Item 14. Indemnification of Directors and Officers
Section 102(b)(7)
of the General Corporate Law of the State of Delaware (the “DGCL”) authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary
duties, subject to certain exceptions. Our Certificate of Incorporation provides that no director shall be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s
duty of loyalty to us or our stockholders, (ii) for acts or omission not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived
an improper personal benefit. Our Certificate of Incorporation also provides that if the DGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated
or limited to the fullest extent permitted by the DGCL, as so amended.
Section 145 of the DGCL
(“Section 145”) provides that a Delaware corporation may indemnify any person who was, is or is threatened to be made,
party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director,
employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding,
provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s
best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or were, a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was
a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’
fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best
interests, provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense
of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
Section 145 further
authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145.
Our Certificate of Incorporation
provides that the we shall, to the fullest extent permitted by Section 145, as the same may be amended and supplemented, indemnify
and advance expenses to any person who is or was a director or officer, or who is or was serving at our request as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise from and against any and
all of the expenses, liabilities or other matters referred to in or covered by such section. In addition, our Certificate of Incorporation
provides clarification that we may provide indemnification to any such person and any other person who is or was an employee or
agent, by agreement or otherwise, on such terms and conditions as our Board of Directors may approve and that any agreement for
indemnification of any director, officer, employee or other person may provide indemnification rights that are broader or otherwise
different from the rights set forth in the amendment.
Our By-Laws require
us to indemnify and advance expenses to our current and former directors and officers, as well as certain persons serving, at our
request, at another entity as a director, officer, employee or agent.
The indemnification
rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter acquire under
any statute, provision of our Certificate of Incorporation or By-Laws, agreement, vote of stockholders or disinterested directors
or otherwise.
We maintain a general
liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or
omissions in the person’s capacity as a director or officer.
We have entered into
indemnification agreements and employment agreements with our directors and certain of our executive officers, respectively, pursuant
to which we have agreed to indemnify such persons against any liability, damage, cost or expense incurred in connection with the
defense of any action, suit or proceeding to which such persons are a party to the extent permitted by applicable law, subject
to certain exceptions.
The underwriting agreement
provides for indemnification by the underwriters of us and our officers and directors, and by us of the underwriters, for certain
liabilities arising under the Securities Act or otherwise in connection with this offering.
Item 15. Recent Sales of Unregistered Securities
During the past three
years, we issued the following securities that were not registered under the Securities Act. None of the following transactions
involved any underwriters, underwriting discounts or commissions. Except with respect to the “Exchange Transaction”
described below, the recipients of the securities in each of these transactions represented their intentions to acquire the securities
for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were
placed on the share certificates issued in these transactions. All recipients had adequate access sufficient information about
us to make an informed investment decision. The sales of these securities were made without any general solicitation or advertising.
KCSA Issuance
.
On September 15, 2015, we issued 286 shares of our common stock to KCSA Strategic Communications as consideration for investor
relations services. The issuance of the shares was exempt from the registration requirements of the Securities Act pursuant to
Section 4(a)(2) thereof and Rule 506(b) of Regulation D promulgated thereunder as a transaction not involving a public offering.
Employee Incentives
.
On October 13, 2015, we awarded Alexander Harrington, our Chief Executive Officer and a director of the Company, a stock option
representing the right to purchase 28,572 shares of our common stock at an exercise price of $2.80 per share in exchange for Mr.
Harrington agreeing to cancel a stock option representing the right to purchase 28,572 shares of our common stock at an exercise
price of $10.15 per share. The issuance of the stock option was exempt from the registration requirements of the Securities Act
pursuant to Section 4(a)(2) thereof and Rule 506(b) of Regulation D promulgated thereunder as a transaction not involving a public
offering.
On March 3, 2016, we
issued Clifford Lerner, a former director, officer and employee of the Company, 142,858 shares of restricted common stock in exchange
for Mr. Lerner agreeing to cancel and forfeit an award of 142,858 shares of restricted common stock issued to Mr. Lerner on April
10, 2013. The issuance of the shares of restricted stock was exempt from the registration requirements of the Securities Act pursuant
to Section 4(a)(2) thereof as a transaction not involving a public offering.
Exchange Transaction
.
On July 13, 2016, we entered into an exchange agreement (the “Exchange Agreement”) with Sigma Opportunity Fund II,
LLC (the “Fund”) and Sigma Capital Advisors, LLC (the “Advisors” and together with the Fund, the “Holders”),
pursuant to which (i) the Fund exchanged a warrant to purchase up to 300,000 shares of our common stock at an exercise price of
approximately $12.25 per share (the “Fund Warrant”) for 40,000 newly issued shares of our common stock and (ii) the
Advisors exchanged a warrant to purchase up to 128,571 shares of our common stock at an exercise price of approximately $12.25
per share (the “Advisors Warrant,” and together with the Fund Warrant, the “Warrants”) for 17,143 newly
issued shares of our common stock, in each case effective as of July 13, 2016 (the “Exchange Offer”). Pursuant to the
Exchange Agreement, the Warrants were automatically terminated and cancelled in full and rendered null and void as a result of
the Exchange Offer.
The Exchange Offer was
exempt from the registration requirements of the Securities Act pursuant to Section 3(a)(9) thereof as a transaction solely with
existing security holders where no commission or other remuneration was paid or given directly or indirectly for soliciting the
Exchange Offer.
AVM Merger
. On
October 7, 2016, we completed the AVM Merger. In connection with the Merger, without any action on the part of any shareholder,
each issued and outstanding share of AVM’s common stock, other than shares to be cancelled pursuant to the merger agreement,
was converted into the right to receive approximately 4.2371 shares of the Company’s common stock (after giving effect to
the Reverse Stock Split) (the “Exchange Ratio”). In addition, in connection with the AVM Merger, each outstanding AVM
stock option was assumed by the Company and converted into a stock option representing the right to purchase shares of the Company’s
common stock, with the number of shares underlying such stock option and the exercise price thereof being adjusted by the Exchange
Ratio, with any fractional shares rounded down to the next lowest number of whole shares.
The shares of the Company’s
common stock issued in the Merger were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2)
thereof and Rule 506 of Regulation D thereunder as a transaction by an issuer not involving any public offering.
MZHCI Issuance
.
On June 22, 2017, we issued 6,000 shares of our common stock to MZHCI, LLC as consideration for investor relations services. The
issuance of the shares was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof
as a transaction not involving any public offering.
Hershey Private Placement
.
On December 19, 2017, we entered into a securities purchase agreement with Hershey Strategic Capital, LP (“Hershey Capital”),
pursuant to which we issued and sold 200,000 shares of our common stock to Hershey Capital for an aggregate purchase price of $1,000,000,
or $5.00 per share, without payment of any placement or brokerage fees.
The issuance of the
shares was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof and Rule 506 of
Regulation D thereunder as a transaction not involving a public offering.
Item 17. Undertakings
The undersigned Registrant
hereby undertakes:
(1) To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus
required by Section 10(a)(3) of the Securities Act;
(ii) To reflect
in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from
the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission (the “Commission”) pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any
material information with respect to the plan of distribution not previously disclosed in this registration statement or any material
change to such information in this registration statement;
provided, however
,
that paragraphs (1)(i), (1)(ii) and (1)(iii) do not apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13
or 15(d) of the Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose
of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration
by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose
of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary
prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing
prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned
registrant;
(iii) the portion of
any other free writing prospectus relating to the offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and
(iv) any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
(5) That, for purposes
of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(6) To deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article
3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus
is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such
interim financial information.
(7) That:
(1) For purposes of
determining any liability under the Securities Act of 1933, as amended, the information omitted from a form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose
of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
(8) Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.