Long-Term Debt and Credit Arrangements	3 Months Ended
Sep. 30, 2016
Notes
Long-Term Debt and Credit Arrangements	12. Long-Term Debt and Credit Arrangements Term Debt and Revolving Credit Facility with DMRJ Group, LLC and Term Debt with Montsant Partners, LLC We are a party to several loan and credit agreements with DMRJ Group LLC (“DMRJ”), an accredited institutional investor. In December 2008, we entered into a note and warrant purchase agreement with DMRJ pursuant to which we issued a senior secured convertible promissory note in the principal amount of $5,600,000 and a warrant to purchase 1,000,000 shares of our common stock. Thereafter, we entered into a series of amendments, waivers and modifications of this facility. The note, which is collateralized by all of our assets, originally bore interest at 11.0% per annum. The note contains restrictions and financial covenants including: (i) restrictions against declaring or paying dividends or making any distributions; against creating, assuming or incurring any liens; against creating, assuming or incurring any indebtedness; against merging or consolidating with any other company, provided, however, that a merger or consolidation is permitted if we are the surviving entity; against the sale, assignment, transfer or lease of our assets, other than in the ordinary course of business and excluding inventory and certain asset sales expressly permitted by the note purchase agreement; against making investments in any company, extending credit or loans, or purchasing stock or other ownership interest of any company; and (ii) covenants that we have authorized or reserved for the purpose of issuance, 150% of the aggregate number of shares of our common stock issuable upon exercise of the warrant; that we maintain a minimum cash balance of at least $500,000; that the aggregate dollar amount of all accounts payable be no more than 100 days past due; and that we maintain a current ratio, defined as current assets divided by current liabilities, of no less than 0.60 to 1.00. On March 19 2015, we amended each of our credit instruments with DMRJ, pursuant to which the maturity of all of our indebtedness to DMRJ was extended from March 31, 2015 to March 31, 2016 and DMRJ waived our compliance with certain financial covenants contained in each of our promissory notes and all related credit agreements through the new maturity date. On May 4, 2015, we entered into an assignment agreement with DMRJ and Montsant Partners LLC ( “Montsant”), wherein DMRJ assigned its rights, title and interest in the senior secured promissory note dated December 10, 2008 and appointed DMRJ as its collateral agent under the promissory note agreement. DMRJ and Montsant Partners, LLC are funds managed by Platinum Partners Value Arbitrage Fund LP. The note purchase agreement with Montsant contains restrictions and financial covenants including: (i) restrictions against declaring or paying dividends or making any distributions; against creating, assuming or incurring any liens; against creating, assuming or incurring any indebtedness; against merging or consolidating with any other company, against the sale, assignment, transfer or lease of our assets, other than in the ordinary course of business; against making investments in any company, extending credit or loans, or purchasing stock or other ownership interest of any company; and (ii) covenants that we maintain a minimum cash balance of at least $500,000; that the weighted average age of all accounts payable be no more than 100 days past due; and that we maintain a current ratio, defined as current assets divided by current liabilities, of no less than 0.60 to 1.00. Montsant waived our compliance with certain financial covenants in our promissory notes through the maturity date, consistent with the financial covenants which have been waived in each of our promissory notes and all related credit agreements with DMRJ. On March 31, 2016, we further amended each of our credit instruments with DMRJ and Montsant, which were entered into on April 6, 2016 and effective March 31, 2016, pursuant to which: ·the maturity of all of our indebtedness to DMRJ under (i) a senior secured promissory note dated July 1, 2009 and (ii) a credit agreement dated September 4, 2009, was extended from March 31, 2016 to June 30, 2016; ·the maturity of all of our indebtedness to (i) Montsant under an amended and restated senior secured convertible promissory note dated March 12, 2009 (the “March 2009 Note”), (ii) DMRJ under a senior secured convertible promissory note dated September 5, 2012 (the “September 2012 Note”) and (iii) to DMRJ under a senior secured convertible promissory note dated February 28, 2013 (the “February 2013 Note” and together with the March 2009 Note, the July 2009 Note, the September 2012 Note, the “Notes”), was extended from March 31, 2016 to December 30, 2016; ·the provisions regarding the prepayment of the March 2009 Note were deleted; ·the “blocker” provisions of the March 2009 Note limiting the number of shares of our common stock, par value $0.001 per share (“Common Stock”) to be issued upon the conversion of the March 2009 Note, when aggregated with the all other shares of Common Stock beneficially owned by the holder of the March 2009 Note at that time, to 4.99% of the then issued and outstanding shares of the Common Stock outstanding at such time were deleted; ·the conversion provisions of the March 2009 Note were fixed to remove the limitations on the conversion to only upon prepayment of the note or during the 30-day period ending March 31, 2014; ·we agreed to make the amendments to our Series H Convertible Preferred Stock (the “Series H Preferred Stock”), Series I Convertible Preferred Stock (the “Series I Preferred Stock”) and Series J Convertible Preferred Stock (the “Series J Preferred Stock” and together with the Series H Preferred Stock and the Series I Preferred Stock, the “Amended Preferred Stock Series”; · we agreed to prepay the interest due on each of the March 2009 Note, the September 2012 Note and the February 2013 Notes from the date of the amendment through June 30, 2016 by increasing the outstanding aggregate principal amount under each such Note; ·all outstanding amounts due to DMRJ and Montsant shall be immediately due and payable if (a) we receive an offer from another person or entity with respect to a Major Transaction, (b) DMRJ notifies us that such offer is satisfactory to DMRJ (in its sole discretion), and (c) either (i) our Board of Directors does not approve such transaction within ten (10) days of our receipt of such notice from DMRJ, (ii) if such transaction is subject to stockholder approval, we do not file a preliminary proxy statement with the SEC within fifteen (15) days of the receipt of such notice from DMRJ or (iii) if such transaction is subject to stockholder approval, our stockholders do not approve such transaction within ninety (90) days of the receipt of such notice from DMRJ, that we shall be obligated to immediately forward to DMRJ any offer that we receive with respect to any Major Transaction; ·we shall provide not less than thirty (30) business days’ written notice to DMRJ and Montsant, as applicable, of the our intent to repay all or any portion of the principal, interest and other amounts outstanding under our indebtedness and following receipt of any such notice, DMRJ and Montsant shall have the option to convert all or any portion of their Notes in accordance with the applicable conversion terms of the applicable Note; ·each Note, plus all accrued and unpaid interest thereon at the time of any conversion, may be converted at the option of DMRJ or Montsant, as applicable, at any time and from time to time into such number of shares of the applicable preferred stock of the Company, upon one (1) business days’ notice to us, and upon Montsant’s conversion of the March 2009 Note, the shares of preferred stock shall be issued to Montsant or any designee(s) of Montsant; ·we agreed that if there is any breach of the Comfort Letter , the interest rate under each term note and advances under the Credit Agreement will be increased by an additional fourteen percent (14%) per annum (pro-rated for partial years), not to exceed the maximum amount of such interest permitted by applicable New York law; ·agreed that we will not, and will not permit any Subsidiary to, enter into, create, incur, assume, suffer, become or be liable for in any manner, or permit to exist, any indebtedness, or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any indebtedness, performance or obligations of any other person, and failure by us to comply with this clause shall be an immediate event of default; ·we shall be obligated to provide DMRJ and Montsant with written notice of the anticipated record date with respect to any Major Transaction at least five (5) business days prior to such record date, and failure by us to comply with this clause shall be an immediate event of default; ·we agreed not to amend the terms of any Amended Preferred Stock Series without the prior written consent of the DMRJ and Montsant, and any breach is an immediate event of default; and ·we agreed not to issue any shares of any Amended Preferred Stock Series other than upon the conversion of the March 2009 Note, the September 2012 Note and the February 2013 Note or with the prior written consent of the Investor, and any breach of this provision is an immediate event of default. The prepayment by us of all interest to be accrued from the March 31, 2016 through June 30, 2016, amounted to $119,400 on account of the March 2009 Note, $450,000 on account of the September 2012 Note and $450,000 on account of the February 2013 Note. Such prepayments were effected by increasing the outstanding aggregate principal amount under each of the March 2009 Note, the September 2012 Note and the February 2013 Note, respectively. Further, the accrued interest amount due under each of the March 2009 Note, the September 2012 Note and the February 2013 Note, as of March 31, 2016, of $1,980,000, $6,520,000 and $5,073,000, respectively, were added to the outstanding principal amount under each of the notes, as of March 31, 2016. Consequently, the new outstanding principal balance under (i) the March 2009 Note was $5,284,000, (ii) the September 2012 Note was $18,970,000 and (iii) the February 2013 Note was $17,523,000, as of March 31, 2016. However, despite the best efforts of the Company, DMRJ and the Assignee, certain post-closing effectiveness conditions to the April 6, 2016 amendment with respect to the delivery of an opinion of counsel and payment of the fees and expenses of DMRJ and the Assignee were not satisfied, and the April 6, 2016 amendment was, therefore, never deemed effective, resulting in our being in default of our obligations to DMRJ and the Montsant since March 31, 2016. On July 20, 2016, we further amended each of our credit instruments with DMRJ and Montsant, effective as of June 30, 2016, pursuant to which: ·the maturity of all of our indebtedness to DMRJ under (i) the amended and restated senior secured convertible promissory note, dated March 12, 2009 (as amended, the “March 2009 Note”), (ii) the senior secured promissory note dated July 1, 2009 (as amended, the “July 2009 Note”), (iii) the credit agreement dated September 4, 2009 (as amended, the “September 2009 Credit Agreement”), (iv) the senior secured convertible promissory note, dated September 5, 2012 (as amended, the “September 2012 Note”), and (v) the senior secured convertible promissory note, dated February 28, 2013 (as amended, the “February 2013 Note”) were each extended to October 31, 2016; ·the “blocker” provisions of the March 2009 Note held by the Assignee, limiting the number of shares of Common Stock, to be issued upon the conversion of such notes, when aggregated with the all other shares of Common Stock beneficially owned by the holders of such notes at that time, to 4.99% of the then issued and outstanding shares of the Common Stock outstanding at such time, were confirmed as never having been deleted by the April 6, 2016 Amendment and an identical “blocker” provision was added to the September 2012 Note held by DMRJ; ·the conversion and anti-dilution provisions of the February 2013 Note held by DMRJ were deleted in their entirety, and the conversion provisions of the September 2012 Note were limited to an aggregate total of $7,000,000 in obligations thereunder; ·the conversion price for the September 2012 Note was reduced from $1.09 to $0.19 per share for up to $7,000,000 of the obligations thereunder, DMRJ agreed to convert $7,000,000 of the principal under the September 2012 Note prior to the consummation of the Zapata Acquisition, and the remaining conversion rights under the September 2012 Note and the February 2013 Note were waived; ·we agreed to amend our Series H Convertible Preferred Stock (the “Series H Preferred Stock”), Series I Convertible Preferred Stock (the “Series I Preferred Stock”) and Series J Convertible Preferred Stock (the “Series J Preferred Stock” and together with the Series H Preferred Stock and the Series I Preferred Stock, the “Amended Preferred Stock Series”) to correct and amend and reinsert the 4.99% “blocker” provisions in lieu and in replacement of the similar provision that was added in the Articles of Amendment to the Restated Articles of Organization that was filed on July 18, 2016; ·in connection with the Zapata Acquisition, we agreed, subject to the approval of our stockholders, to (i) re-domesticate from Massachusetts to Delaware and (ii) amend our Articles of Organization to increase its authorized share capital to 650,000,000 shares of Common Stock; ·we agreed to issue to DMRJ a warrant to purchase 50,657,894 shares of our common stock (see Note 16 to the condensed consolidated financial statements); and ·DMRJ and Montsant waived any defaults from the failure of the effectiveness of the March 31, 2016 amendment. As of September 30, 2016, our obligations to DMRJ under each of the three promissory notes and a revolving line of credit approximated $11,970,000, $17,523,000, $1,000,000 and $17,662,000, respectively. Further, as of September 30, 2016, our obligation to DMRJ for accrued interest under these instruments approximated $7,282,000 and is included in current liabilities in the condensed consolidated financial statements. As of September 30, 2016, our obligations to Montsant under a promissory note approximated $5,284,000. Further, as of September 30, 2016, our obligation to Montsant for accrued interest under this instrument approximated was $203,000. As of December 9, 2016, our obligations to DMRJ under each of the three promissory notes and a revolving line of credit approximated $11,970,000, $17,523,000, $1,000,000 and $17,662,000, respectively. Further, as of December 9, 2016, our obligation to DMRJ for accrued interest under these instruments approximated $8,687,000. Please refer to Note 14 to the condensed consolidated financial statements for a discussion of the August 2016 conversions of principal indebtedness by DMRJ. As of December 9, 2016, our obligations to Montsant under a promissory note approximated $5,284,000. Further, as of December 9, 2016, our obligation to Montsant for accrued interest under this instrument approximated $328,000. The payment of our indebtedness to DMRJ and Montsant are stayed pending the conclusion of the bankruptcy proceedings. Term Debt with BAM On March 19, 2014, we entered into a note purchase agreement with a group of institutional investors and BAM Administrative Services LLC (“BAM”), an administrative agent for the investors, pursuant to which we issued senior secured promissory notes in the aggregate principal amount of $20,000,000. The notes bear interest at 15% per annum and mature on March 31, 2015. The proceeds from the sale of the notes were used to repay (i) $17,624,000 of our outstanding indebtedness to DMRJ under the amended and restated revolving promissory note dated September 29, 2011 (ii) $1,809,000 of interest outstanding under the amended and restated promissory note and (iii) $567,000 of interest outstanding under our senior secured convertible promissory note dated September 5, 2012. On March 19, 2015, we extended our credit agreement with BAM pursuant to which, amongst other matters, the interest rate increased to 16% per annum, commencing on April 1, 2015 and we extended the maturity date of our indebtedness from March 31, 2015 to March 31, 2016. The maturity of our indebtedness to BAM was automatically extended to October 30, 2016 as a result of the extension of the maturity date of our indebtedness to DMRJ and Montsant. The notes purchase agreement contains restrictions and financial covenants including: (i) restrictions against declaring or paying dividends or making any distributions; against creating, assuming or incurring any liens; against creating, assuming or incurring any indebtedness; against merging or consolidating with any other company, against the sale, assignment, transfer or lease of our assets, other than in the inventory ordinary course of business ; against making investments in any company, extending credit or loans, or purchasing stock or other ownership interest of any company; and (ii) covenants that we maintain a minimum cash balance of at least $500,000; that the weighted average age of all accounts payable be no more than 100 days past due; and that we maintain a current ratio, defined as current assets divided by current liabilities, of no less than 0.60 to 1.00. BAM waived our compliance with certain financial covenants in our promissory notes through the maturity date, consistent with the financial covenants which have been waived in each of our promissory notes and all related credit agreements with DMRJ. Further, upon the occurrence of an event of default under certain provisions of our agreements with BAM, we could be required to pay default rate interest equal to the lesser of 2.5% per month and the maximum applicable legal rate per annum on the outstanding principal balance outstanding. On April 6, 2016, we extended our credit agreement with BAM, effective March 31, 2016 pursuant to which; ·the maturity of our indebtedness to the investors extended from March 30, 2016 to June 29, 2016; provided that in the event we extend the maturity date on all obligations owed to DMRJ, to a date past June 30, 2016, the maturity date of the Secured Term Notes shall automatically extend to such business day as is immediately prior to such extended maturity date of the DMRJ obligations; ·all outstanding amounts due to the under the notes shall be immediately due and payable if (a) we receive an offer from another person or entity with respect to a Major Transaction (as defined below under the heading “Amendments to Preferred Stock”), (b) BAM, on behalf of the investors, notifies us that such offer is satisfactory to the investors (in their sole discretion), and (c) either (i) our Board of Directors does not approve such transaction within ten (10) days of receipt of such notice from BAM, (ii) if such transaction is subject to stockholder approval, we do not file a preliminary proxy statement with the SEC within fifteen (15) days of receipt of such notice from BAM or (iii) if such transaction is subject to stockholder approval, our stockholders do not approve such transaction within ninety (90) days of receipt of such notice from BAM; provided, that we shall be obligated to immediately forward to BAM, on behalf of the investors, any offer that we receive with respect to any Major Transaction; ·we shall provide not less than thirty (30) business days’ written notice to BAM, of our intent to repay all or any portion of the principal, interest and other amounts outstanding under our obligations to the investors; ·agreed that we will not, and will not permit any subsidiary to, enter into, create, incur, assume, suffer, become or be liable for in any manner, or permit to exist, any indebtedness, or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any indebtedness, performance or obligations of any other person, and failure by us to comply with this clause shall be an immediate event of default; ·we agreed to make the amendments to our Series H Convertible Preferred Stock (the “Series H Preferred Stock”), Series I Convertible Preferred Stock (the “Series I Preferred Stock”) and Series J Convertible Preferred Stock (the “Series J Preferred Stock” and together with the Series H Preferred Stock and the Series I Preferred Stock, the “Amended Preferred Stock Series”. As of September 30, 2016, our obligations under the senior secured promissory notes for which BAM is the agent were $20,000,000. Further, as of September 30, 2016, our obligation under such notes for accrued interest amounted to approximately $3,200,000 and is included in current liabilities in the consolidated financial statements. As of December 9, 2016, our obligations under the senior secured promissory notes for which BAM is the agent were $20,000,000. Further, as of December 9, 2016, our obligation under such notes for accrued interest amounted to approximately $3,802,000. The payment of our indebtedness to BAM is stayed pending the conclusion of the bankruptcy proceedings.

Long-Term Debt and Credit Arrangements

3 Months Ended

Sep. 30, 2016

12. Long-Term Debt and Credit Arrangements

Term Debt and Revolving Credit Facility with DMRJ Group, LLC and Term Debt with Montsant Partners, LLC

We are a party to several loan and credit agreements with DMRJ Group LLC (“DMRJ”), an accredited institutional investor. In December 2008, we entered into a note and warrant purchase agreement with DMRJ pursuant to which we issued a senior secured convertible promissory note in the principal amount of $5,600,000 and a warrant to purchase 1,000,000 shares of our common stock. Thereafter, we entered into a series of amendments, waivers and modifications of this facility. The note, which is collateralized by all of our assets, originally bore interest at 11.0% per annum.

The note contains restrictions and financial covenants including: (i) restrictions against declaring or paying dividends or making any distributions; against creating, assuming or incurring any liens; against creating, assuming or incurring any indebtedness; against merging or consolidating with any other company, provided, however, that a merger or consolidation is permitted if we are the surviving entity; against the sale, assignment, transfer or lease of our assets, other than in the ordinary course of business and excluding inventory and certain asset sales expressly permitted by the note purchase agreement; against making investments in any company, extending credit or loans, or purchasing stock or other ownership interest of any company; and (ii) covenants that we have authorized or reserved for the purpose of issuance, 150% of the aggregate number of shares of our common stock issuable upon exercise of the warrant; that we maintain a minimum cash balance of at least $500,000; that the aggregate dollar amount of all accounts payable be no more than 100 days past due; and that we maintain a current ratio, defined as current assets divided by current liabilities, of no less than 0.60 to 1.00.

On March 19 2015, we amended each of our credit instruments with DMRJ, pursuant to which the maturity of all of our indebtedness to DMRJ was extended from March 31, 2015 to March 31, 2016 and DMRJ waived our compliance with certain financial covenants contained in each of our promissory notes and all related credit agreements through the new maturity date.

On May 4, 2015, we entered into an assignment agreement with DMRJ and Montsant Partners LLC ( “Montsant”), wherein DMRJ assigned its rights, title and interest in the senior secured promissory note dated December 10, 2008 and appointed DMRJ as its collateral agent under the promissory note agreement.

DMRJ and Montsant Partners, LLC are funds managed by Platinum Partners Value Arbitrage Fund LP.

The note purchase agreement with Montsant contains restrictions and financial covenants including: (i) restrictions against declaring or paying dividends or making any distributions; against creating, assuming or incurring any liens; against creating, assuming or incurring any indebtedness; against merging or consolidating with any other company, against the sale, assignment, transfer or lease of our assets, other than in the ordinary course of business; against making investments in any company, extending credit or loans, or purchasing stock or other ownership interest of any company; and (ii) covenants that we maintain a minimum cash balance of at least $500,000; that the weighted average age of all accounts payable be no more than 100 days past due; and that we maintain a current ratio, defined as current assets divided by current liabilities, of no less than 0.60 to 1.00. Montsant waived our compliance with certain financial covenants in our promissory notes through the maturity date, consistent with the financial covenants which have been waived in each of our promissory notes and all related credit agreements with DMRJ.

On March 31, 2016, we further amended each of our credit instruments with DMRJ and Montsant, which were entered into on April 6, 2016 and effective March 31, 2016, pursuant to which:

·the maturity of all of our indebtedness to DMRJ under (i) a senior secured promissory note dated July 1, 2009 and (ii) a credit agreement dated September 4, 2009, was extended from March 31, 2016 to June 30, 2016;

·the maturity of all of our indebtedness to (i) Montsant under an amended and restated senior secured convertible promissory note dated March 12, 2009 (the “March 2009 Note”), (ii) DMRJ under a senior secured convertible promissory note dated September 5, 2012 (the “September 2012 Note”) and (iii) to DMRJ under a senior secured convertible promissory note dated February 28, 2013 (the “February 2013 Note” and together with the March 2009 Note, the July 2009 Note, the September 2012 Note, the “Notes”), was extended from March 31, 2016 to December 30, 2016;

·the provisions regarding the prepayment of the March 2009 Note were deleted;

·the “blocker” provisions of the March 2009 Note limiting the number of shares of our common stock, par value $0.001 per share (“Common Stock”) to be issued upon the conversion of the March 2009 Note, when aggregated with the all other shares of Common Stock beneficially owned by the holder of the March 2009 Note at that time, to 4.99% of the then issued and outstanding shares of the Common Stock outstanding at such time were deleted;

·the conversion provisions of the March 2009 Note were fixed to remove the limitations on the conversion to only upon prepayment of the note or during the 30-day period ending March 31, 2014;

·we agreed to make the amendments to our Series H Convertible Preferred Stock (the “Series H Preferred Stock”), Series I Convertible Preferred Stock (the “Series I Preferred Stock”) and Series J Convertible Preferred Stock (the “Series J Preferred Stock” and together with the Series H Preferred Stock and the Series I Preferred Stock, the “Amended Preferred Stock Series”;

· we agreed to prepay the interest due on each of the March 2009 Note, the September 2012 Note and the February 2013 Notes from the date of the amendment through June 30, 2016 by increasing the outstanding aggregate principal amount under each such Note;

·all outstanding amounts due to DMRJ and Montsant shall be immediately due and payable if (a) we receive an offer from another person or entity with respect to a Major Transaction, (b) DMRJ notifies us that such offer is satisfactory to DMRJ (in its sole discretion), and (c) either (i) our Board of Directors does not approve such transaction within ten (10) days of our receipt of such notice from DMRJ, (ii) if such transaction is subject to stockholder approval, we do not file a preliminary proxy statement with the SEC within fifteen (15) days of the receipt of such notice from DMRJ or (iii) if such transaction is subject to stockholder approval, our stockholders do not approve such transaction within ninety (90) days of the receipt of such notice from DMRJ, that we shall be obligated to immediately forward to DMRJ any offer that we receive with respect to any Major Transaction;

·we shall provide not less than thirty (30) business days’ written notice to DMRJ and Montsant, as applicable, of the our intent to repay all or any portion of the principal, interest and other amounts outstanding under our indebtedness and following receipt of any such notice, DMRJ and Montsant shall have the option to convert all or any portion of their Notes in accordance with the applicable conversion terms of the applicable Note;

·each Note, plus all accrued and unpaid interest thereon at the time of any conversion, may be converted at the option of DMRJ or Montsant, as applicable, at any time and from time to time into such number of shares of the applicable preferred stock of the Company, upon one (1) business days’ notice to us, and upon Montsant’s conversion of the March 2009 Note, the shares of preferred stock shall be issued to Montsant or any designee(s) of Montsant;

·we agreed that if there is any breach of the Comfort Letter , the interest rate under each term note and advances under the Credit Agreement will be increased by an additional fourteen percent (14%) per annum (pro-rated for partial years), not to exceed the maximum amount of such interest permitted by applicable New York law;

·agreed that we will not, and will not permit any Subsidiary to, enter into, create, incur, assume, suffer, become or be liable for in any manner, or permit to exist, any indebtedness, or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any indebtedness, performance or obligations of any other person, and failure by us to comply with this clause shall be an immediate event of default;

·we shall be obligated to provide DMRJ and Montsant with written notice of the anticipated record date with respect to any Major Transaction at least five (5) business days prior to such record date, and failure by us to comply with this clause shall be an immediate event of default;

·we agreed not to amend the terms of any Amended Preferred Stock Series without the prior written consent of the DMRJ and Montsant, and any breach is an immediate event of default; and

·we agreed not to issue any shares of any Amended Preferred Stock Series other than upon the conversion of the March 2009 Note, the September 2012 Note and the February 2013 Note or with the prior written consent of the Investor, and any breach of this provision is an immediate event of default.

The prepayment by us of all interest to be accrued from the March 31, 2016 through June 30, 2016, amounted to $119,400 on account of the March 2009 Note, $450,000 on account of the September 2012 Note and $450,000 on account of the February 2013 Note. Such prepayments were effected by increasing the outstanding aggregate principal amount under each of the March 2009 Note, the September 2012 Note and the February 2013 Note, respectively. Further, the accrued interest amount due under each of the March 2009 Note, the September 2012 Note and the February 2013 Note, as of March 31, 2016, of $1,980,000, $6,520,000 and $5,073,000, respectively, were added to the outstanding principal amount under each of the notes, as of March 31, 2016. Consequently, the new outstanding principal balance under (i) the March 2009 Note was $5,284,000, (ii) the September 2012 Note was $18,970,000 and (iii) the February 2013 Note was $17,523,000, as of March 31, 2016.

However, despite the best efforts of the Company, DMRJ and the Assignee, certain post-closing effectiveness conditions to the April 6, 2016 amendment with respect to the delivery of an opinion of counsel and payment of the fees and expenses of DMRJ and the Assignee were not satisfied, and the April 6, 2016 amendment was, therefore, never deemed effective, resulting in our being in default of our obligations to DMRJ and the Montsant since March 31, 2016.

On July 20, 2016, we further amended each of our credit instruments with DMRJ and Montsant, effective as of June 30, 2016, pursuant to which:

·the maturity of all of our indebtedness to DMRJ under (i) the amended and restated senior secured convertible promissory note, dated March 12, 2009 (as amended, the “March 2009 Note”), (ii) the senior secured promissory note dated July 1, 2009 (as amended, the “July 2009 Note”), (iii) the credit agreement dated September 4, 2009 (as amended, the “September 2009 Credit Agreement”), (iv) the senior secured convertible promissory note, dated September 5, 2012 (as amended, the “September 2012 Note”), and (v) the senior secured convertible promissory note, dated February 28, 2013 (as amended, the “February 2013 Note”) were each extended to October 31, 2016;

·the “blocker” provisions of the March 2009 Note held by the Assignee, limiting the number of shares of Common Stock, to be issued upon the conversion of such notes, when aggregated with the all other shares of Common Stock beneficially owned by the holders of such notes at that time, to 4.99% of the then issued and outstanding shares of the Common Stock outstanding at such time, were confirmed as never having been deleted by the April 6, 2016 Amendment and an identical “blocker” provision was added to the September 2012 Note held by DMRJ;

·the conversion and anti-dilution provisions of the February 2013 Note held by DMRJ were deleted in their entirety, and the conversion provisions of the September 2012 Note were limited to an aggregate total of $7,000,000 in obligations thereunder;

·the conversion price for the September 2012 Note was reduced from $1.09 to $0.19 per share for up to $7,000,000 of the obligations thereunder, DMRJ agreed to convert $7,000,000 of the principal under the September 2012 Note prior to the consummation of the Zapata Acquisition, and the remaining conversion rights under the September 2012 Note and the February 2013 Note were waived;

·we agreed to amend our Series H Convertible Preferred Stock (the “Series H Preferred Stock”), Series I Convertible Preferred Stock (the “Series I Preferred Stock”) and Series J Convertible Preferred Stock (the “Series J Preferred Stock” and together with the Series H Preferred Stock and the Series I Preferred Stock, the “Amended Preferred Stock Series”) to correct and amend and reinsert the 4.99% “blocker” provisions in lieu and in replacement of the similar provision that was added in the Articles of Amendment to the Restated Articles of Organization that was filed on July 18, 2016;

·in connection with the Zapata Acquisition, we agreed, subject to the approval of our stockholders, to (i) re-domesticate from Massachusetts to Delaware and (ii) amend our Articles of Organization to increase its authorized share capital to 650,000,000 shares of Common Stock;

·we agreed to issue to DMRJ a warrant to purchase 50,657,894 shares of our common stock (see Note 16 to the condensed consolidated financial statements); and

·DMRJ and Montsant waived any defaults from the failure of the effectiveness of the March 31, 2016 amendment.

As of September 30, 2016, our obligations to DMRJ under each of the three promissory notes and a revolving line of credit approximated $11,970,000, $17,523,000, $1,000,000 and $17,662,000, respectively. Further, as of September 30, 2016, our obligation to DMRJ for accrued interest under these instruments approximated $7,282,000 and is included in current liabilities in the condensed consolidated financial statements.

As of September 30, 2016, our obligations to Montsant under a promissory note approximated $5,284,000. Further, as of September 30, 2016, our obligation to Montsant for accrued interest under this instrument approximated was $203,000.

As of December 9, 2016, our obligations to DMRJ under each of the three promissory notes and a revolving line of credit approximated $11,970,000, $17,523,000, $1,000,000 and $17,662,000, respectively. Further, as of December 9, 2016, our obligation to DMRJ for accrued interest under these instruments approximated $8,687,000. Please refer to Note 14 to the condensed consolidated financial statements for a discussion of the August 2016 conversions of principal indebtedness by DMRJ.

As of December 9, 2016, our obligations to Montsant under a promissory note approximated $5,284,000. Further, as of December 9, 2016, our obligation to Montsant for accrued interest under this instrument approximated $328,000.

The payment of our indebtedness to DMRJ and Montsant are stayed pending the conclusion of the bankruptcy proceedings.

Term Debt with BAM

On March 19, 2014, we entered into a note purchase agreement with a group of institutional investors and BAM Administrative Services LLC (“BAM”), an administrative agent for the investors, pursuant to which we issued senior secured promissory notes in the aggregate principal amount of $20,000,000. The notes bear interest at 15% per annum and mature on March 31, 2015. The proceeds from the sale of the notes were used to repay (i) $17,624,000 of our outstanding indebtedness to DMRJ under the amended and restated revolving promissory note dated September 29, 2011 (ii) $1,809,000 of interest outstanding under the amended and restated promissory note and (iii) $567,000 of interest outstanding under our senior secured convertible promissory note dated September 5, 2012.

On March 19, 2015, we extended our credit agreement with BAM pursuant to which, amongst other matters, the interest rate increased to 16% per annum, commencing on April 1, 2015 and we extended the maturity date of our indebtedness from March 31, 2015 to March 31, 2016. The maturity of our indebtedness to BAM was automatically extended to October 30, 2016 as a result of the extension of the maturity date of our indebtedness to DMRJ and Montsant.

The notes purchase agreement contains restrictions and financial covenants including: (i) restrictions against declaring or paying dividends or making any distributions; against creating, assuming or incurring any liens; against creating, assuming or incurring any indebtedness; against merging or consolidating with any other company, against the sale, assignment, transfer or lease of our assets, other than in the inventory ordinary course of business ; against making investments in any company, extending credit or loans, or purchasing stock or other ownership interest of any company; and (ii) covenants that we maintain a minimum cash balance of at least $500,000; that the weighted average age of all accounts payable be no more than 100 days past due; and that we maintain a current ratio, defined as current assets divided by current liabilities, of no less than 0.60 to 1.00. BAM waived our compliance with certain financial covenants in our promissory notes through the maturity date, consistent with the financial covenants which have been waived in each of our promissory notes and all related credit agreements with DMRJ.

Further, upon the occurrence of an event of default under certain provisions of our agreements with BAM, we could be required to pay default rate interest equal to the lesser of 2.5% per month and the maximum applicable legal rate per annum on the outstanding principal balance outstanding.

On April 6, 2016, we extended our credit agreement with BAM, effective March 31, 2016 pursuant to which;

·the maturity of our indebtedness to the investors extended from March 30, 2016 to June 29, 2016; provided that in the event we extend the maturity date on all obligations owed to DMRJ, to a date past June 30, 2016, the maturity date of the Secured Term Notes shall automatically extend to such business day as is immediately prior to such extended maturity date of the DMRJ obligations;

·all outstanding amounts due to the under the notes shall be immediately due and payable if (a) we receive an offer from another person or entity with respect to a Major Transaction (as defined below under the heading “Amendments to Preferred Stock”), (b) BAM, on behalf of the investors, notifies us that such offer is satisfactory to the investors (in their sole discretion), and (c) either (i) our Board of Directors does not approve such transaction within ten (10) days of receipt of such notice from BAM, (ii) if such transaction is subject to stockholder approval, we do not file a preliminary proxy statement with the SEC within fifteen (15) days of receipt of such notice from BAM or (iii) if such transaction is subject to stockholder approval, our stockholders do not approve such transaction within ninety (90) days of receipt of such notice from BAM; provided, that we shall be obligated to immediately forward to BAM, on behalf of the investors, any offer that we receive with respect to any Major Transaction;

·we shall provide not less than thirty (30) business days’ written notice to BAM, of our intent to repay all or any portion of the principal, interest and other amounts outstanding under our obligations to the investors;

·agreed that we will not, and will not permit any subsidiary to, enter into, create, incur, assume, suffer, become or be liable for in any manner, or permit to exist, any indebtedness, or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any indebtedness, performance or obligations of any other person, and failure by us to comply with this clause shall be an immediate event of default;

As of September 30, 2016, our obligations under the senior secured promissory notes for which BAM is the agent were $20,000,000. Further, as of September 30, 2016, our obligation under such notes for accrued interest amounted to approximately $3,200,000 and is included in current liabilities in the consolidated financial statements.

As of December 9, 2016, our obligations under the senior secured promissory notes for which BAM is the agent were $20,000,000. Further, as of December 9, 2016, our obligation under such notes for accrued interest amounted to approximately $3,802,000.

The payment of our indebtedness to BAM is stayed pending the conclusion of the bankruptcy proceedings.

IMPLANT SCIENCES CORP 10-Q