the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC to provide all CD, DVD
and BD 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.
to the end of the fiscal year, 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 agreed to pay DADC $1,489,583, the amount which was owed
and payable by us to DADC for the disk replication, packaging and distribution services.
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. (See Note 7 for additional information about the advance.)