(18)Subsequent Events

Change of Control Plan

On February 28, 2020, the Board of Directors (the “Board”) of the Company approved and adopted the Company’s Change in Control Plan (the “Plan”), which provides for certain benefits and payments to members of the Board and certain members of our senior management team in the event of a Change in Control. Capitalized terms and phrases used but not defined herein will have the respective meanings given to them in the Plan.

The Plan was adopted to ensure that the Company will have the continued dedication of members of the Board and certain members of our senior management team, to diminish the distraction of such individuals that may occur as a result of a Change in Control, and to provide such individuals with compensation upon a Change in Control that is competitive with that of other similarly situated companies.

In the event of a Change in Control, a participant is entitled to receive a grant of shares of the Company’s common stock immediately prior to the effective time of the Change in Control such that the total number of shares of common stock owned by the participant would equal the participant’s target percentage if such participant’s then current ownership percentage is less than their target percentage, which is calculated assuming the conversion of any outstanding shares of preferred stock and the exercise of any outstanding warrants, stock options and other equity-based awards.

The target percentage for participants are as follows:


Participant	Position	Target %
Barton Bandy	President and CEO and Director	4.00	%
Thomas Stankovich	Chief Financial Officer	1.25	%
Other senior management team members as a group	Various senior management team	2.50	%
Total senior management team		7.75	%
Dan Gladney	Chairman of the Board	2.00	%
Gary Blackford	Director	1.00	%
Lori McDougal	Director	1.00	%
Arda Minocherhomjee	Director	1.00	%
Total Board		5.00	%
Total senior management team and Board		12.75	%

Participation in the Plan is contingent upon the participant entering into a Participation Agreement. In order to receive the benefits under this Plan, a participant must additionally sing a release of claims against the Company.

The Plan has a duration of ten years from the effective date, unless (a) the Plan is extended by the Board, (b) a Change in Control occurs while the Plan is in effect, or (c) the Board terminates the Plan in accordance therewith.

Financing

On March 25, 2020, the Company executed a credit agreement up to $3.5 million, with an institutional investor (the “Lender”), who holds warrants in connection with the June and September 2019 transactions. On the day of closing, the Company received $2.5 million and the additional $1.0 million may be drawn from time to time 30 days after the closing date but prior to five months after the closing date, in $500 thousand increments per draw. The credit facility matures six months after the closing date and bears interest at LIBOR plus 2.5%. In conjunction with this credit agreement, the Lender exercised its warrants to purchase an aggregate of 5,085,834 shares of common stock with a current exercise price of $0.12 per warrant on April 15, 2020. In addition, the Company will issue to the Lender 1,200,000 Series G warrants to purchase an aggregate of 1,200,000 shares of common stock. The Series G warrants have an exercise price per share of common stock as the lessor of $3.70 or the average of the two lowest volume weighted average prices (“VWAPs”) for the common stock ten trading days prior to the date of exercise.

On March 31, 2020, the Company and the Lender amended the Series G warrant agreement to set the exercise price at $3.70 per share of common stock.

COVID-19

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. On April 16, 2020, the Company implemented various short-term cost reductions and cash flow improvement actions, such as reducing the compensation for executives, management and key employees and decreasing operating expenses where possible. In addition, the Company also identified temporary headcount reductions and made the decision to furlough a portion of its workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

CARES Act

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property.

On April 24, 2020, the Company entered into a loan agreement (“PPP Loan”) with Silicon Valley Bank (“SVB”) under the Paycheck Protection Program (the “PPP”), which is part of the CARES Act administered by the United States Small Business Administration (“SBA”). As part of the application for these funds, the Company in good faith, has certified that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. Under this program, the Company received proceeds of $1.0 million, from the PPP Loan. In accordance with the requirements of the PPP, the Company intends to use proceeds from the PPP Loan primarily for payroll costs, rent and utilities. The PPP Loan has a 1.00% interest rate per annum, matures on April 24, 2022 and is subject to the terms and conditions applicable to loans administered by the SBA under the PPP. Under the terms of PPP, all or certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, which the Company continues to evaluate.

The Company continues to examine the impact that the CARES Act may have on our business. Currently the Company is unable to determine the impact that the CARES Act will have on our financial condition, results of operation or liquidity.