NOTE 15. RELATED PARTY

Guarantees/Related Party Advances

The former CEO, Michael Palleschi, provided cash advances witnessed by interest-bearing notes totaling $0 and $536, for the years ended December 31, 2018 and 2017, respectively. Additionally, the former CEO provided a personal credit card account for the purchase of goods and services by FTE. While the credit card balances are reflected in the Company’s books and records, the former CEO is personally liable for the payment of the entire amount of the open credit obligation, which was $0 and $18 as of December 31, 2018 and 2017, respectively.

Additionally, the Company entered into several secured equipment financing arrangements with total obligations of approximately $79 and $132 as of December 31, 2018 and 2017, respectively, that required the guaranty of a Company officer, which was provided by Mr. Palleschi.

The former CFO, David Lethem, provided an unsecured, interest-bearing note totaling $150 during the year ended December 31, 2017. Additionally, the former CFO personally guaranteed several secured equipment financing arrangements with total obligations of approximately $291 and $371 as of December 31, 2018 and 2017, respectively.

The former CFO also provided a personal credit card account for the purchase of goods and services by FTE. While the credit card balances are reflected in the Company’s books and records, the former CFO is personally liable for the payment of the entire amount of the open credit obligation, which was $14 as of December 31, 2017. There was no balance outstanding at December 31, 2018.

The Company issued two promissory notes to TBK327 Partners, LLC, an entity controlled by a former member of the Company’s Board of Directors, Christopher Ferguson. The first note was issued in or around January 23, 2014 in the principal amount of $177 and the second note was issued in or around May 16, 2014 in the principal amount of $80 (collectively the “TBK Notes”). As of December 31, 2018 and 2017, the Company had an outstanding principal balance of $237 for the TBK Notes.

The Company issued two promissory notes SRM Entertainment Group, LLC, an entity controlled by a former member of our Board of Directors, Christopher Ferguson. The first note was issued in or around May 5, 2017 in the principal amount of $50 (the “May SRM Note”) and the second note was issued in or around July 11, 2017 in the principal amount of $137 (the “July SRM Note”). As of December 31, 2018, the May SRM Note had been repaid in full and the July SRM Note had an outstanding principal balance of $137.

Related Party Commissions

The Predecessor used the services of HKSE Inc. (“HKSE”) as a consulting firm. HKSE is a company wholly owned and operated by a stockholder of Benchmark and current stockholder of the Company. HKSE is paid commissions computed as a percent of the total annual billings of Benchmark to its clients. This agreement was cancelled in April 2017. For the period from January 1, 2017 through April 20, 2017 (Predecessor), HKSE received commissions totaling $285.

Mr. Christopher Ferguson, a member of the Board of Directors, was owed Board of Directors’ fees in the amount of $5 for each of the years ended December 31, 2018 and December 31, 2017.

As noted above in the discussion of the Internal Investigation, prior management caused the Company to engage in these related party transactions, some of which were implemented to the Company’s detriment and were not disclosed properly or were not disclosed at all.

Common Stock

During the year ended December 31, 2018 and 2017, the Company issued a total of 33,000 and 800 shares of common stock to members of the Company’s Board of Directors having a fair value of $533 and $8, respectively, to satisfy accrued directors’ fees.

Benchmark Acquisition

On April 20, 2017, the Company issued 1,069,538 shares of the Company’s common stock to the former owners for the acquisition of Benchmark. The shares were valued at $21,658 and were part of the purchase price consideration. See Note 5.

On April 20, 2017, the Company issued Series A convertible promissory notes, in the aggregate principal amount of $12,500 to the former owners of Benchmark and to significant shareholders stockholders of the Company, which matured on April 20, 2019. Interest is computed at the rate of 5% percent per annum on the outstanding principal. Interest expense was $695 and $442 for the year ended December 31, 2018 and 2017, respectively. These notes shall be convertible into conversion shares, at the holder’s option, upon an event of default at a conversion price per share of $11.88.

On April 20, 2017, the Company issued Series B Notes in the aggregate principal amount of $30,000 to the former owners of Benchmark and to significant shareholders of the Company, which mature on April 20, 2020. Interest is computed at the rate of 3% per annum on the outstanding principal. Interest expense was $929 and $633 for the year ended December 31, 2018 and 2017, respectively.

On April 20, 2017, the Company issued Series C Notes in the aggregate principal amount of $7,500 to the former owners of Benchmark and to significant shareholders of the Company, which matured on October 20, 2018. Interest is computed at the rate of 3% per annum on the outstanding principal. Interest expense was $138 and $153 for the year ended December 31, 2018 and 2017, respectively.

The following is a summary of the balance of related party notes as of December 31, 2018 and 2017:

During October 2018, the Company paid the remaining principal and accumulated in-kind interest balance totaling $4,891 on its Series C Notes in the aggregate principal amount of $7,500 to the former owners of Benchmark.

The required principal payments for all borrowings for each of the five years following the balance sheet date are as follows: