Board of Directors and Management Changes

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

9. Board of Directors and Management Changes

On September 2, 2016, the Company's shareholders elected four new directors who had run as an alternative slate to the slate the Company had recommended to its shareholders. These directors are Mr. Jeffrey T. Holtmeier, Mr. Brian A. Ross, Mark Scott and Dr. Stephen Weiss. Effective as of September 12, 2016, the newly elected board along with the remaining director, Joseph Heimbrock, whom the Series B shareholders anointed as a class, elected Mr. Holtmeier as Chairman of the Board on October 11, 2016. On September 12, 2016, the Board of Directors formed audit, compensation and nominating governance committees. Committee membership, which the directors subsequently revised per the appointment of Mr. Holtmeier as CEO (See Note 10 - Subsequent Events), are as follows:

· Audit: Ross (Chair), Scott and Weiss

· Compensation: Ross, Scott (Chair)

· Nominating & Governance: Scott, Weiss (Chair)

Subsequent to the election of the new Board of Directors and on September 13, 2016, the Company's Chief Executive Officer, Mr. Lalit Dhadphale, tendered his resignation which the Board of Directors of the Company subsequently accepted. Mr. Dhadphale's separation from the Company was effective October 13, 2016. Mr. Dhadphale's contract provided for severance payments under certain conditions, including a change in the composition of the Board of Directors, and contained restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.

Subsequent to the election of the new Board of Directors and on September 9, 2016, the Company's Chief Financial Officer, Mr. Daniel Seliga, tendered his resignation which the Board of Directors of the Company subsequently accepted.  Mr Seliga's separation from the Company was effective October 9, 2016. Mr. Seliga's contract provides for severance payments under certain conditions, including a change in the composition of the Board of Directors, and contained restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.

Related to the solicitation of shareholders' proxies and subsequent resignations per certain employment agreements mentioned above, the Company incurred proxy, solicitation and severance costs of $548,303 and severance costs of $240,000 during the three and nine months ended September 30, 2016 of, which are included in Selling, General and Administrative expenses. At September 30, 2016, $204,323 and $395,000 of these costs are recorded in Accounts Payable and Accrued Expenses and Other Current Liabilities, respectfully.