We may terminate the
Sales Agreement at any time or it will terminate once proceeds of $40 million have been raised. For the nine months ended
September 30, 2017, we sold 896,811 shares of common stock under our At-The-Market, or ATM, program for aggregate net proceeds
of $1.3 million. Whether we choose to affect future sales under our ATM program will depend upon a variety of factors, including,
among others, market conditions and the trading price of our Common Stock relative to other sources of capital. The issuance from
time to time of these new shares of Common Stock through our ATM program or in any other equity offering, or the perception that
such sales may occur, could have the effect of depressing the market price of our Common Stock.
Our issuance of Common Stock under
our “At-The-Market” offering program may be dilutive, and there may be future dilution of our Common Stock.
After giving effect
to the issuance of Common Stock under our ATM offering program and the receipt of the expected net proceeds and the use of those
proceeds, there may be a dilutive effect on our estimated earnings per share and funds from operations per share in years during
which an offering is ongoing. The actual amount of potential dilution cannot be determined at this time and will be based on numerous
factors. Additionally, we are not restricted by our organizational documents, contractual arrangements or otherwise from issuing
additional Common Stock or preferred stock, including any securities that are convertible into or exchangeable or exercisable for,
or that represent the right to receive, Common Stock or preferred stock or any substantially similar securities in the future.
The market price of our Common Stock could decline as a result of issuances of a large number of shares of our Common Stock after
this offering or the perception that such issuances could occur.
Our management will have broad discretion
with respect to the use of the proceeds resulting from the issuance of Common Stock under our “At-The-Market” offering
Our management has
significant flexibility in applying the net proceeds we expect to receive from the issuance of Common Stock under our ATM program.
We intend to use the net proceeds from this offering for general corporate purposes, which may include repaying debt. However,
because the net proceeds are not required to be allocated to any specific investment or transaction, investors cannot determine
at the time of issuance the value or propriety of our application of the net proceeds, and investors may not agree with our decisions.
In addition, our use of the net proceeds from the offering may not yield a significant return or any return at all. The failure
by our management to apply these funds effectively could have an adverse effect on our financial condition, results of operations
or the trading price of our Common Stock.
The resale of the shares of Common Stock issuable upon
the conversion of our Series A Convertible Preferred Stock could adversely affect the prevailing market price of our Common Stock
and cause stockholders to experience dilution.
On August 2, 2017,
we issued and sold 22,000 shares of our Series A Convertible Preferred Stock, par value $0.001 per share, for a purchase price
of $1,000 per share, or an aggregate purchase price of $22.0 million. Each share of Series A Convertible Preferred Stock
is convertible into approximately 1,005 shares of our Common Stock at a conversion price of $0.9949 per share, provided that any
conversion of Series A Convertible Preferred Stock by a holder into shares of Common Stock is prohibited if, as a result of such
conversion, the holder, together with its affiliates and any other person or entity whose beneficial ownership of our Common Stock
would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act, would beneficially own more than
9.985% of the total number of shares of our Common Stock issued and outstanding after giving effect to such conversion (the “Blocker”).
Pursuant to the registration statement that we filed with the SEC for the resale by holders of our Series A Preferred Convertible
Stock, as selling stockholders, of the aggregate 22,112,775 shares of Common Stock that are issuable upon conversion of the Series
A Convertible Preferred Stock, the outstanding shares of Series A Convertible Preferred Stock may, at each holder’s election,
be converted into our Common Stock, subject to the Blocker. Although we cannot predict if and when the holders of Series A Convertible
Preferred Stock may sell such shares in the public market, any converted shares of Common Stock will be available for immediate
resale and be able to be freely sold in the open market. The conversion of shares of Series A Convertible Preferred Stock into
shares of Common Stock will result in substantial dilution to holders of our Common Stock. Further, the sale of a significant
amount of these shares of Common Stock in the open market or the perception that these sales may occur could adversely affect
prevailing market prices of our Common Stock, including causing the market price of our Common Stock to decline or become highly