SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2014

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

11. SUBSEQUENT EVENTS

Settlement of Ehrlich Litigation

On August 2, 2013, Thomas H. Ehrlich, the Company’s former chief financial officer, filed a complaint against the Company in the District Court of Denton County, Texas, Cause No. 2013 61011 393. The complaint alleges that the Company breached a compensation agreement between the Company and Mr. Ehrlich that provided for certain payments to Mr. Ehrlich upon certain change in control events.

On April 15, 2014, the Company and Mr. Ehrlich entered into a Settlement Agreement and General Release, under the terms of which Mr. Ehrlich agreed to dismiss his claims in his lawsuit with prejudice in exchange for the payment by the Company of Mr. Ehrlich’s attorneys’ fees in the amount of $50,000 and for the issuance by the Company to Mr. Ehrlich of 119,231 shares of common stock. As of March 31, 2014, the Company has accrued $360,000 based on the estimated settlement.

Amendment to Loan Agreement

On April 29, 2014, the Company and RCF entered into Amendment No. 1 to the Loan Agreement (the “Amendment”). The Amendment reduced the amount available under the second tranche of the Loan Agreement from $5.0 million to $3.0 million and terminated RCF’s commitment relating to the $5.0 million third tranche. As a consequence, the aggregate amount available under the Loan Agreement decreased from $15.0 million to $8.0 million. Following execution of the Amendment, the Company requested, and RCF advanced on April 30, 2014, the final $3.0 million available under the Loan Agreement. The total amount drawn under the Loan Agreement after receipt of this advance is $8.0 million. No additional amounts may be drawn under the Loan Agreement.