Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 14, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Frankly Inc | |
Entity Central Index Key | 1,688,667 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 2,660,155 | |
Trading Symbol | TLK | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 2,889,377 | $ 1,254,886 |
Restricted cash | 524,115 | 634,115 |
Accounts receivable, net | 2,193,971 | 3,483,347 |
Prepaid expenses and other current assets | 273,784 | 535,111 |
Total Current Assets | 5,881,247 | 5,907,459 |
Property & equipment, net | 57,780 | 985,321 |
Software development costs, net | 6,972,741 | |
Intangible assets, net | 6,762,216 | |
Other assets | 304,859 | 311,046 |
Total Assets | 6,243,886 | 20,938,783 |
Current Liabilities | ||
Accounts payable | 4,472,804 | 5,740,788 |
Accrued expenses | 1,315,594 | 1,717,030 |
Capital leases, current portion | 40,449 | |
Deferred revenue, non-related party | 70,566 | 92,279 |
Due to related parties | 2,476,380 | 5,090,358 |
Total Current Liabilities | 8,335,344 | 12,680,904 |
Non-revolving credit facility, net | 20,677,686 | 12,155,573 |
Deferred rent | 30,674 | 35,882 |
Other liabilities | 363,820 | 840,973 |
Total Liabilities | 29,407,524 | 25,713,332 |
Commitments and Contingencies (Note 10) | ||
Shareholders' Deficit | ||
Common shares, no par value, unlimited shares authorized, 2,656,917 and 2,226,861 shares outstanding as of September 30, 2018 and December 31, 2017, respectively | ||
Class A restricted voting shares, no par value, unlimited shares authorized, 0 shares outstanding as of September 30, 2018 and December 31, 2017 | ||
Additional paid-in capital | 67,099,415 | 66,127,485 |
Accumulated deficit | (90,208,144) | (70,836,330) |
Accumulated other comprehensive loss | (54,909) | (65,704) |
Total Shareholders' Deficit | (23,163,638) | (4,774,549) |
Total Liabilities and Shareholders' Deficit | $ 6,243,886 | $ 20,938,783 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Statement of Financial Position [Abstract] | ||
Common stock, no par value | ||
Common stock, shares authorized | Unlimited | Unlimited |
Common stock, shares outstanding | 2,656,917 | 2,226,861 |
Class A restricted voting shares, no par value | ||
Class A restricted voting shares, shares authorized | Unlimited | Unlimited |
Class A restricted voting shares, share outstanding | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Total Revenue | $ 6,047,225 | $ 6,537,308 | $ 17,576,696 | $ 19,390,089 |
Costs and operating expenses: | ||||
Cost of revenue (excluding depreciation and amortization) | 2,739,062 | 3,307,870 | 8,052,914 | 9,142,558 |
General and administrative (excluding depreciation and amortization) | 1,216,535 | 1,869,037 | 5,106,030 | 5,999,894 |
Selling and marketing | 420,363 | 606,383 | 1,341,873 | 2,013,174 |
Research and development (excluding depreciation and amortization) | 737,629 | 1,212,703 | 2,568,422 | 3,161,646 |
Depreciation and amortization | 1,313,485 | 1,102,576 | 3,726,729 | 3,261,933 |
Impairment expense | 12,789,343 | 12,789,343 | ||
Loss on disposal of assets | 12,823 | |||
Loss on extinguishment of debt | 38,287 | 38,287 | ||
Transaction costs | (2,110) | 76,582 | ||
Nasdaq listing fees | 943,822 | 943,822 | ||
Restructuring expense | 542,210 | |||
Retention expense | 247,548 | 835,647 | ||
Other expense | 27,017 | |||
Loss from operations | (13,414,630) | (2,543,370) | (17,475,877) | (5,198,242) |
Foreign exchange loss (gain) | 3,940 | (16,144) | 15,608 | (20,236) |
Interest expense, net | 684,230 | 601,910 | 1,880,329 | 1,859,058 |
Loss before income tax expense | (14,102,800) | (3,129,136) | (19,371,814) | (7,037,064) |
Income tax expense | ||||
Net Loss | (14,102,800) | (3,129,136) | (19,371,814) | (7,037,064) |
Other Comprehensive Net Income (Loss) | ||||
Foreign currency translation | 5,120 | (18,237) | 10,795 | (14,140) |
Comprehensive Loss | $ (14,097,680) | $ (3,147,373) | $ (19,361,019) | $ (7,051,204) |
Basic and Diluted Net Loss Per Share | $ (5.37) | $ (1.46) | $ (7.97) | $ (3.29) |
Basic and Diluted Weighted-Average Common and Class A Restricted Voting Shares Outstanding | 2,625,888 | 2,148,332 | 2,429,640 | 2,137,172 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Shareholders' (Deficit) Equity (Unaudited) - USD ($) | Common Shares [Member] | Class A Restricted Voting Shares [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at Dec. 31, 2016 | $ 64,986,368 | $ (53,642,691) | $ (39,466) | $ 11,304,211 | ||
Balance, shares at Dec. 31, 2016 | 2,030,800 | 97,674 | ||||
Vesting of restricted share units | ||||||
Vesting of restricted share units, shares | 54,597 | |||||
Exchange of restricted voting shares for common shares | ||||||
Exchange of restricted voting shares for common shares, shares | 97,674 | (97,674) | ||||
Stock- based compensation | 774,776 | 774,776 | ||||
Other comprehensive loss | (14,140) | (14,140) | ||||
Net loss | (7,037,064) | (7,037,064) | ||||
Balance at Sep. 30, 2017 | 65,761,144 | (60,679,755) | (53,606) | 5,027,783 | ||
Balance, shares at Sep. 30, 2017 | 2,183,071 | |||||
Balance at Dec. 31, 2017 | 66,127,485 | (70,836,330) | (65,704) | (4,774,549) | ||
Balance, shares at Dec. 31, 2017 | 2,226,861 | |||||
Vesting of restricted share units | ||||||
Vesting of restricted share units, shares | 141,414 | |||||
Stock- based compensation | 374,406 | 374,406 | ||||
Other comprehensive loss | 10,795 | 10,795 | ||||
Issuance of common shares | 597,524 | 597,524 | ||||
Issuance of common shares, shares | 288,642 | |||||
Net loss | (19,371,814) | (19,371,814) | ||||
Balance at Sep. 30, 2018 | $ 67,099,415 | $ (90,208,144) | $ (54,909) | $ (23,163,638) | ||
Balance, shares at Sep. 30, 2018 | 2,656,917 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities | ||
Net loss | $ (19,371,814) | $ (7,037,064) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Depreciation and amortization | 3,726,729 | 3,261,933 |
Amortization of debt discount | 388,131 | 405,788 |
Amortization of deferred financing costs | 35,329 | 80,652 |
Stock-based compensation expense | 374,406 | 774,776 |
Deferred interest | 1,298,653 | |
Impairment expense | 12,789,343 | |
Loss on disposal of assets | 12,823 | |
Loss on extinguishment of debt | 38,287 | |
Provision for bad debt expense | 687,806 | |
Changes in assets and liabilities: | ||
Accounts receivable | 601,570 | 499,840 |
Prepaid expenses and other current assets | 256,695 | (265,416) |
Other assets | 6,187 | 130,205 |
Accounts payable | (1,256,982) | 448,127 |
Accrued expenses | (402,367) | (421,451) |
Deferred revenue | (21,713) | 25,901 |
Due to / from related parties | (2,613,978) | 1,359,275 |
Deferred rent and other liabilities | 115,163 | 30,476 |
Net cash used in operating activities | (3,374,019) | (668,671) |
Cash flows from investing activities | ||
Capitalized software costs | (1,856,214) | (2,444,766) |
Purchases of property & equipment | (19,817) | (93,667) |
Proceeds from sale of intangible assets or equipment | 9,635 | |
Net cash used in investing activities | (1,866,396) | (2,538,433) |
Cash flows from financing activities | ||
Restricted cash | 110,000 | |
Revolving credit facility payments | (1,375,474) | |
Capital lease payments | (40,449) | (127,622) |
Proceeds from non-revolving credit facility | 6,800,000 | (64,615) |
Net cash provided by (used in) financing activities | 6,869,551 | (1,567,711) |
Effect of exchange rate changes on cash | 5,355 | (2,243) |
Net change in cash and cash equivalents | 1,634,491 | (4,777,058) |
Cash and cash equivalents at beginning of period | 1,254,886 | 6,053,203 |
Cash and cash equivalents at end of period | 2,889,377 | 1,276,145 |
Supplemental cash flow disclosure | ||
Cash paid for interest | 123,421 | 1,138,557 |
Cash paid for income taxes | ||
Issuance of common shares to settle retention plan | $ 597,524 |
Description of Business and Goi
Description of Business and Going Concern | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Going Concern | 1. Description of Business and Going Concern Description of Business Frankly Inc. (“Frankly”) has been operating since the incorporation of its predecessor, TicToc Planet Inc., on September 10, 2012. These condensed consolidated financial statements include Frankly and its subsidiaries (Frankly Co. and Frankly Media LLC), together referred to as the “Company.” The Company helps TV broadcasters and media companies transform their traditional business from just delivering content over-the-air via broadcast television to distributing content in multi-platform, digital formats on new platforms such as mobile, tablets, desktop and other connected devices. The Company’s core product is a white-labeled software platform that enables media companies to publish their official content onto multiscreen devices, increase social interaction on those multiscreen experiences, and enable digital advertising. The platform consists of a content management system (“CMS”) platform, native mobile and over-the-top (“OTT”) applications, responsive web framework, digital video solutions and digital advertising solutions. The Company generates revenues by charging monthly recurring software licensing fees, variable usage fees for our platform and sharing digital advertising revenue with our customers. Going Concern These condensed consolidated financial statements have been prepared on the assumption that the Company is a going concern, which contemplates the realization of its assets and the settlement of its liabilities in the normal course of operations. As of September 30, 2018, the Company has an accumulated deficit of $90.2 million, representative of recurring losses since inception. The Company had not generated positive cash flow from operations since inception when excluding changes in working capital, until the second quarter of 2018, after implementation of various cost savings initiatives. Beginning January 1, 2018, the billing for all services provided to Raycom Media, Inc. (“Raycom”), a related party, are being applied to the advance agreement balance as of December 31, 2017 in the amount of $4,896,585 ($1,588,994 as of September 30, 2018) and Raycom will not be required to make cash payments for services provided by the Company until the balance has been fully repaid. The Company has recently had several customers provide notice that they plan to terminate their current customer agreements with the Company on or about December 31, 2018. Raycom, a significant customer of the Company which accounted for 19% of the Company’s revenue for the nine months ended September 30, 2018, is in the process of a pending merger with Gray Television, Inc. Raycom has given the Company notification that it will terminate its existing customer agreement with the Company on December 31, 2018. Separately, five other of the Company’s customers, including one other significant customer which accounted for 12% of the Company’s revenue for the nine months ended September 30, 2018, have provided notice that their current customer agreements with the Company will terminate without renewal on or before December 31, 2018 (together with Raycom, the “Customer Terminations”). In the aggregate, these terminations represent a significant percentage of the Company’s total revenue and are expected to have a material negative impact on the Company’s 2019 revenues and related income (loss). These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance of its financial statements. To reduce its operating cash needs, in February 2018, the Company executed a reduction-in-force that removed approximately 20 full-time employees from its headcount. In addition, the Company subleased its remaining office space in San Francisco, CA and is pursuing other areas where operating expenses can be reduced, including moving into a smaller space near its current Long Island City, New York headquarters. On March 13, 2018, the Company received $1.0 million under the existing credit agreement with Raycom, bringing the total outstanding principal balance under the credit agreement to $15.5 million. On May 7, 2018, the Company entered into an amendment of the 2016 credit agreement, whereby Raycom provided the Company with an additional $7.3 million of funding, which was paid in installments over a six-month period. The $1.0 million advanced to the Company on March 13, 2018 was included in the additional $7.3 million funding noted above. As of September 30, 2018, $6.8 million of the $7.3 million had been funded and the remaining $500,000 was funded on October 2, 2018. As of October 2, 2018, the total outstanding principal balance under the amended credit agreement was $21.8 million. On October 15, 2018, the Company amended its amended credit agreement with Raycom to reduce its principal debt balance from $21.8 million (includes $300,000 due to Cordillera) plus accrued interest of $1,298,653 as of September 30, 2018 to $10.0 million (Note 11). With the Customer Terminations described above, the Company will continue efforts to reduce costs and increase revenue, and will need to complete financing or a strategic transaction to provide cash necessary to continue operations into 2019 and beyond. There can be no assurance that the Company will achieve these actions necessary to sustain the Company’s operations and execute its business plan through the next 12 months from the date of this filing. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Frankly and its wholly-owned subsidiaries Frankly Co. and Frankly Media LLC. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period. The accompanying condensed consolidated balance sheet as of December 31, 2017 was derived from the audited financial statements as of that date, but does not include all the information and footnotes required by U.S. GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2017, included within the Company’s Form 10-K as filed with the U.S. Securities and Exchange Commission on April 2, 2018. Accounting Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the condensed consolidated financial statements. Accordingly, actual results may differ from estimated amounts. Accounts Receivable and Concentrations of Risk Accounts receivable are subject to credit risk and as of September 30, 2018 and December 31, 2017, two customers each accounted for greater than 10% of the Company’s accounts receivable balance, respectively. In total, these customers accounted for 47% and 26% of the Company’s accounts receivable balance as of September 30, 2018 and December 31, 2017, respectively. Additionally, approximately 54% and 36% of the Company’s revenue for the nine months ended September 30, 2018 and 2017, respectively, was generated from three and two customers, respectively, that each accounted for greater than 10% of the Company’s total revenue. Two of the three customers have recently provided notice that they plan to terminate their current customer agreements with the Company on or about December 31, 2018 (See Note 1). The allowance for doubtful accounts was $757,806 and $70,000 as of September 30, 2018 and December 31, 2017, respectively. Recently Issued Accounting Pronouncements The Company is an “emerging growth company” (“EGC”) as defined by the Jumpstart Our Business Startups (“JOBS”) Act of 2012. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to avail itself of this exemption and, as a result, its financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable. ASU 2014-09: Revenue from Contracts with Customers (Topic 606) — ASU 2016-02: Leases (Topic 842) — ASU 2016-18: Statement of Cash Flows (Topic 230), Restricted Cash — Recently Adopted ASU 2016-15: Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments — |
Acquisition of Worldnow
Acquisition of Worldnow | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisition of Worldnow | 3. Acquisition of Worldnow On July 28, 2015, the Company signed an agreement (the “Purchase Agreement”) to purchase all of the outstanding units of Gannaway Web Holdings LLC, operating as Worldnow, for total consideration of $45,000,000. On August 25, 2015 (the “Closing Date”), the Company completed the acquisition of Worldnow. Subsequent to the acquisition, Worldnow changed its name to Frankly Media LLC. The acquisition of Worldnow was made primarily to extend the reach of Frankly to Worldnow’s existing customer base within the local broadcast marketplace. Under the terms of the Purchase Agreement, the Company paid $10,000,000 in cash, issued $20,000,000 in Class A restricted voting shares of the Company (the “Share Consideration”) and executed promissory notes to two shareholders of Worldnow bearing simple interest at a rate of 5 percent per year and agreed to pay $15,000,000 on August 31, 2016 (Notes 5 & 7). |
Restructuring Expense
Restructuring Expense | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Expense | 4. Restructuring Expense Following an extensive process to explore and evaluate strategic alternatives, the Company’s Board of Directors, led by the Strategic Committee, determined the best path for the Company at that time was to pursue internal growth opportunities and focus on further optimizing its operations. In an effort to reduce its operating cash needs, in February 2018, the Company executed a reduction-in-force that removed approximately 20 full-time employees from its headcount. In addition, the Company subleased its remaining office space in San Francisco, CA and is pursuing other areas where operating expenses can be reduced. The restructuring also included a reorganization of the senior management team. Effective April 12, 2018, the Company’s CEO resigned and was succeeded by the Company’s former COO and CFO. A number of other senior management changes were implemented on the same date. The Company accounted for the one-time termination benefits and certain contract costs in accordance with ASC 420 – Exit or Disposal Cost Obligations. The following table summarizes the changes in the restructuring liability (included in accrued expenses) for the periods presented, by each major type of cost associated with the restructuring activity: One-time Termination Contract Benefits Costs Total Balance, December 31, 2017 $ - $ - $ - Restructuring expense 443,134 99,076 542,210 Payments (443,134 ) - (443,134 ) Balance, September 30, 2018 $ - $ 99,076 $ 99,076 |
Related Party Transactions and
Related Party Transactions and Balances | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions and Balances | 5. Related Party Transactions and Balances The Company has several significant shareholders as follows: Raycom Media Inc. (“Raycom”), SKP America LLC (“SKP America”) and Gannaway Entertainment Inc. (“GEI”) which each owned approximately 20.6%, 20.5% and 6.7%, respectively, as of September 30, 2018 and 24.6%, 24.5% and 8.0%, respectively, as of December 31, 2017 of the aggregate common shares and Class A restricted voting shares. The following table summarizes related party balances in the condensed consolidated balance sheets for the periods presented: September 30, December 31, Amounts Due (to) from Related Parties 2018 2017 (Unaudited) Non-revolving credit facility, net Raycom $ 20,677,686 $ 12,155,573 Due (to) from Raycom: Accounts receivable, net - 427,489 Prepaid expenses and other current assets - - Accounts payable (419,789 ) (275,960 ) Accrued expenses (467,597 ) (432,802 ) Deferred revenue (1,588,994 ) (4,896,585 ) Total due to Raycom (2,476,380 ) (5,177,858 ) Due from Mobdub: Prepaid expenses and other current assets - 87,500 Total due from Mobdub - 87,500 Total due to related parties $ (2,476,380 ) $ (5,090,358 ) The following table summarizes related party transactions in the condensed consolidated statements of operations and comprehensive loss for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, Revenue (Expense) from Related Parties 2018 2017 2018 2017 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Raycom: Revenue $ 1,175,777 $ 1,272,827 $ 3,594,398 $ 3,920,180 Interest on non-revolving credit facility (658,849 ) (508,646 ) (1,722,116 ) (1,525,637 ) Interest on the Advance Agreement (25,385 ) (78,021 ) (157,946 ) (234,062 ) 491,543 686,160 1,714,336 2,160,481 Mobdub: License fees (29,167 ) (29,167 ) (87,500 ) (87,500 ) (29,167 ) (29,167 ) (87,500 ) (87,500 ) $ 462,376 $ 656,993 $ 1,626,836 $ 2,072,981 Raycom As partial consideration for the acquisition of Worldnow on August 25, 2015, the Company issued a $4,000,000 promissory note to Raycom and 397,126 Class A restricted voting shares (Note 3). The note bore interest at 5% per annum and was due on August 31, 2016 (Note 7). Raycom was a customer and significant shareholder of Worldnow and, subsequent to the acquisition of Worldnow, remains a customer and significant shareholder of Frankly. Accordingly, during the nine months ended September 30, 2018 and 2017, revenue-related transactions and balances with Raycom arose in the ordinary course of business. On September 1, 2016, the Company completed the closing of its financing with Raycom (Note 7). The Company received a non-revolving term line of credit from Raycom in the principal amount of $14.5 million and, subject to approval of Raycom, an additional available $1.5 million non-revolving line of credit (collectively, the “Loan”). The proceeds were used to pay down $14 million of the $15 million outstanding promissory notes. In addition, Raycom converted the remaining $1.0 million of its existing $4.0 million promissory note from the Company into 150,200 common shares of the Company and the Company issued 871,160 common share purchase warrants to Raycom. The Loan was recorded at fair value of $11,578,593 with the remaining $2,921,407 being allocated to the warrants. On March 13, 2018, the Company received $1.0 million of the additional $1.5 million available under the Loan, bringing the total outstanding principal balance to $15.5 million. On May 7, 2018, the Company entered into an amendment of the Loan between the Company and Raycom (Note 7), whereby Raycom agreed to provide the Company with an additional $7.5 million of funding, to be paid in installments over a six-month period, subject to the Company’s achievement of certain operational milestones. The $1.0 million Raycom advanced to the Company under the credit agreement on March 13, 2018 is included in the additional $7.5 million funding. During the second and third quarter of 2018 the Company received $5.8 million of the additional $6.5 million available under the credit facility with Raycom. The total principal outstanding on the Loan as of September 30, 2018 was $21.3 million (Note 7). The carrying value of the Loan at September 30, 2018 and December 31, 2017, net of debt discount and deferred financing costs, was $20,677,686 and $12,155,573, respectively. Interest expense on the Loan for the three and nine months ended September 30, 2018 and 2017, amounted to $658,849, $1,722,116, $508,646 and $1,525,637, respectively, and is presented within interest expense, net on the consolidated statements of operations and comprehensive loss. On December 22, 2016, Raycom pre-paid $3 million of future fees for services to be provided by the Company (the “Advance Agreement”). On March 30, 2017, the Company entered into an amendment to the Advance Agreement pursuant to which Raycom pre-paid an additional $2 million of future fees for services to be provided by the Company. In connection with the Advance Agreement, the Company recognized interest expense of $157,946 and $234,062, for the nine months ended September 30, 2018 and 2017, respectively. All services provided by the Company to Raycom since January 1, 2018 are being applied to the Advance Agreement balance. As of September 30, 2018, deferred revenue and accrued interest under the Advance Agreement amounted to $1,588,994 and $467,597, respectively. Mobdub The Company has a license agreement with a company that is owned by an officer of the Company. The agreement is for licensing of mobile applications and has a total contract value of $350,000. The period of the agreement is three years and commenced on October 14, 2015. |
Long-Lived Assets
Long-Lived Assets | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Long-Lived Assets | 6. Long-Lived Assets All of the Company’s long-lived assets are domiciled in the U.S. Depreciation and amortization expense for long-lived assets was as follows for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Depreciation of property and equipment $ 99,486 $ 151,281 $ 357,513 458,616 Amortization of capitalized software 995,665 732,961 2,714,214 2,148,315 Amortization of other intangibles 218,334 218,334 655,002 655,002 Total depreciation and amortization $ 1,313,485 $ 1,102,576 $ 3,726,729 $ 3,261,933 Property and Equipment, Net The following table summarizes property and equipment, net, including assets held under capital lease: September 30, December 31, 2018 2017 (Unaudited) Cost: Office and computer equipment and software $ 1,759,717 $ 2,064,676 Leasehold improvements 603,978 603,978 2,363,695 2,668,654 Accumulated depreciation and amortization: Office and computer equipment and software (1,383,696 ) (1,416,140 ) Leasehold improvements (354,831 ) (267,193 ) (1,738,527 ) (1,683,333 ) Accumulated impairment: Office and computer equipment and software (318,241 ) Leasehold improvements (249,147 ) - (567,388 ) - $ 57,780 $ 985,321 Depreciation expense for assets held under capital lease for the three and nine months ended September 30, 2018 and 2017, respectively, was $0, $0, $35,400 and $107,299. The net carrying value of assets held under capital lease was $0 and $262,747 as of September 30, 2018 and December 31, 2017, respectively. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Customer Terminations discussed in Note 1 were a strong indicator that the carrying amount of the Company’s long-lived assets would not be recoverable. The Company performed a recoverability test as of September 30, 2018 and concluded the carrying amounts of its long-lived assets were not recoverable. Considering the impact of the Customer Terminations, the Company is forecasting negative cash flows in 2019 and beyond which do not support the carrying value of its long-lived assets. As a result of applying ASC 360-10-35-36 - Measuring an impairment – Step 3, the Company recorded impairment expense of approximately $12.8 million in the third quarter of 2018, which was comprised of a full impairment of its capitalized software development costs and customer relationship intangible assets, which each had carrying values prior to impairment of approximately $6.1 million as of September 30, 2018, as well as impairment expense of approximately $567,000 to property and equipment. Software Development Costs, Net The following table summarizes software development costs, net for the periods presented: September 30, December 31, 2018 2017 (Unaudited) Cost $ 13,977,003 $ 12,120,789 Accumulated amortization (7,862,262 ) (5,148,048 ) Accumulated impairment (6,114,741 ) - $ - $ 6,972,741 During the nine months ended September 30, 2018 and 2017, the Company capitalized software development costs of $1,856,214 and $2,444,766, respectively. In addition, as of September 30, 2018, the Company recorded a full impairment of the remaining carrying value of its software development costs assets, as discussed above. Intangible Assets, Net The following table summarizes intangible assets, net for the periods presented: September 30, December 31, 2018 2017 (Unaudited) Cost: Broadcast relationships, 12-year useful life $ 7,600,000 $ 7,600,000 Advertiser relationships, 5-year useful life 1,200,000 1,200,000 8,800,000 8,800,000 Accumulated amortization: Broadcast relationships (1,952,786 ) (1,477,784 ) Advertiser relationships (740,000 ) (560,000 ) (2,692,786 ) (2,037,784 ) Accumulated impairment: Broadcast relationships (5,647,214 ) - Advertiser relationships (460,000 ) - (6,107,214 ) - $ - $ 6,762,216 As of September 30, 2018, the Company recorded a full impairment of the remaining carrying value of its customer relationship intangible assets, as discussed above. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | 7. Debt Non-revolving Credit Facility On September 1, 2016, the Company completed the closing of its financing with Raycom, a related party (Note 5). The Company received a non-revolving term line of credit from Raycom in the principal amount of $14.5 million and, subject to approval of Raycom, an additional available $1.5 million non-revolving line of credit. In addition, Raycom converted $1.0 million of its existing $4.0 million promissory note from the Company into 150,200 common shares of the Company and the Company issued 871,160 warrants to Raycom entitling the holder of each warrant to acquire one common share of the Company upon exercise of each warrant at a price per common share equal to CDN$8.50 ($6.63 based on the exchange rate at August 18, 2016). The warrants will expire on the earlier of: (i) the repayment of the Loan in accordance with its terms; and (ii) 5 years. To the extent that there is a mandatory repayment of any portion of the principal balance of the Loan, a proportionate number of the warrants will have their term reduced to the later of one year from issuance and 30 days from the date of such repayment. On March 13, 2018, the Company received $1.0 million of the additional $1.5 million available under the Loan, bringing the total outstanding principal balance to $15.5 million. The warrants were recorded within shareholders’ (deficit) equity in accordance with ASC 470-20 - Debt with Conversion and Other Options The debt discount of $2,921,407 is being amortized to interest expense, net on the consolidated statements of operations and comprehensive loss using the effective-interest method. Amortization of debt discount included in interest expense, net for the three and nine months ended September 30, 2018 and 2017 amounted to $132,454, $388,131, $132,826 and $405,788, respectively. In accordance with ASC 470-50 - Debt Modifications and Extinguishments Prior to the completion of the financing arrangements, Raycom held 397,125 voting shares of the Company, which represented approximately 21% of the issued and outstanding voting shares of the Company. Immediately following the completion of the financing transactions, Raycom held 547,325 voting shares of the Company and 871,160 warrants, which collectively represented approximately 27% of the issued and outstanding voting shares of the Company on a non-diluted basis. The proceeds of the Loan were used to pay off the outstanding $15.0 million of promissory notes issued by the Company in connection with the 2015 acquisition of Worldnow, including $3.0 million of the $4.0 million of such notes issued to Raycom, with the remaining $1.0 million promissory note balance owed to Raycom being converted to common shares of the Company as described above. On May 7, 2018, the Company amended and restated the Loan (the “Amended Loan”) to increase the amount of funding available under the Loan by $7.5 million. The Amended Loan supersedes the original Loan. The $1.0 million that was advanced by Raycom to the Company on March 13, 2018 is included in the $7.5 million funding increase, bringing the total amount provided to the Company under the Amended Loan to $22 million. Of the $7.5 million, the Company’s customer Cordillera Communications (“Cordillera” and together with Raycom, the “Lenders”) is participating as a lender for up to $300,000. Under the Amended Loan, outstanding term loans in the amount of $14.5 million were characterized as Term B Loans under a non-revolving term loan facility in such amount (“Facility B”) and an outstanding term loan in the amount of $1.0 million was characterized as a Term A Loan under a non-revolving term loan facility in the amount of $7.5 million (“Facility A”). During the second and third quarter of 2018, the Company received an additional $5.8 million of the $7.5 million available under Facility A. The total principal outstanding on the Amended Loan as of September 30, 2018 was $21.3 million. Refer to Note 11 for amendment made to the Amended Loan on October 15, 2018. The Company determined that the amendment of the Loan with Raycom was considered a troubled debt restructuring within the scope of ASC 470-60, “Debt – Troubled Debt Restructurings”, as the Company was determined to be experiencing financial difficulties and was granted a concession by the lender. Accordingly, the Company expensed financing costs, consisting of third party legal fees, associated with the amendment to the Loan of $47,350 to transaction costs on the consolidated statements of operations and comprehensive loss. Further, for purposes of amortization of the debt discount, a new effective interest rate was established based on the carrying value of the Loan at the time of the amendment and the revised cash flows of the Amended Loan. The Amended Loan terminates on December 31, 2020. The additional availability of $6.5 million under Facility A is available to be drawn until December 31, 2018, subject to monthly borrowing limits based on the achievement of minimum monthly operating profit thresholds. Facility B is postponed and subordinated to Facility A. The Amended Loan also provides that, if the Company (or Guarantors, as defined therein) receive any amount from such a customer for the early termination of any contractual arrangement with such customer, the availability under Facility A will be reduced by such amount and the Facility A lenders may reduce the monthly borrowing limits accordingly. As a result, the amount available under Facility A was reduced from $7.5 million to $7.3 million in the third quarter of 2018. The interest rate payable under the Facility B is 10% and the increased credit amount of $7.5 million, Facility A, bears an interest rate of U.S. LIBOR (1 month) plus 8%. The U.S. LIBOR rate used for computation of interest will be updated on the first day of each interest period (month). Interest payments on the Amended Loan will be deferred and compounded annually at the end of each calendar year, to the principal balance of the Amended Loan, and thereafter interest shall be calculated on such increased principal balance. To the maximum extent permitted by applicable law, the Company will pay interest on all overdue amounts, including any overdue interest payments, from the date each of those amounts is due until the date each of those amounts is paid in full. That interest will be calculated daily, compounded monthly and payable on demand of Raycom at a rate per annum of 12%. The Company has the option to repay all or a portion of principal outstanding under the Amended Loan without premium, penalty or bonus upon prior notice to Raycom and repayment of all interest, fees and other amounts accrued and unpaid under the Amended Loan. The Amended Loan is subject to certain scheduled mandatory principal repayments, with additional mandatory repayments occurring upon the Company’s raising of additional financing, sales of assets and excess cash flow. In addition, the Company must maintain certain leverage ratios and interest coverage ratios beginning with the fiscal quarter ending June 30, 2019. The Company is also subject to certain covenants relating to, among others, indebtedness, fundamental corporate changes, dispositions, acquisitions and distributions. Upon an event of default, the Lenders may by written notice terminate the facility immediately and declare all obligations under the Amended Loan and the related loan documents, whether matured or not, to be immediately due and payable. The Lenders may also as and by way of collateral security, deposit and retain in an interest bearing account, amounts received by the Lenders from the Company under the Amended Loan and the related loan documents and realize upon the security interest agreements, guaranty agreements and pledge agreement, as defined in the Amended Loan agreement. Letter of Credit – Western Alliance Bank On August 31, 2016, in lieu of a security deposit under the lease dated October 26, 2010, with Metropolitan Life Insurance Company, for real property located at 27-01 Queens Plaza North, Long Island City, NY, Frankly Media LLC entered into a standby letter of credit with Western Alliance Bank for an amount of $500,000 (the “Letter of Credit”). For each advance, interest will accrue at a rate equal to the sum of (i) the Base Rate (as defined below), plus (ii) 3.50%, provided that such interest rate will change from time to time as the Base Rate changes. The “Base Rate” means the rate of interest used as the reference or base rate to establish the actual rates charged on commercial loans and which is publicly announced or reported from time to time by the Wall Street Journal as the “prime rate.” Interest will accrue from the date of the advance until such advance is paid in full. The Company has granted Western Alliance Bank a security interest in a $524,115 controlled cash deposit account together with (i) all interest, whether now accrued or hereafter accruing; (ii) all additional deposits hereafter made to the account; (iii) any and all proceeds from the account; and (iv) all renewals, replacements and substitutions for any of the foregoing. As of September 30, 2018 and December 31, 2017, no advances were made under the Letter of Credit. The cash security interest of $524,115 is presented within restricted cash on the consolidated balance sheets. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Shareholders' Equity | 8. Shareholders’ Equity Common Shares and Class A Restricted Voting Shares All common and Class A restricted voting shares and related stock-based grants are denominated in Canadian dollars and have been translated to U.S. dollars using the exchange rate in effect at the date of transaction or grant, as applicable. The Class A restricted voting shares have the same voting rights as common shares except for voting for the election and removal of directors of the Company. The Class A restricted voting shares participate in dividends and liquidation events in the same manner as common shares. In terms of restrictions on transfer, no Class A restricted voting shares shall be transferred to another party unless an offer to acquire common shares is concurrently made that is identical to the offer for the Class A restricted voting shares in terms of price per share, percentage of outstanding shares to be transferred and in all other material respects. Shares Issued During the Nine Months Ended September 30, 2018 During the nine months ended September 30, 2018, the Company issued a total of 141,414 common shares for employee and director restricted stock units (“RSUs”) that vested. In addition, on May 24, 2018, the Company issued 288,642 common shares to employees to settle a portion of the liability associated with the employee retention plan. Stock-Based Compensation Description of the Plan On October 20, 2017, the Company adopted an amended and restated equity incentive plan (the “Restated Plan”). The Restated Plan amends the equity incentive plan, effective as of October 1, 2017, by replacing the compensation plan limit with a fixed total limit of 435,000 common shares that may be granted under option and RSU awards. Options may be exercised over periods of up to 10 years as determined by the Company’s Board of Directors (“Board”) and the exercise price shall not be less than the closing price of the shares on the day preceding the award date. Option awards generally vest over four years with one year cliff vesting. The Restated Plan allows the Company to award RSUs to officers, employees, directors and consultants of Frankly and its subsidiaries upon such conditions as the Board may establish, including the attainment of performance goals recommended by the Company’s compensation committee. The purchase price for common shares of the Company issuable under each RSU award, if any, shall be established by the Board at its discretion. Shares issued pursuant to any RSU award may be made subject to vesting conditions based upon the satisfaction of service requirements, conditions, restrictions, time periods or performance goals established by the Board. Based on the number of outstanding options and RSUs as of September 30, 2018 and RSUs vested through September 30, 2018, the Company had 166,150 options or RSUs remaining for issuance under the Restated Plan. Total stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017 was $42,518, $374,406, $262,604 and $774,776, respectively. The Company did not recognize any tax benefits for stock-based compensation during any of the periods presented. Stock Options The following table sets forth the activity for the Company’s stock options during the periods presented: Weighted Average Remaining Exercise Grant Date Contractual Shares Price Fair Value Term (Years) Balance, December 31, 2016 245,762 $ 19.52 $ 9.10 8.71 Adjustment - Balance, December 31, 2016 (53 ) - - Granted 74,327 5.48 2.81 Exercised - - - Forfeited or canceled (50,431 ) 18.21 9.30 Canceled (Option Replacement) (193,339 ) 19.90 9.11 Granted (Option Replacement) 113,677 5.30 9.11 Balance, December 31, 2017 189,943 $ 5.47 $ 6.58 8.22 Vested and expected to vest, December 31, 2017 183,924 $ 5.48 $ 6.65 8.20 Exercisable, December 31, 2017 69,567 $ 5.73 $ 10.17 7.33 Unaudited interim activity: Balance, December 31, 2017 189,943 $ 5.47 $ 6.58 8.22 Granted - - - Exercised - - - Forfeited or canceled (125,009 ) 5.55 7.92 Balance, September 30, 2018 64,934 $ 5.33 $ 4.00 7.89 Vested and expected to vest, September 30, 2018 63,158 $ 5.33 $ 4.02 7.88 Exercisable, September 30, 2018 29,407 $ 5.31 $ 4.78 7.63 The aggregate intrinsic value of outstanding and exercisable stock options as of September 30, 2018 is $0. Restricted Share Units The following table sets forth the activity for the Company’s RSUs for the periods presented: Weighted-Average Grant Date Shares Fair Value Balance, December 31, 2016 76,731 $ 7.31 Adjustment - Balance, December 31, 2016 (7 ) - Granted 201,507 3.11 Vested (98,387 ) 5.04 Forfeited or canceled (754 ) 6.44 Balance, December 31, 2017 179,090 $ 3.84 Unaudited interim activity: Balance, December 31, 2017 179,090 $ 3.84 Granted - - Vested (141,414 ) 3.13 Forfeited or canceled (18,964 ) 6.80 Balance, September 30, 2018 18,712 $ 6.17 Unrecognized compensation cost related to the Company’s non-vested RSUs was $29,444 as of September 30, 2018, and is expected to be recognized from 2018 through 2020. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 9. Income Taxes The Company had $0 income tax expense for all periods presented. Deferred tax assets have been fully reserved given the Company’s history of losses. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies Legal Proceedings On July 21, 2017, a complaint was filed by GEI, Albert C. Gannaway III, and Samantha Gannaway, and was served on August 4, 2017, captioned Gannaway Entertainment, Inc., Albert C. Gannaway III, Samantha Gannaway V.S. Frankly Inc., Steve Chung, SKP America, LLC, JJR Private Capital Limited Partnership, Ron Schmeichel, Louis Schwartz in the U.S. District Court for the Northern District of California against the Company, the Company’s Chief Executive Officer, Chief Financial Officer and Chief Operating Officer and others alleging violations of U.S. securities laws, fraud and breach of fiduciary duties, and seeking in excess of $15 million in damages, arising out of the Company’s acquisition of Gannaway Web Holdings, LLC from GEI and other parties in 2015. On September 30, 2017, the defendants filed a motion to dismiss the complaint. On October 11, 2017 the plaintiffs filed an amended complaint. On October 31, 2017 the defendants filed a motion to dismiss the amended complaint. On March 12, 2018, the plaintiffs in the GEI complaint voluntarily terminated their case. On March 15, 2018, the plaintiffs in the GEI complaint re-filed their complaint in the California Superior Court, San Francisco County. By order dated September 18, 2018, the state court granted the defendants’ motion to compel arbitration of the matter in New York and staying further proceedings in the state court action. On October 22, 2018, the Gannaway plaintiffs filed a two-count arbitration demand with the American Arbitration Association in New York seeking unspecified damages from the Company, Steve Chung, SKP America, LLC and Louis Schwartz. The Company is reviewing the demand with its counsel and believes that the claims are without merit. The Company intends to defend the claims vigorously. Operating Lease Commitments The Company is obligated under multiple non-cancellable operating leases for office space, expiring in 2019 through 2023. The Company has three subleases for its excess office space as of September 30, 2018. The future aggregate minimum lease payments under these non-cancellable operating leases, without regard to subleases, are payable as follows as of September 30, 2018: Payments Due During the Years Ending September 30, Total 2019 $ 1,422,568 2020 955,761 2021 852,908 2022 852,908 2023 355,378 Thereafter - Total $ 4,439,523 Employee Benefit Plan The Company’s subsidiaries, Frankly Co. and Frankly Media, have a 401(k) plan (the “Plan”), which covers all eligible employees. Under the Plan, employees may contribute from their gross salaries on a before tax basis up to annual statutory limits determined each year. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 11. Subsequent Events The Company has evaluated subsequent events through November 14, 2018 which is the date these unaudited interim condensed consolidated financial statements were available to be issued, and determined that there have been no events that have occurred that would require adjustments to or disclosure in the unaudited interim condensed consolidated financial statements except for the transactions described below. Amendment to credit agreement with Raycom On October 15, 2018, the Company amended its credit agreement with Raycom to reduce its principal debt balance due under the Amended Loan as of October 2, 2018 from $21,800,000 (includes $300,000 due to Cordillera) plus accrued interest of $1,298,653 as of September 30, 2018 (together the “Loan Balance”) to $10,000,000 (“New Loan Balance”) as of October 1, 2018. In addition, the Amended Loan was amended as follows: a. Commencing on October 1, 2018, interest under the Amended Loan will accrue on the New Loan Balance at the annual rate of 10%. b. The maturity date of the New Loan Balance was revised to September 30, 2021. The New Loan Balance along with all accrued interest will be due on the revised maturity date. All interest payments on the New Loan Balance will be deferred and made on the revised maturity date. c. Commencing on October 1, 2018, various provisions of the Amended Loan will no longer be operative, which primarily removed all scheduled mandatory principal repayments and financial covenants under the Amended Loan. In addition, the deleted provisions under the Amended Loan reduced the scope of events that qualify as events of default. d. The Company’s debt to Cordillera under the Amended Loan has been extinguished and Cordillera is no longer party to the Amended Loan as of October 1, 2018. In addition to the above amendment to the Amended Loan, Raycom exercised its right to terminate its website agreement, with such termination to be effective as of December 31, 2018. The deferred revenue balance under the website agreement of $1,588,994 as of September 30, 2018 will continue to be reduced by monthly billings to Raycom under the website agreement through its December 31, 2018 termination date. The remaining balance owed by the Company to Raycom as of December 31, 2018 under the Advance Agreement, comprised of deferred revenue and accrued interest, will be forgiven in full on that date. Legal Proceedings On October 22, 2018, the Gannaway plaintiffs filed a two-count arbitration demand with the American Arbitration Association in New York seeking unspecified damages from the Company, Steve Chung, SKP America, LLC and Louis Schwartz. The Company is reviewing the demand with its counsel and believes that the claims are without merit. The Company intends to defend the claims vigorously. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Use of Estimates | Basis of Presentation and Use of Estimates The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Frankly and its wholly-owned subsidiaries Frankly Co. and Frankly Media LLC. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period. The accompanying condensed consolidated balance sheet as of December 31, 2017 was derived from the audited financial statements as of that date, but does not include all the information and footnotes required by U.S. GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2017, included within the Company’s Form 10-K as filed with the U.S. Securities and Exchange Commission on April 2, 2018. |
Accounting Estimates | Accounting Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the condensed consolidated financial statements. Accordingly, actual results may differ from estimated amounts. |
Accounts Receivable and Concentrations of Risk | Accounts Receivable and Concentrations of Risk Accounts receivable are subject to credit risk and as of September 30, 2018 and December 31, 2017, two customers each accounted for greater than 10% of the Company’s accounts receivable balance, respectively. In total, these customers accounted for 47% and 26% of the Company’s accounts receivable balance as of September 30, 2018 and December 31, 2017, respectively. Additionally, approximately 54% and 36% of the Company’s revenue for the nine months ended September 30, 2018 and 2017, respectively, was generated from three and two customers, respectively, that each accounted for greater than 10% of the Company’s total revenue. Two of the three customers have recently provided notice that they plan to terminate their current customer agreements with the Company on or about December 31, 2018 (See Note 1). The allowance for doubtful accounts was $757,806 and $70,000 as of September 30, 2018 and December 31, 2017, respectively. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements The Company is an “emerging growth company” (“EGC”) as defined by the Jumpstart Our Business Startups (“JOBS”) Act of 2012. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to avail itself of this exemption and, as a result, its financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable. ASU 2014-09: Revenue from Contracts with Customers (Topic 606) — ASU 2016-02: Leases (Topic 842) — ASU 2016-18: Statement of Cash Flows (Topic 230), Restricted Cash — Recently Adopted ASU 2016-15: Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments — |
Restructuring Expense (Tables)
Restructuring Expense (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Changes in Restructuring Liability | The following table summarizes the changes in the restructuring liability (included in accrued expenses) for the periods presented, by each major type of cost associated with the restructuring activity: One-time Termination Contract Benefits Costs Total Balance, December 31, 2017 $ - $ - $ - Restructuring expense 443,134 99,076 542,210 Payments (443,134 ) - (443,134 ) Balance, September 30, 2018 $ - $ 99,076 $ 99,076 |
Related Party Transactions an_2
Related Party Transactions and Balances (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Summary of Related Party Balances | The following table summarizes related party balances in the condensed consolidated balance sheets for the periods presented: September 30, December 31, Amounts Due (to) from Related Parties 2018 2017 (Unaudited) Non-revolving credit facility, net Raycom $ 20,677,686 $ 12,155,573 Due (to) from Raycom: Accounts receivable, net - 427,489 Prepaid expenses and other current assets - - Accounts payable (419,789 ) (275,960 ) Accrued expenses (467,597 ) (432,802 ) Deferred revenue (1,588,994 ) (4,896,585 ) Total due to Raycom (2,476,380 ) (5,177,858 ) Due from Mobdub: Prepaid expenses and other current assets - 87,500 Total due from Mobdub - 87,500 Total due to related parties $ (2,476,380 ) $ (5,090,358 ) |
Schedule of Operations and Comprehensive Loss | The following table summarizes related party transactions in the condensed consolidated statements of operations and comprehensive loss for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, Revenue (Expense) from Related Parties 2018 2017 2018 2017 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Raycom: Revenue $ 1,175,777 $ 1,272,827 $ 3,594,398 $ 3,920,180 Interest on non-revolving credit facility (658,849 ) (508,646 ) (1,722,116 ) (1,525,637 ) Interest on the Advance Agreement (25,385 ) (78,021 ) (157,946 ) (234,062 ) 491,543 686,160 1,714,336 2,160,481 Mobdub: License fees (29,167 ) (29,167 ) (87,500 ) (87,500 ) (29,167 ) (29,167 ) (87,500 ) (87,500 ) $ 462,376 $ 656,993 $ 1,626,836 $ 2,072,981 |
Long-Lived Assets (Tables)
Long-Lived Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Depreciation and Amortization Expense | All of the Company’s long-lived assets are domiciled in the U.S. Depreciation and amortization expense for long-lived assets was as follows for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Depreciation of property and equipment $ 99,486 $ 151,281 $ 357,513 458,616 Amortization of capitalized software 995,665 732,961 2,714,214 2,148,315 Amortization of other intangibles 218,334 218,334 655,002 655,002 Total depreciation and amortization $ 1,313,485 $ 1,102,576 $ 3,726,729 $ 3,261,933 |
Schedule of Property and Equipment | The following table summarizes property and equipment, net, including assets held under capital lease: September 30, December 31, 2018 2017 (Unaudited) Cost: Office and computer equipment and software $ 1,759,717 $ 2,064,676 Leasehold improvements 603,978 603,978 2,363,695 2,668,654 Accumulated depreciation and amortization: Office and computer equipment and software (1,383,696 ) (1,416,140 ) Leasehold improvements (354,831 ) (267,193 ) (1,738,527 ) (1,683,333 ) Accumulated impairment: Office and computer equipment and software (318,241 ) Leasehold improvements (249,147 ) - (567,388 ) - $ 57,780 $ 985,321 |
Summary of Software Development Costs | The following table summarizes software development costs, net for the periods presented: September 30, December 31, 2018 2017 (Unaudited) Cost $ 13,977,003 $ 12,120,789 Accumulated amortization (7,862,262 ) (5,148,048 ) Accumulated impairment (6,114,741 ) - $ - $ 6,972,741 |
Schedule of Intangible Assets | The following table summarizes intangible assets, net for the periods presented: September 30, December 31, 2018 2017 (Unaudited) Cost: Broadcast relationships, 12-year useful life $ 7,600,000 $ 7,600,000 Advertiser relationships, 5-year useful life 1,200,000 1,200,000 8,800,000 8,800,000 Accumulated amortization: Broadcast relationships (1,952,786 ) (1,477,784 ) Advertiser relationships (740,000 ) (560,000 ) (2,692,786 ) (2,037,784 ) Accumulated impairment: Broadcast relationships (5,647,214 ) - Advertiser relationships (460,000 ) - (6,107,214 ) - $ - $ 6,762,216 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Stock Options Activity | The following table sets forth the activity for the Company’s stock options during the periods presented: Weighted Average Remaining Exercise Grant Date Contractual Shares Price Fair Value Term (Years) Balance, December 31, 2016 245,762 $ 19.52 $ 9.10 8.71 Adjustment - Balance, December 31, 2016 (53 ) - - Granted 74,327 5.48 2.81 Exercised - - - Forfeited or canceled (50,431 ) 18.21 9.30 Canceled (Option Replacement) (193,339 ) 19.90 9.11 Granted (Option Replacement) 113,677 5.30 9.11 Balance, December 31, 2017 189,943 $ 5.47 $ 6.58 8.22 Vested and expected to vest, December 31, 2017 183,924 $ 5.48 $ 6.65 8.20 Exercisable, December 31, 2017 69,567 $ 5.73 $ 10.17 7.33 Unaudited interim activity: Balance, December 31, 2017 189,943 $ 5.47 $ 6.58 8.22 Granted - - - Exercised - - - Forfeited or canceled (125,009 ) 5.55 7.92 Balance, September 30, 2018 64,934 $ 5.33 $ 4.00 7.89 Vested and expected to vest, September 30, 2018 63,158 $ 5.33 $ 4.02 7.88 Exercisable, September 30, 2018 29,407 $ 5.31 $ 4.78 7.63 |
Schedule of Restricted Stock Units Activity | The following table sets forth the activity for the Company’s RSUs for the periods presented: Weighted-Average Grant Date Shares Fair Value Balance, December 31, 2016 76,731 $ 7.31 Adjustment - Balance, December 31, 2016 (7 ) - Granted 201,507 3.11 Vested (98,387 ) 5.04 Forfeited or canceled (754 ) 6.44 Balance, December 31, 2017 179,090 $ 3.84 Unaudited interim activity: Balance, December 31, 2017 179,090 $ 3.84 Granted - - Vested (141,414 ) 3.13 Forfeited or canceled (18,964 ) 6.80 Balance, September 30, 2018 18,712 $ 6.17 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Operating Lease Payments | The future aggregate minimum lease payments under these non-cancellable operating leases, without regard to subleases, are payable as follows as of September 30, 2018: Payments Due During the Years Ending September 30, Total 2019 $ 1,422,568 2020 955,761 2021 852,908 2022 852,908 2023 355,378 Thereafter - Total $ 4,439,523 |
Description of Business and G_2
Description of Business and Going Concern (Details Narrative) - USD ($) | May 13, 2018 | May 07, 2018 | Mar. 13, 2018 | Sep. 01, 2016 | Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Accumulated deficit | $ (90,208,144) | $ (90,208,144) | $ (70,836,330) | |||||
Deferred revenue | 70,566 | $ 70,566 | 92,279 | |||||
Sales Revenue, Net [Member] | ||||||||
Percentage for revenue | 54.00% | 36.00% | ||||||
Raycom Media, Inc [Member] | ||||||||
Deferred revenue | 1,588,994 | $ 1,588,994 | $ 4,896,585 | |||||
Proceeds from lines of credit | $ 1,500,000 | $ 14,000,000 | ||||||
Outstanding loan | $ 14,500,000 | 21,300,000 | 21,300,000 | |||||
Raycom Media, Inc [Member] | Credit Agreement [Member] | ||||||||
Proceeds from lines of credit | 1,000,000 | |||||||
Outstanding loan | 15,500,000 | |||||||
Advance to affiliates | $ 1,000,000 | $ 1,000,000 | ||||||
Raycom Media, Inc [Member] | 2016 Credit Agreement [Member] | ||||||||
Proceeds from lines of credit | $ 7,300,000 | 6,800,000 | ||||||
Raycom Media, Inc [Member] | 2016 Credit Agreement [Member] | New Loan Balance [Member] | ||||||||
Accrued interest | 10,000,000 | 10,000,000 | ||||||
Raycom Media, Inc [Member] | 2016 Credit Agreement [Member] | Minimum [Member] | ||||||||
Accrued interest | 1,298,653 | 1,298,653 | ||||||
Raycom Media, Inc [Member] | 2016 Credit Agreement [Member] | October 2, 2018 [Member] | ||||||||
Proceeds from lines of credit | 500,000 | |||||||
Outstanding loan | 21,800,000 | 21,800,000 | ||||||
Raycom Media, Inc [Member] | 2016 Credit Agreement [Member] | October 15, 2018 [Member] | Cordillera [Member] | ||||||||
Outstanding loan | $ 300,000 | $ 300,000 | ||||||
Raycom Media, Inc [Member] | Sales Revenue, Net [Member] | Customer [Member] | ||||||||
Percentage for revenue | 19.00% | |||||||
Raycom Media, Inc [Member] | Sales Revenue, Net [Member] | Five Customer [Member] | ||||||||
Percentage for revenue | 12.00% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Allowance for doubtful accounts | $ 757,806 | $ 70,000 | |
Accounts Receivable [Member] | Two Customers [Member] | |||
Concentration risk, description | Credit risk and as of September 30, 2018 and December 31, 2017, two customers each accounted for greater than 10% of the Company's accounts receivable balance, respectively. | ||
Concentration of risk percentage | 47.00% | 26.00% | |
Sales Revenue, Net [Member] | |||
Concentration risk, description | The Company's revenue for the nine months ended September 30, 2018 and 2017, respectively, was generated from three and two customers, respectively, that each accounted for greater than 10% of the Company's total revenue. | ||
Concentration of risk percentage | 54.00% | 36.00% |
Acquisition of Worldnow (Detail
Acquisition of Worldnow (Details Narrative) - USD ($) | Aug. 31, 2016 | Jul. 28, 2015 | Sep. 30, 2018 | Dec. 31, 2017 |
Debt interest rate | 10.00% | |||
Two Shareholders [Member] | ||||
Debt interest rate | 5.00% | |||
Payments of debt | $ 15,000,000 | |||
Purchase Agreement [Member] | ||||
Payment to acquisitions | $ 10,000,000 | |||
Purchase Agreement [Member] | Class A Restricted Voting Shares [Member] | ||||
Payment to acquisitions | $ 20,000,000 | |||
Purchase Agreement [Member] | Gannaway Web Holdings LLC [Member] | ||||
Total purchase consideration | $ 45,000,000 |
Restructuring Expense - Schedul
Restructuring Expense - Schedule of Changes in Restructuring Liability (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Restructuring liability beginning balance | ||||
Restructuring expense | 542,210 | |||
Payments | (443,134) | |||
Restructuring Liability ending balance | 99,076 | 99,076 | ||
One-time Termination Benefits [Member] | ||||
Restructuring liability beginning balance | ||||
Restructuring expense | 443,134 | |||
Payments | (443,134) | |||
Restructuring Liability ending balance | ||||
Contract Costs [Member] | ||||
Restructuring liability beginning balance | ||||
Restructuring expense | 99,076 | |||
Payments | ||||
Restructuring Liability ending balance | $ 99,076 | $ 99,076 |
Related Party Transactions an_3
Related Party Transactions and Balances (Details Narrative) - USD ($) | May 13, 2018 | May 07, 2018 | Mar. 13, 2018 | Sep. 01, 2016 | Oct. 14, 2015 | Aug. 25, 2015 | Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Mar. 30, 2017 | Dec. 22, 2016 |
Promissory note issued | $ 21,300,000 | $ 21,300,000 | ||||||||||||
Debt interest rate | 10.00% | |||||||||||||
Non-revolving line of credit | 20,677,686 | 20,677,686 | $ 12,155,573 | |||||||||||
Deferred revenue | 70,566 | 70,566 | $ 92,279 | |||||||||||
Advance Agreement [Member] | ||||||||||||||
Pre-paid future fees | $ 2,000,000 | $ 3,000,000 | ||||||||||||
License Agreement [Member] | ||||||||||||||
Deferred revenue | 1,588,994 | 1,588,994 | ||||||||||||
Accrued interest | 467,597 | 467,597 | ||||||||||||
Total contract value | $ 350,000 | $ 350,000 | ||||||||||||
Agreement term | 3 years | |||||||||||||
Raycom Media, Inc [Member] | ||||||||||||||
Ownership percentage | 20.60% | 20.60% | 24.60% | |||||||||||
Promissory note issued | $ 15,000,000 | $ 4,000,000 | ||||||||||||
Debt interest rate | 5.00% | 12.00% | 12.00% | |||||||||||
Debt due date | Aug. 31, 2016 | |||||||||||||
Line of credit principal amount | 14,500,000 | |||||||||||||
Non-revolving line of credit | 1,500,000 | $ 20,677,686 | $ 20,677,686 | $ 12,155,573 | ||||||||||
Proceeds from line of credit | $ 1,500,000 | 14,000,000 | ||||||||||||
Debt conversion of converted amount | $ 1,000,000 | 4,000,000 | ||||||||||||
Debt converted into shares | 150,200 | |||||||||||||
Number of warrant to purchase shares of common stock | 871,160 | |||||||||||||
Fair value of loan | $ 11,578,593 | |||||||||||||
Fair value of warrants | 2,921,407 | |||||||||||||
Outstanding loan | $ 14,500,000 | 21,300,000 | 21,300,000 | |||||||||||
Proceeds from loan | $ 7,500,000 | 15,000,000 | ||||||||||||
Line of credit additional amount | 6,500,000 | 6,500,000 | ||||||||||||
Interest expense on credit facility | 1,722,116 | $ 1,525,637 | ||||||||||||
Interest expense | 157,946 | $ 234,062 | ||||||||||||
Deferred revenue | $ 1,588,994 | $ 1,588,994 | $ 4,896,585 | |||||||||||
Raycom Media, Inc [Member] | Credit Agreement [Member] | ||||||||||||||
Proceeds from line of credit | 1,000,000 | |||||||||||||
Outstanding loan | 15,500,000 | |||||||||||||
Proceeds from loan | $ 7,500,000 | |||||||||||||
Advance to affiliates | $ 1,000,000 | $ 1,000,000 | ||||||||||||
Raycom Media, Inc [Member] | Class A Restricted Shares [Member] | ||||||||||||||
Number of restricted voting shares | 397,126 | |||||||||||||
SKP America LLC [Member] | ||||||||||||||
Ownership percentage | 20.50% | 20.50% | 24.50% | |||||||||||
Gannaway Entertainment Inc [Member] | ||||||||||||||
Ownership percentage | 6.70% | 6.70% | 8.00% | |||||||||||
Raycom Media, Inc [Member] | ||||||||||||||
Proceeds from line of credit | $ 5,800,000 | $ 5,800,000 | ||||||||||||
Line of credit additional amount | $ 6,500,000 | |||||||||||||
Interest expense on credit facility | 658,849 | $ 508,646 | ||||||||||||
Interest expense | $ 25,385 | $ 78,021 |
Related Party Transactions an_4
Related Party Transactions and Balances - Summary of Related Party Balances (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 01, 2016 |
Non-revolving credit facility, net | $ 20,677,686 | $ 12,155,573 | |
Accounts receivable, net | 2,193,971 | 3,483,347 | |
Prepaid expenses and other current assets | 273,784 | 535,111 | |
Accounts payable | (4,472,804) | (5,740,788) | |
Accrued expenses | (1,315,594) | (1,717,030) | |
Total due to Raycom | (2,476,380) | (5,090,358) | |
Raycom Media, Inc [Member] | |||
Non-revolving credit facility, net | 20,677,686 | 12,155,573 | $ 1,500,000 |
Accounts receivable, net | 427,489 | ||
Prepaid expenses and other current assets | |||
Accounts payable | (419,789) | (275,960) | |
Accrued expenses | (467,597) | (432,802) | |
Deferred revenue | (1,588,994) | (4,896,585) | |
Total due to Raycom | (2,476,380) | (5,177,858) | |
Mobdub [Member] | |||
Prepaid expenses and other current assets | 87,500 | ||
Total due from Mobdub | 87,500 | ||
Raycom Media Inc and Mobdub [Member] | |||
Total due related parties | $ (2,476,380) | $ (5,090,358) |
Related Party Transactions an_5
Related Party Transactions and Balances - Schedule of Operations and Comprehensive Loss (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | $ 6,047,225 | $ 6,537,308 | $ 17,576,696 | $ 19,390,089 |
Raycom Media, Inc [Member] | ||||
Revenue | 1,175,777 | 1,272,827 | ||
Interest on non-revolving credit facility | (658,849) | (508,646) | ||
Interest on the Advance Agreement | (25,385) | (78,021) | ||
Revenue from related party | 491,543 | 686,160 | ||
Mobdub [Member] | ||||
License fees | (29,167) | (29,167) | (87,500) | (87,500) |
Raycom Media Inc and Mobdub [Member] | ||||
License fees | (29,167) | (29,167) | (87,500) | (87,500) |
Revenue (Expense) from Related Parties | $ 462,376 | $ 656,993 | 1,626,836 | 2,072,981 |
Raycom Media, Inc [Member] | ||||
Revenue | 3,594,398 | 3,920,180 | ||
Interest on non-revolving credit facility | (1,722,116) | (1,525,637) | ||
Interest on the Advance Agreement | (157,946) | (234,062) | ||
Revenue from related party | $ 1,714,336 | $ 2,160,481 |
Long-Lived Assets (Details Narr
Long-Lived Assets (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Depreciation expense under capital lease | $ 0 | $ 35,400 | $ 0 | $ 107,299 | |
Net carrying value of assets held under capital lease | 0 | 0 | $ 262,747 | ||
Impairment expense | $ 12,789,343 | 12,789,343 | |||
Capitalized software costs | 1,856,214 | $ 2,444,766 | |||
Property and Equipment [Member] | |||||
Impairment expense | 567,000 | ||||
Capitalized Software Development [Member] | |||||
Impairment expense | 6,100,000 | ||||
Customer Relationship Intangible Assets [Member] | |||||
Impairment expense | $ 6,100,000 |
Long-Lived Assets - Schedule of
Long-Lived Assets - Schedule of Depreciation and Amortization Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation of property and equipment | $ 99,486 | $ 151,281 | $ 357,513 | $ 458,616 |
Amortization of capitalized software | 995,665 | 732,961 | 2,714,214 | 2,148,315 |
Amortization of other intangibles | 218,334 | 218,334 | 655,002 | 655,002 |
Total depreciation and amortization | $ 1,313,485 | $ 1,102,576 | $ 3,726,729 | $ 3,261,933 |
Long-Lived Assets - Schedule _2
Long-Lived Assets - Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 2,363,695 | $ 2,668,654 |
Accumulated depreciation and amortization | (1,738,527) | (1,683,333) |
Accumulated impairment | (567,388) | |
Property and equipment, net | 57,780 | 985,321 |
Office and Computer Equipment and Software [Member] | ||
Property and equipment, gross | 1,759,717 | 2,064,676 |
Accumulated depreciation and amortization | (1,383,696) | (1,416,140) |
Accumulated impairment | (318,241) | |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 603,978 | 603,978 |
Accumulated depreciation and amortization | (354,831) | (267,193) |
Accumulated impairment | $ (249,147) |
Long-Lived Assets - Summary of
Long-Lived Assets - Summary of Software Development Costs (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Cost | $ 13,977,003 | $ 12,120,789 |
Accumulated amortization | (7,862,262) | (5,148,048) |
Accumulated impairment | (6,114,741) | |
Software development costs, net | $ 6,972,741 |
Long-Lived Assets - Schedule _3
Long-Lived Assets - Schedule of Intangible Assets (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Intangible assets, gross | $ 8,800,000 | $ 8,800,000 |
Accumulated amortization | (2,692,786) | (2,037,784) |
Accumulated impairment | (6,107,214) | |
Intangible assets, net | 6,762,216 | |
Broadcast Relationships [Member] | ||
Intangible assets, gross | 7,600,000 | 7,600,000 |
Accumulated amortization | (1,952,786) | (1,477,784) |
Accumulated impairment | (5,647,214) | |
Advertiser Relationships [Member] | ||
Intangible assets, gross | 1,200,000 | 1,200,000 |
Accumulated amortization | (740,000) | (560,000) |
Accumulated impairment | $ (460,000) |
Long-Lived Assets - Schedule _4
Long-Lived Assets - Schedule of Intangible Assets (Details) (Parenthetical) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Broadcast Relationships [Member] | ||
Intangible assets useful life | 12 years | 12 years |
Advertiser Relationships [Member] | ||
Intangible assets useful life | 5 years | 5 years |
Debt (Details Narrative)
Debt (Details Narrative) - USD ($) | May 07, 2018 | Mar. 13, 2018 | Sep. 01, 2016 | Aug. 25, 2015 | Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Sep. 02, 2016 | Aug. 31, 2016 | Aug. 18, 2016 |
Amortization of debt discount | $ 132,454 | $ 132,826 | $ 388,131 | $ 405,788 | |||||||||
Legal fees | 206,805 | ||||||||||||
Amortization of deferred financing costs | 12,925 | $ 10,340 | 35,329 | $ 35,328 | |||||||||
Proceeds from loan repayment | 15,000,000 | ||||||||||||
Total debt issued amount | 3,000,000 | ||||||||||||
Advance from related party | 2,476,380 | 2,476,380 | $ 5,090,358 | ||||||||||
Debt interest rate | 10.00% | ||||||||||||
Cash security interest | 524,115 | 524,115 | |||||||||||
Effective-interest Method [Member] | |||||||||||||
Amortization of debt discount | 2,921,407 | ||||||||||||
Amended Loan [Member] | |||||||||||||
Line of credit principal amount | $ 22,000,000 | 21,300,000 | 21,300,000 | ||||||||||
Increase the funding available amount | $ 7,500,000 | 7,500,000 | |||||||||||
Advance from related party | 1,000,000 | ||||||||||||
Term B Loan [Member] | |||||||||||||
Line of credit principal amount | 14,500,000 | ||||||||||||
Non-revolving line of credit | 1,000,000 | ||||||||||||
Term A Loan [Member] | |||||||||||||
Line of credit principal amount | 7,500,000 | ||||||||||||
Facility A [Member] | |||||||||||||
Proceeds from line of credit | 5,800,000 | $ 5,800,000 | |||||||||||
Facility A [Member] | December 31, 2018 [Member] | |||||||||||||
Increase the funding available amount | 6,500,000 | 6,500,000 | |||||||||||
Facility A [Member] | December 31, 2018 [Member] | Maximum [Member] | |||||||||||||
Reduced amount available under facility | 7,500,000 | 7,500,000 | |||||||||||
Facility A [Member] | December 31, 2018 [Member] | Minimum [Member] | |||||||||||||
Reduced amount available under facility | $ 7,300,000 | $ 7,300,000 | |||||||||||
Facility B [Member] | |||||||||||||
Debt description | The interest rate payable under the Facility B is 10% and the increased credit amount of $7.5 million, Facility A, bears an interest rate of U.S. LIBOR (1 month) plus 8%. The U.S. LIBOR rate used for computation of interest will be updated on the first day of each interest period (month). | ||||||||||||
Debt interest rate | 10.00% | 10.00% | |||||||||||
Facility B [Member] | Maximum [Member] | |||||||||||||
Line of credit principal amount | $ 7,500,000 | $ 7,500,000 | |||||||||||
Facility B [Member] | US LIBOR [Member] | |||||||||||||
Debt interest rate | 8.00% | 8.00% | |||||||||||
Letter of Credit - Western Alliance Bank [Member] | |||||||||||||
Revolving line of credit | $ 500,000 | ||||||||||||
Line of credit interest rate | 3.50% | ||||||||||||
Security deposit | $ 524,115 | ||||||||||||
Dividend Yield [Member] | |||||||||||||
Fair value assumptions, measurement input, percentages | 0.00% | ||||||||||||
Warrant [Member] | |||||||||||||
Fair value of warrants issued | 871,160 | ||||||||||||
Warrant [Member] | Volatility [Member] | |||||||||||||
Fair value assumptions, measurement input, percentages | 71.14% | ||||||||||||
Warrant [Member] | Forfeiture Rate [Member] | |||||||||||||
Fair value assumptions, measurement input, percentages | 0.00% | ||||||||||||
Warrant One [Member] | |||||||||||||
Fair value of warrants issued | 751,000 | ||||||||||||
Warrant One [Member] | Risk-free Rate [Member] | |||||||||||||
Fair value assumptions, measurement input, percentages | 0.66% | ||||||||||||
Warrant One [Member] | Expected Term [Member] | |||||||||||||
Fair value of warrants issued | 120,160 | ||||||||||||
Fair value assumptions, measurement input, term | 7 months | ||||||||||||
Warrant Two [Member] | |||||||||||||
Fair value of warrants issued | 120,160 | ||||||||||||
Warrant Two [Member] | Risk-free Rate [Member] | |||||||||||||
Fair value assumptions, measurement input, percentages | 0.56% | ||||||||||||
Warrant Two [Member] | Expected Term [Member] | |||||||||||||
Fair value of warrants issued | 751,000 | ||||||||||||
Fair value assumptions, measurement input, term | 5 years | ||||||||||||
Raycom Media, Inc [Member] | |||||||||||||
Line of credit principal amount | $ 14,500,000 | $ 21,300,000 | $ 21,300,000 | ||||||||||
Non-revolving line of credit | 1,500,000 | ||||||||||||
Debt conversion of converted amount | 1,000,000 | $ 4,000,000 | |||||||||||
Existing amount of promissory note | $ 4,000,000 | ||||||||||||
Debt converted into shares | 150,200 | ||||||||||||
Number of warrant to purchase shares of common stock | 871,160 | ||||||||||||
Warrant exercise price | $ 6.63 | ||||||||||||
Warrant term | 5 years | ||||||||||||
Proceeds from line of credit | 1,500,000 | $ 14,000,000 | |||||||||||
Fair value of loan | 11,578,593 | ||||||||||||
Fair value of warrants | $ 2,921,407 | ||||||||||||
Number of voting shares held by company | Prior to the completion of the financing arrangements, Raycom held 397,125 voting shares of the Company, which represented approximately 21% of the issued and outstanding voting shares of the Company. Immediately following the completion of the financing transactions, Raycom held 547,325 voting shares of the Company and 871,160 warrants, which collectively represented approximately 27% of the issued and outstanding voting shares of the Company on a non-diluted basis. | ||||||||||||
Total debt issued amount | $ 4,000,000 | ||||||||||||
Due to related party | 1,000,000 | 1,000,000 | |||||||||||
Advance from related party | $ 2,476,380 | $ 2,476,380 | $ 5,177,858 | ||||||||||
Debt instrument maturity date | Aug. 31, 2016 | ||||||||||||
Debt interest rate | 5.00% | 12.00% | 12.00% | ||||||||||
Raycom Media, Inc [Member] | Credit Agreement [Member] | |||||||||||||
Line of credit principal amount | 15,500,000 | ||||||||||||
Proceeds from line of credit | $ 1,000,000 | ||||||||||||
Raycom Media, Inc [Member] | CDN [Member] | |||||||||||||
Warrant exercise price | $ 8.50 | ||||||||||||
Cordillera Together With Raycom [Member] | Amended Loan [Member] | |||||||||||||
Line of credit principal amount | 7,500,000 | ||||||||||||
Increase the funding available amount | 300,000 | ||||||||||||
Third Party [Member] | Amended Loan [Member] | |||||||||||||
Legal fees | $ 47,350 | ||||||||||||
Debt instrument maturity date | Dec. 31, 2020 | ||||||||||||
Raycom [Member] | |||||||||||||
Debt interest rate | 12.00% | 12.00% |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) - USD ($) | May 24, 2018 | Oct. 20, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Stock-based compensation expense | $ 42,518 | $ 262,604 | $ 374,406 | $ 774,776 | |||
Board of Directors [Member] | |||||||
Stock option expire period | 10 years | ||||||
Amended and Restated Equity Incentive Plan [Member] | |||||||
Granted replacement options | 435,000 | ||||||
Restricted Stock Units (RSUs) [Member] | |||||||
Granted replacement options | 201,507 | ||||||
Number of options or rsus shares issued | 166,150 | 166,150 | |||||
Unrecognized compensation cost | $ 29,444 | $ 29,444 | |||||
Stock Option [Member] | |||||||
Granted replacement options | 74,327 | ||||||
Aggregate intrinsic value of outstanding | 0 | $ 0 | |||||
Aggregate intrinsic value of exercisable | $ 0 | $ 0 | |||||
Employee [Member] | |||||||
Number of shares issued for settlement | 288,642 | ||||||
Employee [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Number of restricted stock unit shares issued | 141,414 | ||||||
Director [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Number of restricted stock unit shares issued | 141,414 |
Shareholders' Equity - Schedule
Shareholders' Equity - Schedule of Stock Options Activity (Details) - Stock Option [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Number of shares, beginning | 189,943 | 245,762 |
Number of shares, granted | 74,327 | |
Number of shares, exercised | ||
Number of shares, forfeited or canceled | (125,009) | (50,431) |
Number of shares, Canceled (Option Replacement) | (193,339) | |
Number of shares, Granted (Option Replacement) | 113,677 | |
Number of shares, ending | 64,934 | 189,943 |
Number of shares, vested and expected to vest ending | 63,158 | 183,924 |
Number of shares, exercisable ending | 29,407 | 69,567 |
Weighted average exercise price, beginning | $ 5.47 | $ 19.52 |
Weighted average exercise price, granted | 5.48 | |
Weighted average exercise price, exercised | ||
Weighted average exercise price, forfeited or canceled | 5.55 | 18.21 |
Weighted average exercise price, Canceled (Option Replacement) | 19.90 | |
Weighted average exercise price, Granted (Option Replacement) | 5.30 | |
Weighted average exercise price, ending | 5.33 | 5.47 |
Weighted average exercise price, vested and expected to vest ending | 5.33 | 5.48 |
Weighted average exercise price, exercisable ending | 5.31 | 5.73 |
Weighted average grant date fair value, beginning | 6.58 | 9.10 |
Weighted average grant date fair value, granted | 2.81 | |
Weighted average grant date fair value, exercised | ||
Weighted average grant date fair value, forfeited or canceled | 7.92 | 9.30 |
Weighted average grant date fair value, Canceled (Option Replacement) | 9.11 | |
Weighted average grant date fair value, Granted (Option Replacement) | 9.11 | |
Weighted average grant date fair value, ending | 4 | 6.58 |
Weighted average grant date fair value, vested and expected to vest ending | 4.02 | 6.65 |
Weighted average grant date fair value, exercisable ending | $ 4.78 | $ 10.17 |
Weighted average remaining contractual term (years), beginning | 8 years 2 months 19 days | 8 years 8 months 16 days |
Weighted average remaining contractual term (years), ending | 7 years 10 months 21 days | 8 years 2 months 19 days |
Weighted average remaining contractual term (years), vested and expected to vest ending | 7 years 10 months 17 days | 8 years 2 months 12 days |
Weighted average remaining contractual term (years), exercisable ending | 7 years 7 months 17 days | 7 years 3 months 29 days |
Adjustment [Member] | ||
Number of shares, beginning | (53) | |
Number of shares, granted | ||
Weighted average exercise price, beginning | ||
Weighted average grant date fair value, beginning | ||
Weighted average remaining contractual term (years), beginning | 0 years | |
Weighted average remaining contractual term (years), ending | 0 years | |
Weighted average remaining contractual term (years), vested and expected to vest ending | 0 years | |
Weighted average remaining contractual term (years), exercisable ending | 0 years |
Shareholders' Equity - Schedu_2
Shareholders' Equity - Schedule of Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Number of shares, beginning | 179,090 | 76,731 |
Number of shares, granted | 201,507 | |
Number of shares, vested | (141,414) | (98,387) |
Number of shares, forfeited or canceled | (18,964) | (754) |
Number of shares, ending | 18,712 | 179,090 |
Weighted average grant date fair value, beginning | $ 3.84 | $ 7.31 |
Weighted average grant date fair value, granted | 3.11 | |
Weighted average grant date fair value, vested | 3.13 | 5.04 |
Weighted average grant date fair value, forfeited or canceled | 6.80 | 6.44 |
Weighted average grant date fair value, ending | $ 6.17 | $ 3.84 |
Adjustment [Member] | ||
Number of shares, beginning | (7) | |
Weighted average grant date fair value, beginning |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | Jul. 21, 2017 | Sep. 30, 2018 |
Commitments and Contingencies Disclosure [Abstract] | ||
Loss contingency, damages awarded, value | $ 15,000,000 | |
Operating lease expiring year | expiring in 2019 through 2023 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Operating Lease Payments (Details) | Sep. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,019 | $ 1,422,568 |
2,020 | 955,761 |
2,021 | 852,908 |
2,022 | 852,908 |
2,023 | 355,378 |
Thereafter | |
Total | $ 4,439,523 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Oct. 01, 2018 | Oct. 02, 2018 | Sep. 30, 2018 | Mar. 13, 2018 | Dec. 31, 2017 |
Deferred revenue | $ 70,566 | $ 92,279 | |||
Amended Loan [Member] | |||||
Outstanding loan | 21,300,000 | $ 22,000,000 | |||
Amended Loan [Member] | Website Agreement [Member] | |||||
Deferred revenue | 1,588,994 | ||||
Amended Loan [Member] | Raycom Media, Inc [Member] | |||||
Accrued interest | 1,298,653 | ||||
Amended Loan [Member] | Raycom Media, Inc [Member] | New Loan Balance [Member] | |||||
Accrued interest | $ 10,000,000 | ||||
Subsequent Event [Member] | Amended Loan [Member] | New Loan Balance [Member] | |||||
Line of credit annual rate | 10.00% | ||||
Line of credit maturity date | Sep. 30, 2021 | ||||
Subsequent Event [Member] | Amended Loan [Member] | Cordillera [Member] | |||||
Outstanding loan | $ 300,000 | ||||
Subsequent Event [Member] | Amended Loan [Member] | Raycom Media, Inc [Member] | |||||
Outstanding loan | $ 21,800,000 |