NOTE 13—SUBSEQUENT EVENTS

Shareholder Litigation

On July 21, 2014, the Company’s former Chairman of the Board and CEO, Mr. Pignatelli, filed a complaint in the Court of Chancery of the State of Delaware, naming the Company, Messrs. Clark, Nugent and Talevich and Dr. Moll as defendants. Mr. Pignatelli sought expedited proceedings with respect to a number of his claims. On July 24, 2014, the Chancery Court denied Mr. Pignatelli’s motion for expedited proceedings on all but one of his claims. On July 29, 2014, Mr. Pignatelli filed a notice of voluntary dismissal of his July 21, 2014 complaint and withdrew his lawsuit. See Note 9 – Commitments and Contingencies for further discussion.

Credit Agreements

On July 28, 2014, the Company paid in full all amounts due under the Company’s revolving lines of credit with Comerica Bank, including principal, accrued interest, and fees which totaled approximately $2.9 million, and the Credit Agreements were terminated. See Note 8 – Lines of Credit and Other Borrowings for further discussion.

Retirement of Treasury Stock

On July 18, 2014, the Company retired 1,963,500 shares of stock held in treasury at June 30, 2014.

Warrant Termination

Subsequent to June 30, 2014, the Company terminated a performance-based warrant to purchase 60,000 shares of the Company’s common stock originally issued on April 18, 2013.

July 2014 Private Placement

On July 22, 2014, the Company completed a private placement with certain institutional and individual investors, under which the Company sold an aggregate of 6,250,000 unregistered shares of the Company’s common stock at a price of $1.92 per share. Gross proceeds from the offering totaled $12.0 million. The Company expects net proceeds, after commissions and other offering expenses of approximately $300,000, to total approximately $11.7 million.

The Company used the net proceeds to repay all outstanding indebtedness under the Credit Agreements, as amended, between the Company and Comerica Bank. In addition, the Company plans to use the net proceeds for working capital and general corporate purposes. The Company is obligated to use commercially reasonable efforts to file a registration statement on Form S-3 on or before August 21, 2014.

See Note 1 – Description of Business and Basis of Presentation for further discussion.

CEO Compensation Arrangement

On July 13, 2014, the Compensation Committee of the Board of Directors of the Company approved compensation for Mr. Nugent, who was appointed as the Company’s Acting CEO on June 16, 2014.  The arrangement consists of an annual base salary of $300,000, non-qualified stock options to purchase 172,282 shares of the Company’s common stock at an exercise price of $1.98 per share and 37,879 restricted stock units ("RSUs"). One-sixth of the stock options and one-sixth of the RSUs vested immediately, with the remaining five-sixths vesting ratably on a monthly basis over a twelve-month period ending on July 13, 2015, subject to Mr. Nugent’s continued service with the Company through the applicable vesting dates.