4Licensing Corp

The Company computes basic Earnings (Loss) Per Share (“EPS”) based solely on the weighted average number of shares of its Common Stock outstanding during the period. Diluted EPS reflects all potential dilution of Common Stock. For the three and nine months ended September 30, 2015, 4,303,395 shares attributable to outstanding options and equity warrants and 2,223,396 shares attributable to Liability Warrants were excluded from the calculation of diluted EPS because the effect was antidilutive. For the three and nine months ended September 30, 2014, 3,424,739 shares attributable to outstanding options and equity warrants, were excluded from the calculation of diluted EPS because the effect was antidilutive.

On October 23, 2015, the Company entered into an amendment (including the related Security Agreement, the “Amendment”) to the promissory note (the “Old Prescott Note”) previously issued to Prescott Group pursuant to the Purchase Agreement. Pursuant to the Amendment, the Company and the Guarantors granted Prescott Group a security interest in substantially all of the Company’s and the Guarantors’ assets, subject to certain exceptions (including any equity interest in Pinwrest), and agreed to certain limitations on the sale or transfer of and the ability to incur liens on certain assets of the Company and the Guarantors. In exchange, Prescott Group agreed to (i) extend the maturity date of the Old Prescott Note from March 25, 2016 to December 31, 2016 and (ii) remove the prepayment penalty under the Old Prescott Note that required the Company, in the event that it elected to repay the Old Prescott Note prior to December 31, 2016, to pay 125% of the entire outstanding principal balance of the Old Prescott Note, plus any and all unpaid accrued interest thereon to, but excluding, the date of such prepayment.

Additionally, on October 23, 2015, the Company and the Guarantors issued Prescott Group (i) a Senior Secured Promissory Note (the “New Prescott Note”) and (ii) warrants to purchase up to an aggregate of 800,000 shares of the Company’s Common Stock for an aggregate purchase price of $200,000. The warrants have an initial exercise price of $0.25 per share, are exercisable immediately and expire on March 25, 2024. In connection with the issuance of these warrants, both Prescott Group and Cleveland Capital agreed to waive their right to receive additional warrants of the Company pursuant to their rights under the Purchase Agreement.

The New Prescott Note matures on December 31, 2016 and accrues interest at a rate of 5% per year which is due and payable on the first business day of each fiscal quarter commencing in the first quarter of 2016. The New Prescott Note may be prepaid at any time without prepayment penalty or premium. If the New Prescott Note is not repaid in full by December 31, 2016, Prescott Group may elect to receive all or a portion of such repayment in shares of Common Stock.

In the Entertainment and Brand Licensing segment, decreased revenues for the three months ended September 30, 2015 were primarily attributable to decreased licensing revenues on the “Dinosaur King” and “American Kennel Club” Properties, of approximately $55 and $60, respectively. Decreased revenues for the nine months ended September 30, 2015 were primarily attributable to decreased licensing revenues on the “Cabbage Patch Kids” Property as a result of the expiration of the Company’s licensing agreement in a prior period, “American Kennel Club” Property as a result of the expiration of the Company’s licensing agreement as of December 31, 2014, and “Dinosaur King” Property of approximately $225, $110 and $50, respectively.