8. Subsequent Event

 

On July 16, 2018, the Company paid $62,750 of interest owed to SCG Digital Finance, LLC under the Subordinated Loan Agreement pursuant to which the Bridge Loan was made for interest due June 30, 2018. The Company inadvertently failed to pay the interest payment when it came due on June 30, 2018 and it paid the default interest premium of $2,015 on July 17, 2018. On July 23, 2018, the Company received a letter from the Subordinated Lender, notifying the Company that it is in default under the Subordinated Loan Agreement due to the Company’s failure to timely pay cash interest pursuant to the terms of the Subordinated Loan Agreement. In the letter, the Subordinated Lender also states that the breaches of the Merger Agreement alleged by Parent in its letters dated June 21, 2018, July 10, 2018 and July 20, 2018 constitute breaches of the Subordinated Loan Agreement. In addition, the Subordinated Lender states that it is not exercising any remedies at this time but reserves its rights and remedies. Additionally, the default under the Subordinated Loan Agreement caused a cross default under the Loan Agreement as a result of the Company’s failure to timely pay cash interest on the Subordinated Loan Agreement due on June 30, 2018. As of August 14, 2018, there was no arrearage of interest due to the Subordinated Lender by the Company.

 

On August 2, 2018, Mr. Jeffrey Hayzlett, Mr. Alan Swimmer, and Mr. Jonathan Trutter resigned as members of the Board of Directors (the “Board”) of RMG Networks Holdings Corporation (the “Company”) effective August 2, 2018.  Mr. Hayzlett, Mr. Swimmer and Mr. Trutter were members of the Audit Committee, the Compensation Committee and the Special Committee of the Board, and Mr. Swimmer and Mr. Trutter were members of the Nominating and Corporate Governance Committee of the Board. Mr. Trutter was the chairperson of the Audit Committee, the Nominating and Corporate Governance Committee and the Special Committee, and Mr. Swimmer was the chairperson of the Compensation Committee.