ENDV already sued note holders a few years ago.
They simply sold the notes to another investor who then diluted the crap out of the investors.
As I stated in a few deleted posts, the SEC has no legal authority to extinguish debts. It files civil lawsuits in Federal Court and seeks injunctions and civil penalties. The only thing they can accomplish is attaining an injunction preventing Auctus from continuing in the behavior, a ban and civil penalties, in this case paying back the illicit profits (not to the investors) to the SEC.
So if the SEC is able to attain an injunction preventing the conversion of notes, the debt still exists and is still owed and ENDV is still indebted to Auctus so it still has to find a way to pay back the notes.
Hence why ENDV is proposing this ridiculous spin out with a phony $100 million valuation. They want to give stock to the note holders so that they can then dump it onto shareholders that fall for the phony valuation and the subsequent pump-and-dump scheme to create liquidity for them. It is merely a means to an end.
Allan owes these note holders $3.8 million in interest and $6.8 million in principal. The derivative liability is an accounting term to capture the potential variability of the conversions. Allan has no way to pay this back because he has failed. He cannot generate revenue and profits to pay it back and he cannot get an investor to buy it out, so he has come up with another scheme to screw investors in order to get out of the mess he has created and make a killing for himself. Looks like he gifted himself 39 million shares according to the 10Q.
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