NOTE 7 – SUBSEQUENT EVENTS

On July 17, 2017, the Company received a written notification from the NASDAQ Stock Market LLC (“Nasdaq”) indicating that Nasdaq has determined to grant the Company an extension until October 17, 2017 to regain compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”), which requires companies to maintain stockholders’ equity of at least $2.5 million.

On July 17, 2017, the Company and the purchasers (the “Holders”) of securities in the Company’s April 21, 2017 offering (the “Offering”) entered into separate exchange agreements (the “Agreements”).  Under the terms of the Agreements, the Holders agreed to exchange warrants to purchase 2,280,000 shares of the common stock for 2,394,000 shares of common stock of the Company (the “Exchange Shares”) and waived and terminated their rights to participate in or approve any future offering of securities by the Company and other matters related to the Company.  Holders maintain their rights to Exercise the Warrants until the Exchange has been approved by the Company’s shareholders. Under NASDAQ Rule 5635(d) the Company is required to obtain shareholder approval prior to issuing the Exchange Shares (“Shareholder Approval”).

On August 3, 2017, the Company entered into a First Amendment to Amended and Restated Revenue Sharing and Securities Purchase Agreement and Restructuring Agreement (the “First Amendment and Restructuring Agreement”) with DBD Credit Funding LLC, an affiliate of Fortress Investment Group, LLC (referred to as “Fortress”) to restructure and replace the obligations of the Company under that certain Amended and Restated Revenue Sharing and Securities Purchase Agreement (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Amended and Restated Agreement”), dated January 10, 2017, which was originally entered into by the Company and Fortress on January 29, 2015. Pursuant to the First Amendment and Restructuring Agreement, certain intellectual property owned by the Company and originally purchased by the Company from various parties (the “IP”) is to be assigned to one or more newly created special purpose entities (the “SPE”) as elected by Fortress, which SPE is under the management and control of an affiliate of Fortress (the “IP Monetization Manager”). All Monetization Revenues arising from the IP shall be paid to an account that is under the sole and exclusive control of the Collateral Agent as the IP Monetization Manager. In addition, until the Restructuring, the Company shall be responsible for the expenses associated with the maintenance, prosecution and enforcement of the IP, or Maintenance Fees, and for any expenses associated with the pursuit of monetization activities relating to the IP (any such funding by Fortress, the “Cash Advances”). Following the occurrence of the Restructuring, the SPE shall be responsible for any Maintenance Fees arising following the Restructuring. In addition, the First Amendment and Restructuring Agreement modifies the revenue share provided for in the Amended and Restated Agreement such that all proceeds from the Monetization Activities will be applied as follows: (i) first, to pay for certain third party expenses incurred by the Company, Fortress or third party brokers in relation to the Monetization Activities, (ii) second, to Fortress, as the Collateral Agent, to pay any outstanding expenses of the Collateral Agent which have not been advanced by Fortress as Cash Advances, (iii) third, to Fortress to pay the Note Obligations until paid in full, (iv) fourth, to Fortress, as the Purchaser, until Fortress has received an amount equal to the sum of (x) 150% of reimbursement of any Cash Advances by Fortress pursuant to the Restructuring Agreement plus (y) the accrued management fee of $2.45 million per annum plus 10% of any Cash Advances, plus (z) $24.5 million less any amounts paid to Fortress under the Amended and Restated Agreement after January 10, 2017, and (v) fifth, after all of the foregoing payment obligations are satisfied, 55% to Fortress and 45% to the Company.

On August 3, 2017, Erich Spangenberg resigned as an employee of the Company, effective immediately, and the Company and Mr. Spangeberg entered into a consulting agreement whereby Mr. Spangenberg will continue to advise the Company with respect to the monetization of its patent assets.

On August 7, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”) with the holder (the “Holder”) of a convertible promissory note, dated October 16, 2014 (the “Note”), issued by the Company in the aggregate principal amount of $500,000.  Pursuant to the Exchange Agreement, the Holder agreed to exchange the Note, together with interest, in the amount of $2,750 due and payable thereon and relinquish any and all rights thereunder, for five hundred and two thousand seven hundred and fifty (502,750) shares of the Company’s newly authorized Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred Shares”).  Each Series D Preferred Share is initially convertible into five (5) shares of  our common stock in accordance with the terms of the Certificate of Designation Of Rights, Powers, Preferences, Privileges And Restrictions of The 0% Series D Convertible Preferred Stock (the “Series D Certificate of Designation”). On August 7, 2017, the Holder exercised their right to convert 200,000 shares of Series D Preferred Shares.

On August 13, 2017, Richard Chernicoff and Richard Tyler resigned as members of the Company’s Board of Directors, effective immediately. Mr. Chernicoff and Mr. Tyler’s resignations were not the result of any disagreement with respect to the Company’s operations, policies or practices. They were replaced by Merrick Okamoto and David Lieberman.