SUBSEQUENT EVENTS

Amendment to the Cancellation Agreement

As described in Note 9, on September 4, 2015, the Company entered into a Cancellation and Waiver Agreement with the Investor. Pursuant to the Cancellation Agreement, the Company agreed to retire all $21.2 million outstanding Notes as of September 4, 2015. Pursuant to the terms of the Cancellation Agreement, on September 4, 2015 the Company retired approximately $14.9 million aggregate principal amount of the Notes in exchange for a payment of approximately $18.8 million. The remaining $6.3 million (the Investor Payable) was scheduled to be paid in two installments; $2.4 million on October 19, 2015 and $3.9 million on December 4, 2015.

On October 8, 2015, the parties entered into Amendment No. 1 (the “Amendment”) to the Cancellation Agreement. The Amendment provides that:


•	The Company will not make the October 19, 2015 payment to retire $2.4 million of the Investor Payable.


•	The December 4, 2015 payment has been modified. The Company now has agreed instead to make a payment of $2.8 million on December 20, 2015 in order to retire a $2.8 million of the Investor Payable.


•	An approximate $3.5 million portion of the Notes have been reinstated. This $3.5 million portion of the Notes shall remain outstanding with all its current and existing rights and terms including, without limitation, existing rights of conversion and redemption.

There will be no further issuances of the Company’s common stock in connection with payments on or conversions of the $2.8 million portion of the Investor Payable so long as the Company does not default in making the required payment on December 20, 2015. If the Company does not make such payment, then the $2.8 million uncancelled portion of the Notes would continue to remain outstanding with substantially all of its current existing terms and conditions.

Amendment to the Exchange Agreement

As described in Note 9, on July 22, 2015, the Company entered into an Exchange Agreement between the Company and the Investor. Pursuant to the Exchange Agreement, the November and February Warrants have been canceled, and the Company has issued to the Investor a right to receive a fixed number of shares of common stock of the Company in accordance with the terms of a Right to Receive Common Stock dated July 22, 2015 (the Right).

The Right obligated the Company to issue to the Investor (without the payment of any additional consideration) an aggregate of 8.3 million shares of Common Stock to the Investor. As of September 30, 2015, 1.5 million of such shares of Common Stock have been issued to the Investor. The remaining 6.8 million share portion of the Right had not been exercisable until November 22, 2015. In addition, the Investor had generally agreed to limit sales of the remaining 6.8 million shares to approximately 1.1 million shares during any 30-day period.

In the amendment to the Exchange Agreement, the parties agreed to eliminate such exercise and sale limitations. The remaining 6.8 million share portion of the Right is now currently exercisable and such shares will not be subject to such previous contractual restrictions on sales.

Series E Preferred Stock

On November 4, 2015 the Company entered into a securities purchase agreement with the Private Investor for the private placement of up to $2,800,000 of the Company’s newly designated Series E Convertible Preferred Stock.

On November 4, 2015, the Company sold and issued 1,000 shares of Series E Preferred Stock to the Private Investor in exchange for $1 million. The Company will sell and issue an additional 500 shares of Series E Preferred Stock to the Private Investor in exchange for $500,000 within one business day after the Company’s filing of a registration statement covering the re-sale of the common stock underlying the Series E Preferred Stock with the Securities and Exchange Commission. The Company will sell and issue an additional 1,300 shares of Series E Preferred Stock to the Private Investor in exchange for $1,300,000 upon the earlier of (i) December 19, 2015 or (ii) the effectiveness of the Company’s registration statement covering the re-sale of the common stock underlying the Series E Preferred Stock.

Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7.00% per annum, payable when, as and if declared by the Board of Directors in its discretion.

Shares of the Series E 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 variable conversion price equal to 80% of the average of the two lowest volume weighted average prices of the Company's common stock for the ten consecutive trading day period prior to the conversion date. If certain defined default events occur, then 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.

No shares of the Series E Preferred, however, may be converted into common stock unless and until the Company's stockholders approve the potential issuance of the conversion shares in accordance with applicable Nasdaq listing rules. The Company intends to seek such approval at a special meeting to be held in December 2015. If the Company's stockholders do not vote to approve such issuances of the Company's shares in accordance with such rule, then the shares of Series E Preferred Stock will not be convertible into shares of common stock.

The Company will issue 360,000 shares of common stock to the Private Investor as a commitment fee relating to the Series E Preferred Stock within one business day after the later of (i) the effectiveness of the Company’s registration statement covering the re-sale of the commitment fee shares and the common stock underlying the Series E Preferred Stock and (ii) the date the Company's stockholders approve the potential issuance of the commitment shares in accordance with applicable Nasdaq listing rules. If the Company's stockholders do not vote to approve such issuances of the Company's shares in accordance with such rule, then the commitment shares will not be issued.

At any time after March 31, 2016, the holder will have 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.

Committed Equity Line Purchase Agreement

On November 10, 2015, the Company and the Private Investor entered into a committed equity line purchase agreement, together with a related registration rights agreement (the “CEL RRA”).

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 the date that a registration statement, which the Company has agreed to file with the SEC pursuant to the CEL RRA, is declared effective by the SEC.

The Company will not issue any shares of common stock pursuant to the CEL Purchase Agreement unless and until the Company's stockholders approve the potential issuance of the common stock thereunder in accordance with applicable Nasdaq listing rules. The Company intends to seek such approval at a special meeting to be held in December 2015. If the Company's stockholders do not vote to approve such issuances of the Company's shares in accordance with such rule, then no shares of common stock will be issued pursuant to the CEL Purchase Agreement.

From time to time, the Company may direct the Private Investor, at its sole discretion and subject to certain conditions, to purchase an amount (the “Purchase Amount”) of shares of common stock up to the lesser of (i) $1,000,000 (calculated using the per share price described below) 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.

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 4.99% of the Company’s then outstanding shares of common stock.

As consideration for entering into the CEL Purchase Agreement, the Company has agreed to issue to the Private Investor 2,640,000 shares of common stock (the “Commitment Shares”). The Commitment Shares will be issued to the Private Investor in four increments commencing upon the later of (i) the date that a registration statement, which the Company has agreed to file with the SEC pursuant to the CEL RRA, is declared effective by the SEC and (ii) stockholder approval of the issuance of shares of common stock pursuant to the CEL Purchase Agreement in accordance with applicable Nasdaq listing rules.