Page 9 of 10 – SEC Filing
The Reporting Persons, as members of a
“group” for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, may be deemed the
beneficial owner of the Shares directly owned by the other Reporting Person. Each Reporting Person disclaims beneficial
ownership of such Shares except to the extent of his or its pecuniary interest therein.
| Item 6. | Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. |
Item 6 is hereby amended to add the following:
On September 29, 2017,
Lone Star Value Investors, Lone Star Value Co-Invest and the Issuer entered into an Exchange Agreement (the “Exchange Agreement”)
pursuant to which (i) the unsecured promissory note held by Lone Star Value Investors (the “LSV Note”) and (ii) all
of the unsecured promissory notes held by Lone Star Value Co-Invest (the “Co-Invest Notes”) were returned to the Issuer
and cancelled in exchange for an aggregate of 132,548 shares of a new class of 10.00% Series B Cumulative Preferred Stock, par
value $0.001 per share (the “Series B Preferred Stock”), which is non-convertible preferred stock of the Issuer. At
the time of cancellation, (i) the LSV Note had approximately $4.94 million unpaid principal and accrued and unpaid interest outstanding
and (ii) the Co-Invest Notes had approximately $8.31 million unpaid principal and accrued and unpaid interest outstanding. As a
result of the Exchange Agreement, no principal or interest remained outstanding or payable under the LSV Note or the Co-Invest
Notes and Lone Star Value Investors owns 49,406 shares of Series B Preferred Stock and Lone Star Value Co-Invest owns 83,142 shares
of Series B Preferred Stock. The foregoing description of the Exchange Agreement is qualified in its entirety by reference to the
Exchange Agreement, which is attached as Exhibit 99.1 hereto and is incorporated herein by reference.
Also on September
29, 2017, in connection with the Exchange Agreement, Lone Star Value Investors, Lone Star Value Co-Invest and the Issuer entered
into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement,
at any time after October 15, 2018, upon the written request of the holders of at least 66 2/3% of the outstanding Registrable
Securities (as defined in the Registration Rights Agreement), the Issuer will prepare and file with the Securities and Exchange
Commission a registration statement covering the resale of such securities by their holders. The foregoing description of the Registration
Rights Agreement is qualified in its entirety by reference to the Registration Rights Agreement, which is attached as Exhibit 99.2
hereto and is incorporated herein by reference.
The Series B Preferred
Stock, which has a stated value of $100.00 per share (subject to adjustment), pays quarterly cash dividends at a rate of 10.00%
per annum, provided that the Issuer may pay dividends in-kind through the issuance of additional shares to holders of the Series
B Preferred Stock at a rate equal to 12.00% per annum, at the option of the Issuer, for up to four quarterly dividend periods in
any consecutive 36-month period, determined on a rolling basis. In the event of any liquidation, dissolution or winding up of the
affairs of the Issuer, before any payment or distribution to holders of junior shares, holders of Series B Preferred Stock will
be entitled to receive an amount of cash per share of Series B Preferred Stock equal to the stated value plus all accumulated accrued
and unpaid dividends thereon (whether or not earned or declared).
Upon the occurrence
of four accumulated, accrued and unpaid defaults by the Issuer of its obligation to pay dividends (either in cash or in kind)
on the Series B Preferred Stock in full for each quarterly dividend period, whether consecutive or non-consecutive, until the
Issuer has paid all accumulated accrued and unpaid dividends in full and has paid accrued dividends for the two most recently
completed quarterly dividend periods in full in a timely manner, (i) the dividend rate will increase to 12.00% per annum and (ii)
the size of the Board of Directors (the “Board”) will be increased by two directors and the holders of Series B Preferred
Stock (together with the holders of any new class of shares with similar rights) will have the right to elect two directors to
the Board. The terms of such directors will terminate, and the size of the Board will decrease accordingly, once the voting rights
terminate. Additionally, the Issuer is not permitted to take certain corporate actions without the approval of holders of at least
two-thirds of the shares of Series B Preferred Stock (together with the holders of any new class of shares with similar rights),
including increasing the size of the Board above five directors, except as set forth above.
| Item 7. | Material to be Filed as Exhibits. |
Item 7 is hereby amended
to add the following exhibits:
| 99.1 | Exchange Agreement, dated September 29, 2017. |
| 99.2 | Registration Rights Agreement, dated September 29, 2017. |
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