NOTE 16 – SUBSEQUENT EVENTS

In January 2017, the Company committed to a restructuring plan, consisting of the following:

the elimination of approximately 109 positions, approximately 97 of which were from its Bellevue, Washington and Long Beach, California studios, and approximately 12 of which were from its San Francisco headquarters;

the discontinuation of all operations at its Bellevue, Washington studio; and

the potential elimination of approximately an additional 30 positions (for a potential reduction in force of up to approximately 139 positions) and discontinuation of all remaining operations at its Long Beach, California studio, contingent on the results of the planned beta release of its Car Town Racing title in late Q1-2017 (the “Contingent Portion”).

In connection with these actions, the Company expects to incur charges of approximately $2,600 to $2,800 if the Contingent Portion of the plan is not triggered, and estimates approximately $2,000 to $2,100 of such charges will be related to employee severance and benefits, and approximately $600 to $700 will be related to lease, contract termination and other costs. The Company expects to incur charges of approximately $4,300 to $4,700 if the Contingent Portion of the plan is triggered, and estimates approximately $2,450 to 2,650 of such charges will be related to employee severance and benefits, and approximately $1,850 to $2,050 will be related to lease, contract termination and other costs. If the Contingent Portion of the plan is not triggered, the Company expects to recognize substantially all of the restructuring-related costs during the first quarter of 2017. If the Contingent Portion of the plan is triggered, the Company expects to recognize the restructuring-related costs attributable to the Contingent Portion in the second quarter of 2017. The Company expects substantially all of the severance and benefit charges, and a majority of the lease, contract termination and other costs, to entail cash expenditures.

As part of this restructuring plan, the Company also began transitioning game development and live operations for its Racing Rivals title from its Long Beach, California studio to Carbonated Inc. (“Carbonated”) in January 2017. It agreed to provide Carbonated with development funding and a percentage of the profits generated by the Racing Rivals title to the extent that Carbonated is able to increase the net revenue from this title. The development funding is fully recoupable by the Company, along with user acquisition, hosting and certain other game-related costs, before any profit sharing payments are made to Carbonated.