| LOANS | On December 27, 2017, the Company entered into
a loan agreement (the “Loan Agreement”) among the Company, Libsyn, and Pair, together, and First Commonwealth Bank,
a Pennsylvania bank and trust company (the “Bank”). The Loan Agreement provides for: (i) a revolving
credit facility pursuant to which the Company may borrow an aggregate principal amount not to exceed $2,000,000 (the “Revolving
Credit Facility”); and (ii) a term loan in a principal amount equal to $8,000,000 (the “Term Loan” and, together
with the Revolving Credit Facility, the “Facility”). A portion of the Revolving Credit Facility, up to $500,000, may
be used for standby letters of credit for the account of the Company. As of September 30, 2018, $2,000,000 was drawn down on the
revolving line with $0 available. The loan currently accrues interest at LIBOR
plus 150 base points or prime plus 75 basis points at the election of the Company. As of September 30, 2018, the Company has elected
LIBOR plus 150 basis points or 3.886%. The Term Loan is repayable in quarterly installments of $400,000
commencing on March 30, 2018 and on the last day of each June, September, December and March thereafter, through and including
September 30, 2022. Accrued interest is payable in arrears not less frequently than quarterly. The remaining unpaid principal balance
of the Term Loan, together with accrued interest thereon, is due and payable in full on December 27, 2022. The Term Loan also calls
for additional payment equal to the following: 1)100% of the proceeds from the sale of any common shares 2) 100% of the proceeds
from the sale of assets not immediately replaced 3) excess liquidity in any given year up to $1,066,667 a year and no more than
$3,200,000 over the life of the term loan. As of September 30, 2018, the balance on the term loan was $6,800,000. The Company, Libsyn and Pair have granted the
bank a blanket security interest in their respective assets, and the Company has pledged the stock of Webmayhem Inc. and Pair Networks
Inc. to the bank, as security for all obligations under the Loan Agreement. Borrowings under the Facility are at variable
rates which are, at the Company’s option, tied to LIBOR (London Interbank Offered Rate) plus an applicable rate or a prime
rate. Interest rates are subject to change based on the Company’s combined cash balances. The Facility contains covenants
that may have the effect of limiting the ability of the Company to, among other things, merge with or acquire other entities, enter
into a transaction resulting in a change in control, create certain new liens, incur certain additional indebtedness, engage in
certain transactions with affiliates, engage in new lines of business or sell a substantial part of its assets. The Facility also
requires the Company to maintain certain consolidated fixed charge coverage ratios and minimum liquidity balances. The Facility also contains customary events
of default, including (but not limited to) default in the payment of principal or, following an applicable grace period, interest,
breaches of the Company’s covenants or warranties under the Facility, payment default or acceleration of certain indebtedness
of the Company or any subsidiary, certain events of bankruptcy, insolvency or liquidation involving the Company or its subsidiaries,
certain judgments or uninsured losses, changes in control and certain liabilities related to ERISA based plans. On December 27, 2017, the Company drew $10,000,000 under the Facility
to finance a portion of the cash consideration payable to the Seller pursuant to the Share Purchase Agreement. Debt issuance costs
of $113,000 for the Facility were recorded as a discount and will be amortized over the life of the Facility. As of September 30,
2018, the discount was $87,522. Future maturities of the loans at September
30, 2018 are as follows:
For the year ending September 30,
2019 $ 2,666,667
2020 1,600,000
2021 1,600,000
2022 1,600,000
2023 1,333,333
Thereafter -
Total $ 8,800,000 |
