Blueprint
Exhibit 99.2
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ITEM
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PAGE
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Report
of Independent Registered Public Accounting Firm
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1
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Special
Purpose Statement of Revenues and Direct Expenses for the Year
Ended September 30, 2018
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2
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Notes
to Special Purpose Statement of Revenues and Direct
Expenses
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3
– 10
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Report of Independent Registered Public Accounting
Firm
To the
Board of Directors and
Stockholders
of Onstream Media Corporation
Opinion on the Financial Statements
We have
audited the accompanying Special Purpose Statement of Revenues and
Direct Expenses and related notes (collectively referred to as the
“financial statement”) of the VisualWebcaster Platform
of Onstream Media Corporation (the “Company”) for the
year ended September 30, 2018. In our opinion, the financial
statement presents fairly, in all material respects, the revenues
and direct expenses of the Company for the year ended September 30,
2018, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
This
financial statement is the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statement based on our audit. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement
is free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audit, we are required to obtain an understanding of
internal control over financial reporting, but not for the purpose
of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the financial statement, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statement. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis
for our opinion.
Emphasis of Matter
As
discussed in Note 1 to the financial statement, complying with the
rules and regulations of the Securities and Exchange Commission for
inclusion in the amendment to the current report on Form 8-K/A of
Issuer Direct Corporation, have been prepared for the purposes of
the Company, and are not intended to be a complete presentation of
the results of operations or of the Company. Our opinion is not
modified with respect to this matter.
/S/
Cherry Bekaert LLP
We have
served as the Company’s auditor since 2018.
Raleigh,
North Carolina
March
15, 2019
VISUALWEBCASTER PLATFORM OPERATIONS OF ONSTREAM MEDIA
CORPORATION
SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE YEAR ENDED SEPTEMBER 30, 2018
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Total
revenues
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$3,045,016
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Costs and
expenses:
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Costs
of revenue
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$967,794
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Compensation
expense
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1,229,275
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Other
general and administrative expense
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421,585
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Total costs and
expenses
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$2,618,654
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Contribution from
webcasting operations
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$426,362
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The accompanying notes are an integral part of this special purpose
statement of revenues and direct expenses.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 1:
NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business
Onstream Media
Corporation (“we”, “us” or "Onstream"), a
Florida corporation organized in 1993, is a leading online service
provider of live and on-demand corporate audio and web
communications, virtual event technology and social media
marketing, provided primarily to corporate (including large as well
as small to medium sized businesses), education and government
customers. Our VisualWebcaster Platform operations
(“VWP”) are located primarily in South Florida and are
supported by an office in New York City. VWP provides an array of
corporate-oriented, web-based media services including live audio
and video webcasting and on-demand audio and video streaming for
any business, government or educational entity. VWP generates
revenue primarily through production and distribution fees.
VWP’s sales are primarily to United States based customers,
although sales are also made to customers based in Canada, Europe
and other international locations.
Basis of Presentation
On
January 3, 2019 (the “Closing Date”), we entered into
an Asset Purchase Agreement (the “Purchase Agreement”)
with Issuer Direct Corporation, a Delaware corporation (the
“Buyer”), whereby we sold and the Buyer purchased
certain assets related primarily to customer accounts, intellectual
property, fixed assets and assumed certain existing contractual
obligations related primarily to data processing and storage,
bandwidth and facility leases relating to VWP. The accounts
receivable and the accounts payable related to VWP and existing as
of the Closing Date were not included as part of the Purchase
Agreement. See Note 4 – Subsequent Events for additional
details of this transaction.
The
accompanying special purpose statement of revenues and direct
expenses (the “Statement”) has been prepared for
inclusion in the Buyer’s filings with the Securities and
Exchange Commission under Rule 3-05 of Regulation S-X. It is
impracticable to prepare complete financial statements related to
VWP as these operations were not a separate legal entity of
Onstream and was never operated as a stand-alone business, division
or subsidiary. We have never prepared full stand-alone or full
carve-out financial statements for VWP. Because we did not account
for VWP as a separate entity, this Statement was derived from the
operating activities directly attributed to VWP from our internal
books and records.
The
resulting Statement is measured in accordance with United States
generally accepted accounting principles (US GAAP). However,
the direct expenses and revenues of VWP as presented in the
Statement may differ materially from (i) the results that would
have been achieved had VWP been operated as a separate entity and
(ii) the results that will be achieved going forward after giving
effect to the Purchase Agreement.
VWP’s
financing needs were supported by Onstream and cash generated by
VWP was commingled with funds from our other operations. As VWP has
historically been managed as part of Onstream and has not operated
as a stand-alone entity, it is impractical to prepare historical
cash flow information regarding VWP’s operating, investing,
and financing cash flows. As such, information on cash flows is not
presented herein.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 1:
NATURE OF BUSINESS AND BASIS OF PRESENTATION
(Continued)
Basis of Presentation (continued)
During fiscal 2018, we received aggregate gross
cash proceeds (the “Purchase Price”) of $2.5 million
for the sale, effective April 30, 2018, of certain Onstream
accounts (and the related future business to those customers)
(“Sold Accounts”), to Infinite Conferencing Partners
LLC, a Florida limited liability company (“Partners”).
The accounts (and the related future business to those customers)
included in that sale represented historical annual revenues of
approximately $3.9 million, of which approximately $2.4 million was
associated with VWP accounts (“Sold VWP
Accounts”). Since the Partners transaction, with
respect to VWP, was materially discontinued as a result of our
repurchase of all but one of those Sold VWP Accounts in January
2019 in order for us to then sell them to the Buyer (see Note 4
– Subsequent Events), we have not reflected the Partners
transaction in this Statement, including the following two
items:
We have
excluded from this Statement the above proceeds received from
Partners and allocable to the Sold VWP Accounts. Section 1.2.1.2 of
the SEC’s Financial Reporting Manual refers to Rule 11-01 of
Regulation S-X, which among other things lists as a determiner of
what constitutes a business as “whether the nature of the
revenue-producing activity of the component will remain generally
the same as before the transaction”. Proceeds from selling
accounts would not be expected to continue in the future under the
Buyer’s ownership of VWP and are not directly related to the
revenue producing activities of VWP. Therefore, we conclude that
these proceeds, a one-time payment for the purchase of VWP
accounts, are not part of the business being sold (i.e., VWP) and
thus are excluded from the Statement.
We have concluded that the Partners’
guaranteed return related to the Sold VWP Accounts, as well as the
other related expenses incurred by us, are indirect expenses and
thus are excluded from this Statement. The guidance for abbreviated financial
statements in the SEC’s Financial Reporting Manual provides
that “the staff would expect the
statement of revenues and direct expenses to exclude only those
costs not directly involved in the revenue producing activity, such
as corporate overhead, interest and taxes”. Since this
guidance specifically allows the exclusion of interest and since
the list of specifically identified excludable items is preceded by
“such as”, we have concluded that similar costs to
those listed, if not directly involved in the revenue producing
activity, would be excludable. The Partners’ guaranteed
return, even though not structured as an interest payment, is
calculated as a fixed percentage of the original purchase price
paid to us, and thus is a cost of money payment very similar to
interest and is not directly involved in the revenue producing
activity (i.e., VWP).
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 1:
NATURE OF BUSINESS AND BASIS OF PRESENTATION
(Continued)
Basis of Presentation (continued)
Onstream entered
into a Master Services Agreement (“Platform MSA”) with
a company (“Platform”) on July 26, 2016 providing for
Platform to develop a cloud media encoding platform for VWP’s
use. As of September 30, 2018, we had paid Platform $50,000 in
progress payments against the $100,000 total contract value. The
remaining $50,000 was contractually identified as being for initial
testing and acceptance. Therefore, the payments made as of
September 30, 2018 were reflected as an asset on
Onstream/VWP’s balance sheet as of that date, since the
encoding platform was not yet completed nor in service. The
Platform MSA also called for licensing fees to be paid by Onstream
to Platform, commencing January 1, 2017 in the amount of 14,500 BP
per quarter plus 1% of all annual turnover processed through the
platform in excess of $6.5 million. These fees were not paid nor
accrued by Onstream/VWP. The Platform MSA was amended on December
4, 2018, acknowledging that the contract requirements had been met
as of that date and providing that the remaining $50,000 due under
the contract would be paid by March 4, 2019, although as of March
15, 2019 it has not been paid. In addition, the amendment deferred
the start date of 40% of the licensing fees (related to audio
events) to December 1, 2018 and the remaining 60% (related to video
events) to the acceptance date as defined in the Platform MSA,
which was subsequently determined to be March 1, 2019. Platform, in
a document they executed on December 3, 2018, agreed to assign the
Platform MSA to the Buyer effective as of the January 3, 2019
purchase date, although we remain obligated for the $50,000 still
due on the contract as well as the licensing fees accrued through
that date.
Onstream entered
into a Master Services Agreement (“Data Center MSA”)
dated April 11, 2017 and amended on April 20, May 19 and July 27,
2017, with a company (“Data Center”). The Data Center
MSA, with a 36-month term, was for our purchase of production data
center services, production private cloud services, DR public cloud
(Dallas) services, certain software licenses and other charges as
well as amortization of the initial set-up fee. The total monthly
obligation under the Data Center MSA, as amended, is $23,116.60 -
$21,874.02 for the core charge, of which $11,593.23 was allocated
to VWP’s costs of revenue and the balance to our other
operations based on relative CPU count, and $1,242.58 for MS Office
365 and other office/network software, of which $305.75 was
allocated to VWP’s general and administrative expense and the
balance to our other operations based on relative employee
headcount. Due to implementation delays, Data Center did not begin
charging us for the core charge until November 1, 2017 and they
credited us for 50% of that charge for both November and December
2017. In connection with the January 3, 2019 sale of VWP, the Buyer
agreed to assume as of that date $15,000 of the monthly obligation
for the core charge plus the charge corresponding to the MS Office
365 and other office/network software that it retained for the VWP
employees and/or operations. Although Data Center, in a document
they executed on December 30, 2018, agreed to assign the Data
Center MSA to the Buyer effective as of the January 3, 2019 sale
date, Data Center’s implementation of an assignment under the
terms agreed between us and the Buyer is still in progress as of
March 15, 2019.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 2:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenues from sales
of goods and services are recognized when (i) persuasive evidence
of an arrangement between us and the customer exists, (ii) the
goods or service has been provided to the customer, (iii) the price
to the customer is fixed or determinable and (iv) collectability of
the sales price is reasonably assured. Revenues as presented in the
Statement include customer proceeds from the Sold VWP Accounts,
which were deposited in a segregated Partners owned bank account
and then passed on to Infinite (on
behalf of VWP and all other Onstream operations participating in
the Partners transaction), after the deduction of the
Partners’ guaranteed return related to the Sold VWP Accounts,
as well as the other related expenses.
VWP
recognizes revenue from live and on-demand webcasts at the time an
event is accessible for streaming over the Internet. VWP services
are provided to customers using our proprietary streaming media
software, tools and processes. Customer billings are typically
based on (i) the volume of data streamed at rates agreed upon in
the customer contract or (ii) a set monthly fee. Since the primary
deliverable is a webcast, returns are inapplicable. If we have
difficulty in producing the webcast, we may reduce the fee charged
to the customer. Historically these reductions have been immaterial
and are recorded in the month the event occurs.
Services for live
webcast events are usually sold for a single price that includes
on-demand webcasting services in which we host an archive of the
webcast event for future access on an on-demand basis for periods
ranging from one month to one year. However, on-demand webcasting
services are sometimes sold separately without the live event
component and we have referred to these separately billed
transactions as verifiable and objective evidence of the amount of
our revenues related to on-demand services. In addition, we have
determined that the material portion of all views of archived
webcasts take place within the first ten days after the live
webcast.
Amounts
billed to or received from customers for webcasting services to be
provided in future accounting periods are recorded on our balance
sheet as deferred revenue. The revenue is recognized when the
events are completed and/or the services provided.
Concentration of Credit Risk and Bad Debt Reserves
Two
customers represented 16.3% and 15.4%, respectively, of our total
revenues for the year ended September 30, 2018. The customer
representing 16.3% is a large, well-known manufacturer of computer
products. The customer representing 15.4% resells our webcasts to
third party end users, none of which accounted for more than 1% of
our total revenues for the year ended September 30, 2018, and which
is the VWP account not repurchased by us from Partners and not sold
by us to the Buyer (see Note 4 – Subsequent Events). The
above percentages do not reflect concentrations resulting from our
April 30, 2018 transaction with Partners (see Note 1 – Nature
of Business and Basis of Presentation).
We
perform ongoing credit evaluations of our customers' financial
condition and do not require collateral from them. Reserves for
credit losses are maintained at levels considered adequate by our
management.
Where
we are aware of circumstances that may impair a specific customer's
ability to meet its financial obligations, we record a specific
allowance against amounts due from it, and thereby reduce the
receivable to an amount we reasonably believe will be collected.
For all other customers, we recognize allowances for doubtful
accounts based on the length of time the receivables are past due,
the current business environment and historical
experience.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 2:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Costs and Expenses
Costs
of revenues includes (i) direct labor (as discussed in the next
paragraph), (ii) costs for streaming, bandwidth, colocation and
infrastructure services and (iii) costs of third-party production
and other services.
Compensation
expense includes all amounts paid to VWP employees, including (i)
base payroll, bonuses, commissions, vacation and other compensated
absences, (ii) health and other insurance, net of the
employees’ share and (iii) the employer’s share of
payroll taxes, except that compensation expense for VWP employees
considered to be direct labor are classified under costs of
revenue.
Other
general and administrative expense includes rental expense,
professional fees, sales and marketing costs, phone expense, bank
and credit card fees, computer and office supplies, travel and
entertainment, depreciation and amortization and bad debt
expense.
Total
rental expense (including executory costs) was approximately
$161,000 for the year ended September 30, 2018. This rental expense
is primarily related to VWP’s Pompano Beach, Florida
location, but it also includes the cost of a dedicated sales office
in New York City, which is leased on a year-to-year basis, and an
allocation related to the estimated portion of a San Francisco
office space housing our EDNET operations kept available for
back-up of the VWP operations.
The
operating lease for VWP offices (in a facility shared with our
principal executive offices) in Pompano Beach, Florida expired
September 15, 2013. After that time, although we attempted to
negotiate an extension, this lease effectively remained on
month-to-month status, during which time we recorded a monthly
rental expense of approximately $21,100 (including sales taxes and
our estimated share of property taxes, insurance and other
operating expenses incurred under the lease), which excludes
operating expenses such as electricity paid by us directly. As of
September 30, 2018, our rent payments calculated on this basis were
in arrears by approximately $338,000 (sixteen months) and in
January 2019, we concluded negotiations with the landlord to settle
this obligation for $160,000, paying $100,000 at that time and
agreeing to pay the remaining $60,000 in equal installments over
the subsequent twenty-four months. Thirty-five percent of the
originally recorded rental expense for this facility and the
related operating expenses were allocated to VWP through September
30, 2018, based on an evaluation of the relative square footage
usage. Notwithstanding the January 2019 settlement, we determined
that the rent expense originally allocated to VWP was reasonable
based on market rates for the square footage being used and
therefore the credit resulting from the settlement was determined
to be a reduction of corporate overhead unrelated to
VWP.
VWP
moved out of the Pompano Beach facility during October 2018, to a
dedicated facility in nearby Fort Lauderdale. The lease for that
new facility was effective in July 2018 but the full monthly rental
of approximately $4,500 per month (including sales taxes and our
estimated share of property taxes, insurance and other operating
expenses incurred under the lease) did not commence until four
months after substantial completion of the landlord’s work,
which completion was in August 2018. Therefore, we only paid
approximately $1,600 per month (our estimated share of property
taxes, insurance and other operating expenses incurred under the
lease) from September 2018 through December 2018 and upon our sale
of VWP on January 3, 2019 (see Note 4 – Subsequent Events),
the Buyer entered into a lease directly with the landlord of this
Fort Lauderdale facility, which cancelled all of our remaining
obligations, including termination payments, under the July 2018
lease.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 2:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Costs and Expenses (continued)
Depreciation is
computed using the straight-line method over the estimated useful
lives of the related assets. The costs of leasehold improvements
are amortized over the lesser of the lease term or the life of the
improvement. Total depreciation expense was approximately $18,000
for the year ended September 30, 2018.
VWP
shares certain resources with our other operations and/or
subsidiaries. These resources include, but are not limited to, (i)
facility rent and related utilities, maintenance and repairs, (ii)
certain marketing and professional fee expenses, (iii) certain
bandwidth and similar other product related expenses and (iv) the
salary and related benefits and taxes for one marketing executive.
An allocated portion of these expenses are included in the
Statement, generally on a basis to reflect the actual relative
usage of such resources, derived from relative square footage,
headcount or other reasonable and consistently applied allocation
methodologies.
Corporate Overhead
Onstream
and Infinite personnel perform certain functions for VWP including,
but not limited to, executive management, legal services,
administration of insurance, regulatory and compliance, treasury,
information systems, receivable invoicing and collections, payables
processing and payment, general accounting, tax administration,
human resources and employee compensation and benefit
management. The costs of these functions historically have not
been allocated to our products, are not directly attributable or
specifically identifiable to VWP, and therefore, are not included
in the Statement. Income taxes and interest expense have not
been included in the Statement as these expenses are not
specifically identifiable to VWP.
Accounting Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires our management to make estimates and assumptions that
affect the reported amounts of revenue and expenses during the
reporting period. Estimates are used when accounting for allowances
for doubtful accounts, depreciation lives and methods and
allocation of expenses. Such estimates are reviewed on an ongoing
basis and actual results could be materially affected by those
estimates. However, the direct
expenses and revenues of VWP as presented in the Statement may
differ materially from the results that would have been achieved
had VWP been operated as a separate entity (see Note
1).
Effects of Recent Accounting Pronouncements
In May
2014, the FASB issued ASU 2014-09 (Revenue from Contracts with
Customers (Topic 606)), which requires an entity to recognize
revenue from the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. The guidance addresses in particular contracts with more
than one performance obligation as well as the accounting for some
costs to obtain or fulfill a contract with a customer and provides
for additional disclosures with respect to revenues and cash flows
arising from contracts with customers. After giving effect to ASU
2015-14 issued in August 2015, which provided a deferral of the
effective dates, this update is effective with respect to public
entities no later than fiscal years, and interim periods within
those years, beginning after December 15, 2017. Accordingly,
Onstream, including VWP, has not implemented this guidance.
Notwithstanding this, we expect that such implementation would have
no material impact on the Statement.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 2:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Effects of Recent Accounting Pronouncements
(continued)
In
February 2016, the FASB issued ASU 2016-02 (Leases (Topic 842)),
which requires that the assets and liabilities arising from leases,
including operating leases, be recognized on the balance sheet. For
operating leases, a lessee is required to do the following: (i)
recognize a right-of-use asset and a lease liability, initially
measured at the present value of the lease payments, in the balance
sheet, (ii) recognize a single lease cost, calculated so that the
cost of the lease is allocated over the lease term on a generally
straight-line basis and (iii) classify all cash payments within
operating activities in the statement of cash flows. However, for
leases with a term of 12 months or less, a lessee is permitted to
make an accounting policy election by class of underlying asset not
to recognize lease assets and lease liabilities. This update is
effective with respect to public entities no later than fiscal
years, and interim periods within those years, beginning after
December 15, 2018. Accordingly, Onstream, including VWP, has not
implemented this guidance. Notwithstanding this, we expect that
such implementation would have no material impact on the
Statement.
In June
2016, the FASB issued ASU 2016-13 (Financial Instruments –
Credit Losses (Topic 326)), which replaces the incurred loss
impairment methodology in current GAAP with a methodology that
reflects expected credit losses and requires consideration of a
broader range of information to inform credit loss estimates,
including not only historical experience and current conditions,
but reasonable and supportable forecasts. The financial assets
affected by this pronouncement include trade receivables. This
update is effective with respect to public entities no later than
fiscal years, and interim periods within those years, beginning
after December 15, 2019. Accordingly, Onstream, including VWP, has
not implemented this guidance. Notwithstanding this, we expect that
such implementation would have no material impact on the
Statement.
NOTE 3: RELATED PARTY TRANSACTIONS
VWP
invoices Infinite for webcasting services which Infinite then
resells to its customers. Infinite invoices VWP for
teleconferencing services which VWP then resells to its customers.
For the year ended September 30, 2018, VWP’s invoices to
Infinite and included in VWP’s revenue totaled approximately
$170,000, and Infinite’s invoices to VWP and included in
VWP’s costs of revenue totaled approximately $60,000. Another
approximately $4,000 of the approximately $10,000 billed to us by
Infinite for employee conference calling charges was allocated to
VWP’s general and administrative expenses, based on actual
usage by VWP employees.
Included in
VWP’s fiscal 2018 invoices to Infinite is approximately
$43,000 for webcasting events provided to an Infinite client in
which five Onstream executives hold, on an aggregate basis, a 25%
non-voting ownership interest. Approximately $87,000 for such
events was invoiced by VWP to Infinite during fiscal 2019 through
the January 3, 2019 sale of VWP (see Note 4 – Subsequent
Events). As of March 15, 2019, Infinite has been unable to collect
its receivable for these webcasts, as well as other amounts billed
by Infinite, from the client. Furthermore, it appears that the
client has taken other actions contrary to Onstream and Infinite
interests, and while Onstream and Infinite are still in discussions
with the client attempting to resolve these matters, it is possible
at this point the matter will go to litigation. Onstream and
Infinite have agreed that any write-off related to this client will
be absorbed by Infinite, and as of February 27, 2019 Infinite had
paid Onstream in full for these webcasts.
VISUALWEBCASTER
PLATFORM OPERATIONS OF ONSTREAM MEDIA CORPORATION
NOTES
TO THE SPECIAL PURPOSE STATEMENT OF REVENUES AND DIRECT
EXPENSES
FOR THE
YEAR ENDED SEPTEMBER 30, 2018
NOTE 4:
SUBSEQUENT EVENTS
With
respect to the January 3, 2019 Purchase Agreement (see Note 1
– Nature of Company and Basis of Presentation), the Buyer
paid us a cash payment of approximately $2.8 million (the
“Purchase Price”) on the Closing Date. Pursuant to an
agreement between Onstream and Partners, $1.3 million of the
Purchase Price was simultaneously remitted to Partners for
repurchase of all but one of the VWP accounts previously sold by us
to Partners in the April 30, 2018 transaction as described in Note
1. The VWP account not repurchased by us from Partners and not sold
by us to the Buyer represented historical annual revenues of
approximately $470,000.
In
connection with the Purchase Agreement, Onstream, as well as our
Chief Executive Officer, Chief Financial Officer and three other
senior executives, agreed to 5-year non-compete provisions as part
of the Purchase Agreement, with the exceptions as set forth below.
In addition, the Buyer entered into separate Reseller Agreements
with Onstream and with Infinite whereby we shall continue to
utilize certain technology relating to VWP with respect to portions
of those operations we retained after the Effective Date. The
Reseller Agreements each have five-year terms and may be extended
for an unlimited number of one-year terms thereafter. The Buyer
will receive 35% of all revenue generated by us from these Reseller
Agreements for the first two years and then receive 50% of all
revenue generated by us for the final three years and during any
extension of the term of the Reseller Agreements. Our performance
under the terms of these Reseller Agreements will not be violations
of the non-competition requirements set forth above. Also, in
connection with the Purchase Agreement, the Buyer agreed to
exclusively use Infinite’s teleconferencing service for a
period of five years which may be extended for an unlimited number
of one-year terms thereafter for a discounted pricing
rate.
We have evaluated our activity from September 30,
2018 until the date of issuance of the Statement (March 15,
2019) and are not aware of any events that have occurred subsequent
to September 30, 2018 that would require adjustments to or
disclosure in the Statement or related notes besides the paragraphs
above.