Note 9 — Commitments and Contingencies

Private offering of securities. During the first quarter of 2015, the Company commenced a private offering of units at a gross price per unit of $0.55. Each unit included one share of common stock and a three-year warrant to purchase one share of common stock at an initial exercise price per share equal to $0.75, subject to adjustment for certain corporate transactions such as a merger, stock-split or stock dividend. Each unit included registration rights for the investors for the shares of common stock and the shares of common stock that would be issued upon the exercise of a warrant (“Underlying Shares”). As of March 27, 2015, the Company has received subscriptions for approximately 840,000 units. As of April 30, 2015, none of these subscriptions have been accepted by the Company and, accordingly, none of these shares of common stock or warrants have been issued. We have offered to accept these subscriptions if (1) the investors waive their registration rights for their shares of common stock issued with each unit other than to register the Underlying Shares when and if we register our shares of common stock in a different offering, subject to certain excluded registered offerings, and (2) the placement agent agrees to terminate its placement agent agreement. There can be no assurance that we will ever accept these subscriptions. If we accept these subscriptions, then we will pay a placement agent cash fees of 13% of aggregate proceeds received from share sales and 5% of all amounts received upon the exercise of warrants and issue to the placement agent warrants to purchase our shares of common stock equal to 10% of the total shares sold in the offering. The agreement with this placement agent will terminate on the termination of this offering or the date that we accept these subscriptions. We received $0.5 million in cash during the three months ended March 31, 2015 associated with this transaction, which is recorded in restricted cash and other accrued expenses on our Condensed Consolidated Balance Sheets.

Licensing agreements. We are committed to pay royalties for the usage of certain brands, as governed by various licensing agreements, including Rich Dad, Robbie Fowler and Martin Roberts. Total royalty expenses included in our Condensed Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2015 and March 31, 2014 were $1.2 million and $2.2 million, respectively.

Custodial and Counterparty Risk. We are subject to custodial and other potential forms of counterparty risk in respect to a variety of contractual and operational matters. In the course of ongoing company-wide risk assessment, management monitors our arrangements that involve potential counterparty risk, including the custodial risk associated with amounts prepaid to certain vendors and deposits with credit card and other payment processors. Deposits held by our credit card processors at March 31, 2015 and December 31, 2014, was $1.9 million and $1.3 million, respectively. These balances are included on the Condensed Consolidated Balance Sheets in restricted cash. While these balances reside in major financial institutions, they are only partially covered by federal deposit insurance and are subject to the financial risk of the parties holding these funds. When appropriate, we utilize Certificate of Deposit Account Registry Service (CDARS) to reduce banking risk for a portion of our cash in the United States. A CDAR consists of numerous individual investments, all below the FDIC limits, thus fully insuring that portion of our cash. At March 31, 2015, we did not have a CDAR balance.

Litigation. We and certain of our subsidiaries, from time to time, are parties to various legal proceedings, claims and disputes that have arisen in the ordinary course of business. These claims may involve significant amounts, some of which would not be covered by insurance. A substantial settlement payment or judgment in excess of our accruals could have a material adverse effect on our financial position, results of operations or cash flows. While the outcome of these proceedings cannot be predicted with certainty, we do not expect any of these existing matters, individually or in the aggregate, to have a material adverse effect upon our financial position, results of operations or cash flows. There have been no material changes to the legal proceedings disclosed in the litigation section of Note 13 — Commitments and Contingencies, in the Notes to Consolidated Financial Statements for the year ended December 31, 2014, included in our 2014 Annual Report for further discussion.