Subsequent Events

6 Months Ended

Jun. 30, 2018

14. Subsequent Events

Shareholder Note Payable

On July 13, 2018 the Company borrowed $225,000 from the CEO on a new promissory note payable upon demand with interest at the minimum applicable federal rate which is approximately 2.34 percent.

Asset Purchase Agreement – Say Media, Inc.

On August 4, 2018, the Company and Say Media, Inc., a Delaware corporation (“Say”), entered into an Amended & Restated Asset Purchase Agreement (the “APA”), pursuant to which the Company will acquire substantially all of the assets of Say and assume certain liabilities of Say (the “Acquisition”). On August 24, 2018, the Company and Say entered into a modification to the APA to re-negotiate the Acquisition as a merger rather than as an asset purchase arrangement. The parties are continuing to negotiate the terms of a merger agreement . The parties have agreed to restructure the Company’s proposed acquisition of Say from an asset purchase to a merger. Accordingly, the End Date (as that term is defined in the APA) has been pushed back from August 20, 2018 to September 10, 2018, to give the parties time to negotiate a definitive merger agreement pursuant to which a to-be-formed subsidiary of the Company will merge with and into Say, with Say continuing as the surviving corporation in the merger and a wholly-owned subsidiary of the Company.

In connection with the Amendment, the Company made a $100,000 payment to a creditor of Say and a $450,000 payment to counsel for Say for legal fees and expenses incurred to date and that may be incurred in the future, in each case, by Say in connection with the transactions contemplated by the APA and the negotiation, execution and consummation of the proposed merger agreement between Say and the Company.

Subsequent to the initial Acquisition Agreement, the Company has made cash payments to Say Media or to creditors of Say Media totaling $3,680,000:

Loan of $1 million on March 26, 2018

Loan of $250,000 on July 23, 2018

Loan of $322,000 on August 21, 2018

Legal fees of $450,000 on August 24, 2018

$100,000 payment to creditor on August 24, 2018

Operating expenses of $1,558,000 during August and September 2018

Summary of the APA Prior to Modification to Renegotiate the Acquisition as a Merger

Pursuant to the APA, the Company shall (i) pay to Say $5,887,072 in cash consideration at closing, up to $1,250,000 of which shall be paid by cancelling (x) the $1,000,000 Promissory Note of Say dated March 26, 2018 and (y) the $250,000 Promissory Note of Say dated July 23, 2018, (ii) issue to Say a secured promissory note in principal amount of $7,434,003, due on December 10, 2018 (the “Note”), (iii) issue (A) 1,840,000 restricted shares of Common Stock of the Company to Say and (B) 160,000 restricted shares of Common Stock of the Company, plus that number of convertible securities equal to $350,000 divided by the lowest price per share paid in the Company’s then most recent equity financing, to Say What, LLC, in partial satisfaction of certain senior promissory notes issued by Say to Say What, (iv) pay Say’s legal fees and expenses in connection with the transaction, up to $250,000, (v) on or before October 15, 2018, deliver a Letter of Credit to Say as partial security for the Company’s obligations under the Note, (vi) reimburse Say for its legal, accounting and other costs incurred in connection with the winding down and dissolution of Say, in an aggregate amount not to exceed $300,000, and (vii) issue to certain employees and consultants of Say who will continue to be service providers of the Company, a further 2,000,000 restricted shares of Common Stock of the Company.

The APA contains typical representations and warranties by Say about its business, operations and financial condition. Consummation of the Acquisition is subject to certain customary closing conditions. The Company will have to obtain financing for the Letter of Credit in October 2018 and for the repayment of the Note in December 2018, and there can be no assurance that the Company will be able to obtain the necessary funds on terms acceptable to it or at all. The Note will have a security interest in all the assets of the Company.

Strome Warrant Adjustment

Furthermore, effective as of August 3, 2018, the Company adjusted the exercise price of the Common Stock Purchase Warrant to purchase up to 1.5 million shares of the Company’s Common Stock, issued to the Strome Mezzanine Fund LP on June 15, 2018, from $1.19 per share to $0.50 per share.

Securities Purchase Agreement – Series H Convertible Preferred Stock

On August 10, 2018 (the “Closing Date”), the Company, closed on a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company sold an aggregate of 18,730 shares of the Company’s Series H Convertible Preferred Stock, par value $0.01 per share (the “Series H Preferred Stock”), at a stated value of $1,000 (the “Stated Value”), initially convertible into 56,757,575 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at a conversion rate equal to the Stated Value divided by the conversion price of $0.33 (the “Conversion Price”), for aggregate gross proceeds of $13 million. Of the shares of Series H Preferred Stock issued, 5,730 were issued upon conversion of an aggregate principal amount of $4,775,000 and interest and prepayment amounts of the 10% Convertible Debentures (the “Debentures”) issued by the Company on June 15, 2018 to certain accredited investors, including 1,200 shares of Series H Preferred Stock issued to James Heckman, the Company’s Chief Executive Officer, and 30 shares of Series H Preferred Stock issued Josh Jacobs, the Company’s President.

B. Riley FBR, Inc. (“B. Riley”) acted as placement agent for the financing. In consideration for its services as placement, the Company paid B. Riley a fee of $575,000 (including a previously paid retainer of $75,000) and issued to B. Riley 669 shares of Series H Preferred Stock. In addition, entities affiliated with B. Riley purchased 5,592 shares of Series H Preferred Stock in the financing.

The number of shares of Common Stock issuable upon conversion of the Series H Preferred Stock is currently 58,784,849. The terms of Series H Preferred Stock and the number of shares of Common Stock issuable is adjustable in the event of stock splits, stock dividends, combinations of shares and similar transactions. In addition, if at any time prior to the nine month anniversary of the Closing Date, the Company sells or grants any option or right to purchase or issues any shares of Common Stock, or securities convertible into shares of Common Stock, with net proceeds in excess of $1 million in the aggregate, entitling any person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price”), then the Conversion Price shall be reduced to equal the Base Conversion Price. All of the shares of Series H Preferred Stock shall convert automatically into shares of Common Stock on the fifth anniversary of the Closing Date at the then Conversion Price.

In connection with the financing, B. Riley and a majority-in-interest of the Investors each have been granted the right to designate one director to the Company’s Board of Directors, (each a “Designee”). Further, so long as at least 20% of the shares of Series H Preferred Stock issued in the financing are outstanding, the Company shall recommend to its stockholders that it elect each Designee to serve as a director on the Company’s Board of Directors.

The Company intends to use the net proceeds from the financing to consummate its previously announced acquisitions of Say Media, Inc. and HubPages, Inc. and for working capital and general corporate purposes.

Additionally, pursuant to a Registration Rights Agreement (“Registration Rights Agreement”) entered into in connection with the Securities Purchase Agreement, the Company agreed to register the shares issuable upon conversion of the Series H Preferred Stock for resale by the Investors. The Company has committed to file the registration statement by no later than 75 days after the Closing Date and to cause the registration statement to become effective by no later than 120 days after the Closing Date (or, in the event of a full review by the staff of the Securities and Exchange Commission, 150 days following the Closing Date). The Registration Rights Agreement provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such Investor pursuant to the Purchase Agreement.

Merger Agreement – HubPages, Inc

On August 23, 2018, TheMaven, Inc. consummated the merger between HubPages, Inc. (“HubPages”) and the Company’s wholly-owned subsidiary, HP Acquisition Co., Inc. (“HPAC”), in which HPAC merged with and into HubPages, with HubPages continuing as the surviving corporation in the merger and a wholly-owned subsidiary of the Company (the “Merger”), pursuant to the terms of the previously announced an Agreement and Plan of Merger (the “Merger Agreement”), dated as of March 13, 2018, as amended, among the Company, HubPages, HPAC and Paul Edmondson, solely in his capacity as Securityholder Representative.

In connection with the consummation of the Merger, the Company paid a total of $10 million to HubPages’ stockholders and holders of vested options. The Company also issued a total of 2.4 million shares of restricted Common Stock, subject to vesting, to certain key personnel of HubPages who agreed to continue their employment with HubPages.

Repayment of 8% Convertible Notes Payable

On September 6, 2018, the Company repaid the 8% Convertible Notes Payable to L2 Capital, LLC. The total amount borrowed was $1 million and under the terms of the agreement the Company repaid $1,351,000 to satisfy the debt. A loss on repayment of the debt in the amount of $751,000 was recorded.