nineteenth Amendment”) with Centre Lane Partners to provide for an additional term loan amount of $ 2.0 million to, among other things, finance the integration and further growth of the Company post-Big Village Acquisition. This term loan is part of the last in first out loans and matures on June 28, 2024. On June 30, 2024 the Company and its subsidiaries entered into the Twentieth Amendment to the Credit Agreement (the "Twentieth Amendment" and together with the Credit Agreement and all other amendments thereto, the "Centre Lane Secured Credit Facility") with Centre Lane Partners to provide, among other things, for the extension of the maturity date of the term loan under the Nineteenth Amendment to December 31, 2024. Commencing September 30, 2024, the Company will commence repayment by making four monthly payments of principal and interest with the balance payable on December 31, 2024. Beginning in April 2021, Centre Lane Partners loaned the Company an additional $ 38.0 million to provide liquidity to fund operations. The Centre Lane Senior Secured Credit Facility has been determined to qualify as a related party transaction as shares were issued to Centre Lane Partners as part of the transaction. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. The original note issued under the Centre Lane Senior Secured Credit Facility initially bore interest at a rate of 6.0 % per annum, with payments of 2.5 % of outstanding principal beginning on June 30, 2023. The interest rate was increased to 10.0 % pursuant to the first amendment to the Centre Lane Senior Secured Credit Facility and interest payable under the note is payable-in-kind (“PIK Interest”) in lieu of cash payment. Commencing with the ninth amendment, the interest rate was increased to 12 % per annum on all subsequent draws with 8 % per annum payable quarterly in cash and 4 % per annum payable-in-kind in lieu of cash payment. These “last in first out loans,” totaling $ 7.1 million inclusive of exit fees at September 30, 2024, are due and payable on April 20, 2026, excluding the amounts due under the Nineteenth Amendment which are due and payable on December 31, 2024. In connection with the Nineteenth Amendment, adjustments were made to the interest rate for outstanding loans with the exception of the draw under the Seventeenth Amendment as follows: • The interest rate per annum changed to 7.0 % per annum plus the Secured Overnight Financing Rate ("SOFR"). At September 30, 2024, the SOFR was 5.30 % per annum, and overall interest on these facilities was 12.33 % , per annum at September 30, 2024; • The cash pay rate for the last in first out loans was changed to the SOFR plus 3.0 % per annum. At September 30, 2024, the rate was 8.30 % per annum; and • Effective July 1, 2024, the first in last out loans PIK Rate per annum was 7.0 % per annum plus SOFR plus 5.0 % per annum. In connection with the Twentieth Amendment, adjustments were made to the interest rate for outstanding loans as follows: • Adjusting the amortization of the last out loans with quarterly installments of $ 100,000 commencing on September 30, 2024, with quarterly payments increasing to 2.5 % of the amount outstanding under the loans (including capitalized P IK interest) commencing on March 31, 2025. The amount outstanding under the last out loans was $ 36.5 million at September 30, 2024. • Changing the last out term loan PIK rate to the SOFR plus 7 % until December 31, 2024, and to the SOFR plus 2 % (previously 5 %) thereafter; • Converting interest payable on the Seventeenth Amendment loan from April 2024 until June 30, 2025 from a combination of cash and PIK to solely PIK at the rate of 15 %, with an option to maintain such terms after June 30, 2025 in exchange for an additional 2 % PIK fee or to transition to payments made 10 % PIK and 5 % in cash; • Extending the due date for the 5 % exit fee with respect to the Nineteenth Amendment to December 31, 2024; and • Agreeing to pay an amendment fee equal to 2 % of the principal amount of the Seventeenth Amendment term loan and Nineteenth Amendment term loan, which amount was paid-in-kind by adding the amount of such amendment fee to the outstanding principal balance. This fee was $ 672,000 at June 30, 2024. Optional Prepayment The Company may, at any time, voluntarily prepay, in whole or in part, a minimum of $ 250,000 of the outstanding principal of the loans, plus any accrued but unpaid interest on the aggregate principal amount of the loans being prepaid. There is no prepayment penalty associated with the Centre Lane Senior Secured Credit Facility. However, partial or full prepayments of the Centre Lane Senior Secured Credit Facility is required in the event of certain future capital raises. Repayment of Loans With respect to the last out loans, the Company was initially required to repay in cash to Centre Lane Partners (i) commencing with the fiscal quarter ending on June 30, 2023, in consecutive quarterly installments to be paid on the last day of each fiscal quarter of the Company, an amount equal to 2.5 % of the outstanding aggregate principal amount of the original principal plus draws advanced by amendments 2 through 8 along with accrued and unpaid interest (after giving effect to capitalized PIK Interest) and (ii) on the maturity date all outstanding obligations (including, without limitation, all accrued and unpaid principal and interest on the principal amounts of the Loans (including any accrued but uncapitalized PIK Interest)) of the loan parties that are due and payable on such date. As a result of the Twentieth Amendment, the Company will commence amortization of the first in last out loans with quarterly installments of $ 100,000 commencing on September 30, 2024, with quarterly payments increasing to 2.5 % of the amount outstanding under the loans (including capitalized PIK interest) commencing on March 31, 2025 On June 30, 2023, the Company and its subsidiaries entered into its Eighteenth Amendment with Centre Lane Partners to change the timing of certain installment payments which were due on June 30, 2023. The Eighteenth Amendment deferred these payments into equal monthly installments due on July 3, 2023, August 7, 2023, and September 5, 2023, respectively. There was no impact on principal or interest and no fees incurred by the Company as a result of this amendment. In connection with the Nineteenth Amendment, and prior to the execution of the Twentieth Amendment, quarterly installments equal to 2.5 % of the outstanding aggregate principal were due on the first in last out loans commencing March 31, 2024. For the three and nine months ended September 30, 2024, the Company paid $ 0 and $ 879,000 toward the principal loan balance, respectively. For the three and nine months ended September 30, 2023, the Company paid $ 270,000 toward the principal loan balance for both periods. The amount outstanding under the first in last out loans was $ 36.5 million at September 30, 2024. Interest payable on the last in first out loans at September 30, 2024 was $ 165,000 . During the three and nine months ended September 30, 2024, the Company paid approximately $ 150,000 and $ 288,000 , respectively towards outstanding interest on the last in first out loans. During the three and nine months ended September 30, 2023, the Company paid approximately $ 124,000 and $ 285,000 , respectively towards outstanding interest on the last in first out loans. Fees Under the terms of the Centre Lane Senior Secured Credit Facility, the Company is also required to pay Centre Lane Partners a non-refundable annual administration fee equal to $ 35,000 for agency services provided under this agreement. The Centre Lane Senior Secured Credit Facility provides that this fee shall be in all respects fully earned, due and paid-in-kind by the Company on the effective date (“Effective Date”) of the Centre Lane Senior Secured Credit Facility and on each anniversary of the Effective Date during the term of this agreement by adding and capitalizing the full amount of such fee to the outstanding principal balance of the loans. The accumulated administrative fee since inception of the fa cility is $ 175,000 and is included in outstanding principal. The administrative fee charged during the nine months ended September 30, 2024 and 2023 wa s $ 35,000 for both periods, respectively. The below table summarizes the loan balance at September 30, 2024, and December 31, 2023: September 30, 2024 December 31, 2023 (in thousands) Note payable - Centre Lane senior secured credit facility - related party (current) $ 4,122 $ 5,592 Note payable - Centre Lane senior secured credit facility - related party (net of discount) 68,414 58,674 Net principal 72,536 64,266 Add: debt discount 4,426 5,962 Outstanding principal $ 76,962 $ 70,228 The below table summarizes the movement in the outstanding principal from inception through September 30, 2024: September 30, 2024 December 31, 2023 (in thousands) Opening balance $ 70,228 $ 33,109 Add: Draws - 29,816 Exit and other fees 707 917 Interest capitalized 6,906 6,656 77,841 70,498 Less Payments ( 879 ) ( 270 ) Outstanding principal $ 76,962 $ 70,228 Amendments to Centre Lane Senior Secured Credit Facility Commencing April 2021, the Company and certain of its subsidiaries entered into various amendments to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners. The Credit Agreement was amended a number of times to provide for additional loans used for working capital and acquisitions. In addition, and as part of the transaction, there are exit fees (the “Exit Fees”), which will be added and capitalized to the principal amount of the original loan. As of September 30, 2024, there were twenty amendments to the Centre Lane Senior Secured Credit Facility. Consistent with FASB ASC Topic 470 Debt , (“ASC 470”), the Company is required to perform an analysis of the change in each amendment to determine whether the change is a modification or an extinguishment of debt. Under a modification, no gain or loss is recorded, and a new effective interest rate is established based on the carrying value of the debt and revised cash flow. If the debt is extinguished, the old debt is derecognized and the new debt is recorded at fair value, which becomes the new carrying value. A gain or loss is recorded for the difference between the net carrying value of the original debt and the fair value of the new debt, additionally, in the event the transaction is with a related party, this gain or loss should be recognized against additional paid in capital. Interest expense is recorded based on the effective interest rate of the new debt. A debt is considered extinguished if the present value of the new cash flows under the term of the new debt is at least 10% different from the present value of the remaining cash flows under the terms of the old debt. In connection with the Seventeenth Amendment, the Company determined that the change was an extinguishment consistent with ASC 470, Debt, the old debt of $ 35.5 million was de-recognized and the new debt of $ 62.7 million was recognized at estimated fair value. A gain on extinguishment was recognized against additional paid in capital of $ 671,000 , as Centre Lane Partners is a related party. The below table summarizes the amendments that were executed by the Company from the inception of the facility to September 30, 2024, (in thousands, except for share data): Amendment No. Date Draw Repayment Date Interest Rate d Interest Rate e Agency Fee Exit Fee a Common Stock Issued Accounting Impact (in thousands, except share data) 1 4/26/2021 $ - 4/20/2026 12.37 % 0.00 % $ - $ - 150,000 Extinguishment b 2 5/26/2021 1,500 4/20/2026 12.37 % 0.00 % - 750 3,000,000 Modification f 3 8/12/2021 500 4/20/2026 12.37 % 0.00 % - 250 2,000,000 Modification f 4 8/31/2021 1,100 4/20/2026 12.37 % 0.00 % - 550 - Modification f 5 10/8/2021 725 4/20/2026 12.37 % 0.00 % - 363 - Extinguishment f 6 11/5/2021 800 4/20/2026 12.37 % 0.00 % - 800 7,500,000 Modification f 7 12/23/2021 500 4/20/2026 12.37 % 0.00 % 70 500 - Modification f 5,125 70 3,213 12,650,000 8 1/26/2022 350 4/20/2026 12.37 % 0.00 % - 350 - Modification f 9 2/11/2022 250 4/20/2026 4.00 % 8.37 % - 13 - Modification g 10 3/11/2022 300 4/20/2026 4.00 % 8.37 % - 15 - Modification g 11 3/25/2022 500 4/20/2026 4.00 % 8.37 % - 25 - Modification g 12 4/15/2022 450 4/20/2026 4.00 % 8.37 % - 23 - Modification g 13 5/10/2022 500 4/20/2026 4.00 % 8.37 % 35 25 - Modification g 14 6/10/2022 350 4/20/2026 4.00 % 8.37 % - 18 - Modification g 15 7/8/2022 350 4/20/2026 4.00 % 8.37 % - 18 - Modification g 3,050 35 487 - 16 2/10/2023 1,500 4/20/2026 4.00 % 8.37 % - 75 - Modification g 17 h 4/20/2023 26,316 4/20/2026 15.00 % 0.00 % 35 708 21,401,993 Extinguishment c 19 7/28/2023 2,000 6/28/2024 4.00 % 8.37 % - 100 - Modification g 29,816 35 883 21,401,993 20 6/30/2024 - 12/31/2024 4.00 % 8.33 % 35 672 - Modification i - 105 2,438 42,803,986 $ 37,991 $ 210 $ 6,138 55,453,986 a) Added and capitalized to the principal amount of the original loan and the original loan terms apply. b) The Centre Lane Senior Secured Credit Facility was amended to permit the Company to raise up to $ 6.0 million of total cash proceeds from the sale of its preferred stock prior to December 31, 2021 , without having to make a mandatory prepayment of the loans. Additionally, the Company may issue up to $ 800,000 in dividends from the previous limit of $ 500,000 per annum. c) 15 % PIK until April 20, 2024, then 5 % cash and 10 % PIK thereafter. d) New rates in effect in connection with Amendment 19, Amendment 1 through 8, the PIK rate was 10 %. e) New rates in effect in connection with Amendment 19, Amendment 9 through 16, the cash rate was 8 %. f) First In Last Out Loans. g) Last In First Out Loans. h) As discussed above, there was no impact on principal or interest and no fees incurred by the Company as a result of Amendment 18, thus it is not included in above table. i) New rates and repayment terms in connection with Amendment 20. Draws advanced by Amendments 2 through 8 totaling $ 5.5 million and exit fees totaling $ 3.6 million, were due for full repayment on February 28, 2022; prior to this date, the loan agreement allowed the Company to waive the accrual of interest on these amounts. There was no repayment of these amounts, and as a result, on March 11, 2022, amendment 10 was executed, changing the repayment date of the outstanding principal, and commencing interest accrual on the exit fees. All amounts advanced for Amendments 9 through 16 were due on June 30, 2023 along with accrued and unpaid interest, however, the maturity date was changed to April 20, 2026 with amendment 17. The outstanding amount at September 30, 2024 is $ 7.1 million , inclusive of interest paid in kind. As of September 30, 2024 and December 31, 2023, the carrying value of the Centre Lane Senior Secured Credit Facility was $ 72.5 million and $ 64.3 million , respectively, net of unamortized debt discount of $ 4.4 million and $ 6.0 million , respectively. The discount is being amortized over the remaining life of the Centre Lane Senior Secured Credit facility using the effective interest method. During the three months ended September 30, 2024, and 2023, the Company recorded amortization of debt discount of $ 691 thousand and $ 590 thousand , respectively on the Centre Lane Senior Secured Credit Facility. Amortization of debt discount was $ 2.2 million and $ 1.4 million for the nine months ended September 30, 2024 and 2023, respectively. Interest expense for the three and nine months ended September 30, 2024, and 2023 consisted of the following: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 (in thousands) Interest expense $ 2,559 $ 2,179 $ 7,359 $ 4,748 Amortization 691 590 2,243 1,428 Total interest expense $ 3,250 $ 2,769 $ 9,602 $ 6,176 |