SERIES I PREFERRED STOCK AND EXCHANGE CONVERTIBLE NOTES

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

PREFERRED STOCK

SERIES E PREFERRED STOCK

On November 4, 2015, the Company entered into a securities purchase agreement with the Private Investor to issue 2,800 shares of Series E Preferred Stock to an investor in exchange for $2,800,000. The proceeds were fully received upon effectiveness of the Company’s registration statement covering the re-sale of the common stock underlying the Series E Preferred Stock in December of 2015.

Shares of the Series E Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible, at the option of the holder, into common stock at a variable conversion price equal to 80% of the average of the two lowest VWAPs of the Company's common stock for the ten consecutive trading day period prior to the conversion date. If certain defined default events occur, the conversion price would thereafter be reduced (and only reduced), to equal 70% of the average of the two lowest VWAPs of the Company's common stock for the twenty consecutive trading day period prior to the conversion date. The Private Investor had available to them a new conversion price beginning on June 9, 2016 as a result of the Series H Preferred Stock transaction further described in Note 13. Shares of the Series E Preferred Stock are now convertible, at the option of the Private Investor, into common stock at a variable conversion price equal to 70% of (i) the lowest VWAP of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date. During the nine months ended September 30, 2016, the Private Investor exercised its option to convert 2,108 Series E Preferred Shares, representing a value of $2,108,193, resulting in the issuance of 29,676,932 shares of common stock.

Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the nine months ended September 30, 2016, the Company paid dividends in the amount of $61,553 on the Series E Preferred Stock, resulting in the issuance of 1,408,384 shares of common stock.

The Company has issued 18,000 shares of common stock to the Private Investor as a commitment fee relating to the Series E Preferred Stock. Costs associated with the Series E Preferred Stock, such as legal fees and commitment shares are capitalized and reported as deferred financing costs on the Condensed Consolidated Balance Sheets. The total gross debt issuance cost incurred by the Company related to the Series E Preferred Stock was $104,000. These debt issuance costs will be recognized as additional interest expense over the life of the Series E Preferred Stock.

At any time after March 31, 2016, the Private Investor has the option to redeem for cash all or any portion of the outstanding shares of the Series E Preferred Stock at a price per share equal to $1,250 plus any accrued but unpaid dividends thereon.

At any time after the third anniversary of the date of the initial issuance of Series E Preferred Stock, the Company will have the option to redeem for cash all outstanding shares of the Series E Preferred Stock at a price per share equal to $1,250 plus any accrued but unpaid dividends thereon.    

The Company classified the Series E Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception. There are 214 shares of Series E Preferred Stock outstanding as of September 30, 2016.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series E Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At December 31, 2015, the derivative liability associated with the Series E Preferred Stock was $553,000.

The derivative liability associated with the Series E Preferred Stock is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2016, the Company conducted a fair value assessment of the embedded derivative associated with the Series E Preferred Stock. As a result of the fair value assessment, the Company recorded a $265,000 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $288,000 as of September 30, 2016.

The derivative associated with the Series E Preferred Stock approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2016 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 62%, present value discount rate of 12% and dividend yield of 0%.

SERIES F PREFERRED STOCK

On January 19, 2016, the Company entered into a securities purchase agreement (the “Series F SPA”) with the Private Investor for the sale of $7,000,000 of the Company’s newly designated Series F 7% Convertible Preferred Stock (the “Series F Preferred Stock”).

On January 20, 2016, the Company sold and issued 7,000 shares of Series F Preferred Stock to the Private Investor. The aggregate purchase price of the Series F Preferred was $7,000,000. On January 20, 2016, the Private Investor paid $500,000 to the Company. The remaining $6,500,000 was paid by the Private Investor to the Company in 14 weekly increments of $500,000 or $250,000 beginning January 25, 2016 and ending April 28, 2016.

Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. During the quarter ended September 30, 2016, the Company paid dividends in the amount of $140,923 on the Series F Preferred Stock, resulting in the issuance of 3,614,791 shares of common stock.

Shares of the Series F Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible, at the option of the holder, into common stock at a fixed conversion price equal to $5.00 per share. If certain defined default events occur, the conversion price would thereafter be reduced (and only reduced), to equal 70% of the average of the two lowest VWAPs of our common stock for the twenty consecutive trading day period prior to the conversion date.

If requested by the Private Investor, the Company will make weekly redemptions of shares of Series F Preferred Stock (including any accrued and unpaid dividends thereon). If the redemption price is paid by the Company in cash, the number of shares to be redeemed in each weekly increment is 250 shares of Series F Preferred Stock, and the redemption price is a price per share equal to $1,250 plus any accrued but unpaid dividends thereon. The Company has the option to make such redemption payments in shares of common stock provided certain specified equity conditions are satisfied at the time of payment. The number of shares of common stock to be issued would be calculated using a per share price equal to 80% of the one lowest VWAP of our common stock for the ten consecutive trading day period prior to the payment date. For redemption payments made in shares of common stock, the Company will redeem either (i) 250 shares of Series F Preferred Stock or (ii) such greater number of shares of Series F Preferred Stock (and also including any accrued and unpaid dividends) that would result upon redemption in the issuance of a number of shares of common stock equal to 12% of the aggregate composite trading volume for the Company’s common stock during the preceding calendar week.

The Private Investor had available to them a new conversion price beginning on June 9, 2016 as a result of the Series H Preferred Stock transaction further described in Note 13. Shares of the Series F Preferred Stock are now convertible, at the option of the Private Investor, into common stock at a variable conversion price equal to 70% of (i) the lowest VWAP of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date. During the nine months ended September 30, 2016 the Private Investor exercised its option to convert 6,664 Series F Preferred Shares, representing a value of $6.66 million, resulting in the issuance of 87,136,309 shares of common stock.

The Company classified the Series F Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception. There are 336 shares of Series F Preferred Stock outstanding as of September 30, 2016.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series F Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $1,666,000 were recorded. The debt discount will be charged to interest expense ratably over the life of the Series F Preferred Stock.

The derivative liability associated with the Series F Preferred Stock is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2016, the Company conducted a fair value assessment of the embedded derivative associated with the Series F Preferred Stock. As a result of the fair value assessment, the Company recorded a $1,315,000 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $350,000 as of September 30, 2016.

The derivative associated with the Series F Preferred Stock approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2016 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 62%, present value discount rate of 12% and dividend yield of 0%.

SERIES H PREFERRED STOCK AND CONVERTIBLE NOTES

Series H Preferred Stock

On June 9, 2016, the Company entered into a securities purchase agreement with the Private Investor for the sale of up to $2.5 million of the Company’s newly designated Series H 7% Convertible Preferred Stock. On June 9, 2016, the Company sold and issued 250 shares of Series H Preferred Stock to the Private Investor in exchange for $250,000; on June 27, 2016, the Company sold and issued 250 shares of Series H Preferred Stock to the Private Investor in exchange for $250,000; on June 29, 2016, the Company sold and issued 125 shares of Series H Preferred Stock to the Private Investor in exchange for $125,000; on July 1, 2016, the Company sold and issued 55 shares of Series H Preferred Stock to the Private Investor in exchange for $55,000 and on July 7, 2016, the Company sold and issued 150 shares of Series H Preferred Stock to the Private Investor in exchange for $150,000. Holders of the Series H Preferred Stock were entitled to dividends in the amount of 7% per annum.

Shares of the Series H Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were convertible at the option of the holder into common stock at a variable conversion price equal to 70% of (i) the lowest volume weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date. If certain “Triggering Events” occur, the conversion price would thereafter be reduced (and only reduced), to equal 60% of the average of the two lowest VWAPs of our common stock for the twenty consecutive trading day period prior to the conversion date. In no event, however, could the conversion price be less than $0.005 per share. The Private Investor did not convert any shares of Series H Preferred Stock into shares of common stock during the nine months ended September 30, 2016.

The Company classified the Series H Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company has an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series H Preferred Stock was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of  $146,000 were recorded. The debt discount will be charged to interest expense ratably over the life of the Series H Preferred Stock.

Exchange of Outstanding Series H Preferred Stock

In connection with the offering of the July 2016 Convertible Notes described below, the Company and the Private Investor also entered into an Exchange Agreement dated July 13, 2016 (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the outstanding shares of Series H Preferred Stock (approximately $833,000 of capital and accrued dividends) have been cancelled. In exchange, the Company has issued to the Private Investor approximately $866,000 of July 2016 Convertible Notes. There were 830 shares of Series H Preferred Stock outstanding as of the date of the Exchange Agreement.

A net gain on extinguishment of the Series H Preferred Stock and related embedded derivative of $126,000 was recorded to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2016.

July 2016 Convertible Notes

On July 13, 2016, the Company entered into a securities purchase agreement (the “Note SPA”) with the Private Investor for the private placement of up to $2,080,000 of the Company’s 4% Original Issue Discount Senior Secured Convertible Promissory Notes (the “July 2016 Convertible Notes”). On July 13, 2016, the Company sold and issued $364,000 principal amount of Notes to Investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,716,000 principal amount of July 2016 Convertible Notes to the Private Investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016.

Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 (the “Maturity Date”). The July 2016 Convertible Notes bear interest at a rate of 10% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default. Principal on the July 2016 Convertible Notes is payable on the Maturity Date. Interest on the July 2016 Convertible Notes is payable quarterly. Principal and interest are payable in cash or, if specified equity conditions are met, shares of Common Stock.

The July 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the July 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. If there is an event of default, a holder of the July 2016 Convertible Notes may require the Company to immediately repay the July 2016 Convertible Notes in cash, at a price equal to 125% of the principal amount and accrued and unpaid interest.

All principal and accrued interest on the July 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of the Private Investor, into shares of Common Stock at a variable conversion price equal to the lowest of (i) $0.045 (the “Fixed Conversion Price”), (ii) 70% of the lowest volume weighted average price (“VWAP”) of the Company's common stock for the ten consecutive trading day period prior to the conversion date or (iii) 70% of the lowest closing bid price of the Company's common stock for the ten consecutive trading day period prior to the conversion date. If certain defined triggering events occur, the conversion price would thereafter be reduced (and only reduced), to equal 60% of the lower of (i) the lowest closing bid price of the Company's common stock for the thirty consecutive trading day period prior to the conversion date or (ii) the lowest VWAP of the the Company's common stock for the thirty consecutive trading day period prior to the conversion date. In addition, on the 90th day and also on the 180th day from the date of the Note SPA, the Private Investor may reset the Fixed Conversion Price to thereafter be equal to the VWAP of the Common Stock for such day or if such 90th or 180th day is not a trading day, then the VWAP for the immediately preceding trading day. The Private Investor did not convert any July 2016 Convertible Notes into shares of common stock during the nine months ended September 30, 2016.

The July 2016 Convertible Notes are secured by a security interest in substantially all of the Company’s assets. The subsidiaries of the Company have guaranteed the Company’s obligations under the July 2016 Convertible Notes.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion options in the July 2016 Convertible Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $3,155,390 were recorded. The debt discount will be charged to interest expense ratably over the life of the July 2016 Convertible Notes.

The derivative liability associated with the July 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2016, the Company conducted a fair value assessment of the embedded derivative associated with the July 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $(3,088,237) expense as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Statements of Operations to properly reflect the fair value of the embedded derivative of $6,243,627 as of September 30, 2016.

The derivative associated with the July 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2016 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 73%, present value discount rate of 12%, dividend yield of 0%.

SERIES I PREFERRED STOCK AND EXCHANGE CONVERTIBLE NOTES

Series I Preferred Stock

On July 26, 2016, the Company entered into a securities purchase agreement with one accredited investor for the private placement of $536,000 of the Company’s newly designated Series I Convertible Preferred Stock (“Series I Preferred Stock”). At closing, the Company issued a total of 536 shares of Series I Preferred Stock to the investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the investor.

The holder of the Series I Preferred Stock is entitled to dividends in the amount of 10% per annum. During the quarter ended September 30, 2016, the Company paid dividends in the amount of $349 on the Series I Preferred Stock, resulting in the issuance of 11,647 shares of common stock.

Shares of the Series I Preferred Stock (including the amount of any accrued and unpaid dividends thereon) are convertible at the option of the holder into common stock at a fixed conversion price of $0.03 per share. During the nine months ended September 30, 2016, the holder exercised its option to convert 210 Series I Preferred Shares, representing a value of $209,651, resulting in the issuance of 6,988,353 shares of common stock.

One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series I Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. The Series I Preferred Stock is classified outside of permanent equity, in mezzanine equity, on the Company’s Condensed Consolidated Balance Sheets as a result of this redemption feature. As of September 30, 2016, there were 251 shares of Series I Preferred Stock outstanding.

A beneficial conversion feature in the amount of $285,561 was recorded as a debt discount. The debt discount will be recognized as additional expense over the life of the Series I Preferred Stock.

Exchange Convertible Notes

On September 13, 2016, the Series I holder entered into an assignment agreement (the “Assignment Agreement”) with the Private Investor. Pursuant to the Assignment Agreement, the Private Investor has the option to purchase, from time to time, all or any portion of the outstanding shares of Series I Preferred Stock from the Series I holder for cash.

On September 13, 2016, the Company and the Private Investor also entered into an Exchange Agreement dated September 13, 2016 (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the Private Investor has the right, from time to time, to surrender to the Company for cancellation and exchange any shares of Series I Preferred Stock it acquires pursuant to the Assignment Agreement. Any surrendered shares of Series I Preferred Stock would be exchanged for newly issued convertible promissory notes (“Exchange Convertible Notes”). The principal amount of Exchange Convertible Notes to be issued in exchange shall be equal to (i) $1,000 for each share of Series I Preferred Stock surrendered for exchange plus (ii) the amount of any dividends accrued and unpaid on such Series I Preferred Stock surrendered for exchange. On September 14, 2016, the Private Investor purchased 75 shares of Series I Preferred Stock from the Series I Preferred Stock holder and exchanged the Series I Preferred Stock shares for $76,563 of Exchange Convertible Notes, including accrued dividends.

Unless earlier converted or prepaid, the Exchange Convertible Notes will mature one year after issuance. The Exchange Convertible Notes bear interest at a rate of 10% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and interest on the Exchange Convertible Notes is payable on the maturity date or upon any earlier conversion. Principal and interest are payable in cash or, if specified equity conditions are met, shares of Common Stock.

The Exchange Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Convertible Notes; and (ii) bankruptcy or insolvency of the Company. If there is an event of default, a holder of the Exchange Convertible Notes may require the Company to immediately repay the Exchange Convertible Notes in cash, at a price equal to 130% of the principal amount and accrued and unpaid interest.

All principal and accrued interest on the Exchange Convertible Notes are convertible at any time, in whole or in part, at the option of the Private Investor into shares of common stock at a variable conversion price equal to the lowest of (i) the lowest closing bid price of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 70% of the lowest VWAP of our common stock for the ten consecutive trading day period prior to the conversion date. During the nine months ended September 30, 2016, the Private Investor exercised its option to convert $15,000 of Exchange Convertible Notes, resulting in the issuance of 1,470,588 shares of common stock.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion options in the Exchange Convertible Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. on September 14, 2016, a derivative liability and a corresponding debt discount in the amount of $32,814 were recorded. The debt discount will be charged to interest expense ratably over the life of the Exchange Convertible Notes.

The derivative liability associated with the Exchange Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At September 30, 2016, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Convertible Notes. As a result of the fair value assessment, the Company recorded a $(34,944) gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Statements of Operations to properly reflect the fair value of the embedded derivative of $67,758 as of September 30, 2016.

The derivative associated with the Exchange Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at September 30, 2016 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 66%, present value discount rate of 12%, dividend yield of 0%.

SERIES J PREFERRED STOCK

On September 19, 2016, the Company entered into a securities purchase agreement with one accredited investor for the private placement of $1,350,000 of the Company’s newly designated Series J Convertible Preferred Stock (“Series J Preferred Stock”).

At closing, the Company issued a total of 225 shares of Series J Preferred Stock to the investor in exchange for gross proceeds of $225,000. The Company will issue an additional 1,125 shares of Series J Preferred Stock in exchange for gross proceeds of $1,125,000 in five subsequent closings scheduled to occur in October and November 2016. As of September 30, 2016, there were 575 Series J Preferred Stock shares outstanding.

Holders of the Series J Preferred Stock will be entitled to dividends in the amount of 10% per annum. Shares of the Series J Preferred Stock (including the amount of any accrued and unpaid dividends thereon) will be convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share.

There are no registration rights applicable to the Series J Preferred Stock. Accordingly, any shares of Common Stock issued upon conversion of the Series J Preferred Stock are restricted and can only be sold in compliance with Rule 144 or in accordance with another exemption from registration.

One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series J Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. The Series J Preferred Stock is classified outside of permanent equity, in mezzanine equity, on the Company’s Condensed Consolidated Balance Sheets as a result of this redemption feature.

STOCKHOLDERS’ EQUITY

Common Stock

At September 30, 2016, the Company had 2,000,000,000 shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of September 30, 2016, the Company had 147,365,490 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through September 30, 2016.

Preferred Stock

At September 30, 2016, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. 750,000 shares have been designated as Series A preferred stock, 2,000 shares have been designated for Series B-1 and B-2 preferred stock, 690 shares have been designated as Series C preferred stock, 3,000 shares have been designated as Series D preferred stock, 2,500 shares have been designated as Series D-1 preferred stock, 2,800 shares have been designated as Series E preferred stock, 7,000 shares have been designated as Series F preferred stock, 2,000 shares have been designated as Series G preferred stock, 2,500 shares have been designated as Series H preferred stock, 1,000 shares have been designated as Series I preferred stock, and 1,350 shares have been designated as Series J preferred stock. As of September 30, 2016, the Company had 165,541 shares of Series A preferred stock, 0 shares of Series B-1 and Series B-2 preferred stock, 0 shares of Series C preferred stock, 0 shares of Series D preferred stock, 0 shares of Series D-1 preferred stock, 214 shares of Series E preferred stock, 336 shares of Series F preferred stock, 2,000 shares of Series G preferred stock, 0 shares of Series H preferred stock outstanding, 251 shares of Series I preferred stock outstanding, and 575 shares of Series J preferred stock outstanding. The Company has no declared unpaid dividends related to the preferred stock as of September 30, 2016.

Series A Preferred Stock

In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of 750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6,000,000. This purchase agreement included warrants to purchase up to 13,125 shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of 125,000 shares of Series A Preferred Stock and a warrant to purchase 2,187 shares of common stock for $1,000,000. The final closings took place in August 2013, with the transfer of 625,000 shares of Series A Preferred Stock and a warrant to purchase 10,938 shares of common stock for $5,000,000.

Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8.0% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. In addition, the Series A Preferred Stock contains a make-whole provision whereby, conversion or redemption of the preferred stock within 4 years of issuance will require dividends for the full four year period to be paid by the Company in cash or common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period).

The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $232, as adjusted, for 20 consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At September 30, 2016, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time, at no cost, at a ratio of 1 preferred share into 1 common share (subject to standard ratable anti-dilution adjustments). Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends and also any make-whole amount (if applicable). See Note 8. Make-Whole Dividend Liability.

During the nine months ended September 30, 2016, the holder of the Series A Preferred Shares converted 46,849 preferred shares and the related make-whole dividend into 6,942,936 shares of common stock.

Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends.

Series D-1 Preferred Stock

On February 19, 2015, the Company entered into a securities purchase agreement to issue 2,500 shares of Series D-1 Preferred Stock to an investor in exchange for $2,500,000. The proceeds were received on the closing date, February 25, 2015.

All amounts due under the Series D-1 Preferred Stock were convertible at any time, in whole or in part, at the option of the investor into shares of Common Stock at a fixed conversion price, which was subject to adjustment for stock splits, stock dividends, combinations or similar events. The Series D-1 Preferred Stock was convertible into shares of Common Stock at the initial price of $46.20 per share.

The investor had the option to convert the Series D-1 Preferred Stock into shares of Common Stock at a “D-1 Alternate Conversion Price” equal to the lowest of (i) $46.20 per share or (ii) 85% of the lowest VWAPs of the Common Stock on any trading day during the five consecutive trading day period, including the trading day immediately prior to the date of the applicable conversion date. During the quarter ended September 30, 2015, the investor exercised its option to convert 2,500 Preferred Shares, representing a value of $2,500,000, at a D-1 Alternate Conversion Price resulting in the issuance of 115,292 Common Shares.

Holders of the Series D-1 Preferred Stock were entitled to receive dividends in the amount of 7% per annum, subject to increase to 15% per annum upon the occurrence and continuance of certain events of default. Dividends on the Series D-1 Preferred Stock were payable monthly in shares of Common Stock or cash, at the Company’s option. During the quarter ended September 30, 2015, the Company paid dividends in the amount of $6,944 on the Series D-1 Preferred Stock, resulting in the issuance of 195 shares of common stock.

The Company classified the Series D-1 Preferred Stock as a liability pursuant to ASC 480 on the closing date due to the structure of the financing agreement, whereby the Company had an unconditional obligation that the Company may settle by issuing a variable number of common shares with a monetary value that is fixed and known at inception. The Series D-1 Preferred Stock was fully converted into shares of common stock as of September 30, 2015.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion options in the Series D-1 Preferred Stock were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of $3.4 million were recorded. The debt discount of $3.4 million was charged to interest expense. As of September 30, 2015, the value of the derivative liability associated with the Series D-1 Preferred Stock was $0 as the Series D-1 Preferred Stock was fully converted as of September 30, 2015.

A net gain of $2.7 million was recorded to "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the quarter ended September 30, 2015 upon extinguishment of the D-1 Preferred Stock liability and the related embedded derivative.

The derivative associated with the Series D-1 Preferred Stock approximated management’s estimate of the fair value of the embedded derivative liability at the closing date based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 45%, present value discount rate of 12%, dividend yield of 0%, and a life of 0.2 years.

Series E Preferred Stock

Refer to Note 11 descriptions of Series E Preferred Stock.

Series F Preferred Stock

Refer to Note 12 descriptions of Series F Preferred Stock.

Series G Preferred Stock

Refer to Note 10 descriptions of Series G Preferred Stock.

Series H Preferred Stock

Refer to Note 13 descriptions of Series H Preferred Stock.

Series I Preferred Stock

Refer to Note 14 descriptions of Series I Preferred Stock.

Series J Preferred Stock

Refer to Note 15 descriptions of Series J Preferred Stock.

The Committed Equity Line

On November 10, 2015, the Company and the Private Investor entered into a committed equity line purchase agreement (the "CEL"). Under the terms and subject to the conditions of the CEL purchase agreement, at its option the Company has the right to sell to the Private Investor, and the Private Investor is obligated to purchase from the Company, up to $32.2 million of the Company’s common stock, subject to certain limitations, from time to time, over the 36-month period commencing on December 18, 2015, the date that the registration statement was declared effective by the SEC.

From time to time, the Company may direct the Private Investor, at its sole discretion and subject to certain conditions, to purchase an amount of shares of common stock up to the lesser of (i) $1,000,000 or (ii) 300% of the average daily trading volume of the Company’s common stock over the preceding ten trading day period. The per share purchase price for shares of common stock to be sold by the Company under the CEL purchase agreement shall be equal to 80% of the average of the two lowest VWAPs of the common stock for the ten consecutive trading day period prior to the purchase date. During the nine months ended September 30, 2016, the Company directed the Private Investor to purchase $1.06 million of common stock which resulted in the issuance of 525,454 shares of common stock. The remaining availability under the CEL as of September 30, 2016 was $29,143,853.

Actual sales of shares of common stock to the Private Investor under the CEL purchase agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, our ability to register shares of common stock with the SEC, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.

As of January 27, 2016, the Company was not able to access the CEL because the Company does not have any registered shares available for use in connection with the CEL purchase agreement.  The Company is in the process of registering an additional 2,400,000 shares for such purpose with the SEC.  If such additional registration statement is declared effective by the SEC and such additional shares become available for use by the Company, the Company’s sales of shares pursuant to the CEL purchase agreement during 2016 would be limited to such 2,400,000 shares. The Company’s use of the CEL in 2016 and beyond would require, among other things, the Company to file additional registration statements in the future that cover additional shares and have such registration statements declared effective.  The Company would also need to maintain the effectiveness of such additional registration statements.

The Company may not direct the Private Investor to purchase shares of common stock more frequently than once each ten business days. The Company’s sales of shares of common stock to the Private Investor under the CEL purchase agreement are limited to no more than the number of shares that would result in the beneficial ownership by the Private Investor and its affiliates, at any single point in time, of more than 9.99% of the Company’s then outstanding shares of common stock.

As consideration for entering into the CEL purchase agreement, the Company has issued to the Private Investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the Private Investor in five increments which commenced upon the date that the registration statement was declared effective by the SEC.