Related Party Transactions |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
Related Party Transactions
Loan Agreement
On February 24, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with a third party that provides in-flight entertainment systems to airlines (the "Loan Party"). The Loan Party is majority owned by PAR Investment Partners, L.P., or PAR, who beneficially owned approximately 38% of our outstanding shares of common stock as of March 31, 2016. The Chairman of the Company's Board of Directors is also a Managing Partner of PAR and a member of the board of directors of the Loan Party.
The Loan Agreement provides for the loan by the Company to the Loan Party of up to $5.0 million. The Company's Board of Directors considered the entry into the Loan Agreement under the Company’s policies and procedures regarding related person transactions, and determined that it was appropriate and in the best interests of the Company and its stockholders to enter into the Loan Agreement due to the Loan Party’s position as a supplier to flydubai, a connectivity customer of the Company, and the Loan Party’s future business prospects. Our Board of Directors further determined that the parties’ relationships did not give rise to any material conflict of interest in entering into the Loan Agreement.
The Loan Agreement qualifies the Loan Party as a variable interest entity to the Company. In accordance with ASC 810, Consolidation, the Company was not deemed to be the primary beneficiary of the Loan Party as the Company does not hold any power over the Loan Party's activities that most significantly impact its economic performance. Therefore, the Loan Party is not subject to consolidation. The maximum exposure to loss as a result of the Loan Agreement is the outstanding principle balance and any accrued interest.
The Senior Secured Promissory Note bears annual interest at a rate of 15%. The principle amount and accrued interest are payable in full December 31, 2016. As of March 31, 2016, the outstanding principle balance of the loan was $2.6 million, inclusive of a $0.1 million origination fee. Accrued interest receivable on the Senior Secured Promissory Note as of March 31, 2016 was less than $0.1 million. In April 2016, the Company funded an additional $1.0 million under its Loan Agreement, bringing cumulative funding to $3.5 million as of May 9, 2016.
Subscription Receivable with Employee
The Company has an agreement with a former officer of Row 44 to stock-settle his note receivable and accrued interest, which amounted to $0.5 million, in exchange for certain shares of Row 44's common stock held by the officer. At March 31, 2016 and December 31, 2015, the balance of the former officer’s receivables amounted to $0.5 million and is presented as subscriptions receivable. The Company recognizes interest income when earned, using the simple interest method. Interest amounts recognized by the Company during the three months ended March 31, 2016 and March 31, 2015 were not material. The Company makes ongoing assessments regarding the collectability of the notes receivable and subscriptions receivable balances.
Administrative Services
One of the Company's subsidiaries rents office space belonging to a company in which a former member of such subsidiary's management has an ownership interest. The former member of management sold his interest in the office during the third quarter of 2015. There were no unpaid lease liabilities as of March 31, 2016 and December 31, 2015. The Company recognized rent expense of $0.1 million each for the three month periods ended March 31, 2016 and 2015, respectively.
Office Lease Agreement with Employee
In connection with the acquisition of substantially all of the assets of Post Modern Edit, LLC and related entities ("PMG") in 2013, the Company acquired an office lease in a building that is currently being occupied and used as part of operations in Irvine, California. This building is majority owned by one of the founding members of PMG, who was an employee of the Company through March 2015. The lease terminates on March 31, 2024. The total rental expense incurred during the three months periods ended March 31, 2016 and 2015 was less than $0.1 million.
PMG Post-Closing Payment
In connection with the Company's purchase of substantially all of the assets of PMG in June 2013, the Company agreed to a post-closing payment based on the fulfillment of certain post-closing employment obligations by certain PMG executives (the "PMG Earn Out"), which the Company is required to account for as compensation to the sellers and is recognized as an expense, over the requisite service period. In June 2014, the Company modified the PMG Earn Out to waive the PMG Earn Out and certain other purchase obligations and PMG seller rights in exchange for cash consideration of $2.5 million (the “Additional PMG Consideration”). Fifty percent of the additional PMG Consideration was payable after 10 days from closing, and the remaining $1.25 million was payable in four quarterly installments through the first half of 2015. At December 31, 2014, the remaining outstanding balance was approximately $0.9 million. During the quarter ended March 31, 2015, the Company further modified the PMG Earn Out to accelerate the payment of the remaining $0.6 million payment to April 2015. As the PMG Earn Out was settled in 2015, there was no outstanding balance on the PMG Earn Out as of March 31, 2016.
masFlight Earn-Out
In August 2015, the Company acquired masFlight for approximately $10.3 million in cash and $9.3 million in contingent consideration. As a portion of the contingent consideration is subject to future employment of certain employees of masFlight, certain contingent consideration is recorded as compensation expense prospective to the acquisition date. During the three months ended March 31, 2016, the Company recognized compensation expense of $0.1 million relating to the masFlight contingent consideration. As of March 31, 2016, the earn-out liability was $0.6 million.
AIA Earn-Out
The Company recognized an expense of $1.4 million during the year ended December 31, 2014 as a result of the
remeasurement of the fair value of the earn-out liability acquired in the AIA stock acquisition. The earn-out was payable to one of the former managing directors at Entertainment in Motion, a wholly owned subsidiary. At March 31, 2015, the outstanding balance relating to the earn-out liability was $1.7 million. The earn-out liability was paid and fully settled during the year ended December 31, 2015. As of March 31, 2016, there was no outstanding balance owed on this earn-out.
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