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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
of a Registrant
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On September 13, 2019, Dr. Gene Salkind,
who is a director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible
promissory notes (the “Note”) and loaned to the Company an aggregate of $2,300,000 (the “Loans”).
The Notes bear interest at a fixed rate
of 15% per annum, computed based on a 360-day year of twelve 30-day months and will be payable monthly in arrears. Interest on
the Notes is payable in cash, or, at the Lenders’ option, in shares of the Company’s common stock. The principal amount
due under the Notes will be payable on September 30, 2029, unless earlier converted pursuant to the terms of the Notes.
Subject to the Company obtaining prior
approval from the Company’s shareholders for the issuance of shares of common stock upon conversion of the Notes, if and
to the extent required by the New York Business Corporation Law, the Notes will be convertible into equity of the Company upon
the following events on the following terms:
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At
any time at the option of the Lenders, the outstanding principal under the Notes will be converted into shares of common stock
of the Company at a conversion price of $0.08 per share (the “Conversion Price”).
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at
any time that the trailing thirty (30) day volume weighted average price per share (as more particularly described in the Notes)
of the Company’s common stock is above $1.00 per share, until the Notes are no longer outstanding, the Company may convert
the entire unpaid un-converted principal amount of the Notes, plus all accrued and unpaid interest thereon, into shares of the
Company’s common stock at the Conversion Price.
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The Notes contain customary events of default,
which, if uncured, entitle the Lenders thereof to accelerate the due date of the unpaid principal amount of, and all accrued and
unpaid interest on, their Notes.
In connection with the subscription of
the Notes, the Company issued to each Lender a warrant to purchase one share of the Company’s common stock for every two
shares of common stock issuable upon conversion of the Notes, at an exercise price of $0.12 per share (the “Lender Warrants”).
The foregoing is a brief description for
the subscription of the Notes and the terms of the Notes and the Lender Warrants, and is qualified in its entirety by reference
to the full text of the Subscription Agreements, Notes, and Lender Warrants, copies of which are attached to this Current Report
as Exhibit 10.6, 10.7, 10.8, 10.9, and 10.10, the terms of which are incorporated herein by reference.
As previously disclosed in its Current
Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2019 (the “May 8-K”), the Company assumed
a promissory note (the “AVNG Note”) payable to Deepankar Katyal (the “Payee”), as representative of the
former owners of AVNG, which at the time of assumption had a remaining principal balance of $7,512,500. Simultaneously with the
assumption of the AVNG Note, the AVNG Note was amended and restated as disclosed in the May 8-K (the “First Amended AVNG
Note”). Effective as of September 13, 2019, the Company and Payee entered into a Second Amended and Restated Promissory Note
(the “Second Amended AVNG Note”), in the principal amount of $6,750,000, pursuant to which the repayment terms under
the First Amended AVNG Note were amended and restated as follows:
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$5,250,000
of the principal balance remaining due under the Second Amended AVNG Note is payable by the delivery of (i) 65,625 shares of the
Company’s newly designated Class E Preferred Stock, which is convertible into 65,625,000 shares the Company’s common
stock, and (ii) common stock purchase warrants to purchase 32,812,500 shares of the Company’s common stock, at an exercise
price of $0.12 per share (the “AVNG Warrant”).
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$1,530,000
of the principal balance, inclusive of all accrued and unpaid interest, remaining due under the Second Amended AVNG Note in three
equal consecutive monthly installments of $510,000, commencing on September 15, 2019 and on the 15th day of each month
thereafter until paid in full.
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The Second Amended AVNG Note provides that
upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class
E Preferred Stock issuable pursuant to the terms of the Second Amended AVNG Note, and any shares of the Company’s common
stock issued upon the conversion of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the
AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be
cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First
Amended AVNG Note.
The foregoing is a brief description of
the terms of the Second Amended AVNG Note and AVNG Warrant, and is qualified in its entirety by reference to the full text of the
Second Amended AVNG Note and AVNG Warrant, copies of which are attached to this Current Report as Exhibit 10.11 and 10.12, the
terms of which are incorporated herein by reference.