| Public offering of common stock, Series A warrants and Series B warrants | Note
4 - Public offering of common stock, Series A warrants and Series B warrants Effective
October 29, 2014, the Company consummated an underwritten public offering consisting of 133.93 shares of common stock (“Common
Stock”), together with Series A warrants to purchase 133.93 shares of its Common Stock (“Series A Warrants”)
and Series B warrants to purchase 4,687.5 shares of its Common Stock (“Series B Warrants”) for gross proceeds to the
Company of approximately $6.1 million and net proceeds of $5.5 million. The public offering price for each share of Common Stock,
together with one Series A Warrant and one Series B Warrant, was $45,500. The Series A warrants may be exercised for a period
of five years and the Series B warrants may be exercised for a period of 15 months. In connection with the offering, the Company
granted to the underwriter a 45-day option to acquire up to 20 additional shares of Common Stock and/or up to 8,036 additional
Series A Warrants and/or up to 281,250 additional Series B Warrants. As a result of the July 14, 2015 1-for-35 reverse split,
the exercise price of the Series A warrants is $113.75 per share. The Series A Warrants were not subject to the July 15, 2016
1-for-400 reverse split and The Series B warrants were not subject to the 1 for 35 or the 1 for 400 reverse stock splits. The
Company also closed on the underwriter’s exercise of the over-allotment option on the Series A Warrants and the Series B
Warrants. The Company’s Common Stock and Series A Warrants were listed on the Nasdaq Capital Market under the symbols “AXPW”
and “AXPWW”, respectively, until February 2016, when both issues were removed to the OTCQB under the same trading
symbols. On June 15, 2015, as the result of an agreement with the holders of the Company’s Series A warrants and Series
B warrants, the Company adjusted the terms of the Series A warrants so that the exercise price was reduced to $.50, which number
was changed to $17.50 as a result of the Company’s July 14, 2015 1-for -35 reverse stock split. Accounting
for the Series B Warrants Pursuant
to ASC 815-40, due to the net settlement terms included in the Series B Warrants, which requires an increased number of shares
to be issued if the price of the Company’s common stock falls, the Company determined that the Series B Warrants were not
indexed to the Company’s own stock and must be recognized separately as a derivative liability in the consolidated balance
sheet, measured at fair value and marked to market each reporting period. On
April 26, 2016, 10,000 Series B warrants were exercised and 29 shares of the Company’s common stock were issued. The remaining
24,521 unexercised Series B warrants expired on April 29, 2016. As of December 31, 2016, all Series B warrants had either been
exercised or expired. At December 31, 2015, the fair value of the Series B Warrant was estimated to be $35,764. Using the Monte
Carlo simulation model to calculate the mark to market valuation at December 31, 2015, the following key assumptions were used
in determining the fair value: (i) expected life 1 month, (ii) volatility of 50.0%, (iii) risk free interest rate of 0.14%, (iv)
dividend rate of zero, (v) stock price of $0.93, and (vi) exercise price of $1.0463. The
following table rolls forward the fair value of the Company’s warrant liability, which is determined by level 3 inputs for
the year ended December 31, 2016 The
change in the fair value of the Series B warrant liability is as follows:
Fair
Value
Series
B warrant liability, January 1, 2015 $ 2,930,335
Reclassification of
Derivative Liability for Series B warrants exercised (3,500,126 )
Revaluation
of remaining Series B warrants 605,555
Series B warrant liability,
December 31, 2015 35,764
Revaluation
of remaining Series B warrants (35,764 )
Series
B warrant liability, December 31, 2016 $ — Bridge
Notes On
August 7, 2015, the Company entered into a securities purchase agreement (“Bridge Agreement”) with several accredited
investors, including one director of the Company (each, a “Bridge Investor”) pursuant to which it sold $600,000 principal
amount of Senior Convertible Notes (“Bridge Notes”) to the Bridge Investors. The transaction was approved by the Company’s
Board of Directors on August 5, 2015. The Bridge Notes carried an original issue discount of 15% so that the gross amount of proceeds
to the Company (before expenses) was $510,000. The Bridge Notes bore interest at the rate of 12% per annum, and the interest was
payable in cash upon repayment of the Bridge Notes or in shares of the Company’s common stock upon conversion of the Bridge
Notes. The Bridge Notes had a term of 90 days from the date of issuance. The holders of the Notes were issued one five-year warrant
(“Bridge Warrants”) for each $1.00 of principal amount of the Bridge Note invested (510,000 warrants in total). Each
Bridge Warrant has an exercise price of $1.75 per share. The Bridge Agreement, Bridge Notes and Bridge Warrants contain other
terms and provisions which are customary for a transaction of this nature, including standard representations and warranties and
events of default. The transaction was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended,
and Regulation D, as promulgated thereunder. The
fair value of the warrants issued in conjunction with the Bridge Notes is $257,550 in the aggregate and was calculated using the
binomial option model with the following assumptions: (i) expected life of 5 years, (ii) volatility of 100%, (iii) risk free interest
rate of 1.59% and (iv) dividend yield of zero. The
conversion feature of the Bridge Notes and the related warrants were determined not to be derivative instruments, in accordance
with the guidance in ASC Topic 470-20 Debt with conversion and Other Options On
November 5, 2015, $363,530 of principal and accrued and unpaid interest of the Company’s Bridge Notes was exchanged for
an additional note in the principal amount of $363,530 with the same terms as the convertible notes issued in its November 5,
2015 private placement of notes and warrants, and an additional 443,328 warrants were issued with the same terms as the warrants
issued in the November 5, 2015 private placement. On
November 10, 2015, the Company paid $235,294 in principal and $7,074 in interest to settle a portion of the Bridge Notes. The
remaining balance at December 31, 2016 and 2015 related to the Bridge Notes was $0.00 and $11,765, respectively. The final $11,765
in principal and $588 in interest with respect to the August 2015 Bridge Notes was paid on January 7, 2016. The
fair value of the warrants and the beneficial conversion feature were recorded as a debt discount and were amortized over the
life of the Bridge Notes. As of December 31, 2016, the debt discount and beneficial conversion feature have been fully amortized. Certain
of the Company’s machinery and equipment are secured by the Pennsylvania Department of Community and Economic Development
in relation to the Machinery and Equipment Loan Fund financing. The loan proceeds of $776,244 were received by us on September
14, 2009. The balance owed on the loan at December 31, 2016 and 2015 is $31,526 and $123,663, respectively, which bears interest
at a rate of 5.25% and matured on October 1, 2016. The final payment to Pennsylvania Department of Community and Economic Development
in the amount of $29,574 was made by the Company on January 9, 2018. Notes
with Landlords The
Company’s two landlords agreed to extend the payment date of an aggregate $291,975 due in lease payments until December
31, 2015. At
December 31, 2015, the Company renegotiated the repayment of the Notes with the landlords. At that time the Company made payment
of $67,000 to Becan Development, the landlord for its Greenridge facility, which included $54,375 of principal and $12,625 of
accrued interest. The remainder of the note was extended into four monthly installments of $25,000 plus accrued interest, commencing
on January 1, 2016 and concluding on April 1, 2016. The negotiation with S&S Partnership, the landlord for the Clover Lane
facility, resulted in an agreement to pay back the note in eight equal installments commencing January 1, 2016 and concluding
on August 1, 2016. The monthly payments of $18,125, consisting of $17,200 of principal and $925 of accrued interest. During the
year ended December 31, 2016, the balance of these notes was settled. As
of April 1, 2016, the Company has moved from the Greenridge facility as planned and consolidated to the Clover Lane facility. As
of December 31, 2016, and 2015, the balance of these notes amounted to $0.00 and $237,600, respectively. Description
of the 2015 Private Placement On
November 4, 2015, the Company entered into a financing transaction for the sale of convertible notes and warrants for gross proceeds
of $9,000,000. Upon closing, which occurred on November 5, 2015, the Company received cash proceeds of $1,850,000 and deposit
of an additional $7,150,000 into a series of control accounts in the Company’s name. Under the original terms of the notes,
the Company is permitted to withdraw funds from its control accounts (i) in connection with certain conversions of the notes or
(ii) otherwise, as follows: $1,000,000 on each 30-day anniversary of the commencing on the 30 th The
Company received approximately $1.7 million in net proceeds at closing, which occurred on November 5, 2015, after deducting placement
agent’s fee of $138,750. Offering expenses, other than the placement agent’s fee, were approximately $100,000, which
were paid out of proceeds at closing. At each release of funds starting on May 6, 2016, the Company was to receive approximately
$925,000 in net proceeds, after deducting placement agent’s fee of $75,000, if equity conditions (certain stock price and
volume and other conditions set forth in the loan documents from November 5, 2015) were met. As a result of a further waiver and
amendment entered into on May 1, 2016, the equity conditions were waived with respect to a release of $310,000 to the Company
on May 6, 2016. Further, the waiver and amendment (i) waives equity conditions for the Company’s ability to make all installment
and pre-installment payments in stock through May 6, 2017, and (ii) reduces the pre-installment and installment conversion prices
to 75% of an average vwap price over the five trading days preceding the date of issuance. In June of 2016 an additional $355,000
was released. In
the third quarter of 2016 and subsequently, the Company received the following releases from the control accounts as follows:
August $305,389, September $305,389 and October $288,889. The
initial conversion price of the notes was $492.00 per share (for optional conversions only and not Company amortization payments),
and the initial exercise price of the 10,975,608 warrants was $1.29 per share. As
a result of the “rollover” of $363,530 of principal amount and accrued and unpaid interest of the August 2015 Bridge
Notes, on November 10, 2015, an additional note in the principal amount of $363,530 of notes, and an additional 443,328 warrants
were issued to replace the rolled over Bridge Notes. The
$9,363,530 of total outstanding principal on November 10, 2015 bears interest at 9% per annum and shall be repaid or
converted at monthly installment dates over a 14-month period. Additionally, the notes are convertible by the holder at any
time after issuance. Pursuant to the optional conversion feature of these notes (as opposed to the monthly Company
conversions which are at a discount formula as set forth below), the Company would deliver the number of shares of common
stock equal to the outstanding principal amount, accrued interest amount, and a make whole amount equal to the interest that
would be accrued on the conversion amount until maturity, divided by the fixed conversion price of $492. Additionally, a
portion of the outstanding amount is exchanged for common shares at each Monthly Installment Date at a conversion price equal
to the lower of the conversion price in effect and 85% of the fair value of the common shares the trading day prior to the
installment date. Subsequent to May 1, 2016, the rate is 75% of the fair value. On the 23rd date prior to any installment
date, shares to be delivered based upon the conversion price formula for the installment amount, and then on the installment
date in question, the amount of shares to be delivered is recalculated for the conversion price formula on that installment
date, and if the conversion price is lower on the installment date than on the pre-installment date, a number of shares equal
to the number to be delivered on the installment date less the number of shares delivered on the pre-installment date is
delivered to the investor. The number of common shares deliverable under the contract is limited by a beneficial
ownership cap of 4.99% for any single investor (except for one investor which has a cap of 9.99%), so shares may be deemed
issued but held in abeyance by the transfer agent until the investor is able to accept further shares without exceeding the
beneficial ownership cap. As
the Company was required to separate the conversion option in the notes under ASC 815, Derivatives and Hedging, At
inception, the warrants were valued by calibrating the aggregate fair value of the notes and warrants to the transaction price,
as required by ASC 820. Calibrating the valuation model to ensure that the model is consistent with the fair value at initial
recognition provides a basis for estimating the inputs required in the analysis that are not directly observable. For each subsequent
reporting date, the warrants are valued based on the payoff structure, considering the change in assumptions between the inception
and the subsequent reporting date. The
conversion feature fair value is determined at inception and for each reporting date using a “with” and “without”
analysis, based on the payoff structure of the notes. The same key assumptions utilized in the warrants valuation were considered
in the conversion feature fair value, Using
the Calibration model, to calculate the mark to market value at December 31, 2015, the following key assumptions were utilized
in both the valuations of the notes and warrants as follows: (i) risk free interest rate 0.66%, (ii) credit spread break point
$0.72 (iii) credit spread 90%, (iv) volatility 53%, (v) stock price $168, (vi) negotiation discount 90.7%. Using
the Binomial Tree model, to calculate the mark to market value at December 31, 2016, the following key assumptions were utilized
in both the valuations of the notes and warrants as follows: (i) spot price $0.0139, (ii) maturity date: December 31, 2018, (iii)
maximum exercise price $492, (iv) exercise period starting from valuation dates, (v) volatility of 300%, (vi) coupon interest
of 18% per year, (vii) dividend yield $0.00. Derivative
liability relating to the 2015 Private Placement The
change in the fair value of the 2015 Private Placement derivative liability is as follows:
Private
Placement derivative liability, November 5, 2015 $ 2,058,894
Revaluation
of Private Placement Derivative liability 59,262
Private Placement Derivative
liability December 31, 2015 2,118,156
Change
in derivative valuation loss 479,920
Private
Placement derivative liability December 31, 2016 $ 2,598,076 Securities
Purchase Agreement The
notes and warrants were issued pursuant to the terms of a Securities Purchase Agreement among the Company and the investors named
therein. The Purchase Agreement provided for the sale of the notes and warrants for gross proceeds of $9,000,000 to the Company. Notes Ranking The
notes are senior unsecured obligations of the Company. Maturity
Date Unless
earlier converted or redeemed, the notes mature 14 months from the Closing, subject to the right of the investors to extend the
date (i) if an event of default under the notes has occurred and is continuing or any event shall have occurred and be continuing
that with the passage of time and the failure to cure would result in an event of default under the Notes and (ii) for a period
of 20 business days after the consummation of a fundamental transaction if certain events occur. The notes mature on the fourteen-month
anniversary of the issuance date (January 5, 2017) and are therefore already in their default state. Interest
The
notes bear interest at the rate of 9% per annum and are compounded monthly, on the first calendar day of each calendar month.
The interest rate will increase to 18% per annum upon the occurrence and continuance of an event of default (as described below).
Interest on the notes is payable in arrears on each installment date (as defined below). If a holder elects to convert or redeem
all or any portion of a note prior to the maturity date, all accrued and unpaid interest on the amount being converted or redeemed
will also be payable. If the Company elects to redeem all or any portion of a note prior to the maturity date, all accrued and
unpaid interest on the amount being redeemed will also be payable. The amount of interest due at any time is the amount of any
interest that, but for any conversion, installment conversion, acceleration or redemption hereunder on such given date, would
have accrued with respect to the conversion amount or installment amount being converted or redeemed under the note at the interest
rate for the period from such given date through the maturity date of the note. Optional
Conversion All
amounts due under the notes are convertible at any time, in whole or in part, at the option of the holders into shares of the
Company’s common stock at a fixed conversion price, which is subject to adjustment as described below. The notes are initially
convertible into shares of the Company’s common stock at the initial price of $492 per share. This conversion price is subject
to adjustment for stock splits, combinations or similar events and “full ratchet” antidilution provisions. Payment
of Principal and Interest The
Company has agreed to make amortization payments with respect to the principal amount of each note in shares of the Company’s
common stock, subject to the satisfaction of certain equity conditions, or at the Company’s option, in cash on each of the
following installment dates: The
twenty-first trading day after the earlier of (x) the initial effective date of a registration statement filed in connection with
this offering or (y) May 2, 2016; the first trading day of the calendar month immediately following the initial installment date
(or if such date is less than twenty trading days after the initial installment date, the second calendar month immediately following
the initial installment date to the extent); and then each month through and including the Maturity Date, each in an amount equal
to 1/11 of the principal amount of each note. Payment in stock is at 85% of the market price based upon a variable weighted average
price formula. As
a result of the amendment agreements entered into by the Company with each selling stockholder on January 28, 2016, an additional
$1.8 million was released from the controlled accounts on January 28, 2016, starting on May 2, 2016, and continuing for seven
consecutive months thereafter on the 1 st Acceleration
and Deferral of Amortization Amounts During
each period after an installment date and prior to the immediately subsequent installment date, a holder may elect to accelerate
the amortization of the note at the applicable amortization conversion price for such prior installment date with respect to any
given installment period, the holder may not elect to affect any acceleration during such installment period if either (x) in
the aggregate, all the accelerations in such installment period exceeds the sum of two (2) other installment amounts, or (y) accelerations
have been consummated in four (4) prior installment periods. The
holder of a note may, at the holder’s election by giving notice to the Company, defer the payment of the installment amount
due on any installment dates, in whole or in part, to another installment date, in which case the amount deferred will become
part of such subsequent installment date and will continue to accrue interest. Events
of Default The
notes contain standard and customary events of default including but not limited: (i) failure to register the Company’s
common stock within certain time periods; (ii) failure to make payments when due under the Notes; and (iii) bankruptcy or insolvency. If
an event of default occurs, each holder may require the Company to redeem all or any portion of the notes (including all accrued
and unpaid interest thereon), in cash, at a price equal to the greater of (i) up to 125% of the amount being redeemed, depending
on the nature of the default, and (ii) the intrinsic value of the shares of common stock then issuable upon conversion of the
note. Fundamental
Transactions The
notes prohibit the Company from entering into specified transactions involving a change of control, unless the successor entity
assumes in writing all of the Company’s obligations under the notes under a written agreement. In
the event of transactions involving a change of control, the holder of a note will have the right to require the Company to redeem
all or any portion of the Note it holds (including all accrued and unpaid interest thereon) at a price equal to the greater of
125% of the amount of the Note being redeemed and the intrinsic value of the shares of common stock then issuable upon conversion
of the note being redeemed. Limitations
on Conversion and Issuance A
note may not be converted and shares of common stock may not be issued under the notes if, after giving effect to the conversion
or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding
shares of common stock. At each holder’s option, the note blocker may be raised or lowered to any other percentage not in
excess of 9.99%. As
a result of the January 28, 2016 amendment agreements, there is no exchange cap in this transaction. January
28, 2016 Amendment Agreements On
January 28, 2016, the Company entered into amendment agreements with each of the selling stockholders with respect to the November
5, 2015 private placement exempt from securities registration under Section 4(a)(2) of the Securities Act of 1933 and Rule 506(b)
of Regulation D. On or about November 20, 2015, the Company filed a registration statement on Form S-1 to register the Registrable
Securities, and as a result of comments received from the SEC, the Company withdrew this original S-1 on January 21, 2016. Subsequent
to the withdrawal of the original S-1, the Company sought to make certain amendments to the terms of the securities purchase agreement
and registration rights agreement, entered into in connection with the sale of the senior secured convertible notes, as well as
to the notes. The amendments are embodied in the amendment agreements with each of the buyers. Changes
to the securities purchase agreement are as follows:
● The term “principal market” was
changed from the Nasdaq Capital Market to the OTCQB. This change was also made in the notes and accompanying warrants for
conformity.
● Section 4(d) was amended to add the following
at the end of the Section. “Until the later of June 2, 2016 and the date on which the Buyers are eligible to resell
all shares of Company Common Stock underlying the Notes and Warrants (assuming cashless exercise of the Warrants) without
restriction under Rule 144 (assuming such Buyers are not then affiliates of the Company), the Company may not make any payments
to Affiliates other than (i) up to $11,800 to repay, in full, that certain bridge note issued by the Company to Walker Wainwright;
(ii) director and Board committee fees in the ordinary course of business, consistent with past practices, to its non-management
directors accruing on or after January 1, 2016 in an amount not to exceed $25,000, in the aggregate, per calendar quarter,
(iii) current compensation arrangements (but not accrued and unpaid obligations for compensation to current and former officers
of the Company) to its executive officers upon terms and conditions publicly existing as of December 31, 2015 and/or disclosed
on a Current Report on Form 8-K on January 27, 2016; (iv) stock options and/or restricted stock as per normal Board of Directors
policy; and (v) customary, reasonable and usual travel and lodging expenses for Company business.”
● The Company no longer has the obligation to
obtain shareholder approval for the issuance of securities with respect to the private placement as the Company is moving
its listing to the OTCQB which does not require shareholder approval for issuance of securities in this transaction. Accordingly,
the “exchange cap” at 19.9% of issued and outstanding shares was also omitted. Changes
to the notes are as follows:
● The definition of an event upon which funds
can be released from any of the controlled accounts was amended to read as follows: “Controlled Account Release Event”
means, as applicable, (i) with respect to any Restricted Principal designated to be converted in a Conversion Notice, the
Company’s receipt of both (A) such Conversion Notice hereunder executed by the Holder in which all, or any part, of
the Principal to be converted includes any Restricted Principal and (B) written confirmation by the Holder that the shares
of Common Stock issued pursuant to such Conversion Notice have been properly delivered in accordance with Section 3(c) (in
each case, as adjusted, if applicable, to reflect the withdrawal of any Conversion Notice, in whole or in part, by the Holder,
whether pursuant to Section 3(c)(ii) or otherwise), (ii) the Company’s receipt of a notice by the Holder electing to
affect a release of any Restricted Principal to the Company, (iii) on the date of execution of the certain Amendment Agreements,
dated January 28, 2016, by and among the Company and certain holders of the Notes, which act as an amendment to the Notes,
$1,800,000, and (iv) on May 2, 2016, and the first Trading Day of each of the subsequent seven calendar months thereafter,
the lesser of (x) the amount of Restricted Principal then outstanding hereunder and (y) the Holder Pro Rata Amount of $668,750;
provided, in the case of clause (iv) above, as of such date of determination, no Equity Conditions Failure then exists. The
Buyer hereby waives all Equity Condition Failures existing on or before the date of this Agreement.”
● Each existing note is being split into two notes,
one of which is in the principal amount of the buyer’s pro rata portion of the initial $3,650,000 principal amount of
funds released from the controlled accounts, and the second of which represents the remaining principal amount of the original
note issued to that buyer. Changes
to the registration rights agreement are as follows:
● The filing deadline for the initial registration
statement (registering shares to be issued upon conversion of the $3,650,000 principal amount of the notes and interest thereon
representing the total amount of funds released from the controlled accounts to date) was changed to January 29, 2016, and
the effectiveness deadline for the initial registration statement was changed to February 16, 2016.
● The number of registrable securities was reduced
to 10,735,296 shares of the Company’s common stock which may be issued upon conversion of up to $3.65 million principal
amount of the notes and 966,178 shares of the Company’s common stock which may be issued upon conversion of interest
due and owing on the released $3.65 million principal amount.
● The initial notice date for installment payments
by the Company is now the earlier of the effectiveness date of the registration statement being filed on January 29, 2016,
and May 2, 2016. May
1, 2016 Waiver and Amendment The
Company has entered into a Waiver and Amendment (“Waiver”) with each of the buyers listed on the Schedule of Buyers
attached to the securities purchase agreement. In each Waiver, the Company and the Buyer agreed as follows:
● With respect to
the Notes, the Buyer waives the Volume Failure (as defined in the securities purchase agreement) and the Price Failure (as
defined in the securities purchase agreement) on any and all Installment Conversions (as defined in the securities purchase
agreement) and delivery of shares for any Pre-Installment Conversion Shares (as defined in the securities purchase agreement)
pursuant to an Installment Notice (as defined in the securities purchase agreement) until May 1, 2017.
● Section 3(b)(2)
of the Notes is amended by replacing the definition of Conversion Price, as defined in the Notes, with the following definition: “as
of any Conversion Date or other date of determination, a price per share equal to the lowest of (x) $492, subject to adjustment
as provided in this Note (the price set forth in this clause (x), the “Fixed Conversion Price”), (y) 75% of the arithmetic
average of the Weighted Average Prices of the Common Stock during the five (5) consecutive Trading Day period ending immediately
preceding the time of delivery of the applicable Conversion Notice, and (z) 75% of the Weighted Average Price of the Common Stock
on the Trading Day of the delivery of the applicable Conversion Notice. For the avoidance of doubt, all such foregoing determinations
to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction during
the applicable calculation period.”
● All references in
paragraphs 7, 8 and 11 of the Notes to “Conversion Price” are amended to state “Fixed Conversion Price.”
● Paragraph 4 of the
Amendment Agreement, dated January 28, 2016, among the Company and the Buyers, is amended by adding the following sentence
at the end of the paragraph: “Notwithstanding
anything to the contrary in this paragraph 4, the Company and the Buyers hereby acknowledge that the Equity Conditions for the
Controlled Account Release Event on May 6, 2016 are not, and are deemed not to be, satisfied, and the Buyers hereby waive the
Equity Conditions for the Controlled Account Release Event on May 6, 2016, for an aggregate release of $310,000, to be released
proportionately among the Buyers based upon the pro rata share as a result of the original principal amounts of the Notes.” August
8, 2016 Waiver and Amendment to the November 2015 Notes The
Company has entered into a Waiver and Amendment (“Waiver”) with each of the buyers (“Holders”) listed
on the Schedule of Buyers attached to that certain Securities Purchase Agreement (“SPA”), dated November 5, 2015,
among the Company and the Holders (each capitalized term used below is used as defined in the SPA and notes entered into in conjunction
with the SPA, “Notes”). In each Waiver, the Company and the Holders agreed as follows:
● Section 31(n) of
the Notes is hereby amended to add the following:
“Notwithstanding
anything to the contrary within, there shall be a Controlled Account Release Event on August 8, 2016 in an amount equal to
the Holder’s Pro Rata Amount of $300,000. The Company has requested further Controlled Account Release Events on each
of September 1, 2016, October 1, 2016 and November 1, 2016 in an amount equal to the Holder’s Pro Rata Amount of $300,000,
and if, as and when a future release or releases occur, the Holder shall have been automatically deemed to have waived any
Equity Condition Failures with respect to such release.”
● All Restricted Principal
in the Controlled Account in excess of the Holder’s Pro Rata Amount of $1,200,000 shall be immediately returned to Holder,
and the amount of the returned Restricted Principal shall be credited against the outstanding principal balance of the Note
such that for every $420 of Restricted Principal returned, the principal amount of the Note shall be reduced by $400. The
Waivers became effective on August 8, 2016 upon entry into waivers by all of the Holders, individually, with the Company. Warrants The
warrants entitle the holders of the warrants to purchase, in aggregate, 28,547 (27,439 shares from the November 5, 2015 closing
and 1,108 shares from the “rollover” of Bridge Notes described at the beginning of this section) shares of the Company’s
common stock. The warrants will expire November 5, 2017. The Warrants are initially exercisable at an exercise price equal to
the lower of $516 and 85% of the market price at the time of exercise, subject to certain adjustments. The warrants may be exercised
for cash, provided that, if there is no effectiv |
