During the first quarter of 2014, the Company
entered into an exclusive three-year agreement with DADC to provide all CD, DVD and Blu-ray replication, packaging and distribution
to the Company’s direct customers. Under the terms of the long-term, exclusive supply chain services agreement, the Company
will order a minimum level of disk replication, packaging and distribution services for its content across all physical media,
including DVD, CD, and Blu-ray from DADC. As consideration for these minimum order levels, the Company received a total of $1,500,000,
$750,000 during the first quarter of 2014 and $750,000 during the first quarter of 2015. At the end of the term, the Company is
obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term.
On January 10, 2017, the Company entered into
an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583,
which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services.
In connection with such transaction, we issued
Sony 301,231 shares of our Common Stock at $4.945 per share, Sony’s exclusive territory for exercising its home entertainment
distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount
of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement
was increased by the amount of the payment to DADC.