NOTE 8.

OTHER ITEMS:

The Company accrued an aggregate of approximately $0.6 million for payment of dividends on its Series A Preferred Stock due for the six months ended June 30, 2018. The Company has been unable to declare and pay such dividend due to a lack of available cash.

On June 22, 2018, we entered into an Amendment Agreement with Lone Star Value Investors, LP (“LSV”), pursuant to which we and LSV agreed to the amendment and restatement of the certificate of designations (the “Amendment”) for our Series A Preferred Stock (the “Series A Preferred”) and the issuance of warrants (the “Amendment Warrants”) for the purchase of 5,000,000 shares of our common stock to holders of the Series A Preferred (the “Warrant Issuance”), provided that the Amendment and the Warrant Issuance are subject to approval by our stockholders at our 2018 annual meeting of stockholders (the “2018 Annual Meeting”).

The Amendment, which will be filed with the Delaware Secretary of State following stockholder approval, provides for, among other things:

(a)

the payment of the March 31, 2018 dividend payment in-kind in shares of Series A Preferred;

(b)

elimination of any prior default in respect of non-payment of accrued dividends through the filing effective date of the Amendment (the “Effective Date”);

(c)

payment in-kind in shares of Series A Preferred of dividends for all dividend periods from April 1, 2018 through March 31, 2020 at a rate of 2% per annum of the liquidation preference (the “Adjusted Rate”); and

(d)

commencing April 1, 2020, we will pay cash dividends per share at a rate per annum equal to the Adjusted Rate multiplied by the liquidation preference; provided, however, dividends for periods ending after April 1, 2020 may be paid at the election of our Board of Directors in-kind through the issuance of additional shares of Series A Preferred for up to four dividend periods in any consecutive 36-month period, determined on a rolling basis.

In addition, the Amendment revises the change of control definition to mean a change in control of at least 70% of the voting power of all shares of stock of the Company and clarifies that a change of control shall not be deemed to be a dissolution, liquidation or winding up of the Company. The Amendment also eliminates voting rights with respect to the authorization, creation or issuance of any securities ranking senior or equal to the Series A Preferred.

If our stockholders approve the Amendment and the Warrant Issuance at the 2018 Annual Meeting, promptly following the effectiveness of the Amendment, the Company will complete the Warrant Issuance to holders of the Series A Preferred at such time. The Amendment Warrants shall only be exercisable for cash, with an exercise price of $1.50 per share, for five years from the date of issuance. In the event that the closing price of our common stock is $2.00 or higher for ten trading days out of a fifteen consecutive trading day period, we shall have the option, in our sole discretion, to elect to accelerate the termination date of the Amendment Warrants to such date that is 30 days (or more, in our sole discretion) following the date of such election. Following such accelerated termination date, any unexercised Amendment Warrants shall automatically be canceled without any further obligations on the part of the Company or the holders of such Amendment Warrants. The 2018 Annual Meeting will be held on August 16, 2018.