UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 13, 2018
PROPEL MEDIA, INC.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 000-55360 | 47-2133177 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
2010 Main Street, Suite 900, Irvine, California 92614
(Address of Principal Executive Offices) (Zip Code)
(949) 251-0640
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 1.01 | Entry Into a Material Definitive Agreement. |
On August 13, 2018, Propel Media, Inc. (the “Company”) entered into a Sixth Amendment (the “Amendment”) to the Unit Exchange Agreement (the “Exchange Agreement”), dated as of October 10, 2014, as amended, by and among the Company, Kitara Media Corp. (“Kitara”), Propel Media LLC (formerly known as Future Ads LLC) (“Propel”), and the former members of Propel (the “Transferors”).
The Exchange Agreement provided that, on or prior to June 30, 2023, $10,000,000 of additional consideration (the “Additional Consideration”) is payable by the Company to the Transferors in cash and/or shares of the Company’s common stock (of which $5,000,000 was paid in June 2018). The Amendment modifies the payment terms of the remaining $5,000,000 of the Additional Consideration as follows:
| ● | The Exchange Agreement provides that, if the Additional Consideration has not been paid as of any December 31st prior to June 30, 2023, Jared Pobre has the right during the 10 business day period following such date to elect, on behalf of the Transferors, to receive the Additional Consideration in shares of the Company’s common stock. Under the Amendment, if the Company’s common stock is no longer registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as December 31, 2018, or the Company is not required to file periodic reports as December 31, 2018, Jared Pobre waives the right to make this election during the ten business day period after such date. |
| ● | Prior to the Amendment, the Exchange Agreement provided that, in the event the Transferors received the Additional Consideration in shares of the Company’s common stock, the shares would be valued at the closing market price on any exchange on which the shares are then listed (or the closing bid price on the over-the-counter bulletin board if the shares are not so listed). Under the Amendment, if the Company’s common stock is no longer registered under the Exchange Act or the Company is not required to file periodic reports, the Company’s common stock instead will be valued by a nationally recognized investment banking, accounting or valuation firm selected by the Company with the consent of Jared Pobre (which consent is not to be unreasonably withheld, conditioned or delayed). |
The foregoing summary of the Amendment is qualified in its entirety by reference to the full text of the Amendment, which is filed as an exhibit to this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference.
| Item 8.01 | Other Events. |
On August 13, 2018, the Company issued a press release announcing its intention to deregister its common and suspend its reporting obligations under the Exchange Act. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
| 1 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 13, 2018
| PROPEL MEDIA, INC. | |||
| By: | /s/ Marv Tseu | ||
| Name: | Marv Tseu | ||
| Title: | Chief Executive Officer | ||
| 2 |
Exhibit 2.1
SIXTH AMENDMENT TO
UNIT EXCHANGE AGREEMENT
This Sixth Amendment (this “Amendment”) to Unit Exchange Agreement (as amended and supplemented prior to the date hereof, the “Exchange Agreement”) is made as of August 13, 2018, by and between Kitara Media Corp., a Delaware corporation (“Kitara”), Propel Media, Inc., formerly known as Kitara Holdco Corp., a Delaware corporation (“Holdco”), Propel Media LLC, formerly known as Future Ads LLC, a California limited liability company (“Future Ads”), Lowenstein Enterprises Corporation (“Lowenstein”), Family Trust of Jared L. Pobre, U/A DTD 12/13/2004 (“Pobre Trust”), Newport Holding Trust (“Newport”) and Neptune Capital Trust (“Neptune” and together with Kitara, Holdco, Future Ads, Lowenstein, Pobre Trust and Newport, the “Parties”). Defined terms used herein and not otherwise defined shall have the meanings ascribed to them in the Exchange Agreement.
W I T N E S S E T H:
WHEREAS, the Parties are party to the Exchange Agreement; and
WHEREAS, pursuant to Section 8.3 of the Exchange Agreement, the Exchange Agreement may be amended by a written agreement executed by the Parties; and
WHEREAS, the Parties previously amended certain provisions of the Exchange Agreement in the First Amendment to Unit Exchange Agreement dated as of December 23, 2014, in the Second Amendment to Unit Exchange Agreement dated as of April 29, 2015, in the Third Amendment to Unit Exchange Agreement dated as of January 26, 2016, in the Fourth Amendment to Unit Exchange Agreement dated as of May 9, 2018 and in the Fifth Amendment to Unit Exchange Agreement dated as of May 30, 2018; and
WHEREAS, the Parties desire to further amend certain provisions of the Exchange Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1) Amendment to Exchange Agreement.
(a) Section 1.2 of the Exchange Agreement is hereby amended by adding the following rows in alphabetical order to the table of definitions:
| Term | Section | ||
| Appraiser | Section 2.3(e) | ||
| Determination Date | Section 2.3(e) | ||
| Equity Election Revocation Period | Section 2.3(e) | ||
| Fair Market Value | Section 2.3(e) |
(b) Section 2.3 of the Exchange Agreement is hereby amended by replacing it in its entirety with the following:
“Section 2.3 Additional Consideration.
“(a) On or prior to June 30, 2023, Holdco shall pay to the Transferors, as additional consideration and in accordance with the Consideration Notice, $10,000,000 (the “Additional Consideration”) in cash and/or shares of Holdco Common Stock in accordance with Section 2.3(b); provided, that for purposes of any cross-references contained in the Financing Agreement to the definition of Additional Consideration (as defined in this Agreement), the term “Additional Consideration” shall also include each Available Working Capital Amount (as defined in Section 2.3(b) below).
“(b) During the Equity Financing Period, Holdco and its Affiliates shall use their reasonable best efforts to issue additional shares of Holdco Common Stock or other equity securities of Holdco in one or more offerings, pursuant to which Holdco will raise sufficient net proceeds to enable Holdco to pay to the Transferors the remaining Additional Consideration in cash without violation of any express covenants in any loan documents to which Holdco is a party (including with respect to the Debt Financing so long as those obligations remain applicable) (such equity offering or offerings, the “Equity Capital Raise”). As promptly as practicable following completion of each Equity Capital Raise, Holdco shall pay a portion of the net proceeds received from such Equity Capital Raise to the Transferors, unless otherwise instructed by a Transferor, in accordance with the Consideration Notice. With respect to the Equity Capital Raises as provided in this Section 2.3(b), the parties acknowledge and agree that a material consideration for undertaking such Equity Capital Raises is to enable Holdco to be able to pay to the Transferors the remaining Additional Consideration in cash; provided, however, that if the Board of Directors of Holdco determines in good faith that the aggregate net proceeds raised pursuant to the Equity Capital Raises was insufficient for Holdco to pay the remaining Additional Consideration in cash, then Holdco shall pay to the Transferors such maximum amount that the Holdco Board of Directors determines in good faith. In addition to any payments made from any Equity Capital Raise or required to be made pursuant to Section 2.3(d), at least two times per year during the Equity Financing Period, in connection with the approval of the filing of the Company’s quarterly report on Form 10-Q for its second fiscal quarter (or equivalent unaudited interim financial statements in the event the Company is no longer subject to the reporting obligations under the Exchange Act) and in connection with the approval of the filing of the Company’s annual report on Form 10-K (or equivalent audited annual financial statements in the event the Company is no longer subject to the reporting obligations under the Exchange Act), the Holdco Board of Directors shall determine, in its sole and absolute discretion, the amount, if any, of Holdco’s working capital available to be used to pay the remaining Additional Consideration in cash to the Transferors in accordance with the immediately following sentence (the “Available Working Capital Amount”), taking into account such factors as it may deem relevant, including without limitation, the cash generated by Holdco’s operating activities during the fiscal quarters completed since its last such determination, the prospects for Holdco’s business, general economic and business conditions, any plans for acquisitions, capital expenditures or other investments in Holdco’s business and any other factors that the Holdco Board of Directors deems, in its sole and absolute discretion, germane to such determination. If the Holdco Board of Directors determines that there is an Available Working Capital Amount, Holdco shall use its reasonable best efforts to promptly obtain any applicable Lender Consent and, if such consent is obtained, promptly shall pay the Available Working Capital Amount in cash to the Transferors, unless otherwise instructed by a Transferor, in accordance with the Consideration Notice. The difference between (a) the aggregate amount paid to the Transferors in satisfaction of the Additional Consideration pursuant to this Section 2.3(b) or Section 2.3(d) or otherwise, and (b) the total initial amount of the Additional Consideration, is referred to in this Agreement as the “Capital Raise Deficit Amount.” In the event of a Capital Raise Deficit Amount at the end of the Equity Financing Period, Holdco shall, in accordance with the Consideration Notice, unless otherwise instructed by a Transferor, issue and deliver to the Transferors a number of shares of Holdco Common Stock with an aggregate Fair Market Value as of the last day of the Equity Financing Period equal to the Capital Raise Deficit Amount.
| 2 |
“(c) If, as of any December 31st occurring during the Equity Financing Period commencing with December 31, 2016 (each an “Early Election Date”), Holdco has not been able to successfully complete the Equity Capital Raise or otherwise pay the Additional Consideration in full in accordance with Section 2.3(b) or Section 2.3(d) or otherwise, then during the ten Business Day period following any such Early Election Date, Jared Pobre, on behalf of the Transferors, may elect to receive the Additional Consideration (or, if applicable, the Capital Raise Deficit Amount) in shares of Holdco Common Stock (the date of such election, unless revoked in accordance with Section 2.3(e), the “Early Equity Termination Date”) valued at Fair Market Value as of the Early Equity Termination Date; provided, however, that Jared Pobre, on behalf of the Transferors, hereby waives the right to make such election during the ten Business Day period following any December 31st occurring on or prior to December 31, 2018, if the Holdco Common Stock is not registered under Section 12 of the Exchange Act or the Company is not obligated to file the reports required by Section 13(a) of the Exchange Act as of such December 31st.
“(d) After (but no later than 10 Business Days after) each date during the Equity Financing Period on which the Agents have received the audited annual financial statements deliverable pursuant to Section 7.01(a)(iii) of the Financing Agreement, Holdco shall make a cash payment of $1,000,000 (or such amount as would not result in a Default or Event of Default, if less, but not more than $1,000,000 in any Fiscal Year or more than $5,000,000 during the term of the Financing Agreement) to the Transferors in respect of any Capital Raise Deficit Amount then existing, provided that (A) no Default or Event of Default has occurred and is continuing at the time such payment is proposed to be made or would result from the making of such payment and (B) the Consolidated Adjusted EBITDA of Holdco and its Subsidiaries for the Fiscal Year with respect to which such annual financial statements have been delivered is not less than $45,000,000. Solely for the purposes of this paragraph, the term “Financing Agreement” shall mean that certain Financing Agreement, dated as of May 30, 2018, by and among Holdco, each subsidiary of Holdco listed as a “Borrower” on the signature pages thereto, each subsidiary of Holdco listed as a “Guarantor” on the signature pages thereto, the lenders from time to time party thereto, and MGG California LLC, as collateral agent and administrative agent for the lenders. Solely for the purposes of this paragraph, each of the terms “Agents,” “Consolidated Adjusted EBITDA,” “Default,” “Event of Default,” and “Fiscal Year” shall have the meaning set forth for such term in the Financing Agreement.
“(e) “Fair Market Value” of each share of Holdco Common Stock as of a given date (the “Determination Date”) shall be determined as follows:
“(i) If the Holdco Common Stock is registered under Section 12 of the Exchange Act and the Company is obligated to file the reports required by Section 13(a) of the Exchange Act as of the Determination Date, the “Fair Market Value” of each share of Holdco Common Stock will be equal to the closing market price of the Holdco Common Stock as reported on NASDAQ or such other national securities exchange on which the Holdco Common Stock is listed (or if not so listed, the bid price on the over-the-counter bulletin board) on the Determination Date (it being understood that if a closing price or bid price, as applicable, is not reported on such day, then the parties shall value the stock at the last closing price or bid price, as applicable, reported).
| 3 |
“(ii) If the Holdco Common Stock is not so registered or the Company is not subject to such reporting obligations as of the Determination Date, the “Fair Market Value” of each share of Holdco Common Stock will be equal to the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for a share of Holdco Common Stock in an arm’s length transaction on the Determination Date, as determined by a nationally recognized investment banking, accounting or valuation firm (the “Appraiser”) selected by the Company with the consent of Jared Pobre (which consent shall not be unreasonably withheld, conditioned or delayed). Jared Pobre shall have the right to participate fully in the selection process of the Appraiser. The Appraiser shall act as an expert, not as an arbitrator, and the determination of the Appraiser shall be final and conclusive, except in the case of manifest error, and the fees and expenses of the Appraiser shall be borne by the Company. The Appraiser shall be engaged within 15 days of the last day of the Equity Financing Period or the Early Election Date, as applicable, and shall be instructed to make such determination within 90 days of its engagement and to deliver simultaneously therewith a report showing in reasonable detail the basis for the determination. In the case Fair Market Value is being determined as the result of an election made pursuant to Section 2.3(c), Jared Pobre, on behalf of the Transferors, shall have the right to revoke such election during the 10 day period following the date the Appraiser delivers its determination as to Fair Market Value (the last day of such period, the “Equity Election Revocation Period”).
“(f) The shares of Holdco Common Stock issued and delivered to the Transferors pursuant to this Section 2.3, if any, (i) shall be delivered within 5 days after the last day of Equity Financing Period or the Early Equity Termination Date, as applicable, or if Fair Market Value is determined in accordance with Section 2.3(e)(ii), the last day of the Equity Election Revocation Period, and (ii) shall not be subject to the Future Ads Lockup Agreements.”
2) Acknowledgment. The Parties hereby acknowledge that Holdco previously has paid $5,000,000 of the Additional Consideration, in cash, and the remaining balance of the Additional Consideration due from Holdco to the Transferors (sometimes referred to as the Capital Raise Deficit Amount) as of the date hereof is $5,000,000, which shall be paid in accordance with Section 2.3 of the Exchange Agreement.
3) Governing Law. This Amendment shall be governed in all respects in accordance with the provisions of Section 8.9 of the Exchange Agreement.
4) No Other Amendment. Except as amended hereby, the Exchange Agreement shall remain in full force and effect. By executing this Amendment below, each of the Parties certifies that this Amendment has been executed and delivered in compliance with the amendment provisions of the Exchange Agreement.
5) Counterparts. This Amendment may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.
6) Facsimile or Portable Document File Signature. This Amendment may be executed by facsimile or portable document file signature and a facsimile or portable document file signature shall constitute an original for all purposes.
[The remainder of this page is intentionally left blank.]
| 4 |
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives as of the date hereof.
|
|
PROPEL MEDIA, INC. | |
| By: | /s/ Marv Tseu | |
| Name: Marv Tseu | ||
| Title: CEO | ||
| KITARA MEDIA CORP. | ||
| By: | /s/ Marv Tseu | |
| Name: Marv Tseu | ||
| Title: CEO | ||
| PROPEL MEDIA LLC | ||
| By: | /s/ Marv Tseu | |
| Name: Marv Tseu | ||
| Title: | CEO | |
| LOWENSTEIN ENTERPRISES CORPORATION | ||
| By: | /s/ Jared Pobre | |
| Name: Jared Pobre | ||
| Title: CEO | ||
| FAMILY TRUST OF JARED L. POBRE, U/A DTD 12/31/2004 | ||
| By: | /s/ Jared Pobre | |
| Name: Jared Pobre | ||
| Title: Trustee | ||
| NEWPORT HOLDING TRUST | ||
| By: | /s/ David McNair | |
| Name: David McNair | ||
| Title: Managing Trustee | ||
| NEPTUNE CAPITAL TRUST | ||
| By: | /s/ Brian Mason | |
| Name: Brian Mason | ||
| Title: Managing Trustee | ||
Signature Page to Sixth Amendment to Unit Exchange Agreement
Exhibit 99.1
Propel Media Announces Intent to Deregister Its Common Stock
IRVINE, Calif., August 13, 2018. Propel Media, Inc. (OTC Pink: “PROM”) (“Propel Media” or the “Company”), a performance focused digital media and advertising company, today announced its intention to deregister its common stock and suspend its reporting obligations with the Securities and Exchange Commission (the “SEC”). The required documentation to deregister Propel Media’s common stock and suspend its reporting obligations, which is expected to be filed with the SEC on or about September 4, 2018, will not impact stockholders’ ownership of their common stock, and such common stock will continue to represent the same percentage ownership interest in the Company as immediately before such filing.
Marv Tseu, Propel Media’s Chief Executive Officer, stated: “During the past several years, the trading volume in our stock has been low. In addition, the valuations of comparable publicly-traded businesses in our sector have been erratic and volatile, making it difficult to use stock as a currency for accretive acquisitions. At the same time, the valuations of privately-held businesses in the sector have often eclipsed those of their publicly-traded peers. Because of these factors, which are exacerbated by our small float (more than 78% of the outstanding shares are owned by founders, directors and officers), we don’t believe that the benefits of maintaining our status as a reporting company outweigh the management time, cost and other burdens associated with such status.”
Deregistration will reduce the Company’s administrative costs and it will eliminate the time and distractions of the management team associated with SEC reporting requirements. As a result, Propel Media’s team will be able to increase its focus on maintaining its core business and growing DeepIntent, its AI-based platform. DeepIntent enables large advertisers to curate and target relevant audiences efficiently, resulting in a significant increase in the financial returns realized through their advertising campaigns. The Company will also continue to aggressively pursue other opportunities to diversify its revenue streams by providing new services to brands and direct-response advertisers in both existing and new markets for both customer acquisition and increased customer engagement.
Propel Media’s board of directors decided to deregister and suspend its reporting obligations after careful consideration of the advantages and disadvantages of being an SEC reporting company. The decision to deregister was also made in conjunction with the board’s continuing review of various strategic alternatives available to the Company. In addition, the board considered many factors in making this decision, including:
| ● | the low trading volume and minimal liquidity in Propel Media’s common stock and the current lack of analyst coverage for the stock; |
| ● | the lack of institutional investor support and interest in Propel Media in particular and publicly-traded AdTech companies in general; and |
| ● | the costs and significant management time associated with the preparation and filing of periodic reports with the SEC and the burdens associated with complying with laws applicable to reporting companies, such as the Sarbanes-Oxley Act of 2002. |
Propel Media intends to file a Form 15 with the SEC on or about September 4, 2018 to terminate the registration of its stock and suspend its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). After the filing of the Form 15, Propel Media will no longer be required to file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The obligation to file other reports under the Exchange Act will continue until the deregistration is effective 90 days after the filing of the Form 15.
The Company believes that, immediately following the filing of the Form 15, its common stock will continue to be quoted on the OTC Pink, a centralized electronic quotation service operated by the OTC Markets for over-the-counter securities. However, the Company can give no assurance that trading in its stock will continue in the future on the OTC Pink or on any other securities exchange or quotation medium.
Stockholders may consult their financial advisors, the Company or the Company’s Transfer Agent, Continental Stock Transfer & Trust Company, regarding any questions related to their holding of common stock in the Company following the Company deregistering its common stock and suspending its reporting obligations with the SEC.
About Propel Media
Propel Media connects digital marketers with unique audiences through intent-based technology that delivers superior performance with measurable results. We “Do Digital Differently” with a distinctive approach to digital powered by proprietary contextualization technology and a unique supply of ad inventory. Headquartered in Irvine, California, Propel Media is distinguished by its ability to deliver consistent results and its commitment to providing the highest level of client services to its partners. For more information, visit: www.propelmedia.com.
Forward-Looking Statements:
This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not statements of historical fact. Forward-looking statements herein include those statements regarding Propel Media’s capital structure, ability to execute its operating plan, anticipated financial flexibility and future financial performance and any other statements that are not statements of historical fact. These statements may be identified, without limitation, by the use of forward-looking terminology such as “anticipates”, “expects,” “will” or comparable terms or the negative thereof. Such statements are based on management’s current estimates, assumptions that management believes to be reasonable, and currently available competitive, financial, and economic data as of the date hereof. Forward-looking statements are inherently uncertain and subject to a variety of events, factors and conditions, many of which are beyond the control of Propel Media and not all of which are known to Propel Media, including, without limitation, Propel Media’s ability to realize anticipated cost savings from its deregistration, the ability to timely and effectively implement its deregistration plans, adverse effects on share price and liquidity following Propel Media’s deregistration, as well as more general business and financial risks such as those risk factors described from time to time in Propel Media’s reports filed with the SEC. Among the business and financial factors that could cause Propel Media’s actual results to differ materially are: loss of key advertising customers; inability to acquire new advertising customers; limitations on its ability to acquire new users profitably or at all, including, but not limited to, due to changing policies of Google, Facebook or another larger industry participant; inability to protect its intellectual property; inability to comply with the covenants in its credit facility; inability to obtain necessary financing or enter into equity arrangements with existing or new institutional shareholders; inability to execute its acquisition strategy; inability to effectively manage its growth; failure to effectively integrate the operations of acquired businesses; competition; loss of key personnel; increases in costs of operations; continued compliance with government regulations; and general economic conditions. Further, investors should keep in mind that Propel Media’s financial results in any particular period may not be indicative of future results. Propel Media is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise, except as required by law.