15. SUBSEQUENT EVENTS

PUBLIC OFFERING

On February 16, 2018, the Company closed its underwritten public offering (the “Public Offering”) of an aggregate 4,353,000 shares of the Company’s common stock and warrants to purchase 8,706,000 shares of common stock at a combined public offering price of $4.25 per unit comprised of one share and two warrants. The Public Offering resulted in approximately $18.5 million of gross proceeds, less underwriting discounts and commissions and other offering expenses of approximately $4.4 million, a portion of which is included within deferred public offering costs on the balance sheet as of December 31, 2017, for aggregate net proceeds of approximately $14.1 million.

Each warrant is exercisable for five years from issuance and has an exercise price equal to $4.25. The Company granted the Public Offering’s underwriters a 45-day option to purchase up to an additional 652,950 shares of common stock and/or warrants to purchase 1,305,900 shares of common stock to cover over-allotments, if any. In connection with the closing of the Public Offering, the underwriters have partially exercised their over-allotment option and purchased an additional 406,956 warrants.

CONVERSION AGREEMENT EXTENSION

On January 4, 2018, the Company and Mr. Farkas agreed to extend the expiration date of the Conversion Agreement from December 29, 2017 to February 14, 2018.

AMENDMENT TO SERIES C CONVERTIBLE PREFERRED STOCK CERTIFICATE OF DESIGNATION

Effective January 8, 2018, the Company’s Board of Directors and shareholders amended the Certificate of Designation of its Series C Convertible Preferred Stock to add the following provisions:

Automatic Preferred Conversion

Upon closing of a public offering of the Company’s securities; and the listing of the Company’s shares of common stock on an exchange all outstanding shares of Series C Convertible Preferred Stock will be converted into that number of shares of Common Stock determined by the number of shares of Series C Preferred multiplied by a factor of 115 divided by 80% of the per share price of common stock in the offering.

Conversion Price

The conversion price shall be specified in the automatic preferred conversion notice to be provided by the Company upon triggering of the automatic preferred conversion.

Lock-Up Provision

Until 270 days after the effective date specified within the automatic preferred conversion notice, no holder of Series C Convertible Preferred Stock may offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of any Series C Preferred Shares without the prior written consent of the underwriter of the offering.

Expiration of Conversion Provision

If the offering does not close by 5.00 PM Eastern Standard Time on February 15, 2018 the amended conversion provision shall revert back to the conversion provision as filed on December 23, 2014 and as amended on April 6, 2016 with the addition of a provision at that time. Such additional provision will state that if the Company, pursuant to a conversion agreement, is notified of and implements a conversion that is or will be more favorable to the holder of such securities than the terms of conversion for holders of Series C Convertible Preferred Stock in the conversion provision as filed on December 23, 2014 and as amended on April 6, 2016 Sections 6(a) and 6(b), then the Company shall provide notice thereof to the holders of Series C Convertible Preferred Stock following the occurrence thereof and the terms of Series C Convertible Preferred Stock shall be, without any further action by the holders of Series C Convertible Preferred Stock or the Company, automatically amended and modified in an economically and legally equivalent manner such that the holders of Series C Convertible Preferred Stock shall receive the benefit of the more favorable terms set forth in any such conversion agreement.

JMJ ADVANCE

Separate from and unrelated to the JMJ Agreement, on January 22, 2018, JMJ advanced $250,000 to the Company (the “JMJ Advance”).

On February 1, 2018, the Company and JMJ entered into a letter agreement whereby the parties agreed that, concurrent with the closing of the public offering, the Company will convert the JMJ Advance into units, with each unit consisting of one share of restricted common stock and a warrant to purchase one share of restricted common stock at an exercise price equal to the exercise price of the warrants sold as part of the public offering, at a price equal to 80% of the per unit price in the public offering. If the public offering is not consummated by February 15, 2018 or if the Company’s underwriting agreement with Joseph Gunnar & Co. shall terminate prior to payment for and delivery of the units to be sold thereunder, then the letter agreement shall terminate. On March 16, 2018, the Company issued 73,529 units to JMJ, pursuant to this agreement.

SETTLEMENT AGREEMENT

On January 31, 2018, the Company, SemaConnect Inc. (“SemaConnect”) and their legal counsel entered into an amendment to their settlement agreement dated June 23, 2017 whereby the parties agreed that, concurrent with the closing of the public offering, the Company will settle the outstanding liabilities of $153,529 by issuing shares of common stock at a price equal to 80% of the price of the shares sold in the public offering, plus an additional 1,500 shares of common stock. If the public offering is not consummated by February 15, 2018, the agreement is terminated. On March 16, 2018, the Company issued 17,595 shares of common stock to SemaConnect.

LIABILITY CONVERSION AGREEMENTS

On February 3, 2018, the Company and Sunrise Securities Corp. entered into a letter agreement whereby the parties agreed that, concurrent with the closing of the public offering, the Company will settle outstanding liabilities of $867,242 owed to the counterparty as follows: (i) the Company will pay $381,260 in cash out of the proceeds of the public offering; and (ii) in satisfaction of the remaining liability of $485,982, the Company will issue units, with each unit consisting of one share of restricted common stock and a warrant to purchase one share of restricted common stock at an exercise price equal to the exercise price of the warrants sold as part of the public offering, at a price equal to 80% of the per unit price in the public offering. If the public offering is not consummated by February 28, 2018, the outstanding liabilities will automatically convert into restricted shares of common stock at the average closing price for the twenty (20) trading days preceding March 1, 2018. On February 16, 2018, the Company paid $375,000 in cash and on March 22, 2018, the Company issued 153,295 shares of common stock.

On February 3, 2018, the Company and Schafer & Weiner, PLLC (“Schafer & Weiner”) entered into a letter agreement whereby the parties agreed that, concurrent with the closing of the public offering, the Company will settle outstanding liabilities of $813,962 owed to Schafer & Weiner as follows: (i) the Company will pay $406,981 in cash out of the proceeds of the public offering; and (ii) in satisfaction of the remaining liability of $406,981, the Company will issue units, with each unit consisting of one share of restricted common stock and a warrant to purchase one share of restricted common stock at an exercise price equal to the exercise price of the warrants sold as part of the public offering, at a price equal to 80% of the per unit price in the public offering. In consideration, Schafer & Weiner agreed to return to the Company 11,503 shares of common stock of the Company. On February 16, 2018, the Company paid $406,981 in cash. On March 19, 2018, the Company issued 119,700 shares of common stock to Schafer & Weiner.

On February 13, 2018, the Company and Genweb2 entered into a letter agreement whereby the parties agreed that, concurrent with the closing of the public offering, the Company will settle outstanding liabilities of $116,999 owed to Genweb2 as follows: (i) the Company will pay $48,500 in cash out of the proceeds of the public offering; and (ii) in satisfaction of the remaining liability of $48,500, the Company will issue shares of restricted common stock at a price equal to 80% of the per unit price in the public offering.

On February 16, 2018, the Company paid $48,500 in cash. On March 16, 2018, the Company issued 17,132 shares of common stock.

On February 13, 2018, the Company and Dickinson Wright PLLC (“Dickinson Wright”) entered into a letter agreement whereby the parties agreed that, concurrent with the closing of the public offering, the Company will settle outstanding liabilities of $88,845 owed to Dickinson Wright as follows: (i) the Company will pay $88,845 in cash out of the proceeds of the public offering. On February 16, 2018, the Company paid the full amount owed to Dickinson Wright.

DESIGNATION OF SERIES D CONVERTIBLE PREFERRED STOCK

On February 13, 2018, the Company’s Board of Directors approved the designation of 13,000 shares of the 40,000,000 authorized shares of preferred stock as Series D Convertible Preferred Stock, par value $0.001 per share (the “Series D Convertible Preferred Stock”). On February 15, 2018, the Company filed the Certificate of Designation with the State of Nevada related to the Series D Convertible Preferred Stock. Each share of Series D Convertible Preferred Stock will have a stated value of $1,000 per share.

Conversion. Each share of Series D Convertible Preferred Stock is convertible into shares of common stock (subject to adjustment as provided in the related certificate of designation of preferences, rights and limitations) at any time at the option of the holder at a conversion price equal to the price of the units in the public offering. Holders of Series D Convertible Preferred Stock are prohibited from converting Series D Convertible Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of common stock then issued and outstanding.

Liquidation Preference. In the event of the liquidation, dissolution or winding-up of the Company, holders of Series D Convertible Preferred Stock will be entitled to receive the same amount that a holder of common stock would receive if the Series D Convertible Preferred Stock were fully converted into shares of common stock at the conversion price (disregarding for such purposes any conversion limitations) which amounts shall be paid pari passu with all holders of Common Stock.

Voting Rights. Shares of Series D Convertible Preferred Stock will generally have no voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then outstanding shares of Series D Convertible Preferred Stock is required to, (a) alter or change adversely the powers, preferences or rights given to the Series D Convertible Preferred Stock, (b) amend the Company’s articles of incorporation or other charter documents in any manner that materially adversely affects any rights of the holders, (c) increase the number of authorized shares of Series D Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

Dividends. Shares of Series D Convertible Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by the Company’s board of directors. The holders of the Series D Convertible Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of common stock.

Redemption. The Company is not obligated to redeem or repurchase any shares of Series D Convertible Preferred Stock. Series D Convertible Preferred Stock are not otherwise entitled to any redemption rights or mandatory sinking fund or analogous fund provisions.

Exchange Listing. The Company does not plan on making an application to list the Series D Convertible Preferred Stock on any national securities exchange or other nationally recognized trading system.

COMMON STOCK ISSUANCES

On March 16, 2018, the Company issued an aggregate of 666,777 shares of common stock in satisfaction of various agreements.

On March 19, 2018, the Company issued an aggregate of 141,582 shares of common stock in satisfaction of various agreements.

On March 22, 2018, the Company issued an aggregate of 2,385,225 shares of common stock in satisfaction of various agreements.

On March 28, 2017 the Company issued an aggregate of 9,111,644 shares of common stock in connection with the conversion of the Series C Convertible Preferred Stock.