Note 19 – Subsequent Events

Accounts Receivable Financing (Prepaid Forward Purchase Contract) and Loans From Mr. Diamantis

Subsequent to June 30, 2019, Mr. Diamantis advanced the Company $4.9 million, which was used to repay obligations under a prepaid forward purchase contract related to an accounts receivable financing, as more fully discussed in Note 7. In addition Mr. Diamantis loaned the Company $2.4 million, of which $1.6 million was used for fees and expenses incurred in connection with the settlement of the prepaid forward purchase contract and the remainder was used for working capital purposes. Subsequent to June 30, 2019, and through October 31, 2019, the Company incurred interest of $0.7 million on the loans from Mr. Diamantis and the Company repaid Mr. Diamantis $0.8 million, which was from the proceeds of a promissory note issued on September 27, 2019 as more fully discussed below.

Issuance of Common Stock

Subsequent to June 30, 2019 and through December 5, 2019, the Company issued an aggregate of 3,090,000,000 shares of common stock for conversions of preferred stock. The following table presents the dilutive effect of our various potential common shares as of December 5, 2019.

On October 4, 2019, the Board of Directors authorized the issuance and sale of certain shares of Series K Preferred Stock to Alcimede LLC pursuant to the terms of an Exchange Agreement. The Board considered all options to secure additional financing required to continue operations and determined this authorization to be necessary to secure needed financing in the required time frame. As a result of this authorization, as of the date of filing this report, the Company believes that it has the ability to have sufficient authorized shares of its common stock to cover all potentially dilutive common shares outstanding. Following is a summary of certain terms of the Series K Preferred Stock:

General. The Company’s Board of Directors has designated 250,000 shares of the 5,000,000 authorized shares of preferred stock as the Series K Preferred Stock. Each share of the Series K Preferred Stock has a stated value of $1.00.

Voting Rights. Each holder of the Series K Preferred Stock shall be entitled to vote on all matters submitted to a vote of the holders of the Company’s common stock. With respect to a vote of stockholders to approve either or both a reverse stock split of the Company’s common stock (and any reduction in the authorized shares) and an increase in the authorized shares of common stock from 10 billion shares to up to 12.5 billion shares, no later than December 31, 2019 only, each share of the Series K Preferred Stock shall be entitled to the whole number of votes equal to 40,000 shares of common stock. With respect to all other matters, and from and after December 31, 2019, each share of the Series K Preferred Stock shall be entitled to the whole number of votes equal to the number of shares of common stock into which it is then convertible. The Series K Preferred Stock shall vote with the common stock as if they were a single class of securities.

Dividends. Holders of the Series K Preferred Stock shall be entitled to receive dividends on shares of the Series K Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if dividends are paid on shares of common stock.

Rank. The Series K Preferred Stock ranks with respect to dividends or a liquidation, (i) on parity with the common stock, the Company’s Series G Convertible Preferred Stock and the Company’s Series H Convertible Preferred Stock, (ii) senior to the Company’s Series F Convertible Preferred Stock, and (iii) junior to the Company’s Series I-1 Convertible Preferred Stock and the Company’s Series 1-2 Convertible Preferred Stock.

Conversion. Each share of the Series K Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such share of Preferred Stock plus any accrued and unpaid dividends thereon, by the conversion price. The conversion price is equal to the average closing price of the common stock on the 10 trading days immediately prior to the conversion date.

Liquidation Preference. Upon any liquidation, dissolution or winding up of the Company, the holders of the Series K Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series K Preferred Stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon for each share of the Series K Preferred Stock before any distribution or payment shall be made on any junior securities.

Redemption. At any time the Company shall have the right to redeem all, or any part, of the Series K Preferred Stock then outstanding. The Series K Preferred Stock subject to redemption shall be redeemed by the Company in cash in an amount equal to the stated value of the shares of the Series K Preferred Stock being redeemed plus all accrued and unpaid dividends.

Accounts Receivable Factoring Arrangements

In addition to the accounts receivable factoring arrangement discussed in Note 4, subsequent to June 30, 2019 and through September 30, 2019, the Company entered into two additional accounts receivable factoring arrangements. Under the terms of the two agreements, the aggregate amount of accounts receivable sold on a non-recourse basis, was $2.0 million. The aggregate purchase price paid to the Company was $1.4 million and the total origination and other fees incurred by the Company were $61,205. As of October 31, 2019, an aggregate of $1.3 million was purchased but not yet paid to the factors under all factoring arrangements.

Promissory Note

On September 27, 2019, the Company issued a promissory note to a lender in the principal amount of $1.9 million and received proceeds of $1.5 million, which is net of a $0.3 million original issue discount and $0.1 million in financing fees. The first principal payment of $1.0 million was due on November 8, 2019 and has not yet been made and the remaining $0.9 million is due on December 26, 2019. The note does not bear interest except upon the occurrence of an event of default (as defined in the note). The note is unsecured and is guaranteed by Mr. Diamantis.

Past Due Debentures

The Company had $17,050,000 principal amount of debentures due September 19, 2019 outstanding on the maturity date. These debentures have not been paid and remain outstanding, accruing interest at the default rate of 18% per annum. In addition, the Company will incur a default penalty of approximately $5.1 million during the three months ended September 30, 2019 as a result of the payment default.