NOTE 15.

SUBSEQUENT EVENTS:

Private Placement and Securities Purchase Agreement

On July 25, 2018, we entered into a securities purchase agreement (the “Private Placement Purchase Agreement”) with certain institutional and accredited investors (collectively, the “Purchasers”) in connection with a private placement (the “Private Placement”) of shares of our common stock (“Common Stock”) and warrants (the “Private Placement Warrants”). Pursuant to the Private Placement, we agreed to issue 5,000,000 shares of Common Stock or common stock equivalents with an initial per share purchase price of $1.20 and Private Placement Warrants to purchase 4,000,000 shares of common stock with an initial exercise price equal to $1.60 per share, subject to adjustment. The Private Placement Warrants are immediately exercisable, subject to certain ownership limitations, and expire five years after the date of issuance. On July 30, 2018, we issued 3,250,000 of the shares of Common Stock to the Purchasers, and 1,750,000 shares of Common Stock will be issued pursuant to pre-funded warrants, subject to adjustment. The aggregate gross proceeds received by us for the Private Placement were approximately $6,000,000, which we have used and are using for the repayment of certain indebtedness, past acquisition obligations and working capital purposes.

We must seek stockholder approval for the Private Placement by September 27, 2018. In the event our stockholders do not approve the Private Placement, we are required to seek stockholder approval again by November 15, 2018 and then every four months until the transaction is approved or until the Private Placement Warrants have terminated.

The per share purchase price (through the pre-funded warrants) and Private Placement Warrant exercise price will automatically be adjusted lower (the “Price Adjustment”), if applicable, to 80% (with respect to the purchase price of the shares) and 110% (with respect to the exercise price of the Private Placement Warrants) of the lowest of the average daily prices on the 6 trading days after the date that (i) a registration statement covering the resale of the securities being issued in the transaction is declared effective by the Securities and Exchange Commission (the “SEC”) and (ii) our stockholders approve the Private Placement transaction. If all the shares issuable pursuant to the Private Placement Purchase Agreement are not included in the registration statement, another similar adjustment to the per share purchase price and Private Placement Warrant exercise price will occur on the date that such shares may be sold pursuant to Rule 144 under the Securities Act of 1933. Following any adjustment to the Private Placement Warrant exercise price, the number of shares that may be issued pursuant to a Private Placement Warrant will be proportionately increased. In no event will the purchase price or the Private Placement Warrant exercise price be less than $0.29 per share. In addition, the Private Placement Warrants have transaction-specific anti-dilution provisions.

The Private Placement was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. Each of the Purchasers represented that it is either: (i) an “accredited investor” as defined in Rule 501 of the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. The securities were offered without any general solicitation by the Company or its representatives.

Registration Rights Agreement

In connection with the Private Placement, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, effective as of the closing of the Private Placement. Pursuant to the Registration Rights Agreement, we agreed to prepare and file a registration statement (the “Resale Registration Statement”) with the SEC by August 24, 2018 for purposes of registering the resale of the shares of Common Stock and the shares of Common Stock issuable upon exercise of the Private Placement Warrants. We also agreed to use our reasonable best efforts to cause this registration statement to be declared effective by the SEC by September 23, 2018 (October 23, 2018 in the event the registration statement is reviewed by the SEC). If we fail to meet the specified filing deadlines or keep the Resale Registration Statement effective, subject to certain permitted exceptions, we will be required to pay liquidated damages to the Purchasers. We also agreed, among other things, to indemnify the selling holders under the registration statements from certain liabilities and to pay all fees and expenses incident to our performance of or compliance with the Registration Rights Agreement.

Voting Agreement

For the benefit of the Purchasers, certain officers, directors and stockholders of the Company, owning approximately 40% of the outstanding number of Common Stock, entered into voting agreements, pursuant to which such stockholders will agree to vote all shares of Common Stock owned by them in favor of the Private Placement.

Placement Agent

A.G.P. / Alliance Global Partners (“AGP”) acted as exclusive placement agent for the issuance and sale of the securities in the Private Placement. We agreed to pay AGP an aggregate fee equal to 7% of the gross proceeds received by us from the sale of the securities in the transaction, plus expenses. We also agreed to grant to AGP or its designees warrants to purchase up to 150,000 shares of Common Stock (the “Placement Agent Warrants”). The Placement Agent Warrants are exercisable on or after the later of (a) the effective date of the registration statement registering the Purchasers’ securities and (b) the date that stockholder approval is obtained and deemed effective, and the Placement Agent Warrants terminate on July 27, 2022. The Placement Agent Warrants have an exercise price of $1.32 per share. The terms of the Placement Agent Warrants are otherwise substantially similar to the terms of the Private Placement Warrants, except the Placement Agent Warrants have customary anti-dilution provisions and do not have the Price Adjustment mechanism. The Placement Agent Warrants and the shares issuable upon exercise of the Placement Agent Warrants will be issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and in reliance on similar exemptions under applicable state laws.