SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2024

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 16 – SUBSEQUENT EVENTS

Steel Partners Transaction

On February 5, 2025 (the “SPA Effective Date”), the Company entered into a Stock Purchase Agreement (the “Steel Stock Purchase Agreement”) with TPHS Lender and Steel IP Investments, LLC (the “Steel Purchaser”), an affiliate of Steel Partners Holdings L.P. (“Steel Partners”), pursuant to which the Steel Purchaser agreed to purchase from TPHS Lender, and TPHS Lender agreed to sell to Steel Purchaser, 25,862,245 shares of Common Stock of the Company (such shares are referred to collectively herein as the “Steel Shares”) in accordance with the terms and conditions of the Steel Stock Purchase Agreement. The aggregate consideration payable to TPHS Lender was $2,586,200 for the Steel Shares and certain agreements pursuant to the Steel Stock Purchase Agreement.

On February 18, 2025 (the “Steel Closing”), at the closing of the transactions contemplated by the Steel Stock Purchase Agreement, the Company, TPHS and the Steel Purchaser entered into certain ancillary agreements referenced above and below, including the Amended and Restated JV Operating Agreement and the Steel Purchaser Stockholders’ Agreement (as defined below). The transactions contemplated by the Steel Stock Purchase Agreement are herein referred to as the “Steel Partners Transaction.”

Steel Purchaser Stockholders’ Agreement

On the SPA Effective Date and in connection with the Steel Partners Transaction, the Company and the Steel Purchaser entered into a shareholder rights agreement (the “Steel Purchaser Stockholders’ Agreement”), which became effective upon the Steel Closing.

The Steel Purchaser Stockholders’ Agreement contains various covenants including, among others:

● The Company will take all necessary corporate actions and obtain all necessary approvals so that, as of the Steel Closing, the Company’s board of directors (the “Board”) consists of five (5) members, who will initially be: (i) Jack L. Howard (Chairman), (ii)Alexander C. Matina, (iii) Joseph Martin, (iv) Jeffrey S. Wald, and (v) Joanne M. Minieri. Subsequently, the Company has agreed that so long as Steel Purchaser owns at least 20% of the Company’s outstanding capital stock, the Company will take all action reasonably necessary to cause the Board to remain at five (5) members, which shall include (A) one (1) director who shall qualify as independent and is mutually agreed upon by Steel Purchaser and the Company and (B) two (2) directors designated solely by Steel Purchaser.

● As of the Steel Closing, Matthew Messinger will act as an observer of the Board until the earlier of (i) his voluntary resignation as an observer of the Board and (ii) the Board’s determination to remove Mr. Messinger as an observer of the Board

● So long as at least ten percent (10%) of the Company’s total issued and outstanding Common Stock continues to be traded on OTC Pink Market, the Company will use commercially reasonable best efforts to, and Steel Purchaser agrees to provide management services to assist the Company to, prepare and publish the information as contemplated by Rule 144(c) of the Securities Act of 1933, as amended, including: (i) within 45 days following each quarter of each fiscal year and (ii) within 90 days following each fiscal year of the Company, (A) a consolidated balance sheet, (B) consolidated statements of operations and comprehensive income and of cash flows, and, as applicable, a comparison between (x) the actual amounts as of and for such period and (y) the comparable amounts for the prior corresponding period, with an explanation of any material differences between such amounts, and (C) a consolidated statement of stockholders’ equity; in each case, prepared in accordance with GAAP and, in the case of annual financial statements, audited and certified by independent public accountants of recognized standing selected by the Company.

● On or prior to the Steel Closing, the Company will amend its bylaws (as currently in effect as of the date hereof, the “Bylaws”), to provide for the ability of shareholders holding at least an aggregate of 15% of the Company’s outstanding Common Stock to call a special meeting of the shareholders of the Company (the “Bylaws Amendment”). Following the effectiveness of the Bylaws Amendment, the Company will not further amend the Bylaws without the prior written consent of the Steel Purchaser, not to be unreasonably withheld, conditioned or delayed.

As previously disclosed, the changes to the Board discussed above became effective upon the Steel Closing. In addition, the Bylaws Amendment was effective as of Steel Closing.

Secured Promissory Note

In connection with the Steel Partners Transaction, on February 18, 2025, the Company issued a Senior Secured Promissory Note (the “Steel Promissory Note”) to Steel Connect, LLC (the “Steel Lender”), an affiliate of Steel Partners and Steel Purchaser, pursuant to which the Company may borrow up to $5.0 million from the Steel Lender. The Steel Promissory Note is secured by a pledge of all of the assets of the Company. As of March 24, 2025, $1.0 million was outstanding under the Steel Promissory Note.

Termination of Asset Management Agreement

In connection with the Steel Partners Transaction, the parties to the Asset Management Agreement mutually agreed to terminate the Asset Management Agreement, effective upon 45 days following the closing of the Steel Partners Transaction, or April 4, 2025.

Charter Amendment

In February 2025, the Company filed an Amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State (the “Amendment”). The Amendment extended certain transfer restrictions set forth in the Company’s charter through February 25, 2035.

Other than as disclosed above and elsewhere in these consolidated financial statements, there were no subsequent events requiring adjustment to, or disclosure in, the consolidated financial statements.

Steel Services Agreement

As of March 19, 2025, Steel Services Ltd. (“Steel Services”), an affiliate of Steel Partners, and the Company entered into a management services agreement (the “Steel MSA”) pursuant to which Steel Services agreed to provide certain managerial services to the Company.  

Pursuant to the Steel MSA, for a period of one year (which shall renew automatically for additional one-year terms unless otherwise terminated), Steel Services shall provide certain managerial services to the Company, including general assistance with legal, finance & treasury, internal audit, human resources, IT and tax functions and obligations. In consideration for the services rendered under the Steel MSA, the Company shall pay Steel Services $10,000 monthly.

The Steel MSA may be terminated (i) by either party, effective on the last day of the current term, upon not less than ninety (90) days prior written notice to the other; (ii) by the Company, at any time, on less than ninety (90) days-notice; provided that, in the case of a termination by the Company pursuant to (i) or (ii), the Company shall pay to Steel Services a termination fee equal to 125% of the fees due under the Steel MSA; (iii) immediately upon the bankruptcy or dissolution of Steel Services, (iv) promptly by the Company upon a material breach of the Steel MSA Agreement (provided Steel Services shall be provided notice of the breach and be provided a reasonable opportunity to cure during a period of no less than 90 days); or (v) immediately by the Company for Cause (as defined in the Steel MSA).