x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-3672603 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
12300 Grant Street, Thornton, CO | 80241 | |
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $0.0001 par value per share | OTCBB Market |
Large accelerated filer | o | Accelerated filer | o | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | x | |||
Emerging growth company | o | |||||
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• | Our limited operating history and lack of profitability; |
• | Our ability to develop demand for, and sales of, our products; |
• | Our ability to attract and retain qualified personnel to implement our business plan and corporate growth strategies; |
• | Our ability to develop sales, marketing and distribution capabilities; |
• | Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets; |
• | The accuracy of our estimates and projections; |
• | Our ability to secure additional financing to fund our short-term and long-term financial needs; |
• | Our ability to maintain the listing of our common stock on the OTCBB Market; |
• | The commencement, or outcome, of legal proceedings against us, or by us, including ongoing ligation proceedings; |
• | Changes in our business plan or corporate strategies; |
• | The extent to which we are able to manage the growth of our operations effectively, both domestically and abroad, whether directly owned or indirectly through licenses; |
• | The supply, availability and price of equipment, components and raw materials, including the elements needed to produce our photovoltaic modules; |
• | Our ability to expand and protect the intellectual property portfolio that relates to our consumer electronics, photovoltaic modules and processes; |
• | Our ability to implement remediation measures to address material weaknesses in internal control; |
• | General economic and business conditions, and in particular, conditions specific to consumer electronics and the solar power industry; and |
• | Other risks and uncertainties discussed in greater detail in the section captioned "Risk Factors." |
• | CIGS versus a-Si: Although a-Si, like CIGS, can be deposited on a flexible substrate, its conversion efficiency, which already is generally much lower than that of CIGS, measurably degrades when it is exposed to ultraviolet light, including natural sunlight. To mitigate such degradation, manufacturers of a-Si solar cells are required to implement measures that add cost and complexity to their manufacturing processes. |
• | CIGS versus CdTe: Although CdTe modules have achieved conversion efficiencies that are generally comparable to CIGS in production, we believe CdTe has never been successfully applied to a flexible substrate on a commercial scale. We believe the use of CdTe on a rigid, transparent substrate, such as glass, makes CdTe unsuitable for a number of the applications. We also believe CIGS can achieve higher conversion efficiencies than CdTe in production. |
• | We are a pioneer in CIGS technology with a proprietary, flexible, lightweight, high efficiency PV thin film product that positions us to penetrate a wide range of attractive high value added markets such as consumer products, off grid, portable power, transportation, defense, aerial, and other markets. By applying CIGS to a flexible plastic substrate, we have developed a PV module that is efficient, lightweight and flexible; with the highest power-to-weight ratio in at-scale commercially available solar. The market for electronic components, such as electronic packages, casings and accessories, as well as defense portable power systems, transportation integrated applications and space and near-space solar power application solutions represent a significant premium market for the company. Relative to our thin film competitors, we believe our advantage in thin film CIGS on plastic technology provides us with a superior product offering for these strategic market segments. |
• | We have the ability to manufacture PV modules for different markets and for customized applications without altering our production processes. Our ability to produce PV modules in customized shapes and sizes, or in a variety of shapes and sizes simultaneously, without interrupting production flow, provides us with flexibility in addressing target markets and product applications, and allows us to respond quickly to changing market conditions. Many of our competitors are limited by their technology and/or their manufacturing processes to a more restricted set of product opportunities. |
• | Our integrated, roll-to-roll manufacturing process and proprietary monolithic integration techniques provide us a potential cost advantage over our competitors. Historically, manufacturers have formed PV modules by manufacturing individual solar cells and then interconnecting them. Our large format, roll-to-roll manufacturing process allows for integrated continuous production. In addition, our proprietary monolithic integration techniques allow us to utilize laser patterning to create interconnects, thereby creating PV modules at the same time we create PV cells. In so doing, we are able to reduce or eliminate an entire back end processing step, saving time as well as labor and manufacturing costs relative to our competitors. |
• | Our lightweight, powerful, and durable solar panels provide a performance advantage over our competitors. For consumer applications where a premium is placed on the weight and profile of the product, our ability to integrate our PV modules into portable packages and cases offers the customer a lightweight and durable solution for all their portable electronics. |
• | Our proven research and development capabilities position us to continue the development of next generation PV modules and technologies. Our ability to produce CIGS based PV modules on a flexible plastic substrate is the result of a concerted research and development effort that began more than twenty years ago. We continue to pursue research and development in an effort to drive efficiency improvements in our current PV modules and to work toward next generation technologies and additional applications. |
• | Our manufacturing process can be differentiated into two distinct functions; a front end module manufacturing process and a back end packaging process. Our ability to produce finished unpackaged rolls of CIGS material for shipment worldwide to customers for encapsulation and integration into various products enhances our ability to work with partners internationally and domestically. |
1. | US Patent No. 7,271,333 entitled “Apparatus and Method of Production of Thin-Film Photovoltaic Modules” (issued September 18, 2007) |
2. | US Patent No. 7,812,247 entitled “Flexible Photovoltaic Array With Integrated Wiring And Control Circuitry, And Associated Methods” (issued October 12, 2010; (co-owned with PermaCity Corporation) |
3. | US Patent No. 8,021,905 entitled “Machine and Process for Sequential Multi-Sublayer Deposition of Copper Indium Gallium Diselenide Compound Semiconductors” (issued September 20, 2011) |
4. | US Patent No. 8,124,870 entitled “Systems and Processes for Bifacial Collection and Tandem Junctions Using a Thin film Photovoltaic Device” (issued February 28, 2012) |
5. | US Patent No. 8,207,442 entitled “Reinforcing Structures for Thin film Photovoltaic Device Substrates, and Associated Methods” (issued June 26, 2012) |
6. | US Patent No. 8,426,725 entitled “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (issued April 23, 2013) |
7. | US Patent No. 8,465,589 entitled “Machine and Process for Sequential Multi-Sublayer Deposition of Copper Indium Gallium Diselenide Compound Semiconductors” (issued June 18, 2013) |
8. | US Patent No. D697,502 entitled "Mobile Electronic Device Case” (issued January 14, 2014) |
9. | US Patent No. 8,648,253 entitled “Machine and Process for Continuous, Sequential, Deposition of Semiconductor Solar Absorbers Having Variable Semiconductor Composition Deposited in Multiple Sublayers” (issued February 11, 2014) |
10. | US Patent No. 8,716,591 entitled “Array of Monolithically Integrated Thin Film PhotoVoltaic Cells and Associated Methods” (issued May 6, 2014) |
11. | ECD No. 001429773-0001 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
12. | ECD No. 001429773-0002 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
13. | ECD No. 001429773-0003 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
14. | ECD No. 001429773-0004 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
15. | ECD No. 001429773-0005 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
16. | ECD No. 001429773-0006 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
17. | ECD No. 001429773-0007 entitled “Mobile Handheld Electronic Device Case” (issued February 6, 2015) |
18. | ECD No. 002732123-0001 entitled “Portable Battery Charging Device” (issued July 7, 2015) |
19. | ECD No. 002732123-0002 entitled “Portable Battery Charging Device” (issued July 7, 2015) |
20. | ECD No. 002732123-0003 entitled “Portable Battery Charging Device” (issued July 7, 2015) |
21. | ECD No. 002735159-0001 entitled “Portable Energy Storage And Distribution Device” (issued July 10, 2015) |
22. | ECD No. 002735159-0002 entitled “Portable Energy Storage And Distribution Device” (issued July 10, 2015) |
23. | ECD No. 002735159-0003 entitled “Portable Energy Storage And Distribution Device” (issued July 10, 2015) |
24. | ECD No. 002735159-0004 entitled “Portable Energy Storage And Distribution Device” (issued July 10, 2015) |
25. | US Patent 9,147,783 entitled “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (issued September 29, 2015) |
26. | KR Patent No. 30. 0860220 entitled “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (issued October 13, 2015) |
27. | KR Patent 10-1561453 entitled “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (issued October 13, 2015) |
28. | US Patent No. 9,209,322 entitled “Multilayer Thin-Film Back Contact System For Flexible Photovoltaic Devices On Polymer Substrates” (issued December 8, 2015) |
29. | US Patent No. 9,219,179 entitled “Multilayer Thin-Film Back Contact System For Flexible Photovoltaic Devices On Polymer Substrates” (issued December 22, 2015) |
30. | CN Patent No. ZL 201530237203.8 entitled “Photovoltaic-Based Fully Integrated Portable Power System” (issued February 10, 2016) |
31. | TW Patent No. I526630 entitled “Subtractive Hinge and Associated Methods” (issued March 21, 2016) |
32. | US Patent No. 9,349,905 entitled “Hybrid Multi-Junction Photovoltaic Cells And Associated Methods” (issued May 24, 2016) |
33. | TW Patent No. I536592 entitled “Photovoltaic Assembly and Associated Methods” (issued June 1, 2016) |
34. | KR Patent No. 30-0860220 entitled “Photovoltaic-Based Fully Integrated Portable Equipment For Control of Electric Power” (issued June 16, 2016) |
35. | CN Patent No. ZL 201180067131.6 entitled “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (issued August 10, 2016) |
36. | CN Patent No. ZL201380012566.X entitled “Subtractive Hinge And Associated Methods” (issued August 24, 2016) |
37. | US Patent No. 9538671 entitled System For Housing And Powering A Battery-Operated Device And Associated Methods (issued January 3, 2017) |
38. | US Patent No. D781,228 entitled Pocket-Sized Photovoltaic-Based Fully Integrated Portable Power System (issued March 14, 2017) |
39. | US Patent No. 9601650 entitled Machine And Process For Continuous, Sequential, Deposition Of Semiconductor Solar Absorbers Having Variable Semiconductor Composition Deposited In Multiple Sublayers (issued March 21, 2017) |
40. | US Patent No. 9634175 entitled Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates (issued April 25, 2017) |
41. | US Patent No. 9640706 entitled Hybrid Multi-Junction Photovoltaic Cells And Associated Methods (issued May 2, 2017) |
42. | US Patent No. 9640692 entitled Flexible Photovoltaic Array with Integrated Wiring and Control Circuitry, and Associated Methods (issued May 2, 2017) |
43. | US Patent No. 9653635 entitled Flexible High-Voltage Adaptable Current Photovoltaic Modules and Associated Methods (issued May 16, 2017) |
44. | Tawian Patent No. I583810 entitled Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates (issued May 21, 2017) |
45. | Switzerland Patent No. 2742535 entitled Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates (issued July 26, 2017) |
46. | EPC Patent No. 2742535 entitled Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates (issued July 26, 2017) |
47. | France Patent No. 2742535 entitled Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates (issued July 26, 2017) |
48. | Great Britain Patent No. 2742535 entitled Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates (issued July 26, 2017) |
49. | Germany Patent No. 602012035034.2 entitled Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates (issued July 26, 2017) |
50. | Taiwan Patent No. I595674 entitled Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates (issued August 11, 2017) |
51. | US Patent No. 9780242 entitled “Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (issued October 3, 2017) |
1. | "Flexible Photovoltaic Array with Integrated Wiring and Control Circuitry, and Associated Methods" (US 12/901,963) (filed October 11, 2010) (co-owned with PermaCity Corporation) |
2. | “Cd-Free, Oxide Buffer Layers for Thin Film CIGS Solar Cells By Chemical Solution Deposition Methods” (US 13/227,935) (filed September 8, 2011) |
3. | “Systems and Processes for Bifacial Collection and Tandem Junctions Using a Thin film Photovoltaic Device” (US 13/406,376) (filed February 27, 2012) |
4. | “Multilayer Thin Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (US 13/572,387) (filed August 10, 2012) |
5. | “Multilayer Thin Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (PCT/US2012/050398) (filed August 10, 2012) |
6. | “Multilayer Thin Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (CN 201280047345.1) (filed August 10, 2012) |
7. | “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (EP 11804861.0) (filed December 13, 2011) |
8. | “Apparatus and Method for Hybrid Photovoltaic Device Having Multiple, Stacked, Heterogeneous, Semiconductor Junctions” (CN 201180067131.6) (filed December 13, 2011) |
9. | “Subtractive Hinge and Associated Methods (US 13/783,336) (filed March 3, 2013) |
10. | “Subtractive Hinge and Associated Methods (PCT/US 2013/28,929) (filed March 4, 2013) |
11. | “Subtractive Hinge and Associated Methods (CN 201380012566.X) (filed March 4, 2013) |
12. | “Subtractive Hinge and Associated Methods (EP 13758462.9) (filed March 4, 2013) |
13. | “System For Housing And Powering A Battery-Operated Device And Associated Methods” (US 13/802,713) (filed March 14, 2013) |
14. | “System For Housing And Powering A Battery-Operated Device And Associated Methods” (US 13/802,719) (filed March 14, 2013) |
15. | “System For Housing And Powering A Battery-Operated Device And Associated Methods” (PCT/US2013/34988) (filed April 2, 2013) |
16. | “Photovoltaic Assembly and Associated Methods” ( US 14/038096) (filed September 26, 2013) |
17. | “Photovoltaic Assembly and Associated Methods” (PCT/US2013/62355) (filed September 27, 2013) |
18. | “Photovoltaic Assembly and Associated Methods” (CN 201380060351.5) (filed September 27, 2013) |
19. | “Photovoltaic Assembly and Associated Methods” (EP 13840976.8) (filed September 27, 2013) |
20. | “Flexible High-Voltage Adaptable Current Photovoltaic Modules and Associated Methods” (US 14/041,886) (filed September 30, 2013) |
21. | “Hybrid Multi-Junction Photovoltaic Cells And Associated Methods” (US 14/100,960) (filed December 9, 2013) |
22. | “System For Housing And Powering A Battery-Operated Device And Associated Methods” (PCT/US2013/74936) (filed December 13, 2013) |
23. | “Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates” (US 14/150,376) (filed January 8, 2014) |
24. | “Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates” (PCT/US2014/10867) (filed January 8, 2014) |
25. | “Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates” (CN 201480004408.4) (filed January 8, 2014) |
26. | “Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates” (EP 14738271.7) (filed January 8, 2014) |
27. | “Multilayer Thin-Film Back Contact System For Flexible Photovoltaic Devices On Polymer Substrates” (PCT/US15/20184) (filed March 12, 2015) |
28. | “Array Of Monolithically Integrated Thin Film Photovoltaic Cells And Associated Methods” (14/252,485) (filed April 14, 2014) |
29. | “Subtractive Hinge And Associated Methods” (EP 13758462.9) (filed March 4, 2013) |
30. | “Photovoltaic Assembly and Associated Methods” (EP 13840976.8) (filed September 27, 2013) |
31. | “Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates” (CN 201480004408.4) (filed January 9, 2014) |
32. | “Systems And Methods For Thermally Managing High-Temperature Processes On Temperature Sensitive Substrates” (EP 14738271.7 ) (filed January 9, 2014) |
33. | “Multilayer Thin-Film Back Contact System For Flexible Photovoltaic Devices On Polymer Substrates” (US 14/932,933) (filed November 4, 2015) |
34. | “Photovoltaic-Based Fully Integrated Portable Power Systems” (PCT/US16/12047) (filed January 4, 2016) |
35. | “Photovoltaic-Based Fully Integrated Portable Power System” (US 14/987,214) (filed January 4, 2016) |
36. | “Systems and Processes for Bifacial Collection and Tandem Junctions Using a Thin-Film Photovoltaic Device” (US 15/099,835) (filed April 15, 2016) |
37. | “Photovoltaic-Based Fully Integrated Portable Power Management And Networking System” (PCT/US16/25647) (filed April 1, 2016) |
38. | “Photovoltaic-Based Fully Integrated Portable Power Management And Networking System” (US 15/089,028) (filed April 1, 2016) |
39. | “Photovoltaic Device and Method of Manufacturing Same” (CN 201610416638.2) (filed December 13, 2011) |
40. | “Multilayer Thin-Film Back Contact System For Flexible Photovoltaic Devices On Polymer Substrates” (US 15/258,169) (filed September 7, 2016) |
41. | “Hybrid Multi-Junction Photovoltaic Cells And Associated Methods” (US 15/137,696) (filed April 25, 2016) |
42. | “Machine And Process For Continuous, Sequential, Deposition Of Semiconductor Solar Absorbers Having Variable Semiconductor Composition Deposited In Multiple Sublayers” (US 15/584,241) (filed May 2, 2017) |
43. | “Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (GB 12759843.1) (Filed August 10, 2012) |
44. | “Multilayer Thin-Film Back Contact System for Flexible Photovoltaic Devices on Polymer Substrates” (WO PCT/US16/58933) (Filed October 26, 2016) |
45. | “Subtractive Hinge and Associated Methods” (US 15/673,283) (Filed August 9, 2017) |
• | We can generate customer acceptance of and demand for our products; |
• | We successfully ramp up commercial production on the equipment installed; |
• | Our products are successfully and timely certified for use in our target markets; |
• | We successfully operate production tools to achieve the efficiencies, throughput and yield necessary to reach our cost targets; |
• | The products we design are saleable at a price sufficient to generate profits; |
• | We raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us; |
• | We are able to successfully design, manufacture, market, distribute and sell our products; |
• | We effectively manage the planned ramp up of our operations; |
• | We successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators and distributors, retailers and e-commerce companies, who deal directly with end users in our target markets; |
• | Our ability to maintain the listing of our common stock on the OTCBB Market; |
• | Our ability to achieve projected operational performance and cost metrics; |
• | Our ability to enter into commercially viable licensing, joint venture, or other commercial arrangements; and |
• | The availability of raw materials. |
• | Difficulty in procuring supplies and supply contracts abroad; |
• | Difficulty in enforcing agreements in foreign legal systems; |
• | Foreign countries imposing additional withholding taxes or otherwise taxing our foreign income, imposing tariffs or adopting other restrictions on foreign trade and investment, including currency exchange controls; |
• | Inability to obtain, maintain or enforce intellectual property rights; |
• | Risk of nationalization; |
• | Changes in general economic and political conditions in the countries in which we may operate, including changes in the government incentives we might rely on; |
• | Unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to environmental protection, export duties and quotas; |
• | Difficulty with staffing and managing widespread operations; |
• | Trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries; and |
• | Difficulty of, and costs relating to, compliance with the different commercial and legal requirements of the international markets in which we plan to offer and sell our PV products. |
• | Faulty human judgment and simple errors, omissions or mistakes; |
• | Fraudulent action of an individual or collusion of two or more people; |
• | Inappropriate management override of procedures; and |
• | The possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial information. |
• | Authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; |
• | Dividing our Board into three classes; |
• | Limiting the removal of directors by the stockholders; and |
• | Limiting the ability of stockholders to call a special meeting of stockholders. |
High | Low | |||||||
Fiscal 2016 | ||||||||
First Quarter | $ | 52.0000 | $ | 18.4000 | ||||
Second Quarter | $ | 1.3980 | $ | 0.0520 | ||||
Third Quarter | $ | 0.0850 | $ | 0.0130 | ||||
Fourth Quarter | $ | 0.0243 | $ | 0.0025 | ||||
Fiscal 2017 | ||||||||
First Quarter | $ | 0.0078 | $ | 0.0014 | ||||
Second Quarter | $ | 0.0023 | $ | 0.0003 | ||||
Third Quarter | $ | 0.0026 | $ | 0.0004 | ||||
Fourth Quarter | $ | 0.0018 | $ | 0.0007 |
• | Our ability to generate customer acceptance of and demand for our products; |
• | Successful ramping up of commercial production on the equipment installed; |
• | Our products are successfully and timely certified for use in our target markets; |
• | Successful operating of production tools to achieve the efficiencies, throughput and yield necessary to reach our cost targets; |
• | The products we design are saleable at a price sufficient to generate profits; |
• | Our ability to raise sufficient capital to enable us to reach a level of sales sufficient to achieve profitability on terms favorable to us; |
• | Effective management of the planned ramp up of our domestic and international operations; |
• | Our ability to successfully develop and maintain strategic relationships with key partners, including OEMs, system integrators, distributors, retailers and e-commerce companies, who deal directly with end users in our target markets; |
• | Our ability to maintain the listing of our common stock on the OTCQB Venture Market; |
• | Our ability to implement remediation measures to address material weaknesses in internal control; |
• | Our ability to achieve projected operational performance and cost metrics; |
• | Our ability to enter into commercially viable licensing, joint venture, or other commercial arrangements; and |
• | Availability of raw materials. |
1. | Net product revenues were $642,000 for the year ended December 31, 2017 compared to $1,700,000 for the year ended December 31, 2016, a decrease of $1,058,000. The decrease in product sales is largely the result of our sale of the Enerplex brand of products. |
2. | The Company did not have any revenues attributable to government research and development contracts during the year ended December 31, 2017, compared to $48,000 during the year ended December 31, 2016. |
1. | Personnel and facility related expenses decreased approximately $1,675,000 as compared to the year ended December 31, 2016. The decrease in personnel related costs was primarily due to a reduction in headcount. |
2. | Consulting and contract services decreased approximately $13,000 compared to the year ended December 31, 2016. The year to year decrease in expense was primarily attributed to the reduced number of contractors during the year ended December 31, 2017. |
3. | Materials and equipment related expenses decreased approximately $119,000 compared to the year ended December 31, 2016. The decrease in expense was primarily due to the reserve against WIP inventory as a result of our transition from the retail consumer electronics market to high-value PV markets. |
1. | Personnel and facility related costs decreased approximately $1,960,000 during the year ended December 31, 2017, compared to the year ended December 31, 2016. The overall decrease in personnel related costs was primarily due a lower headcount for the year ended December 31, 2017. |
2. | Marketing and related expenses decreased approximately $1,975,000 during the year ended December 31, 2017, compared to the year ended December 31, 2016. The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the year ended December 31, 2017, which is the direct result of changing our main focus from the retail consumer electronics market to higher-value PV markets. |
3. | Consulting and contract services decreased approximately $252,000 during the year ended December 31, 2017, compared to the year ended December 31, 2016. The decrease was a result of decreased consulting expenses related to our financing efforts. |
4. | Legal expenses decreased approximately $487,000 during the year ended December 31, 2017, compared to the year ended December 31, 2016. The primary reasons for the decrease is due to reductions in both legal expenses related to our patents and general legal expenses related to financing efforts. |
5. | Bad debt expense decreased approximately $122,000 during the year ended December 31, 2017, compared to the year ended December 31, 2016. This decrease is due to payments and settlements against existing reserves which were offset by additional reserves for customers whose accounts were greater than 120 days overdue. |
6. | Public company expenses decreased approximately $85,000 during the year ended December 31, 2017, compared to the year ended December 31, 2016. This decrease is primarily due to a decrease in public relations expense. |
7. | Settlement expenses for the year ended December 31, 2017 were approximately $174,000. These expenses consisted of a settlement of $23,000 related to an alleged Proposition 65 violation and aggregate settlements of $151,000 with former EnerPlex customers regarding a return of product. |
1. | Interest Expense decreased $1,384,000 compared to 2016. The decrease is primarily due to an decrease of non-cash interest expense and amortization of debt discounts related to convertible and promissory notes and Preferred Stock. The non-cash portion of interest expense for the year ended December 31, 2017 was $5,147,000. |
2. | Warrant expense increased by approximately $346,000 as compared to the year ended December 31, 2016. This increase is due to the issuance of warrants during the year ended December 31, 2017, related to redemption agreements, settlement agreements, and the engagement of outside professional services. |
3. | Other income, net increased $492,000. This increase is comprised of an increase in gain on sale of assets of $1,128,000, primarily related to the transfer of the EnerPlex IP, offset by induced conversion costs of $636,000 on several of the financial instruments. |
4. | Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, net was a gain of $1,878,000 for the year ended December 31, 2017, an increase of $8,280,000 compared to the net loss of $6,402,000 for the year ended December 31, 2016. The change in this non-cash item is the result of an increase of $3,487,000 in the gain on change in the fair value of our embedded derivative instruments during 2017, and a decrease of $4,793,000 in the loss on extinguishment of liabilities related to conversions of certain convertible notes and preferred stock in the same comparative periods. |
(Increase) decrease in Net Loss For the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016 | |||
Revenues | $ | (1,105,000 | ) |
Cost of Revenue | 3,029,000 | ||
Research, development and manufacturing operations | |||
Materials and Equipment Related Expenses | 119,000 | ||
Personnel and Facility Related Expenses | 1,675,000 | ||
Consulting and Contract Services | 13,000 | ||
Inventory impairment costs | (363,000 | ) | |
Selling, general and administrative expenses | |||
Personnel, Administrative, and Facility Related Expenses | 1,960,000 | ||
Marketing Related Expenses | 1,975,000 | ||
Legal Expenses | 487,000 | ||
Public Company Costs | 85,000 | ||
Bad Debt Expense | 122,000 | ||
Consulting and Contract Services | 252,000 | ||
Settlement Costs | (174,000 | ) | |
Depreciation and Amortization Expense | 2,406,000 | ||
Other Income/Expense | |||
Interest Expense | 1,384,000 | ||
Other Income/Expense | 492,000 | ||
Warrant Expense | (346,000 | ) | |
Non-Cash Change in Fair Value of Derivative Liabilities and Gain/Loss on Extinguishment of Liabilities, net | 8,280,000 | ||
Decrease to Net Loss | $ | 20,291,000 |
Payments Due by Year (in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||
Long-term debt obligations | $ | 7,702 | $ | 694 | $ | 2,081 | $ | 2,081 | $ | 2,846 | ||||||||||
Operating lease obligations | 87 | 59 | 14 | 14 | — | |||||||||||||||
Purchase obligations | 443 | 443 | — | — | — | |||||||||||||||
Total | $ | 8,232 | $ | 1,195 | $ | 2,095 | $ | 2,095 | $ | 2,846 |
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
• | provide reasonable assurance transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
• | The Company was understaffed and did not have sufficiently trained resources with the technical expertise to research and account for the Company's complex capitalization and multiple complex capital raising and equity transactions. This deficiency arose primarily from staff turnover including the Company’s failure to more quickly replace its Director of Financial Planning and Reporting, who left the Company for a new position in November, 2016. |
• | Accounting for the Company's convertible debt and preferred stock transactions was lacking for the preparation of the December 31, 2016 financial statements. Many of the special accounting issues specific to debt and equity financing have become increasingly complex and time-consuming, and require extensive expertise to ensure that the accounting and reporting are accurate and in accordance with applicable standards. Given the numerous complex convertible equity financing transactions engaged in by the Company during 2016, the relevant accounting standards require the calculation, monitoring, recalculation and “marking to market” of a wide variety of derivative securities instruments that are deemed to arise from such financing transactions. These complex derivatives calculations are used in order to calculate the intrinsic value of the financial instruments and affect the short term embedded derivative liabilities line item on the Company’s balance sheet and in the change in fair value of derivatives and gain/loss on extinguishment of liabilities line item on the Company’s consolidated statement of operations. As the calculations in question relate to non-cash transactions, there was no impact on the Company's cash, current assets, revenues, operating results, or cash flows. |
• | In March 2017, the Company hired a Director of Financial Planning and Reporting with the technical expertise to research and account for the Company's complex capital raising and financial transactions. In addition, the Company is continuously evaluating its personnel needs and other resources to ensure appropriate staffing and enhance its research and technical accounting knowledge base. |
• | The Company designed and implemented additional procedures in order to assure that the Director of Financial Planning and Reporting and other audit/accounting personnel are more involved with the Company’s financing activities to monitor and earlier identify accounting issues that may be raised by the Company’s ongoing financing activities. |
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | |||||
Equity compensation plans approved by security holders | 67,014 | $ | 41.98 | 685,323 |
(1) | Financial Statements—See Index to Financial Statements at Item 8 of the Annual Report on Form 10-K. |
(2) | Financial Statement Schedules—Supplemental schedules are not provided because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. |
(3) | Exhibits: See Item 15(b) below. |
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
3.7 | ||
3.8 | ||
3.9 | ||
3.10 | ||
3.11 | ||
3.12 | ||
3.13 |
Exhibit No. | Description | |
3.14 | ||
3.15 | ||
3.16 | ||
3.17 | ||
3.18 | ||
3.19 | ||
3.20 | ||
3.21 | ||
3.22 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 |
Exhibit No. | Description | |
4.7 | ||
4.8 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | ||
10.9 | ||
10.10 | ||
10.11† | ||
10.12 | ||
10.13 |
Exhibit No. | Description | |
10.14 | ||
10.15 | ||
10.16 | ||
10.17 | ||
10.18 | ||
10.19 | ||
10.20 | ||
10.21 | ||
10.22 | ||
10.23† | ||
10.24† | ||
10.25 | ||
10.26 | ||
10.27 | ||
10.28 |
Exhibit No. | Description | |
10.29 | ||
10.30 | ||
10.31 | ||
10.32 | ||
10.33 | ||
10.34 | ||
10.35 | ||
10.36 | ||
10.37 | ||
10.38 | ||
10.39 | ||
10.40 | ||
10.41 | ||
10.42 | ||
10.43 |
Exhibit No. | Description | |
10.44 | ||
10.45 | ||
10.46 | ||
10.47 | ||
10.48 | ||
10.49 | ||
10.50 | ||
10.51 | ||
10.52 | ||
10.53 | ||
10.54 | ||
10.55 | ||
10.56 | ||
10.57 | ||
10.58 |
Exhibit No. | Description | |
10.59 | ||
10.60 | ||
10.61 | ||
10.62 | ||
10.63 | ||
10.64 | ||
10.65 | ||
10.66 | ||
10.67 | ||
10.68 | ||
10.69 | ||
16.1 | ||
23.1 | ||
23.2 | ||
31.1 |
Exhibit No. | Description | |
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document* | |
101.SCH | XBRL Taxonomy Extension Schema Document* | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* | |
* | Filed herewith | |
CTR | Portions of this exhibit have been omitted pursuant to a request for confidential treatment. | |
† | Denotes management contract or compensatory plan or arrangement. |
ASCENT SOLAR TECHNOLOGIES, INC. | ||
By: | /S/ VICTOR LEE | |
Lee Kong Hian (aka Victor Lee) President and Chief Executive Officer |
Signature | Capacities | Date | ||
/S/ VICTOR LEE | President & Chief Executive Officer and a Director (principal executive officer, and principal financial officer and accounting officer) | March 29, 2018 | ||
Lee Kong Hian (aka Victor Lee) | ||||
/S/ AMIT KUMAR | Chairman of the Board of Directors | March 29, 2018 | ||
Amit Kumar, Ph.D. | ||||
/S/ TOMAS MARSH | Director | March 29, 2018 | ||
G. Thomas Marsh | ||||
/S/ KIM J. HUNTLEY | Director | March 29, 2018 | ||
Kim J. Huntley |
Page | ||
December 31, 2017 | December 31, 2016 | |||||||
ASSETS (substantially pledged) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 89,618 | $ | 130,946 | ||||
Trade receivables, net of allowance of $48,201 and $106,205, respectively | 6,658 | 549,204 | ||||||
Inventories | 1,037,854 | 2,569,816 | ||||||
Prepaid expenses and other current assets | 494,425 | 983,796 | ||||||
Total current assets | 1,628,555 | 4,233,762 | ||||||
Property, Plant and Equipment: | 36,645,862 | 36,639,460 | ||||||
Less accumulated depreciation and amortization | (32,013,686 | ) | (30,983,448 | ) | ||||
4,632,176 | 5,656,012 | |||||||
Other Assets: | ||||||||
Patents, net of accumulated amortization of $430,071 and $279,143, respectively | 1,470,796 | 1,647,505 | ||||||
Other non-current assets | 49,813 | 77,562 | ||||||
1,520,609 | 1,725,067 | |||||||
Total Assets | $ | 7,781,340 | $ | 11,614,841 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,600,455 | $ | 4,902,471 | ||||
Related party payables | 202,827 | 214,903 | ||||||
Accrued expenses | 1,623,748 | 1,469,684 | ||||||
Notes payable | 1,570,231 | — | ||||||
Current portion of long-term debt | 343,395 | 243,113 | ||||||
Current portion of secured promissory notes, net of discount of $1,934,304 and zero, respectively | 253,590 | 1,010,000 | ||||||
Litigation settlement | — | 339,481 | ||||||
Promissory notes, net of discount of $20,626 and zero, respectively | 948,811 | 420,000 | ||||||
TFG promissory notes, net of discount of zero and $59,658, respectively | — | 542,808 | ||||||
July 2016 convertible notes, net of discount of zero and $1,634,357, respectively | — | 1,159,610 | ||||||
October 2016 convertible notes, net of discount of zero and $264,000, respectively | 330,000 | 66,000 | ||||||
St. George convertible note, net of discount and cash payment premium of $673,241 and zero, respectively | 1,032,592 | — | ||||||
BayBridge convertible note, net of discount of $565,000 and zero, respectively | — | — | ||||||
Series E preferred stock, net of discount of zero and $63,640, respectively | — | 56,360 | ||||||
Series F preferred stock | — | 160,001 | ||||||
Series G preferred stock, net of discount of zero and $699,674, respectively | — | 408,326 | ||||||
Series I exchange notes, net of discount of zero and $199,474, respectively | — | 26,597 | ||||||
Embedded derivative liabilities | 6,406,833 | 6,578,154 | ||||||
Make-whole dividend liability | — | 500,176 | ||||||
Total current liabilities | 14,312,482 | 18,097,684 | ||||||
Long-term debt, net of current portion | 5,118,424 | 5,281,776 | ||||||
Secured promissory notes, net of current portion and discount of $1,684,267 and zero, respectively | 685,066 | — | ||||||
Accrued Warranty Liability | 57,703 | 176,457 | ||||||
Redeemable Preferred Stock: | ||||||||
Series J preferred stock: 1,350 shares authorized; zero and 1,350 issued and outstanding as of December 31, 2017 and December 31, 2016, respectively | — | 1,350,000 | ||||||
Series J-1 preferred stock: 1,000 shares authorized; zero and 700 issued and outstanding as of December 31, 2017 and December 31, 2016, respectively | — | 700,000 | ||||||
Series K preferred stock: 20,000 and zero shares authorized as of December 31, 2017 and December 2016, respectively; 2,810 and zero issued and outstanding as of December 31, 2017 and December 31, 2016, respectively | 2,810,000 | — | ||||||
Commitments and Contingencies | — | — | ||||||
Stockholders’ Deficit: | ||||||||
Series A preferred stock, $.0001 par value; 750,000 shares authorized and issued; 60,756 and 125,044 shares outstanding as of December 31, 2017 and December 31, 2016, respectively ($761,864 and $1,500,528 Liquidation Preference) | 6 | 13 | ||||||
Common stock, $0.0001 par value, 20,000,000,000 and 2,000,000,000 shares authorized as of December 31, 2017 and December 31, 2016, respectively; 9,606,597,777 and 554,223,320 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively | 960,660 | 55,422 | ||||||
Additional paid in capital | 386,332,475 | 369,886,065 | ||||||
Accumulated deficit | (402,495,476 | ) | (383,932,576 | ) | ||||
Total stockholders’ equity (deficit) | (15,202,335 | ) | (13,991,076 | ) | ||||
Total Liabilities and Stockholders’ Equity | $ | 7,781,340 | $ | 11,614,841 |
For the Years Ended December 31, | |||||||||
2017 | 2016 | ||||||||
Revenues | 642,179 | 1,747,356 | |||||||
Costs and Expenses | |||||||||
Cost of revenues (exclusive of depreciation shown below) | 2,814,782 | 5,843,872 | |||||||
Research, development and manufacturing operations (exclusive of depreciation shown below) | 4,820,536 | 6,627,249 | |||||||
Selling, general and administrative (exclusive of depreciation shown below) | 5,598,004 | 10,304,779 | |||||||
Depreciation and amortization | 1,193,535 | 3,600,007 | |||||||
Inventory impairment loss | 363,377 | — | |||||||
Total Costs and Expenses | 14,790,234 | 26,375,907 | |||||||
Loss from Operations | (14,148,055 | ) | (24,628,551 | ) | |||||
Other Income/(Expense) | |||||||||
Other Income/(Expense), net | 574,817 | 82,772 | |||||||
Interest Expense | (6,518,747 | ) | (7,902,926 | ) | |||||
Deemed interest expense on warrant liability | (345,774 | ) | — | ||||||
Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net | 1,877,629 | (6,402,077 | ) | ||||||
Total Other Income/(Expense) | (4,412,075 | ) | (14,222,231 | ) | |||||
Net Loss | $ | (18,560,130 | ) | $ | (38,850,782 | ) | |||
Net Loss Per Share (Basic and diluted) | $ | 0.003 | $ | (0.418 | ) | ||||
Weighted Average Common Shares Outstanding (Basic and diluted) | 5,883,374,222 | 93,005,062 |
Common Stock | Series A Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Balance, December 31, 2015 | 7,759,844 | $ | 777 | 212,390 | $ | 21 | $ | 347,659,690 | $ | (345,081,794 | ) | $ | 2,578,694 | |||||||||||||
Conversion of Convertible Notes into Common Shares | 48,993 | 5 | $ | 58,818 | — | 58,823 | ||||||||||||||||||||
Common Shares sold pursuant to the Committed Equity Line | 525,454 | 52 | 1,056,095 | — | 1,056,147 | |||||||||||||||||||||
Conversion of Right Shares into Common Shares | 2,052,865 | 205 | 1,346,795 | — | 1,347,000 | |||||||||||||||||||||
Interest and Dividend Expense paid with Common Stock | 18,575,710 | 1,858 | 254,922 | — | 256,780 | |||||||||||||||||||||
Issuance of Restricted Stock | 183,230 | 18 | (18 | ) | — | — | ||||||||||||||||||||
Commitment Shares | 107,000 | 11 | (11 | ) | — | — | ||||||||||||||||||||
Conversion of Series A Preferred Stock into Common Shares, plus make-whole | 6,942,936 | 694 | (46,849 | ) | (4 | ) | 222,099 | — | 222,789 | |||||||||||||||||
Conversion of Series E Preferred Stock into Common Shares | 41,895,161 | 4,189 | 3,414,032 | — | 3,418,221 | |||||||||||||||||||||
Conversion of Series F Preferred Stock into Common Shares | 113,059,991 | 11,306 | 9,920,148 | — | 9,931,454 | |||||||||||||||||||||
Conversion of Series G Preferred Stock into Common Shares | 234,409,413 | 23,441 | 1,472,955 | — | 1,496,396 | |||||||||||||||||||||
Conversion of Series I Preferred Stock into Common Shares | 6,988,353 | 699 | 2,532,718 | — | 2,533,417 | |||||||||||||||||||||
Conversion of Series I Convertible Notes into Common Shares | 14,816,862 | 1,481 | 159,345 | — | 160,826 | |||||||||||||||||||||
Conversion of July 2016 Convertible Notes into Common Shares | 64,000,000 | 6,400 | 245,280 | — | 251,680 | |||||||||||||||||||||
Conversion of October 2016 Convertible Notes into Common Shares, plus make-whole | 42,857,508 | 4,286 | (40,497 | ) | (4 | ) | 173,288 | — | 177,570 | |||||||||||||||||
Stock based compensation | 888,348 | 888,348 | ||||||||||||||||||||||||
Beneficial Conversion Feature related to Series G and Series I Preferred Stock | 481,561 | 481,561 | ||||||||||||||||||||||||
Net Loss | (38,850,782 | ) | (38,850,782 | ) | ||||||||||||||||||||||
Balance, December 31, 2016 | 554,223,320 | $ | 55,422 | 125,044 | $ | 13 | $ | 369,886,065 | $ | (383,932,576 | ) | $ | (13,991,076 | ) |
Common Stock | Series A Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Balance, December 31, 2016 | 554,223,320 | $ | 55,422 | 125,044 | $ | 13 | $ | 369,886,065 | $ | (383,932,576 | ) | (13,991,076 | ) | |||||||||||||
Interest and Dividend Expense paid with Common Stock | 332,006,907 | 33,201 | 213,383 | 246,584 | ||||||||||||||||||||||
Issuance of Restricted Stock | 40,000 | 4 | (4 | ) | — | |||||||||||||||||||||
Commitment Shares | 37,500,000 | 3,750 | 60,000 | 63,750 | ||||||||||||||||||||||
Conversion of Series A Preferred Stock into Common Shares, plus make-whole | 131,088,740 | 13,109 | (64,288 | ) | (7 | ) | 244,050 | 257,152 | ||||||||||||||||||
Conversion of Series E Preferred Stock into Common Shares | 247,371,677 | 24,737 | 95,263 | 120,000 | ||||||||||||||||||||||
Conversion of Series F Preferred Stock into Common Shares | 189,780,458 | 18,978 | 108,022 | 127,000 | ||||||||||||||||||||||
Conversion of Series G Preferred Stock into Common Shares | 1,529,316,391 | 152,932 | 745,068 | 898,000 | ||||||||||||||||||||||
Conversion of Series I Convertible Notes into Common Shares | 419,719,614 | 41,972 | 184,099 | 226,071 | ||||||||||||||||||||||
Conversion of Series J Preferred Stock into Common Shares | 365,646,259 | 36,565 | 238,435 | 275,000 | ||||||||||||||||||||||
Conversion of Series J-1 Preferred Stock into Common Shares | 466,666,667 | 46,667 | 653,333 | 700,000 | ||||||||||||||||||||||
Conversion of Series K Preferred Stock into Common Shares | 1,550,000,000 | 155,000 | 6,045,000 | 6,200,000 | ||||||||||||||||||||||
Conversion of July 2016 Convertible Notes into Common Shares | 2,808,248,547 | 280,825 | 1,419,142 | 1,699,967 | ||||||||||||||||||||||
Conversion of TFG note into Common Shares | 333,333,333 | 33,333 | 511,348 | 544,681 | ||||||||||||||||||||||
Conversion of BayBridge Note into Common Shares | 473,404,630 | 47,340 | 330,659 | 377,999 | ||||||||||||||||||||||
Conversion of Global Ichiban Note into Common Shares | 168,251,234 | 16,825 | 146,683 | 163,508 | ||||||||||||||||||||||
Loss on Extinguishment of Liabilities | 4,481,939 | 4,481,939 | ||||||||||||||||||||||||
Induced Conversion Costs | 500,948 | 500,948 | ||||||||||||||||||||||||
Warrant Expense | 345,774 | 345,774 | ||||||||||||||||||||||||
Stock based compensation | 123,268 | 123,268 | ||||||||||||||||||||||||
Prior period adjustment - subsidiary | (2,770 | ) | (2,770 | ) | ||||||||||||||||||||||
Net Loss | (18,560,130 | ) | (18,560,130 | ) | ||||||||||||||||||||||
Balance, December 31, 2017 | 9,606,597,777 | $ | 960,660 | 60,756 | $ | 6 | $ | 386,332,475 | $ | (402,495,476 | ) | $ | (15,202,335 | ) |
For the Years Ended | |||||||||
December 31, | |||||||||
2017 | 2016 | ||||||||
Operating Activities: | |||||||||
Net loss | $ | (18,560,130 | ) | $ | (38,850,782 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
Depreciation and amortization | 1,197,285 | 3,600,007 | |||||||
Stock based compensation | 123,268 | 888,348 | |||||||
Realized loss (gain) on sale of assets | (1,210,331 | ) | (82,772 | ) | |||||
Amortization of financing costs | 76,351 | 137,111 | |||||||
Non-cash interest expense | 643,263 | 948,901 | |||||||
Amortization of debt discount | 4,427,086 | 6,214,060 | |||||||
Bad debt expense | 514 | 122,416 | |||||||
Accrued litigation settlement | (339,481 | ) | (541,279 | ) | |||||
Warrant expense | 345,774 | — | |||||||
Impairment of inventory | 363,377 | — | |||||||
Warranty reserve | (118,754 | ) | (87,543 | ) | |||||
Change in fair value of derivatives and loss on extinguishment of liabilities, net | (1,877,629 | ) | 6,402,077 | ||||||
Induced conversion expense | 635,514 | — | |||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 569,632 | 1,321,265 | |||||||
Inventories | 1,168,585 | 1,702,564 | |||||||
Prepaid expenses and other current assets | 389,910 | 379,374 | |||||||
Accounts payable | (592,403 | ) | 1,492,053 | ||||||
Related party payable | (12,076 | ) | |||||||
Accrued expenses | 172,316 | (501,284 | ) | ||||||
Net cash used in operating activities | (12,597,929 | ) | (16,855,484 | ) | |||||
Investing Activities: | |||||||||
Purchase of property, plant and equipment | (6,402 | ) | (51,724 | ) | |||||
Proceeds from sale of assets | 150,000 | 82,772 | |||||||
Patent activity costs | (62,652 | ) | (189,455 | ) | |||||
Net cash used in investing activities | 80,946 | (158,407 | ) | ||||||
Financing Activities: | |||||||||
Proceeds from debt | 5,542,500 | 1,930,000 | |||||||
Repayment of debt | (2,056,845 | ) | (266,027 | ) | |||||
Payment of debt financing costs | (20,000 | ) | (81,500 | ) | |||||
Proceeds from Committed Equity Line | — | 1,056,147 | |||||||
Proceeds from issuance of stock and warrants | 9,010,000 | 14,180,000 | |||||||
Net cash provided by financing activities | 12,475,655 | 16,818,620 | |||||||
Net change in cash and cash equivalents | (41,328 | ) | (195,271 | ) | |||||
Cash and cash equivalents at beginning of period | 130,946 | 326,217 | |||||||
Cash and cash equivalents at end of period | $ | 89,618 | $ | 130,946 | |||||
Supplemental Cash Flow Information: | |||||||||
Cash paid for interest | $ | 1,221,843 | $ | 417,876 | |||||
Cash paid for income taxes | $ | — | $ | — | |||||
Non-Cash Transactions: | |||||||||
Non-cash conversions of preferred stock and convertible notes to equity | $ | 11,835,962 | $ | 10,617,764 | |||||
Non-cash conversions of preferred stock to notes payable | $ | 1,075,000 | $ | — | |||||
Make-whole provision on convertible preferred stock | $ | 257,152 | $ | 161,988 | |||||
Non-cash financing costs | $ | 2,500 | $ | — | |||||
Debt converted to accounts payable | $ | 55,067 | $ | — | |||||
Accounts payable converted to notes payable | $ | 1,587,760 | $ | — | |||||
Accounts payable forgiven related to sale of EnerPlex | $ | 1,031,726 | $ | — | |||||
Interest converted to principal | $ | 431,195 | $ | — | |||||
Common shares issued for commitment fee | $ | 63,750 | $ | — | |||||
Initial embedded derivative liabilities | $ | 5,878,345 | $ | 5,444,362 |
Useful Lives in Years | ||
Buildings | 40 | |
Manufacturing machinery and equipment | 5 - 10 | |
Furniture, fixtures, computer hardware/software | 3 - 7 | |
Leasehold improvements | life of lease |
2018 | $ | 173,439 | |
2019 | $ | 153,717 | |
2020 | $ | 130,885 | |
2021 | $ | 85,760 | |
2022 | $ | 56,099 | |
Thereafter | $ | 40,267 | |
$ | 640,167 |
• | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
• | Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
• | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
As of December 31, | ||||||||
2017 | 2016 | |||||||
Building | $ | 5,828,960 | $ | 5,828,960 | ||||
Furniture, fixtures, computer hardware and computer software | 489,421 | 489,421 | ||||||
Manufacturing machinery and equipment | 30,327,481 | 30,321,079 | ||||||
Depreciable property, plant and equipment | 36,645,862 | 36,639,460 | ||||||
Less: Accumulated depreciation and amortization | (32,013,686 | ) | (30,983,448 | ) | ||||
Net property, plant and equipment | $ | 4,632,176 | $ | 5,656,012 |
As of December 31, | ||||||||
2017 | 2016 | |||||||
Raw materials | $ | 689,000 | $ | 833,000 | ||||
Work in process | 12,000 | 635,000 | ||||||
Finished goods | 337,000 | 1,102,000 | ||||||
Total | $ | 1,038,000 | $ | 2,570,000 |
2018 | $ | 343,395 | |
2019 | 366,757 | ||
2020 | 391,709 | ||
2021 | 418,358 | ||
2022 | 446,821 | ||
Thereafter | 3,494,779 | ||
$ | 5,461,819 |
Closing Date | Closing Amount | Maturity Date | ||
11/30/2017 | $ | 250,000 | 11/30/2018 | |
12/28/2017 | $ | 250,000 | 12/28/2018 |
1) | The first valuation was done on the November 30, 2017 Note with term of three years. Management's analysis, using the following assumptions: annual volatility of 63% present value discount rate of 12% and a dividend yield of 0%, resulted in a fair value of the embedded derivative associated with this Note of $2,756,074 as of November 30, 2017. The value of the embedded derivative associated with the Note was recorded as a debt discount. |
2) | The second valuation was done on the group of Notes dated November 30, 2017, that had a term of one year. Management's analysis, using the following assumptions: annual volatility of 67% present value discount rate of 12% and a dividend yield of 0%, resulted in a fair value of the embedded derivative associated with these Notes of $943,735 as of November 30, 2017. The value of the embedded derivative associated with the Note was recorded as a debt discount. |
3) | The third valuation was done on the Note dated December 28, 2017, which had a term of one year. Management's analysis, using the following assumptions: annual volatility of 65% present value discount rate of 12% and a dividend yield of 0%, resulted in a fair value of the embedded derivative associated with this Note of $267,008 as of December 28, 2017. Since the value of the derivative was more than the liability, the entire liability of $250,000 was recorded as a debt discount to be amortized with the liability. The remaining balance of $17,008 was charged to interest expense. |
1) | For the November 30, 2017 3yr Note: Management conducted a fair value assessment with the following assumptions: annual volatility of 63% present value discount rate of 12% and a dividend yield of 0% as of December 31, 2017. As a result of the fair value assessment, the Company recorded a loss of $985,928 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $3,742,002 as of December 31, 2017. |
2) | For the November 30, 2017 1yr Notes: Management conducted a fair value assessment with the following assumptions: annual volatility of 60% present value discount rate of 12% and a dividend yield of 0% as of December 31, 2017. As a result of the fair value assessment, the Company recorded a gain of $55,567 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $888,168 as of December 31, 2017. |
3) | There were no changes to the December 28, 2017 1yr note, as there was only one trading day for the year following the issuance. |
• | The Company agreed to redeem for cash all secured convertible notes of the Company held by the holder no later than September 1, 2017. |
• | The Company affirmed that the current balance of owed principal and accrued and unpaid interest to the holder is $1,790,214 as of May 2, 2017. |
• | The redemption price for such secured convertible notes shall be 120% (if redeemed on or prior to August 15, 2017) or 125% (if redeemed after August 15, 2017) of the then outstanding principal, plus any accrued and unpaid interest. |
• | During the month of May 2017, the Holder agreed to limit its conversions of outstanding Company secured convertible notes to $50,000 per calendar week of principal/interest. |
• | During the months of June, July and August 2017, the holder agreed to limit its conversions of outstanding Company secured convertible notes to $75,000 per calendar week of principal/interest. |
• | During the months of May, June, July and August 2017, the holder agreed that all outstanding Company secured convertible notes shall bear interest at the normal stated rate of 10%, rather than default rate of 24%. |
• | All conversions during the months of May, June, July and August 2017 will be at the “triggering event” discount conversion price as stated in the secured convertible notes, and will continue at the “triggering event” discount price until, if and when the notes are redeemed. |
• | Should the Company fail to redeem for cash all secured convertible notes on or before September 1, 2017, default interest and normal stated interest will accrue from the date of execution of this agreement. |
Conversion Period | Principal Converted | Common Shares Issued | |||
Q4 2016 | $ | 152,460 | 64,000,000 | ||
Q1 2017 | 1,017,732 | 959,704,543 | |||
Q2 2017 | 682,235 | 1,865,043,998 | |||
$ | 1,852,427 | 2,888,748,541 |
Conversion Period | Preferred Series E Shares Converted | Value of Series E Preferred Shares (inclusive of accrued dividends) | Common Shares Issued | ||||
Q4 2015 | 478 | $ | 481,500 | 250,000 | |||
Q1 2016 | 1,220 | 1,239,436 | 1,132,000 | ||||
Q2 2016 | 365 | 381,414 | 7,979,568 | ||||
Q3 2016 | 523 | 548,896 | 21,973,747 | ||||
Q4 2016 | 94 | 101,018 | 13,089,675 | ||||
Q1 2017 | 15 | 16,248 | 8,289,962 | ||||
Q2 2017 | 35 | 38,886 | 134,927,207 | ||||
Q3 2017 | 70 | 76,814 | 129,314,677 | ||||
2,800 | $ | 2,884,212 | 316,956,836 |
Conversion Period | Principal Converted | Dividends Converted | Common Shares Issued | |||||
Q1 2016 | $ | 2,168,402 | $ | 19,896 | 2,183,991 | |||
Q2 2016 | $ | 3,234,000 | $ | 66,931 | 6,649,741 | |||
Q3 2016 | $ | 1,261,648 | $ | 54,096 | 81,917,367 | |||
Q4 2016 | $ | 175,949 | $ | 9,168 | 27,276,006 | |||
Q3 2017 | $ | 20,000 | $ | — | 18,181,818 | |||
Q4 2017 | $ | 107,000 | $ | 467 | 172,552,354 | |||
$ | 6,966,999 | $ | 150,558 | 308,761,277 |
Conversion Period | Principal Converted | Dividends Converted | Common Shares Issued | |||||
Q4 2016 | $ | 892,000 | $ | 37,895 | 245,726,283 | |||
Q1 2017 | $ | 372,000 | $ | 25,970 | 327,718,386 | |||
Q2 2017 | $ | 526,000 | $ | 49,096 | 1,337,776,821 | |||
$ | 1,790,000 | $ | 112,961 | 1,911,221,490 |
Conversion Period | Principal Converted | Interest Converted | Common Shares Issued | |||||
Q3 2016 | $ | 15,000 | $ | — | 1,470,588 | |||
Q4 2016 | $ | 91,563 | $ | — | 13,346,274 | |||
Q1 2017 | $ | 70,000 | $ | — | 50,503,662 | |||
Q2 2017 | $ | 37,535 | $ | — | 86,987,428 | |||
Q3 2017 | $ | 118,535 | $ | 10,268 | 306,675,548 | |||
$ | 332,633 | $ | 10,268 | 458,983,500 |
Closing Period | Preferred Series K Shares Purchased | Closing Amount | |||
Q1 2017 | 150 | $ | 150,000 | ||
Q2 2017 | 4,100 | $ | 4,100,000 | ||
Q3 2017 | 4,760 | $ | 4,760,000 | ||
9,010 | $ | 9,010,000 |
Conversion Period | Preferred Series K Shares Converted | Value of Series K Preferred Shares | Common Shares Issued | ||||
Q2 2017 | 3,200 | $ | 3,200,000 | 800,000,000 | |||
Q3 2017 | 3,000 | $ | 3,000,000 | 750,000,000 | |||
6,200 | $ | 6,200,000 | 1,550,000,000 |
Preferred Stock Series Designation | Shares Authorized | Shares Outstanding | ||
Series A | 750,000 | 60,756 | ||
Series B-1 | 2,000 | — | ||
Series B-2 | 1,000 | — | ||
Series C | 1,000 | — | ||
Series D | 3,000 | — | ||
Series D-1 | 2,500 | — | ||
Series E | 2,800 | — | ||
Series F | 7,000 | — | ||
Series G | 2,000 | — | ||
Series H | 2,500 | — | ||
Series I | 1,000 | — | ||
Series J | 1,350 | — | ||
Series J-1 | 1,000 | — | ||
Series K | 20,000 | 2,810 |
Warrant Shares | Warrant Weighted Average Exercise Price | ||||
Outstanding at December 31, 2016 | — | $ | — | ||
Granted | 700,000,000 | $ | 0.003 | ||
Exercised | — | $ | — | ||
Canceled | — | $ | — | ||
Outstanding at December 31, 2017 | 700,000,000 | $ | 0.003 | ||
Exercisable at December 31, 2017 | 700,000,000 | $ | 0.003 |
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
Share-based compensation cost included in: | ||||||||
Research and development | $ | 18,231 | $ | 181,985 | ||||
Selling, general and administrative | 105,037 | 706,363 | ||||||
Total share-based compensation cost | $ | 123,268 | $ | 888,348 |
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
Type of Award: | ||||||||
Stock Options | $ | 96,939 | $ | 377,653 | ||||
Restricted Stock Units and Awards | 26,329 | 510,695 | ||||||
Total share-based compensation cost | $ | 123,268 | $ | 888,348 |
For the years ended December 31, | ||||||
2017 | 2016 | |||||
Expected volatility | — | % | 114.6 | % | ||
Risk free interest rate | — | % | 1.5 | % | ||
Expected dividends | — | — | ||||
Expected life (in years) | 0 | 5.8 years |
Stock Option Shares | Stock Options Weighted Average Exercise Price | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||
Outstanding at December 31, 2015 | 73,870 | $ | 56.43 | 8.84 | ||||||||
Granted | 33,250 | $ | 1.35 | $ | 1,540 | |||||||
Exercised | — | — | ||||||||||
Canceled | (30,206 | ) | 41.15 | |||||||||
Outstanding at December 31, 2016 | 76,914 | $ | 37.67 | 8.28 | ||||||||
Granted | — | $ | — | $ | — | |||||||
Exercised | — | — | ||||||||||
Canceled | (6,283 | ) | 31.23 | |||||||||
Outstanding at December 31, 2017 | 70,631 | $ | 29.61 | 7.32 | ||||||||
Exercisable at December 31, 2017 | 52,364 | $ | 37.75 |
Shares | Weighted Average Grant Date Fair Value | |||||
Non-vested at December 31, 2015 | 20,487 | 5.59 | ||||
Granted | 245,414 | 1.97 | ||||
Vested | (176,693 | ) | ||||
Forfeited | (28,618 | ) | ||||
Non-vested at December 31, 2016 | 60,590 | 1.84 | ||||
Granted | — | — | ||||
Vested | (59,390 | ) | ||||
Forfeited | (1,200 | ) | ||||
Non-vested at December 31, 2017 | — | — |
As of December 31 | ||||||||
2017 | 2016 | |||||||
Deferred Tax Asset | ||||||||
Current: | ||||||||
Accrued Expenses | $ | — | $ | 192,000 | ||||
Inventory Allowance | 141,000 | 234,000 | ||||||
Other | 13,000 | 43,000 | ||||||
Total Current | 154,000 | 469,000 | ||||||
Non-current: | ||||||||
Stock Based Compensation-Stock Options and Restricted Stock | 1,058,000 | 1,919,000 | ||||||
Tax effect of NOL carryforward | 67,852,000 | 79,384,000 | ||||||
Depreciation | 8,748,000 | 17,406,000 | ||||||
Amortization | (368,000 | ) | (637,000 | ) | ||||
Warranty reserve | 14,000 | 68,000 | ||||||
Total Non-current | 77,304,000 | 98,140,000 | ||||||
Net deferred tax asset | 77,458,000 | 98,609,000 | ||||||
Less valuation allowance | (77,458,000 | ) | (98,609,000 | ) | ||||
Net deferred tax asset | $ | — | $ | — |
2017 | 2016 | |||||
Federal statutory rate | 35.0 | % | 35.0 | % | ||
State statutory rate | 2.8 | % | 2.6 | % | ||
Change in rate | — | % | (0.4 | )% | ||
Permanent tax differences | (2.3 | )% | (0.1 | )% | ||
Change in fair value of derivatives | 8.4 | % | 0.9 | % | ||
Deemed interest expense on debt discount | (5.5 | )% | (5.1 | )% | ||
Loss on extinguishment of liabilities | (4.9 | )% | (5.9 | )% | ||
Other | (0.9 | )% | (1.8 | )% | ||
Increase in valuation allowance | (32.6 | )% | (25.6 | )% | ||
— | % | — | % |
Date Received | Amount Received | Maturity Date | ||
1/11/2018 | $ | 250,000 | 1/11/2019 | |
1/25/2018 | $ | 250,000 | 1/25/2019 | |
2/8/2018 | $ | 250,000 | 2/8/2019 | |
2/22/2018 | $ | 250,000 | 2/22/2019 | |
3/7/2018 | $ | 250,000 | 3/7/2019 | |
3/21/2018 | $ | 250,000 | 3/21/2019 |
1. | ISSUE OF NOTES PURSUANT TO EXCHANGE AND PURCHASE |
2. | THE CLOSING |
3. | REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY |
4. | REPRESENTATIONS AND WARRANTIES OF THE PURCHASER |
5. | CONDITIONS TO CLOSING OF THE PURCHASER |
6. | CONDITIONS TO OBLIGATIONS OF THE COMPANY |
7. | MISCELLANEOUS |
COMPANY: ASCENT SOLAR TECHNOLOGIES, INC. By: /s/ Victor Lee Name: Victor Lee Title: Chief Executive Officer | PURCHASER: GLOBAL ICHIBAN LIMITED By: /s/ Ashley Ong Name: Ashley Ong Title: Director |
PURCHASER: | NOTE AMOUNT: | Closing Date: |
Global Ichiban Limited | $250,000 | November 30, 2017 |
Global Ichiban Limited | $250,000 | December 31, 2017 |
Global Ichiban Limited | $250,000 | January 31, 2018 |
Global Ichiban Limited | $250,000 | February 28, 2018 |
Global Ichiban Limited | $250,000 | March 31, 2018 |
Global Ichiban Limited | $250,000 | April 30, 2018 |
Global Ichiban Limited | $250,000 | May 31, 2018 |
Global Ichiban Limited | $250,000 | June 30, 2018 |
PRINCIPAL: | Accrued Interest/Dividend: | Total Amount for New Issue Note | Maturity | |
Promissory Note 9/19/17 | 3,340,690.92 | 18,847.65 | 3,359,538.57 | 36 months |
Promissory Note 11/16/17 | 250,000.00 | 2,465.75 | 252,465.75 | 12 months |
Series J Preferred Stock 400 shares | 400,000.00 | 45,222.19 | 445,222.19 | 12 months |
DEBTOR: ASCENT SOLAR TECHNOLOGIES, INC. By: /s/ Victor Lee Name: Victor Lee Title: Chief Executive Officer |
March 29, 2018 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory) |
March 29, 2018 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory) |
1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
March 29, 2018 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory) |
1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
March 29, 2018 | ||
/s/ VICTOR LEE | ||
Victor Lee President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory) |
Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Mar. 26, 2018 |
Jun. 30, 2017 |
|
Document And Entity Information [Abstract] | |||
Entity Registrant Name | Ascent Solar Technologies, Inc. | ||
Entity Central Index Key | 0001350102 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 12,738,084,718 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 2.9 |
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) |
Total |
Rights [Member] |
Committed Equity Line [Member] |
Common stock [Member] |
Common stock [Member]
Rights [Member]
|
Common stock [Member]
Committed Equity Line [Member]
|
Additional Paid-in Capital [Member] |
Additional Paid-in Capital [Member]
Rights [Member]
|
Additional Paid-in Capital [Member]
Committed Equity Line [Member]
|
Accumulated Deficit [Member] |
Series A Preferred Stock [Member] |
Series A Preferred Stock [Member]
Common stock [Member]
|
Series A Preferred Stock [Member]
Preferred Stock [Member]
|
Series A Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series E Preferred Stock [Member] |
Series E Preferred Stock [Member]
Common stock [Member]
|
Series E Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series F Preferred Stock [Member] |
Series F Preferred Stock [Member]
Common stock [Member]
|
Series F Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series G Preferred Stock [Member] |
Series G Preferred Stock [Member]
Common stock [Member]
|
Series G Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series I Preferred Stock [Member] |
Series I Preferred Stock [Member]
Common stock [Member]
|
Series I Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series J Preferred Stock [Member] |
Series J Preferred Stock [Member]
Common stock [Member]
|
Series J Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series J-1 Preferred Stock [Member] |
Series J-1 Preferred Stock [Member]
Common stock [Member]
|
Series J-1 Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series K Preferred Stock [Member] |
Series K Preferred Stock [Member]
Common stock [Member]
|
Series K Preferred Stock [Member]
Additional Paid-in Capital [Member]
|
Series I Exchange Notes [Member] |
Series I Exchange Notes [Member]
Common stock [Member]
|
Series I Exchange Notes [Member]
Additional Paid-in Capital [Member]
|
Four Percent Original Issue Discount Senior Secured Convertible Promissory Notes [Member] |
Four Percent Original Issue Discount Senior Secured Convertible Promissory Notes [Member]
Common stock [Member]
|
Four Percent Original Issue Discount Senior Secured Convertible Promissory Notes [Member]
Additional Paid-in Capital [Member]
|
October 2016 Convertible Notes [Member] |
October 2016 Convertible Notes [Member]
Common stock [Member]
|
October 2016 Convertible Notes [Member]
Preferred Stock [Member]
|
October 2016 Convertible Notes [Member]
Additional Paid-in Capital [Member]
|
TFG Promissory Notes [Member] |
TFG Promissory Notes [Member]
Common stock [Member]
|
TFG Promissory Notes [Member]
Additional Paid-in Capital [Member]
|
BayBridge Promissory Notes [Member] |
BayBridge Promissory Notes [Member]
Common stock [Member]
|
BayBridge Promissory Notes [Member]
Additional Paid-in Capital [Member]
|
Global Ichiban Convertible Notes [Member] |
Global Ichiban Convertible Notes [Member]
Common stock [Member]
|
Global Ichiban Convertible Notes [Member]
Additional Paid-in Capital [Member]
|
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2015 | 7,759,844 | 212,390 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance at Dec. 31, 2015 | $ 2,578,694 | $ 777 | $ 347,659,690 | $ (345,081,794) | $ 21 | |||||||||||||||||||||||||||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of shares (in shares) | 48,993 | 6,942,936 | (46,849) | 41,895,161 | 113,059,991 | 234,409,413 | 6,988,353 | 14,816,862 | 64,000,000 | 42,857,508 | (40,497) | |||||||||||||||||||||||||||||||||||||||||||
Conversion of shares | 58,823 | $ 5 | 58,818 | $ 222,789 | $ 694 | $ (4) | $ 222,099 | $ 3,418,221 | $ 4,189 | $ 3,414,032 | $ 9,931,454 | $ 11,306 | $ 9,920,148 | $ 1,496,396 | $ 23,441 | $ 1,472,955 | $ 2,533,417 | $ 699 | $ 2,532,718 | $ 160,826 | $ 1,481 | $ 159,345 | $ 251,680 | $ 6,400 | $ 245,280 | $ 177,570 | $ 4,286 | $ (4) | $ 173,288 | |||||||||||||||||||||||||
Issuance of stock (in shares) | 2,052,865 | 525,454 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | $ 1,347,000 | $ 1,056,147 | $ 205 | $ 52 | $ 1,346,795 | $ 1,056,095 | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest and Dividend Expense paid with Common Stock (in shares) | 18,575,710 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and Dividend Expense paid with Common Stock | 256,780 | $ 1,858 | 254,922 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Restricted Stock (in shares) | 183,230 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Restricted Stock | 0 | $ 18 | (18) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment Shares (in shares) | 107,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment Shares | 0 | $ 11 | (11) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 888,348 | 888,348 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beneficial Conversion Feature related to Series G and Series I Preferred Stock | 481,561 | 481,561 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (38,850,782) | (38,850,782) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance (in shares) at Dec. 31, 2016 | 554,223,320 | 125,044 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance at Dec. 31, 2016 | (13,991,076) | $ 55,422 | 369,886,065 | (383,932,576) | $ 13 | |||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance (in shares) at Dec. 31, 2015 | 7,759,844 | 212,390 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance at Dec. 31, 2015 | 2,578,694 | $ 777 | 347,659,690 | (345,081,794) | $ 21 | |||||||||||||||||||||||||||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of shares (in shares) | 308,761,277 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance (in shares) at Dec. 31, 2017 | 9,606,597,777 | 60,756 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance at Dec. 31, 2017 | (15,202,335) | $ 960,660 | 386,332,475 | (402,495,476) | $ 6 | |||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance (in shares) at Dec. 31, 2016 | 554,223,320 | 125,044 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance at Dec. 31, 2016 | (13,991,076) | $ 55,422 | 369,886,065 | (383,932,576) | $ 13 | |||||||||||||||||||||||||||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of shares (in shares) | 131,088,740 | (64,288) | 247,371,677 | 189,780,458 | 1,529,316,391 | 419,719,614 | 365,646,259 | 466,666,667 | 1,550,000,000 | 2,808,248,547 | 333,333,333 | 473,404,630 | 168,251,234 | |||||||||||||||||||||||||||||||||||||||||
Conversion of shares | $ 257,152 | $ 13,109 | $ (7) | $ 244,050 | $ 120,000 | $ 24,737 | $ 95,263 | $ 127,000 | $ 18,978 | $ 108,022 | $ 898,000 | $ 152,932 | $ 745,068 | $ 226,071 | $ 41,972 | $ 184,099 | $ 275,000 | $ 36,565 | $ 238,435 | $ 700,000 | $ 46,667 | $ 653,333 | $ 6,200,000 | $ 155,000 | $ 6,045,000 | $ 1,699,967 | $ 280,825 | $ 1,419,142 | $ 544,681 | $ 33,333 | $ 511,348 | $ 377,999 | $ 47,340 | $ 330,659 | $ 163,508 | $ 16,825 | $ 146,683 | |||||||||||||||||
Interest and Dividend Expense paid with Common Stock (in shares) | 332,006,907 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and Dividend Expense paid with Common Stock | 246,584 | $ 33,201 | 213,383 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Restricted Stock (in shares) | 40,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Restricted Stock | 0 | $ 4 | (4) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment Shares (in shares) | 37,500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment Shares | 63,750 | $ 3,750 | 60,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on Extinguishment of Liabilities | 4,481,939 | 4,481,939 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Induced Conversion Costs | 500,948 | 500,948 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrant Expense | 345,774 | 345,774 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 123,268 | 123,268 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Prior period adjustment - subsidiary | (2,770) | (2,770) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (18,560,130) | (18,560,130) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance (in shares) at Dec. 31, 2017 | 9,606,597,777 | 60,756 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance at Dec. 31, 2017 | $ (15,202,335) | $ 960,660 | $ 386,332,475 | $ (402,495,476) | $ 6 |
Organization |
12 Months Ended |
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Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | ORGANIZATION Ascent Solar Technologies, Inc. (“Ascent”) was incorporated on October 18, 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel and core technologies. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin film, photovoltaic (“PV”), battery, fuel cell and nano technologies. Through its work on research and development contracts for private and governmental entities, ITN developed proprietary processing and manufacturing know how applicable to PV products generally, and to Copper-Indium-Gallium-diSelenide (“CIGS”) PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies. In January 2006, in exchange for 102,800 shares of common stock of Ascent, ITN assigned to Ascent certain CIGS PV technologies and trade secrets and granted to Ascent a perpetual, exclusive, royalty free worldwide license to use, in connection with the manufacture, development, marketing and commercialization of CIGS PV to produce solar power, certain of ITN’s existing and future proprietary and control technologies that, although non-specific to CIGS PV, Ascent believes will be useful in its production of PV modules for its target markets. Upon receipt of the necessary government approvals and pursuant to novation in early 2007, ITN assigned government funded research and development contracts to Ascent and also transferred the key personnel working on the contracts to Ascent. Currently, the Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, and fixed-wing unmanned aerial vehicles (UAV). The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers. Reverse Stock Split On May 26, 2016, the Company, a Delaware corporation, filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, par value $0.0001 per share, at a ratio of one-for-twenty (the “Reverse Stock Split”). The Certificate of Amendment did not change the number of authorized shares, or the par value, of the Company’s common stock. The Certificate of Amendment provides that every twenty shares of the Company’s issued and outstanding common stock were automatically combined into one issued and outstanding share of the Company’s common stock. All shares and per share amounts in the consolidated financial statements and accompanying notes have been retroactively adjusted to give effect to the Reverse Stock Split. |
Basis of Presentation |
12 Months Ended |
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Dec. 31, 2017 | |
Basis Of Presentation [Abstract] | |
Basis of Presentation | BASIS OF PRESENTATION The accompanying consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of December 31, 2017 and December 31, 2016, and the results of operations for the years ended December 31, 2017 and 2016. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Summary of Significant Accounting Policies |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash Equivalents: The Company classifies all short-term investments in interest bearing bank accounts and highly liquid debt securities purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances which may exceed federally insured limits. The Company does not believe this results in significant credit risk. Foreign Currencies: Bank account balances held in foreign currencies are translated to U.S. dollars utilizing the period end exchange rate. Gains or losses incurred in connection with the Company’s accounts held in foreign currency were not material for the years ended December 31, 2017 and 2016 and were recorded in “Other Income/(Expense)” in the Consolidated Statements of Operations. Receivables and Allowance for Doubtful Accounts: Trade accounts receivable are recorded at the invoiced amount as the result of transactions with customers. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company estimates the collectability of accounts receivable using analysis of historical bad debts, customer credit-worthiness and current economic trends. Reserves are established on an account-by-account basis. Account balances are written off against the allowance in the period in which the Company determines that is it probable that the receivable will not be recovered. As of December 31, 2017 and 2016, the Company had an allowance for doubtful accounts of $48,201 and $106,205, respectively. Inventories: All inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average method. Inventory balances are frequently evaluated to ensure they do not exceed net realizable value. The computation for net realizable value takes into account many factors, including expected demand, product life cycle and development plans, module efficiency, quality issues, obsolescence and others. Management's judgment is required to determine reserves for obsolete or excess inventory. As of December 31, 2017 and 2016, the Company had inventory reserve balances of $562,140 and $736,663, respectively. If actual demand and market conditions are less favorable than those estimated by management, additional inventory write downs may be required. Due to the sale of the EnerPlex brand and the re-purposing of our work-in-process inventory, we are unable to estimate the recoverability of all of our work-in process inventory values, resulting in a lower-cost-to-market analysis and reserve for impairment. An expense of $363,377 was recorded to inventory impairment costs for the year ended December 31, 2017. There were no lower of cost or market adjustments during the year ended December 31, 2016. Property, Plant and Equipment: Property, plant and equipment are recorded at the original cost to the Company. Assets are being depreciated over estimated useful lives of three to forty years using the straight-line method, as presented in the table below, commencing when the asset is placed in service. Leasehold improvements are depreciated over the shorter of the remainder of the lease term or the life of the improvements. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income. Expenditures for repairs and maintenance are expensed as incurred.
Patents: At such time as the Company is awarded patents, patent costs are amortized on a straight-line basis over the legal life on the patents, or over their estimated useful lives, whichever is shorter. As of December 31, 2017 and 2016, the Company had $1,470,796 and $1,647,505 of net patent costs, respectively. Of these amounts $640,167 and $619,241 represents costs net of amortization incurred for awarded patents, and the remaining $830,629 and $1,028,264 represents costs incurred for patent applications to be filed as of December 31, 2017 and 2016, respectively. During the years ended December 31, 2017 and 2016, the Company capitalized $62,652 and $189,455 in patent costs, respectively, as it worked to secure design rights and trademarks for newly developed products. Amortization expense was $150,928 and $109,517 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, future amortization of patents is expected as follows:
Impairment of Long-lived Assets: The Company analyzes its long-lived assets (property, plant and equipment) and definitive-lived intangible assets (patents) for impairment, both individually and as a group, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Events that might cause impairment would include significant current period operating or cash flow losses associated with the use of a long-lived asset or group of assets combined with a history of such losses, significant changes in the manner of use of assets and significant negative industry or economic trends. An undiscounted cash flow analysis is calculated to determine if impairment exists. If impairment is determined to exist, any related loss is calculated using the difference between the fair value and the carrying value of the assets. During the years ended December 31, 2017 and 2016, the Company did not incur impairments of its manufacturing facilities and equipment. Interest Capitalization: Historically the Company has capitalized interest cost as part of the cost of acquiring or constructing certain assets during the period of time required to get the asset ready for its intended use. The Company capitalized interest to the extent that expenditures to acquire or construct an asset have occurred and interest cost has been incurred. Convertible Notes: The Company issues, from time to time, convertible notes. Refer to Notes 12, 13, 14, and 15 for further information. Convertible Preferred Stock: The Company evaluates its preferred stock instruments under FASB ASC 480, "Distinguishing Liabilities from Equity" to determine the classification, and thereby the accounting treatment, of the instruments. Refer to Notes 12, 16, 17, 18, 19, 20, 21, and 22 for further discussion on the classification of each instrument. Derivatives: The Company evaluates its financial instruments under FASB ASC 815, "Derivatives and Hedging" to determine whether the instruments contain an embedded derivative. When an embedded derivative is present, the instrument is evaluated for a fair value adjustment upon issuance and at the end of every reporting period. Any adjustments to fair value are treated as gains and losses in fair values of derivatives and are recorded in the Consolidated Statements of Operations. Refer to Notes 12, 13, 14, 15, 17, 18, 19, and 20 for further discussion on the embedded derivatives of each instrument. Product Warranties: The Company provides a limited warranty to the original purchaser of products against defective materials and workmanship. The Company also guarantees that standalone modules and PV integrated consumer electronics will achieve and maintain the stated conversion efficiency rating for certain products. Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms, historical experience and analysis of peer company product returns. The Company assesses the adequacy of its liabilities and makes adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available. Warrant Liability: Warrants to purchase the Company's common stock with nonstandard anti-dilution provisions, regardless of the probability or likelihood that may conditionally obligate the issuer to ultimately transfer assets, are classified as liabilities and are recorded at their estimated fair value at each reporting period. Any change in fair value of these warrants is recorded at each reporting period in Other income/(expense) on the Company's statement of operations. Revenue Recognition: Product revenue - The Company generated product revenues of $642,179 and $1,699,802 for the years ended December 31, 2017 and 2016, respectively. Product revenue is generated from commercial sales of flexible PV modules and PV integrated consumer electronics, non-PV integrated power banks and associated accessories. Products are sold through the Company's own e-commerce website, online retailers, direct to retailers and indirectly to retailers through distributors. Revenue is recognized as products are shipped or delivered and title has transferred to the customer. In certain instances, the Company has agreed to refund a portion of the purchase price to customers if the Company decreases its standard retail price. The Company estimates the effect of this price protection and records the difference as a reduction of revenue at the time of sale. We also, in certain instances have provided customers with a right of return provision. In these instances, we defer the recognition of revenues until the provision period has expired. Estimated costs of returns and allowances, other than those specifically pertaining to a right of return provision, and discounts are accrued as a reduction to sales when revenue is recognized. See Marketing and Advertising Costs below for accounting treatment related to cooperative advertising programs. Government contracts revenue - Revenue from governmental research and development contracts is generated under terms that are cost plus fee or firm fixed price. Revenue from cost plus fee contracts is recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the fixed fee. Revenue from firm fixed price contracts is recognized under the percentage-of-completion method of accounting, with costs and estimated profits included in contract revenue as work is performed. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract. Shipping and Handling Costs: The Company classifies shipping and handling costs for products shipped to customers as a component of “Cost of revenues” on the Company’s Consolidated Statements of Operations. Customer payments of shipping and handling costs are recorded as a component of Revenues. Research, Development and Manufacturing Operations Costs: Research, development and manufacturing operations expenses were approximately $4.8 million and $6.6 million for the years ended December 31, 2017 and 2016, respectively. Research, development and manufacturing operations expenses include: 1) technology development costs, which include expenses incurred in researching new technology, improving existing technology and performing federal government research and development contracts, 2) product development costs, which include expenses incurred in developing new products and lowering product design costs, and 3) pre-production and production costs, which include engineering efforts to improve production processes, material yields and equipment utilization, and manufacturing efforts to produce saleable product. Research, development and manufacturing operations costs are expensed as incurred, with the exception of costs related to inventoried raw materials, work-in-process and finished goods, which are expensed as Cost of revenue as products are sold. Marketing and Advertising Costs: The Company advertises in print, television, online and through social media. The Company will also authorize customers to run advertising campaigns on its behalf through various media outlets. Marketing and advertising costs are expensed as incurred. Marketing and advertising expenses were $189,382 and $2,164,693 for the years ended December 31, 2017 and 2016, respectively. Share-Based Compensation: The Company measures and recognizes compensation expense for all share-based payment awards made to employees, officers, directors, and consultants based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Company’s Statements of Operations. Share-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates. For purposes of determining estimated fair value of share-based payment awards on the date of grant the Company uses the Black-Scholes option-pricing model (“Black-Scholes Model”) for option awards. The Black-Scholes Model requires the input of highly subjective assumptions. Because the Company’s employee stock options may have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of the Company’s employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which result in changes to these assumptions and methodologies, which could materially impact the Company’s fair value determination. The Company estimates the fair value of its restricted stock awards as its stock price on the grant date. The accounting guidance for share-based compensation may be subject to further interpretation and refinement over time. There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions. If factors change and the Company employs different assumptions in the accounting for share-based compensation in future periods, or if the Company decides to use a different valuation model, the compensation expense the Company records in the future may differ significantly from the amount recorded in the current period and could materially affect its loss from operations, net loss and net loss per share. Income Taxes: Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates as of the date of enactment. Interest and penalties, if applicable, would be recorded in operations. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years (2014-2017) in these jurisdictions. The Company believes its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded. Net Loss per Common Share: Basic loss per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect the potential securities that could share in the earnings of the Company, similar to fully diluted earnings per share. Common stock equivalents outstanding as of December 31, 2017 and 2016 of approximately 3.0 billion and 301.1 million shares have been omitted from loss per share because they are anti-dilutive. Common stock equivalents consist of stock options, unvested restricted stock, warrants, preferred stock, preferred stock make-whole dividend liability amounts (assuming the make-whole dividend liability is paid in common stock in lieu of cash), and convertible notes (assuming the amortization payments are paid in common stock in lieu of cash). Net loss per common share was the same for both basic and diluted methods for the periods ended December 31, 2017 and 2016. Fair Value Estimates: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses fair value hierarchy based on three levels of inputs, of which, the first two are considered observable and the last unobservable, to measure fair value:
Certain long-lived assets and current liabilities have been measured at fair value on a recurring and non-recurring basis. See Note 6. Property, Plant and Equipment, Note 10. Secured Promissory Note, Note 12. July 2016 Convertible Notes and Series H Preferred Stock, Note 13. October 2016 Convertible Notes and Exchange of Series A Preferred Stock, Note 13. St. George Convertible Note, Note 15. BayBridge Convertible Note, Note 17. Series E Preferred Stock, Note 18. Series F Preferred Stock, Note 19. Series G Preferred Stock, Note 20. Series I Preferred Stock and Series I Convertible Notes, Note 21. Series J Preferred Stock and Series J-1 Preferred Stock, and Note 23. Make-whole Dividend Liability. The carrying amount of our long term debt outstanding approximates fair value because our current borrowing rate does not materially differ from market rates for similar bank borrowings. The carrying value for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other assets and liabilities approximate their fair values due to their short maturities. Related Party Transactions: One of the Company's named shareholders is Tertius Financial Group Pte Ltd, of which Mr. Victor Lee, President and Chief Executive Officer of the Company, is Managing Director and 50% shareholder. Accounting for transactions under these agreements is consistent with those defined in our Significant Accounting Policies. See Notes 11 and 27 for further information. Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recently Issued Accounting Standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The Company has evaluated ASU 2014-09, and it will not have a material effect on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company continues to evaluate the impact, that the adoption of this guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including 1) accounting for income taxes, 2) classification of excess tax benefits in the statement of cash flows, 3) forfeitures, 4) minimum statutory tax withholding requirements, 5) cash flow classification of employee taxes withheld in the form of shares, 6) the practical expedient for estimating the expected term, and 7) intrinsic value. The guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. The implementation of ASU 2016-09 did not have a material effect on the Company's consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The Company continues to evaluate the impact, if any, that the adoption of this guidance will have on its consolidated financial statements, but does not expect the effect, if any, will be material. In July 2017, the FASB issued ASU No. 2017-11 Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements. |
Liquidity, Continued Operations, and Going Concern |
12 Months Ended |
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Dec. 31, 2017 | |
LIQUIDITY AND CONTINUED OPERATIONS [Abstract] | |
Liquidity, Continued Operations, and Going Concern | LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN During the years ended December 31, 2017 and 2016, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 8, 10, 11, 12, 13, 14, 15, 17, 18, 19, 20, 21, and 22. The Company has continued PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the year ended December 31, 2017 the Company used approximately $12.6 million in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of approximately $5.5 million to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately $0.7 million, including principal and interest, will come due in the remainder of 2017. The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As of December 31, 2017, the Company has negative working capital. As such, cash liquidity sufficient for the year ending December 31, 2018 will require additional financing. The Company continues to accelerate sales and marketing efforts related to its consumer and military solar products and specialty PV application strategies through expansion of its sales and distribution channels. The Company has begun activities related to securing additional financing through strategic or financial investors, but there is no assurance the Company will be able to raise additional capital on acceptable terms or at all. If the Company's revenues do not increase rapidly, and/or additional financing is not obtained, the Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on the Company's future operations. As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern. Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. |
Trade Receivables |
12 Months Ended |
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Dec. 31, 2017 | |
Receivables [Abstract] | |
Trade Receivables | TRADE RECEIVABLES Trade receivables, net consist of amounts generated from product sales and government contracts. Accounts receivable totaled $6,658 and $549,204 as of December 31, 2017 and 2016, respectively. Provisional Indirect Cost Rates - The Company bills the government under cost-based research and development contracts at provisional billing rates which permit the recovery of indirect costs. These rates are subject to audit on an annual basis by the government agencies’ cognizant audit agency. The cost audit may result in the negotiation and determination of the final indirect cost rates. In the opinion of management, re-determination of any cost-based contracts will not have a material effect on the Company’s financial position or results of operations. |
Property, Plant and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | PROPERTY, PLANT AND EQUIPMENT The following table summarizes property, plant and equipment as of December 31, 2017 and December 31, 2016:
The Company analyzes its long-lived assets for impairment, both individually and as a group, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Depreciation expense for the years ended December 31, 2017 and 2016 was $1,030,237 and $3,486,741, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Consolidated Statements of Operations. |
Inventories |
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Inventories | INVENTORIES Inventories consisted of the following at December 31, 2017 and December 31, 2016:
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Notes Payable |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable | NOTES PAYABLE On February 24, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matures on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $39,565. As of the date of this filing, this note has matured and is due and payable on demand. On February 27, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $49,500. The note bears interest of 6% per annum and matures on September 27, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On September 27, 2017, the Company paid the note, plus $1,725 in accrued interest, in full. On March 23, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $356,742. The note bears interest of 5% per annum and matures on October 23, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On October 23, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to November 6, 2017. Again on December 12, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to March 31, 2018. As of December 31, 2017, the Company had not made any payments on the note and the accrued interest was $13,830. On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matures on February 28, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $6,301. As of the date of this filing, this note has matured and is due and payable on demand. On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matures on September 30, 2018. Per the settlement agreement, monthly payments of $18,426 were to commence on October 30, 2017. As of December 31, 2017, one of the monthly payments had been made and the remaining principal and interest balances were $197,705 and $2,540, respectively. SECURED PROMISSORY NOTE On November 30, 2017, the Company, entered into a note purchase and exchange agreement (the “Note SPA”) with Global Ichiban Ltd (“Investor”), for the private placement of up to $2,000,000 of the Company’s Secured Convertible Promissory Notes (“Notes”) in exchange for $2,000,000 of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least $50,000 for the 20 trading day period preceding such future tranche closing dates. Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of November 30, 2017, the Investor surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ($252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to the Investor $4,057,227 aggregate principal amount of additional Notes. Please refer to Note 11 for further discussion on the canceled promissory notes and Note 21 on the canceled Series J Preferred Stock shares. Of the Notes issued on November 30, 2017, $3,359,539 aggregate principal amount will mature on December 15, 2020. Principal and interest will be payable in 36 equal monthly installments beginning January 15, 2018. Of the Notes issued on November 30, 2017, $697,688 aggregate principal amount will mature on November 30, 2018. Principal and interest will be payable upon maturity. The $2,000,000 aggregate principal amount of Notes to be issued in the future in tranches pursuant to the Note SPA will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of December 31, 2017, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
The Notes will be secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the Notes. All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.002 per share The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. As of December 31, 2017, the principal and interest balance of the Notes were $4,557,227 and $44,134, respectively Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below. Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
During the fourth quarter of 2017, a net loss of $930,361 had been recorded to reflect the total derivative liability of $4,897,178 as of December 31, 2017. PROMISSORY NOTES Tertius Financial Group Notes and Exchange On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company. On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000. On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG. TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns approximately 3% of the Company's outstanding shares at December 31, 2017. Offering of Unsecured Promissory Notes Between December 2016 and April 2017, the Company initiated eleven non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to $3,400,000. The promissory notes bear interest of 12% per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured. Between June and August, 2017, eight of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017, $143,148 interest was paid. On September 13, 2017, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the eleven outstanding promissory notes (with an aggregate principal and accrued interest of $3,504,199) for one new promissory note having a principal amount of approximately $3,504,199. The new note has a term of three years, bears interest at a rate of 12% per annum, and calls for monthly installment payments of $116,390 commencing on October 13, 2017. The Company has the option to pay monthly installment amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.004 per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $3,359,539 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. Offering of Unsecured, Non-Convertible Notes During October 2016, the Company received $420,000 from a separate private investor. These funds, along with $250,000 of additional funding, were rolled into a promissory note, executed on January 17, 2017, in the amount of $700,000 issued with a discount of $30,000 which will be charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017. Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured. On June 30, 2017, the Company and the private investor agreed to a twelve month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at 12% per annum and payments of approximately $62,000 will be made monthly beginning in July 2017. Four monthly payments were made between July and October of 2017. As of December 31, 2017, $205,563 of principal and $45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of December 31, 2017 were $494,437 and $27,126, respectively. On April 6, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $103,000 in exchange for proceeds of $100,000. The discount of $3,000 will be charged to interest expense ratably over the term of the note. The promissory note bears interest of 10% per annum and matures on October 6, 2017. On October 6, 2017, the Company and its investor entered into a Promissory Note Exchange Agreement to convert a promissory note with a principal balance of $103,000 and accrued interest of $5,233 in to common shares. Per the terms of the agreement, the promissory note was canceled and 72,500,000 shares were issued. On May 8, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $125,000. The promissory note bears interest of 12% per annum and matures on September 8, 2017. On September 8, 2017, the Company redeemed this note, in full, for cash. On October 31, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $250,000 . The promissory note bears interest of 12% per annum and matures on January 31, 2018. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $252,466 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. On November 16, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $275,000. The promissory note was issued with an original issue discount of $25,000, resulting in proceeds to the company of $250,000. The note does not have a stated interest rate and matures on December 18, 2017. As of December 31, 2017, no payments had been made on this note and the discount had been recorded as interest expense. During December 2017, the Company received aggregate proceeds of $177,500, from a private investor. These proceeds were incorporated into a promissory note on January 31, 2018. Please refer to Note 30 for further information on this note. ST. GEORGE CONVERTIBLE NOTE On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC (“Investor”), for the private placement of $1,725,000 principal amount of the Company’s Original Issue Discount Convertible Promissory Notes. On September 11, 2017, the Company sold and issued $1,725,000 principal amount of the convertible notes to the Investor in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing fee, will be charged to interest expense, ratably, over the life of the note. Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019. The notes do not bear interest in the absence of an event of default. For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately $96,000. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If the Investor does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts. But in no event can the amount requested by the Investor for any one month exceed $275,000. Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium. Beginning six months after the issuance of the convertible notes, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior 5 trading days or (ii) the closing bid price for the shares on the prior trading day. All principal and accrued interest on the Notes are 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 of $0.004 per share. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by 25%. In connection with the closing under the Note SPA, the Company issued $37,500,000 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $0.0017 resulting in an interest expense of $63,750 being recorded as of the date of close. The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. Per the conditions of the SPA, a reserve of 1.88 billion shares was set up out of our authorized and unissued shares. During the fourth quarter of 2017, we made cash payments of $191,667 on this note, and as of December 31, 2017, the principal balance on this note was $1,705,833. In lieu of making the December 2017 payment, the share reserve was increased by 3 billion shares. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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 $468,095 was recorded. The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a $151,504 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net gain recorded for the year ended December 31, 2017 was $73,815, to properly reflect the fair value of the embedded derivative of $394,280 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 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%. BAYBRIDGE CONVERTIBLE NOTE On December 6, 2017, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”). Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange 675 shares of outstanding Series J Preferred Stock ($755,417 of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of $840,000 (the “Exchange Note”), with an original issue discount of $84,583. Please refer to Note 21 for further discussion on the Series J Preferred Stock. The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on December 6, 2018, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity. Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.003 per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Note 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. December 6, 2017, the derivative liability associated with the promissory note was $1,048,311. Since the value of the derivative was more than the liability and the original issue discount, the entire undiscounted liability of $755,417 was recorded as a debt discount to be amortized over the life of the liability. The remaining $292,894 was charged to interest expense. The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a $505,578 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the year ended December 31, 2017, to properly reflect the fair value of the embedded derivative of $542,733 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 61%, present value discount rate of 12% and dividend yield of 0%. As of December 31, 2017, principal of $275,000 had been converted into 404,411,765 shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of December 31, 2017 were $565,000 and $4,825, respectively. |
Debt |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Debt | DEBT On February 8, 2008, the Company acquired a manufacturing and office facility in Thornton, Colorado, for approximately $5.5 million. The purchase was financed by a promissory note, deed of trust and construction loan agreement (the “Construction Loan”) with the Colorado Housing and Finance Authority (“CHFA”), which provided the Company borrowing availability of up to $7.5 million for the building and building improvements. In 2009, the Construction Loan was converted to a permanent loan pursuant to a Loan Modification Agreement between the Company and CHFA (the “Permanent Loan”). The Permanent Loan, collateralized by the building, has an interest rate of 6.6% and the principal will be amortized through its term to January 2028. Further, pursuant to certain covenants in the Permanent Loan, the Company may not, among other things, without CHFA’s prior written consent (which by the terms of the deed of trust is subject to a reasonableness requirement): create or incur additional indebtedness (other than obligations created or incurred in the ordinary course of business); merge or consolidate with any other entity; or make loans or advances to the Company’s officers, shareholders, directors or employees. On November 1, 2016, the Company and the CFHA agreed to modify the original agreement described above with the addition of a forbearance period. Per the modification agreement, no payments of principal and interest shall be due under the note during the forbearance period commencing on November 1, 2016 and continuing through April 1, 2017. The amount of interest that should have been paid by the Company during the forbearance period in the total amount of $180,043 shall be added to the outstanding principal balance of the note. As a result, on May 1, 2017, the principal balance of the note was $5,704,932. Commencing on May 1, 2017, the monthly payments of principal and interest due under the note resumed at $57,801, and the Company shall continue to make such monthly payments over the remaining term of the note ending on February 1, 2028. As of December 31, 2017, future principal payments on long-term debt are due as follows:
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Secured Promissory Note |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Promissory Note | NOTES PAYABLE On February 24, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matures on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $39,565. As of the date of this filing, this note has matured and is due and payable on demand. On February 27, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $49,500. The note bears interest of 6% per annum and matures on September 27, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On September 27, 2017, the Company paid the note, plus $1,725 in accrued interest, in full. On March 23, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $356,742. The note bears interest of 5% per annum and matures on October 23, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On October 23, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to November 6, 2017. Again on December 12, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to March 31, 2018. As of December 31, 2017, the Company had not made any payments on the note and the accrued interest was $13,830. On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matures on February 28, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $6,301. As of the date of this filing, this note has matured and is due and payable on demand. On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matures on September 30, 2018. Per the settlement agreement, monthly payments of $18,426 were to commence on October 30, 2017. As of December 31, 2017, one of the monthly payments had been made and the remaining principal and interest balances were $197,705 and $2,540, respectively. SECURED PROMISSORY NOTE On November 30, 2017, the Company, entered into a note purchase and exchange agreement (the “Note SPA”) with Global Ichiban Ltd (“Investor”), for the private placement of up to $2,000,000 of the Company’s Secured Convertible Promissory Notes (“Notes”) in exchange for $2,000,000 of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least $50,000 for the 20 trading day period preceding such future tranche closing dates. Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of November 30, 2017, the Investor surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ($252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to the Investor $4,057,227 aggregate principal amount of additional Notes. Please refer to Note 11 for further discussion on the canceled promissory notes and Note 21 on the canceled Series J Preferred Stock shares. Of the Notes issued on November 30, 2017, $3,359,539 aggregate principal amount will mature on December 15, 2020. Principal and interest will be payable in 36 equal monthly installments beginning January 15, 2018. Of the Notes issued on November 30, 2017, $697,688 aggregate principal amount will mature on November 30, 2018. Principal and interest will be payable upon maturity. The $2,000,000 aggregate principal amount of Notes to be issued in the future in tranches pursuant to the Note SPA will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of December 31, 2017, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
The Notes will be secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the Notes. All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.002 per share The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. As of December 31, 2017, the principal and interest balance of the Notes were $4,557,227 and $44,134, respectively Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below. Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
During the fourth quarter of 2017, a net loss of $930,361 had been recorded to reflect the total derivative liability of $4,897,178 as of December 31, 2017. PROMISSORY NOTES Tertius Financial Group Notes and Exchange On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company. On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000. On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG. TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns approximately 3% of the Company's outstanding shares at December 31, 2017. Offering of Unsecured Promissory Notes Between December 2016 and April 2017, the Company initiated eleven non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to $3,400,000. The promissory notes bear interest of 12% per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured. Between June and August, 2017, eight of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017, $143,148 interest was paid. On September 13, 2017, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the eleven outstanding promissory notes (with an aggregate principal and accrued interest of $3,504,199) for one new promissory note having a principal amount of approximately $3,504,199. The new note has a term of three years, bears interest at a rate of 12% per annum, and calls for monthly installment payments of $116,390 commencing on October 13, 2017. The Company has the option to pay monthly installment amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.004 per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $3,359,539 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. Offering of Unsecured, Non-Convertible Notes During October 2016, the Company received $420,000 from a separate private investor. These funds, along with $250,000 of additional funding, were rolled into a promissory note, executed on January 17, 2017, in the amount of $700,000 issued with a discount of $30,000 which will be charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017. Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured. On June 30, 2017, the Company and the private investor agreed to a twelve month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at 12% per annum and payments of approximately $62,000 will be made monthly beginning in July 2017. Four monthly payments were made between July and October of 2017. As of December 31, 2017, $205,563 of principal and $45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of December 31, 2017 were $494,437 and $27,126, respectively. On April 6, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $103,000 in exchange for proceeds of $100,000. The discount of $3,000 will be charged to interest expense ratably over the term of the note. The promissory note bears interest of 10% per annum and matures on October 6, 2017. On October 6, 2017, the Company and its investor entered into a Promissory Note Exchange Agreement to convert a promissory note with a principal balance of $103,000 and accrued interest of $5,233 in to common shares. Per the terms of the agreement, the promissory note was canceled and 72,500,000 shares were issued. On May 8, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $125,000. The promissory note bears interest of 12% per annum and matures on September 8, 2017. On September 8, 2017, the Company redeemed this note, in full, for cash. On October 31, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $250,000 . The promissory note bears interest of 12% per annum and matures on January 31, 2018. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $252,466 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. On November 16, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $275,000. The promissory note was issued with an original issue discount of $25,000, resulting in proceeds to the company of $250,000. The note does not have a stated interest rate and matures on December 18, 2017. As of December 31, 2017, no payments had been made on this note and the discount had been recorded as interest expense. During December 2017, the Company received aggregate proceeds of $177,500, from a private investor. These proceeds were incorporated into a promissory note on January 31, 2018. Please refer to Note 30 for further information on this note. ST. GEORGE CONVERTIBLE NOTE On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC (“Investor”), for the private placement of $1,725,000 principal amount of the Company’s Original Issue Discount Convertible Promissory Notes. On September 11, 2017, the Company sold and issued $1,725,000 principal amount of the convertible notes to the Investor in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing fee, will be charged to interest expense, ratably, over the life of the note. Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019. The notes do not bear interest in the absence of an event of default. For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately $96,000. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If the Investor does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts. But in no event can the amount requested by the Investor for any one month exceed $275,000. Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium. Beginning six months after the issuance of the convertible notes, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior 5 trading days or (ii) the closing bid price for the shares on the prior trading day. All principal and accrued interest on the Notes are 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 of $0.004 per share. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by 25%. In connection with the closing under the Note SPA, the Company issued $37,500,000 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $0.0017 resulting in an interest expense of $63,750 being recorded as of the date of close. The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. Per the conditions of the SPA, a reserve of 1.88 billion shares was set up out of our authorized and unissued shares. During the fourth quarter of 2017, we made cash payments of $191,667 on this note, and as of December 31, 2017, the principal balance on this note was $1,705,833. In lieu of making the December 2017 payment, the share reserve was increased by 3 billion shares. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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 $468,095 was recorded. The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a $151,504 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net gain recorded for the year ended December 31, 2017 was $73,815, to properly reflect the fair value of the embedded derivative of $394,280 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 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%. BAYBRIDGE CONVERTIBLE NOTE On December 6, 2017, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”). Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange 675 shares of outstanding Series J Preferred Stock ($755,417 of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of $840,000 (the “Exchange Note”), with an original issue discount of $84,583. Please refer to Note 21 for further discussion on the Series J Preferred Stock. The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on December 6, 2018, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity. Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.003 per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Note 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. December 6, 2017, the derivative liability associated with the promissory note was $1,048,311. Since the value of the derivative was more than the liability and the original issue discount, the entire undiscounted liability of $755,417 was recorded as a debt discount to be amortized over the life of the liability. The remaining $292,894 was charged to interest expense. The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a $505,578 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the year ended December 31, 2017, to properly reflect the fair value of the embedded derivative of $542,733 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 61%, present value discount rate of 12% and dividend yield of 0%. As of December 31, 2017, principal of $275,000 had been converted into 404,411,765 shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of December 31, 2017 were $565,000 and $4,825, respectively. |
Promissory Notes |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Promissory Note | NOTES PAYABLE On February 24, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matures on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $39,565. As of the date of this filing, this note has matured and is due and payable on demand. On February 27, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $49,500. The note bears interest of 6% per annum and matures on September 27, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On September 27, 2017, the Company paid the note, plus $1,725 in accrued interest, in full. On March 23, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $356,742. The note bears interest of 5% per annum and matures on October 23, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On October 23, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to November 6, 2017. Again on December 12, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to March 31, 2018. As of December 31, 2017, the Company had not made any payments on the note and the accrued interest was $13,830. On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matures on February 28, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $6,301. As of the date of this filing, this note has matured and is due and payable on demand. On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matures on September 30, 2018. Per the settlement agreement, monthly payments of $18,426 were to commence on October 30, 2017. As of December 31, 2017, one of the monthly payments had been made and the remaining principal and interest balances were $197,705 and $2,540, respectively. SECURED PROMISSORY NOTE On November 30, 2017, the Company, entered into a note purchase and exchange agreement (the “Note SPA”) with Global Ichiban Ltd (“Investor”), for the private placement of up to $2,000,000 of the Company’s Secured Convertible Promissory Notes (“Notes”) in exchange for $2,000,000 of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least $50,000 for the 20 trading day period preceding such future tranche closing dates. Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of November 30, 2017, the Investor surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ($252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to the Investor $4,057,227 aggregate principal amount of additional Notes. Please refer to Note 11 for further discussion on the canceled promissory notes and Note 21 on the canceled Series J Preferred Stock shares. Of the Notes issued on November 30, 2017, $3,359,539 aggregate principal amount will mature on December 15, 2020. Principal and interest will be payable in 36 equal monthly installments beginning January 15, 2018. Of the Notes issued on November 30, 2017, $697,688 aggregate principal amount will mature on November 30, 2018. Principal and interest will be payable upon maturity. The $2,000,000 aggregate principal amount of Notes to be issued in the future in tranches pursuant to the Note SPA will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of December 31, 2017, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
The Notes will be secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the Notes. All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.002 per share The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. As of December 31, 2017, the principal and interest balance of the Notes were $4,557,227 and $44,134, respectively Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below. Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
During the fourth quarter of 2017, a net loss of $930,361 had been recorded to reflect the total derivative liability of $4,897,178 as of December 31, 2017. PROMISSORY NOTES Tertius Financial Group Notes and Exchange On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company. On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000. On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG. TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns approximately 3% of the Company's outstanding shares at December 31, 2017. Offering of Unsecured Promissory Notes Between December 2016 and April 2017, the Company initiated eleven non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to $3,400,000. The promissory notes bear interest of 12% per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured. Between June and August, 2017, eight of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017, $143,148 interest was paid. On September 13, 2017, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the eleven outstanding promissory notes (with an aggregate principal and accrued interest of $3,504,199) for one new promissory note having a principal amount of approximately $3,504,199. The new note has a term of three years, bears interest at a rate of 12% per annum, and calls for monthly installment payments of $116,390 commencing on October 13, 2017. The Company has the option to pay monthly installment amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.004 per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $3,359,539 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. Offering of Unsecured, Non-Convertible Notes During October 2016, the Company received $420,000 from a separate private investor. These funds, along with $250,000 of additional funding, were rolled into a promissory note, executed on January 17, 2017, in the amount of $700,000 issued with a discount of $30,000 which will be charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017. Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured. On June 30, 2017, the Company and the private investor agreed to a twelve month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at 12% per annum and payments of approximately $62,000 will be made monthly beginning in July 2017. Four monthly payments were made between July and October of 2017. As of December 31, 2017, $205,563 of principal and $45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of December 31, 2017 were $494,437 and $27,126, respectively. On April 6, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $103,000 in exchange for proceeds of $100,000. The discount of $3,000 will be charged to interest expense ratably over the term of the note. The promissory note bears interest of 10% per annum and matures on October 6, 2017. On October 6, 2017, the Company and its investor entered into a Promissory Note Exchange Agreement to convert a promissory note with a principal balance of $103,000 and accrued interest of $5,233 in to common shares. Per the terms of the agreement, the promissory note was canceled and 72,500,000 shares were issued. On May 8, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $125,000. The promissory note bears interest of 12% per annum and matures on September 8, 2017. On September 8, 2017, the Company redeemed this note, in full, for cash. On October 31, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $250,000 . The promissory note bears interest of 12% per annum and matures on January 31, 2018. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $252,466 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. On November 16, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $275,000. The promissory note was issued with an original issue discount of $25,000, resulting in proceeds to the company of $250,000. The note does not have a stated interest rate and matures on December 18, 2017. As of December 31, 2017, no payments had been made on this note and the discount had been recorded as interest expense. During December 2017, the Company received aggregate proceeds of $177,500, from a private investor. These proceeds were incorporated into a promissory note on January 31, 2018. Please refer to Note 30 for further information on this note. ST. GEORGE CONVERTIBLE NOTE On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC (“Investor”), for the private placement of $1,725,000 principal amount of the Company’s Original Issue Discount Convertible Promissory Notes. On September 11, 2017, the Company sold and issued $1,725,000 principal amount of the convertible notes to the Investor in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing fee, will be charged to interest expense, ratably, over the life of the note. Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019. The notes do not bear interest in the absence of an event of default. For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately $96,000. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If the Investor does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts. But in no event can the amount requested by the Investor for any one month exceed $275,000. Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium. Beginning six months after the issuance of the convertible notes, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior 5 trading days or (ii) the closing bid price for the shares on the prior trading day. All principal and accrued interest on the Notes are 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 of $0.004 per share. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by 25%. In connection with the closing under the Note SPA, the Company issued $37,500,000 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $0.0017 resulting in an interest expense of $63,750 being recorded as of the date of close. The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. Per the conditions of the SPA, a reserve of 1.88 billion shares was set up out of our authorized and unissued shares. During the fourth quarter of 2017, we made cash payments of $191,667 on this note, and as of December 31, 2017, the principal balance on this note was $1,705,833. In lieu of making the December 2017 payment, the share reserve was increased by 3 billion shares. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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 $468,095 was recorded. The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a $151,504 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net gain recorded for the year ended December 31, 2017 was $73,815, to properly reflect the fair value of the embedded derivative of $394,280 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 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%. BAYBRIDGE CONVERTIBLE NOTE On December 6, 2017, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”). Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange 675 shares of outstanding Series J Preferred Stock ($755,417 of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of $840,000 (the “Exchange Note”), with an original issue discount of $84,583. Please refer to Note 21 for further discussion on the Series J Preferred Stock. The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on December 6, 2018, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity. Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.003 per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Note 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. December 6, 2017, the derivative liability associated with the promissory note was $1,048,311. Since the value of the derivative was more than the liability and the original issue discount, the entire undiscounted liability of $755,417 was recorded as a debt discount to be amortized over the life of the liability. The remaining $292,894 was charged to interest expense. The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a $505,578 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the year ended December 31, 2017, to properly reflect the fair value of the embedded derivative of $542,733 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 61%, present value discount rate of 12% and dividend yield of 0%. As of December 31, 2017, principal of $275,000 had been converted into 404,411,765 shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of December 31, 2017 were $565,000 and $4,825, respectively. |
Series H Preferred Stock and July 2016 Convertible Notes |
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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St. George Convertible Note |
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Convertible Note | NOTES PAYABLE On February 24, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matures on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $39,565. As of the date of this filing, this note has matured and is due and payable on demand. On February 27, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $49,500. The note bears interest of 6% per annum and matures on September 27, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On September 27, 2017, the Company paid the note, plus $1,725 in accrued interest, in full. On March 23, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $356,742. The note bears interest of 5% per annum and matures on October 23, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On October 23, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to November 6, 2017. Again on December 12, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to March 31, 2018. As of December 31, 2017, the Company had not made any payments on the note and the accrued interest was $13,830. On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matures on February 28, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $6,301. As of the date of this filing, this note has matured and is due and payable on demand. On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matures on September 30, 2018. Per the settlement agreement, monthly payments of $18,426 were to commence on October 30, 2017. As of December 31, 2017, one of the monthly payments had been made and the remaining principal and interest balances were $197,705 and $2,540, respectively. SECURED PROMISSORY NOTE On November 30, 2017, the Company, entered into a note purchase and exchange agreement (the “Note SPA”) with Global Ichiban Ltd (“Investor”), for the private placement of up to $2,000,000 of the Company’s Secured Convertible Promissory Notes (“Notes”) in exchange for $2,000,000 of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least $50,000 for the 20 trading day period preceding such future tranche closing dates. Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of November 30, 2017, the Investor surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ($252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to the Investor $4,057,227 aggregate principal amount of additional Notes. Please refer to Note 11 for further discussion on the canceled promissory notes and Note 21 on the canceled Series J Preferred Stock shares. Of the Notes issued on November 30, 2017, $3,359,539 aggregate principal amount will mature on December 15, 2020. Principal and interest will be payable in 36 equal monthly installments beginning January 15, 2018. Of the Notes issued on November 30, 2017, $697,688 aggregate principal amount will mature on November 30, 2018. Principal and interest will be payable upon maturity. The $2,000,000 aggregate principal amount of Notes to be issued in the future in tranches pursuant to the Note SPA will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of December 31, 2017, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
The Notes will be secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the Notes. All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.002 per share The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. As of December 31, 2017, the principal and interest balance of the Notes were $4,557,227 and $44,134, respectively Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below. Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
During the fourth quarter of 2017, a net loss of $930,361 had been recorded to reflect the total derivative liability of $4,897,178 as of December 31, 2017. PROMISSORY NOTES Tertius Financial Group Notes and Exchange On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company. On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000. On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG. TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns approximately 3% of the Company's outstanding shares at December 31, 2017. Offering of Unsecured Promissory Notes Between December 2016 and April 2017, the Company initiated eleven non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to $3,400,000. The promissory notes bear interest of 12% per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured. Between June and August, 2017, eight of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017, $143,148 interest was paid. On September 13, 2017, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the eleven outstanding promissory notes (with an aggregate principal and accrued interest of $3,504,199) for one new promissory note having a principal amount of approximately $3,504,199. The new note has a term of three years, bears interest at a rate of 12% per annum, and calls for monthly installment payments of $116,390 commencing on October 13, 2017. The Company has the option to pay monthly installment amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.004 per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $3,359,539 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. Offering of Unsecured, Non-Convertible Notes During October 2016, the Company received $420,000 from a separate private investor. These funds, along with $250,000 of additional funding, were rolled into a promissory note, executed on January 17, 2017, in the amount of $700,000 issued with a discount of $30,000 which will be charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017. Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured. On June 30, 2017, the Company and the private investor agreed to a twelve month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at 12% per annum and payments of approximately $62,000 will be made monthly beginning in July 2017. Four monthly payments were made between July and October of 2017. As of December 31, 2017, $205,563 of principal and $45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of December 31, 2017 were $494,437 and $27,126, respectively. On April 6, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $103,000 in exchange for proceeds of $100,000. The discount of $3,000 will be charged to interest expense ratably over the term of the note. The promissory note bears interest of 10% per annum and matures on October 6, 2017. On October 6, 2017, the Company and its investor entered into a Promissory Note Exchange Agreement to convert a promissory note with a principal balance of $103,000 and accrued interest of $5,233 in to common shares. Per the terms of the agreement, the promissory note was canceled and 72,500,000 shares were issued. On May 8, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $125,000. The promissory note bears interest of 12% per annum and matures on September 8, 2017. On September 8, 2017, the Company redeemed this note, in full, for cash. On October 31, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $250,000 . The promissory note bears interest of 12% per annum and matures on January 31, 2018. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $252,466 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. On November 16, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $275,000. The promissory note was issued with an original issue discount of $25,000, resulting in proceeds to the company of $250,000. The note does not have a stated interest rate and matures on December 18, 2017. As of December 31, 2017, no payments had been made on this note and the discount had been recorded as interest expense. During December 2017, the Company received aggregate proceeds of $177,500, from a private investor. These proceeds were incorporated into a promissory note on January 31, 2018. Please refer to Note 30 for further information on this note. ST. GEORGE CONVERTIBLE NOTE On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC (“Investor”), for the private placement of $1,725,000 principal amount of the Company’s Original Issue Discount Convertible Promissory Notes. On September 11, 2017, the Company sold and issued $1,725,000 principal amount of the convertible notes to the Investor in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing fee, will be charged to interest expense, ratably, over the life of the note. Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019. The notes do not bear interest in the absence of an event of default. For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately $96,000. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If the Investor does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts. But in no event can the amount requested by the Investor for any one month exceed $275,000. Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium. Beginning six months after the issuance of the convertible notes, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior 5 trading days or (ii) the closing bid price for the shares on the prior trading day. All principal and accrued interest on the Notes are 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 of $0.004 per share. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by 25%. In connection with the closing under the Note SPA, the Company issued $37,500,000 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $0.0017 resulting in an interest expense of $63,750 being recorded as of the date of close. The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. Per the conditions of the SPA, a reserve of 1.88 billion shares was set up out of our authorized and unissued shares. During the fourth quarter of 2017, we made cash payments of $191,667 on this note, and as of December 31, 2017, the principal balance on this note was $1,705,833. In lieu of making the December 2017 payment, the share reserve was increased by 3 billion shares. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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 $468,095 was recorded. The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a $151,504 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net gain recorded for the year ended December 31, 2017 was $73,815, to properly reflect the fair value of the embedded derivative of $394,280 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 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%. BAYBRIDGE CONVERTIBLE NOTE On December 6, 2017, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”). Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange 675 shares of outstanding Series J Preferred Stock ($755,417 of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of $840,000 (the “Exchange Note”), with an original issue discount of $84,583. Please refer to Note 21 for further discussion on the Series J Preferred Stock. The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on December 6, 2018, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity. Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.003 per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Note 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. December 6, 2017, the derivative liability associated with the promissory note was $1,048,311. Since the value of the derivative was more than the liability and the original issue discount, the entire undiscounted liability of $755,417 was recorded as a debt discount to be amortized over the life of the liability. The remaining $292,894 was charged to interest expense. The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a $505,578 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the year ended December 31, 2017, to properly reflect the fair value of the embedded derivative of $542,733 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 61%, present value discount rate of 12% and dividend yield of 0%. As of December 31, 2017, principal of $275,000 had been converted into 404,411,765 shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of December 31, 2017 were $565,000 and $4,825, respectively. |
Baybridge Convertible Note |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Note | NOTES PAYABLE On February 24, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matures on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $39,565. As of the date of this filing, this note has matured and is due and payable on demand. On February 27, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $49,500. The note bears interest of 6% per annum and matures on September 27, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On September 27, 2017, the Company paid the note, plus $1,725 in accrued interest, in full. On March 23, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $356,742. The note bears interest of 5% per annum and matures on October 23, 2017; all outstanding principal and accrued interest is due and payable upon maturity. On October 23, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to November 6, 2017. Again on December 12, 2017, the Company amended its promissory note with this vendor. The amendment extended the note's maturity to March 31, 2018. As of December 31, 2017, the Company had not made any payments on the note and the accrued interest was $13,830. On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matures on February 28, 2018; all outstanding principal and accrued interest is due and payable upon maturity. As of December 31, 2017, the Company had not made any payments on these notes and the accrued interest was $6,301. As of the date of this filing, this note has matured and is due and payable on demand. On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matures on September 30, 2018. Per the settlement agreement, monthly payments of $18,426 were to commence on October 30, 2017. As of December 31, 2017, one of the monthly payments had been made and the remaining principal and interest balances were $197,705 and $2,540, respectively. SECURED PROMISSORY NOTE On November 30, 2017, the Company, entered into a note purchase and exchange agreement (the “Note SPA”) with Global Ichiban Ltd (“Investor”), for the private placement of up to $2,000,000 of the Company’s Secured Convertible Promissory Notes (“Notes”) in exchange for $2,000,000 of gross proceeds in several tranches through June 2018, The closing of each tranche is conditioned upon the Company having an average daily trading volume for its Common Stock of at least $50,000 for the 20 trading day period preceding such future tranche closing dates. Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of November 30, 2017, the Investor surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ($252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to the Investor $4,057,227 aggregate principal amount of additional Notes. Please refer to Note 11 for further discussion on the canceled promissory notes and Note 21 on the canceled Series J Preferred Stock shares. Of the Notes issued on November 30, 2017, $3,359,539 aggregate principal amount will mature on December 15, 2020. Principal and interest will be payable in 36 equal monthly installments beginning January 15, 2018. Of the Notes issued on November 30, 2017, $697,688 aggregate principal amount will mature on November 30, 2018. Principal and interest will be payable upon maturity. The $2,000,000 aggregate principal amount of Notes to be issued in the future in tranches pursuant to the Note SPA will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of December 31, 2017, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
The Notes will be secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the Notes. All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.002 per share The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. As of December 31, 2017, the principal and interest balance of the Notes were $4,557,227 and $44,134, respectively Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below. Due to the varying terms and varying issue dates, the tranches of this instrument were broken into three separate instruments for valuation purposes.
The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.
During the fourth quarter of 2017, a net loss of $930,361 had been recorded to reflect the total derivative liability of $4,897,178 as of December 31, 2017. PROMISSORY NOTES Tertius Financial Group Notes and Exchange On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company. On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000. On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG. TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns approximately 3% of the Company's outstanding shares at December 31, 2017. Offering of Unsecured Promissory Notes Between December 2016 and April 2017, the Company initiated eleven non-convertible, unsecured promissory notes with a private investor with varying principal amounts aggregating to $3,400,000. The promissory notes bear interest of 12% per annum and mature six months from the respective dates of issuance, ranging from June 2, 2017 to October 21, 2017. Unless paid in advance, the principal and interest of these promissory notes are payable upon maturity. The notes are not convertible into equity shares of the Company and are unsecured. Between June and August, 2017, eight of the promissory notes described above matured. The Company and the private investor agreed to pay the interest accrued on these notes, as of the maturity dates, and extend the notes another three months without the Company being in default. Through August 30, 2017, $143,148 interest was paid. On September 13, 2017, the Company and the investor entered into a Promissory Note Exchange Agreement. Pursuant to the agreement, the Investor exchanged and canceled the eleven outstanding promissory notes (with an aggregate principal and accrued interest of $3,504,199) for one new promissory note having a principal amount of approximately $3,504,199. The new note has a term of three years, bears interest at a rate of 12% per annum, and calls for monthly installment payments of $116,390 commencing on October 13, 2017. The Company has the option to pay monthly installment amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior five trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.004 per share. The Company may not make payments in the form of shares of Common Stock if, after giving effect to the issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $3,359,539 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. Offering of Unsecured, Non-Convertible Notes During October 2016, the Company received $420,000 from a separate private investor. These funds, along with $250,000 of additional funding, were rolled into a promissory note, executed on January 17, 2017, in the amount of $700,000 issued with a discount of $30,000 which will be charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017. Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured. On June 30, 2017, the Company and the private investor agreed to a twelve month payment plan on the balance of this promissory note. Interest will continue to accrue on this note at 12% per annum and payments of approximately $62,000 will be made monthly beginning in July 2017. Four monthly payments were made between July and October of 2017. As of December 31, 2017, $205,563 of principal and $45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of December 31, 2017 were $494,437 and $27,126, respectively. On April 6, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $103,000 in exchange for proceeds of $100,000. The discount of $3,000 will be charged to interest expense ratably over the term of the note. The promissory note bears interest of 10% per annum and matures on October 6, 2017. On October 6, 2017, the Company and its investor entered into a Promissory Note Exchange Agreement to convert a promissory note with a principal balance of $103,000 and accrued interest of $5,233 in to common shares. Per the terms of the agreement, the promissory note was canceled and 72,500,000 shares were issued. On May 8, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $125,000. The promissory note bears interest of 12% per annum and matures on September 8, 2017. On September 8, 2017, the Company redeemed this note, in full, for cash. On October 31, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $250,000 . The promissory note bears interest of 12% per annum and matures on January 31, 2018. On November 30, 2017, the terms of this note were canceled and the remaining principal and accrued interest balance of $252,466 was combined with other instruments into a new Securities Purchase Agreement and secured note with the same investor. Please see Note. 10 for more information. On November 16, 2017, the Company initiated a non-convertible, unsecured promissory note with a private investor for $275,000. The promissory note was issued with an original issue discount of $25,000, resulting in proceeds to the company of $250,000. The note does not have a stated interest rate and matures on December 18, 2017. As of December 31, 2017, no payments had been made on this note and the discount had been recorded as interest expense. During December 2017, the Company received aggregate proceeds of $177,500, from a private investor. These proceeds were incorporated into a promissory note on January 31, 2018. Please refer to Note 30 for further information on this note. ST. GEORGE CONVERTIBLE NOTE On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC (“Investor”), for the private placement of $1,725,000 principal amount of the Company’s Original Issue Discount Convertible Promissory Notes. On September 11, 2017, the Company sold and issued $1,725,000 principal amount of the convertible notes to the Investor in exchange for $1,500,000 of gross proceeds, and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing fee, will be charged to interest expense, ratably, over the life of the note. Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019. The notes do not bear interest in the absence of an event of default. For the first six months after the issuance of the notes, the Company will make a monthly cash repayment on the notes of approximately $96,000. Thereafter, the Investor may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If the Investor does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts. But in no event can the amount requested by the Investor for any one month exceed $275,000. Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium. Beginning six months after the issuance of the convertible notes, the Company also has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior 5 trading days or (ii) the closing bid price for the shares on the prior trading day. All principal and accrued interest on the Notes are 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 of $0.004 per share. The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the Notes will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, the Investor has the option to increase the outstanding balance of the Notes by 25%. In connection with the closing under the Note SPA, the Company issued $37,500,000 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $0.0017 resulting in an interest expense of $63,750 being recorded as of the date of close. The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. Per the conditions of the SPA, a reserve of 1.88 billion shares was set up out of our authorized and unissued shares. During the fourth quarter of 2017, we made cash payments of $191,667 on this note, and as of December 31, 2017, the principal balance on this note was $1,705,833. In lieu of making the December 2017 payment, the share reserve was increased by 3 billion shares. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the 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 $468,095 was recorded. The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Notes. As a result of the fair value assessment, the Company recorded a $151,504 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net gain recorded for the year ended December 31, 2017 was $73,815, to properly reflect the fair value of the embedded derivative of $394,280 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 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%. BAYBRIDGE CONVERTIBLE NOTE On December 6, 2017, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”). Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange 675 shares of outstanding Series J Preferred Stock ($755,417 of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of $840,000 (the “Exchange Note”), with an original issue discount of $84,583. Please refer to Note 21 for further discussion on the Series J Preferred Stock. The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on December 6, 2018, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity. Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $0.003 per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Note 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. December 6, 2017, the derivative liability associated with the promissory note was $1,048,311. Since the value of the derivative was more than the liability and the original issue discount, the entire undiscounted liability of $755,417 was recorded as a debt discount to be amortized over the life of the liability. The remaining $292,894 was charged to interest expense. The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a $505,578 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations, for the year ended December 31, 2017, to properly reflect the fair value of the embedded derivative of $542,733 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 61%, present value discount rate of 12% and dividend yield of 0%. As of December 31, 2017, principal of $275,000 had been converted into 404,411,765 shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of December 31, 2017 were $565,000 and $4,825, respectively. |
Series A Preferred Stock |
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Preferred Stock | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Make-whole dividend liability [Abstract] | |
Make-Whole Dividend Liability | MAKE-WHOLE DIVIDEND LIABILITY In June 2013, the Company entered into a Series A Preferred Stock Purchase Agreement. Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8% per annum, with the dividend rate being indexed to the Company's stock price and subject to adjustment. Conversion or redemption of the Series A Preferred Stock within four years of issuance requires the Company pay a make-whole dividend to the holders, whereby dividends for the full four year period are to be paid in cash or common stock (valued at 10% below market price). The Company concluded the make-whole dividends should be characterized as embedded derivatives under ASC 815. The make-whole dividends were expensed at the time of issuance and recorded as "Make-whole dividend liability" in the Condensed Consolidated Balance Sheets. The fair value of these dividend liabilities, which are indexed to the Company's common stock, must be evaluated at each period end. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The fair value determination required forecasting stock price volatility, expected average annual return and conversion date. Between December 2016 and March 2017, a Preferred Series A holder converted 104,785 shares of Series A Preferred Stock, and the related make whole dividend of $419,140, which resulted in the issuance of 173,946,250 shares of common stock. On June 17, 2017, the make-whole dividend reached maturity. As such, the Company eliminated the Make-Whole derivative liability, moving the remaining balance of $274,583 to accrued interest and dividends, and began accruing additional dividends on the Series A Preferred Stock as they occur. Please refer to Note 16 for further information on the Series A Preferred Stock and the associated accrued and unpaid dividends. |
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Stockholders' Equity (Deficit) | SERIES H PREFERRED STOCK AND JULY 2016 CONVERTIBLE NOTES Series H Preferred Stock On June 9, 2016, the Company entered into a securities purchase agreement with a private investor to issue 2,500 shares of Series H Preferred Stock for $2,500,000. The Company received gross proceeds of $250,000 at Closing. Additional gross proceeds of $580,000 were received by the Company through July 7, 2016. The Company agreed to exchange outstanding Series H Preferred Stock for Senior Secured Convertible Notes (“July 2016 Notes”) on July 13, 2016. At the date of the exchange, the Company had sold and issued 830 shares of Series H Preferred Stock to the private investor in exchange for $830,000 of gross proceeds. Please see the section below for details of the exchange. 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 $2,082,600 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 the investor in exchange for $350,000 of gross proceeds. The Company sold and issued the remaining $1,718,600 principal amount of July 2016 Convertible Notes to the investor in exchange for $1,650,000 of gross proceeds in weekly tranches between July and September 2016. 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) were canceled. In exchange, the Company 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. Unless earlier converted or prepaid, all of the July 2016 Convertible Notes will mature July 13, 2017 . 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 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. 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; (ii) bankruptcy or insolvency of the Company; and (iii) failure to file a registration statement by October 9, 2016. On October 10, 2016 the Company had not been successful in filing the registration statement triggering an event of default per the July 2016 Note Agreement. Upon default the interest rate increases to 24% per annum and the holder of the July 2016 Notes has the option to accelerate the Note and demand cash payment of the Mandatory Default Amount consisting of a 25% premium of the principal balance plus any accrued and unpaid interest. The Company began accruing interest at the rate of 24% on October 10, 2016. Forbearance and Settlement Agreement on July 2016 Convertible Notes On May 5, 2017, the Company entered into a Forbearance and Settlement Agreement ("Forbearance Agreement") with a holder of certain secured convertible notes that are in default due to various triggering events. The holder and the Company agreed to forbear from taking any action provided for under the secured convertible notes in exchange for the following terms provided in this agreement:
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 following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
In addition to the $1,852,427 in principal conversions, $3,960 of interest was converted during 2017. As of December 31, 2017, with $1,096,600 of principal payments, $400,017 of interest payments, and $219,320 of redemption penalty payments, the July 2016 Convertible notes had been redeemed in full. The difference in the accrued interest and the paid interest, due to the terms of the settlement agreement, was $22,661 which was credited to interest expense upon full redemption of the instrument. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the July 2016 Convertible Notes 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, 2016 the fair value of the derivative liability was $3,733,348. Throughout 2017, the Company recorded the fair value changes of the embedded derivative associated with the July 2016 Convertible Notes as a gain or loss in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $3,733,348, to properly reflect the elimination of the embedded derivative upon the extinguishment of the liability. OCTOBER 2016 CONVERTIBLE NOTES AND EXCHANGE OF SERIES A PREFERRED STOCK October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor (“Adar Bays”) for the private placement of $330,000 principal amount of October 2016 Convertible Notes. At Closing, the Company sold and issued $330,000 principal amount of October 2016 Convertible Notes to Adar Bays in exchange for $300,000 of gross proceeds. Unless earlier converted or prepaid, the October 2016 Convertible Notes will mature December 31, 2017 (the “Maturity Date”). The October 2016 Convertible Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable on the Maturity Date. All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the 15 consecutive trading day period prior to the conversion date. The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company. Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $24,860, respectively as of December 31, 2017. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the October 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 $330,000 was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2016, the fair value of the derivative liability was $544,746. The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At December 31, 2017, the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $279,442 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2017. The net loss recorded for the year ended December 31, 2017 was $27,897, to properly reflect the fair value of the embedded derivative of $572,643 as of December 31, 2017. The fair value measurements rely primarily on Company-specific inputs and the Company’s own assumptions. With the absence of observable inputs, the Company determined these recurring fair value measurements reside primarily within Level 3 of the fair value hierarchy. The derivative associated with the October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at December 31, 2017 based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of 65% present value discount rate of 12% and dividend yield of 0%. Exchange of Outstanding Series A Preferred Stock for Convertible Notes In 2013, the Company completed private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock. Prior to the exchange agreement described below the Company had $165,541 shares of Series A Preferred Stock that remained outstanding as of October 6, 2016. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes for outstanding shares of Series A Preferred Stock from the Series A Holder. As of March 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, and the Series A Holder held $330,000 of the October 2016 Convertible Notes. 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 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% 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). This make-whole provision expired in June 2017 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 for more information. 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 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At December 31, 2017, 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. On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with Adar Bays. Pursuant to the exchange agreement, beginning December 5, 2016, Adar Bays has the option to exchange, from time to time, all or any portion of the October 2016 Convertible Notes (see Note 13) for outstanding shares of Series A Preferred Stock from the Series A Holder. As of December 31, 2017, Adar Bays had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of December 31, 2017, Adar Bays had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,946,250 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 per share of Series A Preferred Stock plus any accrued and unpaid dividends. As of December 31, 2017, there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $279,815. SERIES E PREFERRED STOCK AND THE COMMITTED EQUITY LINE Series E Preferred Stock On November 4, 2015, the Company entered into a securities purchase agreement with a private investor to issue 2,800 shares of Series E Preferred Stock in exchange for $2,800,000. 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 12. 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. The following table summarizes the conversion activity of the Series E Preferred Stock:
Holders of the Series E Preferred Stock will be entitled to dividends in the amount of 7% per annum. During the year ended December 31, 2017, the holder converted dividends in the amount of $11,948 on the Series E Preferred Stock, resulting in the issuance of 25,160,171 shares of common stock. On September 30, 2017, the Company paid $2,013 in cash for the remaining accrued dividends. 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. As of December 31, 2017, all outstanding shares of Series E Preferred Stock, along with all accrued dividends, had either been converted or redeemed. 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. 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, 2016 the fair value of the derivative liability was $140,748. At September 30, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series E Preferred Stock of $121,390 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $140,748, to properly reflect the elimination of the embedded derivative as of December 31, 2017. 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. In total, the Company directed the private investor to purchase $3,056,147 of common stock which resulted in the issuance of 1,368,000 shares of common stock. 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 agreed to issue to the private investor 132,000 shares of common stock (the “Commitment Shares”). The Commitment Shares were issued to the private investor commencing upon the date that the registration statement was declared effective by the SEC. While not officially terminated, the CEL is no longer active and the Company does not consider this a viable source of capital. SERIES F PREFERRED STOCK On January 19, 2016, the Company entered into a securities purchase agreement with a private investor for the sale of $7,000,000 of the Company’s newly designated 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 shares 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. 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 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 12. 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. Amendment of Outstanding Series F Preferred Stock Conversion Price On October 5, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series F Preferred Stock can be converted into shares of common stock. The Company had approximately $336,000 of Series F Preferred Stock remaining outstanding as of October 5, 2016. As amended, the conversion price will now be equal to the lowest of (i) 50% of the lowest weighted average price (“VWAP”) of our common stock for the ten consecutive trading day period prior to the conversion date or (ii) 50% of 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” specified in the terms of the Series F Preferred Stock occur, then the conversion price of the Series F Preferred Stock shall be thereafter reduced, and only reduced, to equal 50% of the average of the lowest traded price of the common stock for the twenty consecutive trading day period prior to the conversion date. The following table summarizes the conversion activity of the Series F Preferred Stock:
Holders of the Series F Preferred Stock are entitled to dividends in the amount of 7% per annum. As of December 31, 2017, all shares and accrued dividends had been converted and no balance remained. 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. 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 balance was $255,324, as of December 31, 2016. At December 31, 2017, the Company recorded the reduction of the remaining embedded derivative associated with the Series F Preferred Stock of $42,347 as a gain in the "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations. The net gain recorded for the year ended December 31, 2017 was $255,324, to properly reflect the elimination of the embedded derivative as of December 31, 2017. SERIES G PREFERRED STOCK On April 29, 2016, the Company entered into a securities purchase agreement with private investors to issue 2,000 shares of Series G Preferred Stock for $2,000,000. The Company issued 2,000 shares of Series G Preferred Stock to the private investors, in various tranches between April and June 2016, resulting in gross proceeds to the Company of $2,000,000. Holders of the Series G Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash all or any portion of the outstanding shares of the Series G Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. Assignment of Series G Preferred Stock Beginning September 19, 2016, the two private investors (the “Series G Sellers”) entered into assignment agreements with accredited investors (the “Series G Purchasers”). Under the terms of the assignment agreements, the Series G Sellers may sell all 2,000 outstanding shares of Series G Preferred Stock to the Series G Purchasers for a purchase price of $1,000 per share of Series G Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). During 2016 and 2017, the Series G Sellers had sold 1,795 shares of Series G Preferred Stock, representing a value of $1,795,000, to the Series G Purchasers. On September 21, 2016, the Company filed a Certificate of Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series G Preferred Stock with the Secretary of State of the State of Delaware. The Certificate of Amendment amends the conversion price at which the Series G Preferred Stock can be converted into shares of common stock. Shares of the Series G Preferred Stock (including the amount of any accrued and unpaid dividends thereon) were previously convertible at the option of the private investors into common stock at a fixed conversion price of $1 per share. As amended, the conversion price is equal to the lowest of (i) $0.045, (ii) 70% of the lowest volume weighted average price 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. The following table summarizes the conversion activity of the Series G Preferred Stock:
On June 29, and June 30, 2017, the Company redeemed the remaining 210 outstanding shares, and the related accrued dividends for cash payments in the amount of $232,440. As of December 31, 2017, all Series G Preferred Stock Shares, and the related accrued dividends, had either been converted or redeemed. 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. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series G 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, 2016, the fair value of the derivative liability was $361,831. The net gain recorded for the year ended December 31, 2017 was $361,831, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Conversion Inducement and Disposal Price Guarantee On January 17, 2017, one of the Series G Preferred Stock holders (“Holder A”) requested a conversion of 100 shares of Series G Preferred Stock, $100,000 face value, including accrued dividends of $6,147, into common stock of the Company at a conversion price of $0.00112 which would have resulted in the issuance of 95,014,884 shares of common stock. At the date of the request the Company did not have enough authorized shares to execute the conversion request and therefore entered into an agreement with Holder A to honor the conversion price of $0.00112 and issue the 95,014,884 shares of common stock upon the increase of the authorized common shares of the Company. The actual conversion occurred on March 17, 2017 which would have been a conversion price of $0.00168. In conjunction with the conversion price agreement the Company agreed to provide a minimum disposal price guarantee to the Holder A of $0.003 on the tranche of 95,014,884 shares. If Holder A fails to dispose of these shares at $0.003 or above the Company will issue additional shares of common stock to make up the difference between the minimum disposal price of $0.003 and the price that Holder A disposed of the shares. During the year ended December 31, 2017, in accordance with ASC 470-20-40-16, the Company recorded expense of $79,179 related to the conversion inducement and expense of $134,566 related to the disposal price guarantee. On June 29, 2017, the Company and Holder A agreed to settle the disposal price guarantee liability in cash instead of shares of the Company's common stock. The liability was paid in three equal monthly installments commencing on June 30, 2017. As of December 31, 2017, the Company had repaid the liability in full. SERIES I PREFERRED STOCK AND SERIES I CONVERTIBLE NOTES Series I Preferred Stock On July 26, 2016, the Company entered into a securities purchase agreement with a private investor for the placement of approximately 1,000 of the Company’s Series I Preferred Stock. At Closing, the Company issued a total of 536 shares of Series I Preferred Stock to the private investor in exchange for the cancellation of an outstanding $536,000 promissory note (including accrued interest) of the Company held by the private investor. On September 13, 2016, the private investor (the “Series I Seller”) entered into an assignment agreement with an accredited investor (the “Series I Purchaser”). Under the terms of the assignment agreements, the Series I Seller may sell all 326 outstanding shares of Series I Preferred Stock to the Series I Purchaser for a purchase price of $1,000 per share of Series I Preferred Stock (plus the amount of any accrued and unpaid dividends thereon). In September and October 2016, the Series I Seller sold all 326 shares of Series I Preferred Stock, representing a value of $332,633, to the Series I Purchaser. On September 13, 2016, the Company agreed to exchange outstanding Series I Preferred Stock for convertible notes (“Exchange Convertible Notes”) and as of December 31, 2016 the Series I Purchaser had exchanged all 326 shares of Series I Preferred Stock and no shares were outstanding. Refer to the section below for details of the exchange. Series I Exchange Convertible Notes On September 13, 2016, the Company and the investor entered into an Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the 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 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. During the year ended December 31, 2016, the investor exercised their option to exchange 326 Series I Preferred Shares, representing a value of $326,000, and accrued dividends of $6,633, resulting in the creation of $332,633 of Exchange Convertible Notes. Unless earlier converted or prepaid, all of 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. 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 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. The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
On July 31, 2017, the remaining interest balance of $5,255 was paid in cash. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Exchange Convertible Notes 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, 2016 the fair value of the derivative liability was $196,617. The net gain recorded for the year ended December 31, 2017 was $196,617, to properly reflect the elimination of the embedded derivative as of July 31, 2017. SERIES J PREFERRED STOCK AND SERIES J-1 PREFERRED STOCK 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”). During September and October 2016, the Company issued 1,350 shares of Series J Preferred Stock in exchange for proceeds of $1,350,000. On March 29, 2017, the accredited investor (the “Series J Seller”) entered into an assignment agreement with a private investor (the “Series J Purchaser”). Under the terms of the assignment agreement, the Series J Seller may sell 250 outstanding shares of Series J Preferred Stock to the Series J Purchaser for a purchase price of $1,000 per share of Series J Preferred Stock, plus the amount of any accrued and unpaid dividends. Again on April 4, 2017, the Series J Seller entered into an assignment agreement with the same Series J Purchaser to sell an additional 600 shares of the Series J Preferred Stock at a purchase price of $1,000 per share, plus the amount of any accrued and unpaid dividends. During the year ended December 31, 2017, the Series J Seller sold an aggregate of 850 shares to the Series J Seller for an aggregate proceeds of $850,000. Holders of the Series J Preferred Stock are 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) are convertible at the option of the holder into common stock at a fixed conversion price of $0.015 per share. During 2017, no shares of the Series J Preferred Stock had been converted at the fixed conversion price; 275 shares of Series J Preferred Stock were converted under conversion inducement offers (see Conversion Inducement Offers discussion below). 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. 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. Conversion Inducement Offers On March 24, 2017, the Company offered to lower the conversion price, applicable to 100 shares of Series J Preferred Stock. The reduced conversion rate was $0.00147 calculated by giving a 30% discount on the day’s closing bid price resulting in the issuance of 71,636,432 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $142,155 related to the inducement offer. On March 29, 2017, the Company offered to lower the conversion price, applicable to 125 shares of Series J Preferred Stock. The reduced conversion rate was $0.00105 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 125,429,895 shares of common stock. In accordance with ASC 470-20, the Company recorded a conversion expense of $186,640 related to the inducement offer. On May 8, 2017, the Company offered to lower the conversion price, applicable to 50 shares of Series J Preferred Stock. The reduced conversion rate was $0.00028 calculated by giving a 30% discount to the lowest closing bid price in a ten day look back period resulting in the issuance of 189,484,143. In accordance with ASC 470-20, the Company recorded a conversion expense of $92,974 related to the inducement offer. As a result of these inducement offers, the Company re-evaluated the embedded conversion feature of the Series J Preferred Stock. Upon original issuance, the embedded conversion feature was determined to not require bifurcation, in accordance with ASC 815-10. Due to the inducement offers described above, the Company no longer believes the embedded conversion feature should remain unbifurcated. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option in the Series J Preferred Stock, post inducement offers, 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 March 24, 2017, the fair value of the derivative liability was $705,024 . The net gain recorded for the year ended December 31, 2017 was $705,024, to properly reflect the elimination of the embedded derivative as of December 31, 2017. Exchange Agreements On November 30, 2017, the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 400 outstanding shares of Series J Preferred Stock, with a value of $400,000, and $45,222 in accrued dividends, in return for a secured promissory note. Please see Note 10 for further discussion on the secured promissory note. On December 6, 2017, the the Company entered into an exchange agreement with one of the Series J holders. Under the terms of the agreement, the Series J Holder agreed to surrender their 675 outstanding shares of Series J Preferred Stock, with a value of $675,000, and $80,417 in accrued dividends, in return for a promissory note. Please see Note 15 for further discussion on the promissory note. As of December 31, 2017, there were no outstanding shares of Series J Preferred Stock and no accrued and unpaid interest. Series J-1 Preferred Stock On October 14, 2016, the Company entered into a securities purchase agreement with a private investor to issue 1,000 shares of Series J-1 Preferred Stock for $1,000,000. The Company issued a total of 700 shares of Series J-1 Preferred Stock to the private investor in exchange for gross proceeds of $700,000. Shares of the Series J-1 Preferred Stock (including the amount of any accrued and unpaid dividends thereon) may be converted, at the option of the holder, into common stock at a fixed conversion price of $0.0125 per share. Holders of the Series J-1 Preferred Stock are entitled to dividends in the amount of 10% per annum. One year after issuance, the Company is required to redeem for cash, all or any portion of the outstanding shares of Series J-1 Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends thereon. On August 10, 2017, the Company and the investor entered into a redemption agreement whereby the Company agreed to redeem $700,000 face value of Series J-1 Preferred Stock plus accrued dividends of $55,305 by issuing 500 million shares of common stock and a warrant to purchase 250 million shares of common stock. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder of the Warrant, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of common stock. SERIES K PREFERRED STOCK On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20 million of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”). Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to the Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of December 31, 2017, the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor as of December 31, 2017. The following summarizes the closings and proceeds received as of December 31, 2017:
The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends. The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004. At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. The following table summarizes the conversion activity of Series K Preferred Stock:
As of December 31, 2017, the investor owned approximately 16% of the Company's outstanding common stock and there are 2,810 shares of Series K Preferred Stock Outstanding, representing a value of $2,810,000. The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares. STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock At December 31, 2017, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of December 31, 2017, the Company had 9,606,597,777 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2017. Preferred Stock At December 31, 2017, 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. The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Series A Preferred Stock Refer to Note 16 descriptions of Series A Preferred Stock. Series B-1, B-2, C, D, and D-1 Preferred Stock There were no transactions involving the Series B-1, B-2, C, D, or D-1 during the years ended December 31, 2016 and December 31, 2017. Series E Preferred Stock Refer to Note 17 descriptions of Series E Preferred Stock. Series F Preferred Stock Refer to Note 18 descriptions of Series F Preferred Stock. Series G Preferred Stock Refer to Note 19 descriptions of Series G Preferred Stock. Series H Preferred Stock Refer to Note 12 descriptions of Series H Preferred Stock. Series I Preferred Stock Refer to Note 20 descriptions of Series I Preferred Stock. Series J Preferred Stock Refer to Note 21 descriptions of Series J Preferred Stock. Series J-1 Preferred Stock Refer to Note 21 descriptions of Series J-1 Preferred Stock. Series K Preferred Stock Refer to Note 22 descriptions of Series K Preferred Stock. Warrants On July 24, 2017, the Company issued a warrant for 250 million shares of common stock, in connection with a settlement agreement with a consultant. The warrant is exerciseable at a fixed exercise price of $0.004, on the issuance date through the first anniversary of the issuance date. The warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0007, stock volatility of 234%, and a risk free rate of 1.23%. Using these parameters, the Company calculated a fair value of $88,937 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On August 10, 2017, the Company issued a warrant for 250 million shares of common stock in connection with a preferred stock redemption agreement. The warrant is exerciseable, at a fixed exercise price of $0.003, on the issuance date through the first anniversary of the issuance date. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0015, stock volatility of 230%, and a risk free rate of 1.22%. Using these parameters, the Company calculated a fair value of $246,803 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. On December 15, 2017, the Company issued a warrant for 200 million shares of common stock in connection with a consulting agreement. The warrant is exerciseable, at a fixed exercise price of $0.0018, on the issuance date through the June 30, 2018. The Warrant may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. The Company conducted a fair value assessment of the warrant upon issuance using a Black Scholes model with the following inputs: stock price on the date of issuance of $0.0008, stock volatility of 99%, and a risk free rate of 1.48%. Using these parameters, the Company calculated a fair value of $10,035 and recorded a corresponding expense on the Company's consolidated and condensed statement of operations. The following table summarizes warrant activity:
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Equity Plans and Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Plans and Share-Based Compensation | EQUITY PLANS AND SHARE-BASED COMPENSATION Stock Option Plan: The Company’s 2005 Stock Option Plan, as amended (the “Stock Option Plan”) provides for the grant of incentive or non-statutory stock options to the Company’s employees, directors and consultants. The stock Option Plan initially reserved 170,000 shares (as adjusted for the Reverse Stock Split) of the Company's common stock for option awards to eligible employees. Upon recommendation of the Board of Directors, the stockholders approved an increase in the total shares of common stock reserved for issuance under the Stock Option Plan to 270,000 during 2015. Restricted Stock Plan: The Company’s 2008 Restricted Stock Plan, as amended (the “Restricted Stock Plan”) was adopted by the Board of Directors and was approved by the stockholders on July 1, 2008. The Restricted Stock Plan initially reserved up to 75,000 shares (as adjusted for the Reverse Stock Split) of the Company’s common stock for restricted stock awards and restricted stock units to eligible employees, directors and consultants of the Company. Upon recommendation of the Board of Directors, the stockholders approved an increase in the total shares of common stock reserved for issuance under the Restricted Stock Plan to 125,000 and 750,000 shares during 2015 and 2016, respectively. There were no changes to the plan in 2017. The Stock Option Plan and the Restricted Stock Plan are administered by the Compensation Committee of the Board of Directors, which determines the terms of the option and share awards, including the exercise price, expiration date, vesting schedule and number of shares. The term of any incentive stock option granted under the Stock Option Plan may not exceed ten years, or five years for options granted to an optionee owning more than 10% of the Company’s voting stock. The exercise price of an incentive stock option granted under the Option Plan must be equal to or greater than the fair market value of the shares of the Company’s common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than 10% of the Company’s voting stock must have an exercise price equal to or greater than 110% of the fair market value of the Company’s common stock on the date the option is granted. The exercise price of a non-statutory option granted under the Option Plan must be equal to or greater than 85% of the fair market value of the shares of the Company’s common stock on the date the option is granted. Share-Based Compensation: The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes this cost as an expense over the grant recipients’ requisite service periods for all awards made to employees, officers, directors and consultants. The share-based compensation expense recognized in the Consolidated Statements of Operations was as follows:
The following table presents share-based compensation expense by type:
Stock Options: The Company recognized share-based compensation expense for stock options of $97,000 to officers, directors and employees for the year ended December 31, 2017 related to stock option awards, reduced for estimated forfeitures. There were no option grants during the year ended December 31, 2017, and the weighted average estimated fair value of employee stock options granted for the years ended December 31, 2016 was $1.35 per share. Fair value was calculated using the Black-Scholes Option Pricing Model with the following assumptions:
Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate of return is based on the yield of U.S. Treasury bonds with a maturity equal to the expected term of the award. Historical data is used to estimate forfeitures within the Company’s valuation model. The Company’s expected life of stock option awards is derived from historical experience and represents the period of time that awards are expected to be outstanding. As of December 31, 2017, total compensation cost related to non-vested stock options not yet recognized was $36,000 which is expected to be recognized over a weighted average period of approximately 1.2 years. As of December 31, 2017, 67,000 shares were vested or expected to vest in the future at a weighted average exercise price of $30.71. As of December 31, 2017, 189,475 shares remained available for future grants under the Option Plan. The following table summarizes stock option activity within the Stock Option Plan:
Restricted Stock: The Company recognized share-based compensation expense related to restricted stock grants of approximately $26,000 for the year ended December 31, 2017. There were no restricted stock grants during the year ended December 31, 2017, and the weighted average estimated fair value of restricted stock grants for the year ended December 31, 2016 was $1.97. There are no unvested shares of restricted stock as of December 31, 2017, and there is no unrecognized share-based compensation expense from restricted stock. As of December 31, 2017, approximately 496,000 shares remained available for future grants under the Restricted Stock Plan. The following table summarizes stock option activity within the Restricted Stock Plan:
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Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | INCOME TAXES The Company records income taxes using the liability method. Under this method, deferred tax assets and liabilities are computed for the expected future impact of temporary differences between the financial statement and income tax bases of assets and liabilities using current income tax rates and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold before a benefit is recognized in the financial statements. At December 31, 2017, the Company had $321,066,413 of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income through the year 2037. Under the Internal Revenue Code, the future utilization of net operating losses may be limited in certain circumstances where there is a significant ownership change. The Company prepared an analysis for the year ended December 31, 2012 and determined that a significant change in ownership has occurred as a result of the cumulative effect of the sales of common stock through its offerings. Such change limited the Company's utilizable net operating loss carryforwards to $234,024,680 for the year ended December 31, 2017. Available net operating loss carryforwards may be further limited in the event of another significant ownership change. Deferred income taxes reflect an estimate of the cumulative temporary differences recognized for financial reporting purposes from that recognized for income tax reporting purposes. At December 31, 2017 and 2016, the components of these temporary differences and the deferred tax asset were as follows:
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical losses and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is not "more-likely-than-not" that the Company will realize the benefits of these deductible differences at December 31, 2017. The Company’s deferred tax valuation allowance of $77,458,000 reflected above is a decrease of $21,151,000 from the valuation allowance reflected as of December 31, 2016 of $98,609,000. As of December 31, 2017, the Company has not recorded a liability for uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax (benefit)/expense. No interest and penalties related to uncertain tax positions were accrued at December 31, 2017. The Company’s effective tax rate for the years ended December 31, 2017 and 2016 differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):
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Related Party Transactions |
12 Months Ended |
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Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS On August 29, 2016, the Company entered into a note purchase agreement with Tertius Financial Group Pte. Ltd. ("TFG”) for the private placement of $330,000 of the Company’s original issue discount notes with an original maturity date of November 29, 2016. The notes bear interest of 6% per annum and principal and interest on the notes are payable upon maturity. The notes are unsecured and not convertible into equity shares of the Company. On December 6, 2016, the Company issued a new $600,000 original issue discount note to TFG in exchange for (i) $200,000 of additional gross proceeds and (ii) cancellation of the existing outstanding $330,000 note. The new TFG note bears interest at a rate of 6% per annum and matures on December 31, 2017. Principal and interest on the new TFG note is payable at maturity. Following the transaction, the outstanding balance of the new note was $602,000 (including accrued and unpaid interest) with a discount of $60,000. On January 19, 2017, the Company issued 333,333,333 shares of unregistered common stock in a private placement to TFG pursuant to a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, the Company issued the 333,333,333 shares to TFG in exchange for cancellation of its $600,000 promissory note (including accrued interest of approximately $4,340) that was issued by the Company on December 6, 2016. The SPA does not provide any registration rights for the shares issued to TFG. TFG is a Singapore based entity controlled and 50% owned by Ascent’s President & CEO, Victor Lee, and owns approximately 3% of the Company's outstanding shares at December 31, 2017. All related party transactions were approved by our independent board of directors. |
Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated financial position or results of operations in particular quarterly or annual periods. On October 21, 2011, the Company was notified that a complaint claiming $3.0 million for an investment banking fee (the “Lawsuit”) was filed by Jefferies & Company, Inc. (“Jefferies”) against the Company in New York State Supreme Court in the County of New York. In December 2010, Ascent and Jefferies entered into an engagement agreement (the “Fee Agreement”) pursuant to which Jefferies was hired to act as the Company's financial advisor in relation to certain potential transactions. In addition, Jefferies claimed an award for attorney's fees and prejudgment interest in the approximate amount of $1.2 million. On April 16, 2014, the parties settled the lawsuit where the Company agreed to pay Jefferies a total of $2.0 million in equal installments over 40 months. The Company paid $339,481 during the year ended December 31, 2017. The Company records a liability in its financial statements for costs related to claims, including settlements and judgments, where the Company has assessed that a loss is probable and an amount can be reasonably estimated. The Company accrued $1.7 million, the net present value of the $2.0 million settlement, as of December 31, 2013. As of December 31, 2017, the settlement had been redeemed in full and there was no remaining accrued litigation settlement, recorded as a current liability on the Consolidated Balance Sheets. |
Retirement Plan |
12 Months Ended |
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Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |
Retirement Plan | RETIREMENT PLAN On July 1, 2006, the Company adopted a qualified 401(k) plan which provides retirement benefits for all of its eligible employees. Under the plan, employees become eligible to participate at the first entry date, provided they are at least 21 years of age. The participants may elect through salary reduction to contribute up to ceilings established in the Internal Revenue Code. The Company will match 100% of the first six percent of employee contributions. In addition, the Company may make discretionary contributions to the Plan as determined by the Board of Directors. Employees are immediately vested in all salary reduction contributions. Rights to benefits provided by the Company’s discretionary and matching contributions vest 100% after the first year of service for all employees hired before January 1, 2010. For employees hired after December 31, 2009, matching contributions vest over a three-year period, one-third per year. Payments for 401(k) matching totaled $199,669 and $338,230 for the years ended December 31, 2017 and 2016, respectively. Payments for 401(k) matching are recorded under “Research, development and manufacturing operations" expense and “Selling, general and administrative" expense in the Consolidated Statements of Operations. |
Subsequent Events |
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Subsequent Events | SUBSEQUENT EVENTS Secured Promissory Notes Between January 11, 2018 and March 21, 2018, the Company received the remaining $1,500,000 in proceeds per the Securities Purchase Agreement dated November 30, 2017 (Note 10). The funding occurred in six tranches as follows:
Between January 4, 2018 and March 26, 2018, the Company made five payments of $250,000 in stock. The aggregate payments of $1,250,000 resulted in the issuance of 2,450,980,392 shares of the Company's common stock. As of the date of this report, the total principal balance of the notes under the aforementioned Securities Purchase Agreement was $4,665,675. Promissory Notes On January 31, 2018, the Company and a private investor entered into a promissory note agreement for the $177,500 of aggregate proceeds received in December 2017 (Note11). This $200,000 original issue discount note is unsecured, was issued with a discount of $22,500, bears interest at 12% per annum, and matures on December 29, 2018. As of the date of this filing, the principal balance on this note is $200,000. On February 16, 2018, the Company received $30,000 in proceeds from a private investor. As of the date of this filing, the Company is expecting more funding from this investor and has not yet finalized the note. St. George Convertible Note In lieu of the cash payments for January and February 2018, we increased the reserve for the St. George Convertible Note by 2 billion shares, to a total of 6.88 billion shares. On March 12, 2018, the investor, pursuant to the terms of the Convertible Promissory Note dated September 11, 2017 (Note 14), elected to redeem a portion of the note in conversion shares. On this date, the investor redeemed $75,000 of the note, resulting n the issuance of 187,500,000 shares of the Company's common stock. These shares were drawn out of the reserve created for this note the remaining reserves are 6.69 billion. As of the date of this report, the remaining principal balance on the St. George Convertible Note is $1,630,833. BayBridge Convertible Note On March 26, 2018, pursuant to the terms of the Convertible Promissory Note dated November 30, 2017, the investor converted $105,000 in principal and $20,717 in interest into shares of the Company's common stock, resulting in the issuance of 493,006,549 shares. As of the date of this report, the remaining principal balance on the BayBridge Convertible Note is $460,000. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||
Cash Equivalents | The Company classifies all short-term investments in interest bearing bank accounts and highly liquid debt securities purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances which may exceed federally insured limits. The Company does not believe this results in significant credit risk. |
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Foreign Currencies | Bank account balances held in foreign currencies are translated to U.S. dollars utilizing the period end exchange rate. Gains or losses incurred in connection with the Company’s accounts held in foreign currency were not material for the years ended December 31, 2017 and 2016 and were recorded in “Other Income/(Expense)” in the Consolidated Statements of Operations. |
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Receivables and Allowance for Doubtful Accounts | Trade accounts receivable are recorded at the invoiced amount as the result of transactions with customers. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company estimates the collectability of accounts receivable using analysis of historical bad debts, customer credit-worthiness and current economic trends. Reserves are established on an account-by-account basis. Account balances are written off against the allowance in the period in which the Company determines that is it probable that the receivable will not be recovered. |
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Inventories | All inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average method. Inventory balances are frequently evaluated to ensure they do not exceed net realizable value. The computation for net realizable value takes into account many factors, including expected demand, product life cycle and development plans, module efficiency, quality issues, obsolescence and others. Management's judgment is required to determine reserves for obsolete or excess inventory. |
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Property, Plant and Equipment | Property, plant and equipment are recorded at the original cost to the Company. Assets are being depreciated over estimated useful lives of three to forty years using the straight-line method, as presented in the table below, commencing when the asset is placed in service. Leasehold improvements are depreciated over the shorter of the remainder of the lease term or the life of the improvements. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income. Expenditures for repairs and maintenance are expensed as incurred.
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Patents | At such time as the Company is awarded patents, patent costs are amortized on a straight-line basis over the legal life on the patents, or over their estimated useful lives, whichever is shorter. |
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Impairment of Long-lived Assets | The Company analyzes its long-lived assets (property, plant and equipment) and definitive-lived intangible assets (patents) for impairment, both individually and as a group, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Events that might cause impairment would include significant current period operating or cash flow losses associated with the use of a long-lived asset or group of assets combined with a history of such losses, significant changes in the manner of use of assets and significant negative industry or economic trends. An undiscounted cash flow analysis is calculated to determine if impairment exists. If impairment is determined to exist, any related loss is calculated using the difference between the fair value and the carrying value of the assets. |
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Interest Capitalization | Historically the Company has capitalized interest cost as part of the cost of acquiring or constructing certain assets during the period of time required to get the asset ready for its intended use. The Company capitalized interest to the extent that expenditures to acquire or construct an asset have occurred and interest cost has been incurred. |
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Convertible Preferred Stock | The Company evaluates its preferred stock instruments under FASB ASC 480, "Distinguishing Liabilities from Equity" to determine the classification, and thereby the accounting treatment, of the instruments. |
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Derivatives | The Company evaluates its financial instruments under FASB ASC 815, "Derivatives and Hedging" to determine whether the instruments contain an embedded derivative. When an embedded derivative is present, the instrument is evaluated for a fair value adjustment upon issuance and at the end of every reporting period. Any adjustments to fair value are treated as gains and losses in fair values of derivatives and are recorded in the Consolidated Statements of Operations. |
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Product Warranties | The Company provides a limited warranty to the original purchaser of products against defective materials and workmanship. The Company also guarantees that standalone modules and PV integrated consumer electronics will achieve and maintain the stated conversion efficiency rating for certain products. Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms, historical experience and analysis of peer company product returns. The Company assesses the adequacy of its liabilities and makes adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available. |
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Warrant liability | Warrants to purchase the Company's common stock with nonstandard anti-dilution provisions, regardless of the probability or likelihood that may conditionally obligate the issuer to ultimately transfer assets, are classified as liabilities and are recorded at their estimated fair value at each reporting period. Any change in fair value of these warrants is recorded at each reporting period in Other income/(expense) on the Company's statement of operations. |
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Product revenue | The Company generated product revenues of $642,179 and $1,699,802 for the years ended December 31, 2017 and 2016, respectively. Product revenue is generated from commercial sales of flexible PV modules and PV integrated consumer electronics, non-PV integrated power banks and associated accessories. Products are sold through the Company's own e-commerce website, online retailers, direct to retailers and indirectly to retailers through distributors. Revenue is recognized as products are shipped or delivered and title has transferred to the customer. In certain instances, the Company has agreed to refund a portion of the purchase price to customers if the Company decreases its standard retail price. The Company estimates the effect of this price protection and records the difference as a reduction of revenue at the time of sale. We also, in certain instances have provided customers with a right of return provision. In these instances, we defer the recognition of revenues until the provision period has expired. Estimated costs of returns and allowances, other than those specifically pertaining to a right of return provision, and discounts are accrued as a reduction to sales when revenue is recognized. |
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Government contracts revenue | Revenue from governmental research and development contracts is generated under terms that are cost plus fee or firm fixed price. Revenue from cost plus fee contracts is recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the fixed fee. Revenue from firm fixed price contracts is recognized under the percentage-of-completion method of accounting, with costs and estimated profits included in contract revenue as work is performed. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract. |
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Shipping and Handling Costs | The Company classifies shipping and handling costs for products shipped to customers as a component of “Cost of revenues” on the Company’s Consolidated Statements of Operations. Customer payments of shipping and handling costs are recorded as a component of Revenues. |
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Research, Development and Manufacturing Operations Costs | Research, development and manufacturing operations expenses were approximately $4.8 million and $6.6 million for the years ended December 31, 2017 and 2016, respectively. Research, development and manufacturing operations expenses include: 1) technology development costs, which include expenses incurred in researching new technology, improving existing technology and performing federal government research and development contracts, 2) product development costs, which include expenses incurred in developing new products and lowering product design costs, and 3) pre-production and production costs, which include engineering efforts to improve production processes, material yields and equipment utilization, and manufacturing efforts to produce saleable product. Research, development and manufacturing operations costs are expensed as incurred, with the exception of costs related to inventoried raw materials, work-in-process and finished goods, which are expensed as Cost of revenue as products are sold. |
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Marketing and Advertising Costs | The Company advertises in print, television, online and through social media. The Company will also authorize customers to run advertising campaigns on its behalf through various media outlets. Marketing and advertising costs are expensed as incurred. |
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Share-Based Compensation | The Company measures and recognizes compensation expense for all share-based payment awards made to employees, officers, directors, and consultants based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Company’s Statements of Operations. Share-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates. For purposes of determining estimated fair value of share-based payment awards on the date of grant the Company uses the Black-Scholes option-pricing model (“Black-Scholes Model”) for option awards. The Black-Scholes Model requires the input of highly subjective assumptions. Because the Company’s employee stock options may have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of the Company’s employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which result in changes to these assumptions and methodologies, which could materially impact the Company’s fair value determination. The Company estimates the fair value of its restricted stock awards as its stock price on the grant date. The accounting guidance for share-based compensation may be subject to further interpretation and refinement over time. There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions. If factors change and the Company employs different assumptions in the accounting for share-based compensation in future periods, or if the Company decides to use a different valuation model, the compensation expense the Company records in the future may differ significantly from the amount recorded in the current period and could materially affect its loss from operations, net loss and net loss per share. |
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Income Taxes | Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates as of the date of enactment. Interest and penalties, if applicable, would be recorded in operations. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years (2014-2017) in these jurisdictions. The Company believes its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded. |
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Net Loss per Common Share | Basic loss per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect the potential securities that could share in the earnings of the Company, similar to fully diluted earnings per share. Common stock equivalents outstanding as of December 31, 2017 and 2016 of approximately 3.0 billion and 301.1 million shares have been omitted from loss per share because they are anti-dilutive. Common stock equivalents consist of stock options, unvested restricted stock, warrants, preferred stock, preferred stock make-whole dividend liability amounts (assuming the make-whole dividend liability is paid in common stock in lieu of cash), and convertible notes (assuming the amortization payments are paid in common stock in lieu of cash). |
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Fair Value Estimates | Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses fair value hierarchy based on three levels of inputs, of which, the first two are considered observable and the last unobservable, to measure fair value:
Certain long-lived assets and current liabilities have been measured at fair value on a recurring and non-recurring basis. See Note 6. Property, Plant and Equipment, Note 10. Secured Promissory Note, Note 12. July 2016 Convertible Notes and Series H Preferred Stock, Note 13. October 2016 Convertible Notes and Exchange of Series A Preferred Stock, Note 13. St. George Convertible Note, Note 15. BayBridge Convertible Note, Note 17. Series E Preferred Stock, Note 18. Series F Preferred Stock, Note 19. Series G Preferred Stock, Note 20. Series I Preferred Stock and Series I Convertible Notes, Note 21. Series J Preferred Stock and Series J-1 Preferred Stock, and Note 23. Make-whole Dividend Liability. The carrying amount of our long term debt outstanding approximates fair value because our current borrowing rate does not materially differ from market rates for similar bank borrowings. The carrying value for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other assets and liabilities approximate their fair values due to their short maturities. |
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Related Party Transactions | One of the Company's named shareholders is Tertius Financial Group Pte Ltd, of which Mr. Victor Lee, President and Chief Executive Officer of the Company, is Managing Director and 50% shareholder. Accounting for transactions under these agreements is consistent with those defined in our Significant Accounting Policies. |
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Use of Estimates | The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Recently Issued Accounting Standards | In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The Company has evaluated ASU 2014-09, and it will not have a material effect on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company continues to evaluate the impact, that the adoption of this guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including 1) accounting for income taxes, 2) classification of excess tax benefits in the statement of cash flows, 3) forfeitures, 4) minimum statutory tax withholding requirements, 5) cash flow classification of employee taxes withheld in the form of shares, 6) the practical expedient for estimating the expected term, and 7) intrinsic value. The guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. The implementation of ASU 2016-09 did not have a material effect on the Company's consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The Company continues to evaluate the impact, if any, that the adoption of this guidance will have on its consolidated financial statements, but does not expect the effect, if any, will be material. In July 2017, the FASB issued ASU No. 2017-11 Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Property, Plant and Equipment |
The following table summarizes property, plant and equipment as of December 31, 2017 and December 31, 2016:
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Future Amortization of Patents | As of December 31, 2017, future amortization of patents is expected as follows:
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
The following table summarizes property, plant and equipment as of December 31, 2017 and December 31, 2016:
|
Inventories (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory, current | Inventories consisted of the following at December 31, 2017 and December 31, 2016:
|
Debt (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Long-term Debt | As of December 31, 2017, future principal payments on long-term debt are due as follows:
|
Secured Promissory Note (Tables) |
12 Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | As of December 31, 2017, the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:
|
Series H Preferred Stock and July 2016 Convertible Notes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt Conversions | The following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
|
Series E Preferred Stock and the Committed Equity Line (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Conversions of Stock | The following table summarizes the conversion activity of the Series E Preferred Stock:
The following table summarizes the conversion activity of the Series F Preferred Stock:
The following table summarizes the conversion activity of the Series G Preferred Stock:
The following table summarizes the conversion activity of Series K Preferred Stock:
|
Series F Preferred Stock (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Conversions of Stock | The following table summarizes the conversion activity of the Series E Preferred Stock:
The following table summarizes the conversion activity of the Series F Preferred Stock:
The following table summarizes the conversion activity of the Series G Preferred Stock:
The following table summarizes the conversion activity of Series K Preferred Stock:
|
Series G Preferred Stock (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Conversions of Stock | The following table summarizes the conversion activity of the Series E Preferred Stock:
The following table summarizes the conversion activity of the Series F Preferred Stock:
The following table summarizes the conversion activity of the Series G Preferred Stock:
The following table summarizes the conversion activity of Series K Preferred Stock:
|
Series I Preferred Stock and Series I Convertible Notes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt Conversions | The following table summarizes the conversion activity on the principal of the July 2106 Convertible Notes:
The following table summarizes the conversion activity of the Exchange Convertible Notes, which were converted in full as of December 31, 2017:
|
Series K Preferred Stock (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock by Class | The following summarizes the closings and proceeds received as of December 31, 2017:
The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Conversions of Stock | The following table summarizes the conversion activity of the Series E Preferred Stock:
The following table summarizes the conversion activity of the Series F Preferred Stock:
The following table summarizes the conversion activity of the Series G Preferred Stock:
The following table summarizes the conversion activity of Series K Preferred Stock:
|
Stockholders' Equity (Deficit) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warrant Activity | The following table summarizes warrant activity:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock by Class | The following summarizes the closings and proceeds received as of December 31, 2017:
The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
|
Equity Plans and Share-Based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation cost by line item | The share-based compensation expense recognized in the Consolidated Statements of Operations was as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation cost by award type | The following table presents share-based compensation expense by type:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation fair value assumptions | Fair value was calculated using the Black-Scholes Option Pricing Model with the following assumptions:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option activity | The following table summarizes stock option activity within the Stock Option Plan:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock activity | The following table summarizes stock option activity within the Restricted Stock Plan:
|
Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of deferred tax assets and liabilities | At December 31, 2017 and 2016, the components of these temporary differences and the deferred tax asset were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of effective income tax rate reconciliation | The Company’s effective tax rate for the years ended December 31, 2017 and 2016 differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):
|
Subsequent Events (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||
Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Short-term Debt Instruments | The funding occurred in six tranches as follows:
|
Organization (Details) |
1 Months Ended | |||
---|---|---|---|---|
May 26, 2016
$ / shares
|
Jan. 31, 2006
shares
|
Dec. 31, 2017
$ / shares
|
Dec. 31, 2016
$ / shares
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Common stock issued (in shares) | shares | 102,800 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Stock split, conversion ratio | 0.05 |
Summary of Significant Accounting Policies (Property, Plant and Equipment) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Buildings [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 40 years |
Manufacturing machinery and equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Manufacturing machinery and equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 10 years |
Furniture, fixtures, computer hardware/software [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 3 years |
Furniture, fixtures, computer hardware/software [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 7 years |
Summary of Significant Accounting Policies (Future Amortization Expense of Patents) (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Total patent amortization expense | $ 1,470,796 | $ 1,647,505 |
Patents [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total patent amortization expense | 1,470,796 | 1,647,505 |
Awarded patents [Member] | Patents [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
2018 | 173,439 | |
2020 | 153,717 | |
2021 | 130,885 | |
2019 | 85,760 | |
2022 | 56,099 | |
Thereafter | 40,267 | |
Total patent amortization expense | $ 640,167 | $ 619,241 |
Liquidity, Continued Operations, and Going Concern (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
LIQUIDITY AND CONTINUED OPERATIONS [Abstract] | ||
Net cash used in operating activities | $ 12,597,929 | $ 16,855,484 |
Debt, principal | 5,461,819 | |
Notes payable, repayments of principal and interest | $ 700,000 |
Trade Receivables (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable | $ 6,658 | $ 549,204 |
Property, Plant and Equipment (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | ||
Depreciable property, plant and equipment | $ 36,645,862 | $ 36,639,460 |
Less: Accumulated depreciation and amortization | (32,013,686) | (30,983,448) |
Net property, plant and equipment | 4,632,176 | 5,656,012 |
Depreciation expense | 1,030,237 | 3,486,741 |
Building [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable property, plant and equipment | 5,828,960 | 5,828,960 |
Furniture, fixtures, computer hardware and computer software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable property, plant and equipment | 489,421 | 489,421 |
Manufacturing machinery and equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable property, plant and equipment | $ 30,327,481 | $ 30,321,079 |
Inventories (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 689,000 | $ 833,000 |
Work in process | 12,000 | 635,000 |
Finished goods | 337,000 | 1,102,000 |
Total | $ 1,037,854 | $ 2,569,816 |
Debt (Narrative) (Details) - USD ($) |
5 Months Ended | ||||
---|---|---|---|---|---|
May 01, 2017 |
Feb. 08, 2008 |
Mar. 31, 2017 |
Dec. 31, 2017 |
Dec. 31, 2009 |
|
Debt Instrument [Line Items] | |||||
Debt, principal | $ 5,461,819 | ||||
Construction Loan [Member] | |||||
Debt Instrument [Line Items] | |||||
Construction loan borrowing capacity | $ 7,500,000 | ||||
Permanent Loan [Member] | |||||
Debt Instrument [Line Items] | |||||
Stated interest rate | 6.60% | ||||
Interest accrued on convertible debt | $ 180,043 | ||||
Debt, principal | $ 5,704,932 | ||||
Debt instrument, periodic payment | $ 57,801 | ||||
Manufacturing and Office Facility [Member] | |||||
Debt Instrument [Line Items] | |||||
Cost of acquisition | $ 5,500,000 |
Debt (Schedule of Maturities of Long-term Debt) (Details) |
Dec. 31, 2017
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2018 | $ 343,395 |
2019 | 366,757 |
2020 | 391,709 |
2021 | 418,358 |
2022 | 446,821 |
Thereafter | 3,494,779 |
Future principal payments on long-term debt, total | $ 5,461,819 |
Secured Promissory Note (Summary of Secured Promissory Note) (Details) - Secured Debt [Member] - USD ($) |
Dec. 31, 2017 |
Nov. 30, 2017 |
---|---|---|
Note Secured Promissory Agreement, Maturing November 30, 2018 [Member] | ||
Debt Instrument [Line Items] | ||
Aggregate principal amount of notes outstanding | $ 250,000 | $ 697,688 |
Note Secured Promissory Agreement, Maturing December 28, 2018 [Member] | ||
Debt Instrument [Line Items] | ||
Aggregate principal amount of notes outstanding | $ 250,000 |
Series H Preferred Stock and July 2016 Convertible Notes (Series H Preferred Stock) (Details) - Series H Preferred Stock [Member] - USD ($) |
1 Months Ended | |||
---|---|---|---|---|
Jul. 13, 2016 |
Jun. 09, 2016 |
Jul. 07, 2016 |
Dec. 31, 2017 |
|
Class of Stock [Line Items] | ||||
Preferred stock, shares outstanding (in shares) | 830 | 0 | ||
Private placement [Member] | ||||
Class of Stock [Line Items] | ||||
Issuance of stock (in shares) | 2,500 | |||
Proceeds from issuance of stock | $ 2,500,000 | |||
Proceeds from issuance of preferred stock | $ 830,000 | $ 250,000 | $ 580,000 | |
Preferred stock, shares outstanding (in shares) | 830 |
Series H Preferred Stock and July 2016 Convertible Notes (Summary of Conversions of July 2016 Convertible Notes) (Details) - Convertible Notes, July 2016 [Member] - Convertible Debt [Member] - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Class of Stock [Line Items] | |||||
Debt conversion, original debt, amount | $ 682,235 | $ 1,017,732 | $ 152,460 | $ 1,852,427 | $ 1,852,427 |
Debt conversion, converted instrument, shares issued (in shares) | 1,865,043,998 | 959,704,543 | 64,000,000 | 2,888,748,541 |
Series E Preferred Stock and the Committed Equity Line (Summary of the Conversion Activity of Series E Preferred Stock) (Details) - Series E Preferred Stock [Member] - USD ($) |
3 Months Ended | 24 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2017 |
|
Class of Stock [Line Items] | |||||||||
Shares converted (in shares) | 70 | 35 | 15 | 94 | 523 | 365 | 1,220 | 478 | 2,800 |
Stock issued in lieu of cash, value | $ 76,814 | $ 38,886 | $ 16,248 | $ 101,018 | $ 548,896 | $ 381,414 | $ 1,239,436 | $ 481,500 | $ 2,884,212 |
Conversion of shares (in shares) | 129,314,677 | 134,927,207 | 8,289,962 | 13,089,675 | 21,973,747 | 7,979,568 | 1,132,000 | 250,000 | 316,956,836 |
Series E Preferred Stock and the Committed Equity Line (Committed Equity Line) (Details) - Committed Equity Line [Member] |
12 Months Ended | ||
---|---|---|---|
Nov. 10, 2015
USD ($)
price
shares
|
Dec. 31, 2017
USD ($)
shares
|
Dec. 31, 2016
USD ($)
|
|
Class of Stock [Line Items] | |||
Proceeds from issuance of stock | $ 1,056,147 | ||
Common stock [Member] | |||
Class of Stock [Line Items] | |||
Common stock, subscriptions, period following registration date | 36 months | ||
Percent of average trading volume of common stock | 300.00% | ||
Threshold consecutive trading days | 10 days | ||
Purchase price calculation, percent | 80.00% | ||
Component of purchase price calculation | price | 2 | ||
Proceeds from issuance of stock | $ 3,056,147 | ||
Issuance of stock (in shares) | shares | 1,368,000 | ||
Percent of outstanding shares of stock | 9.99% | ||
Shares issued as commitment fee | shares | 132,000 | ||
Maximum [Member] | Common stock [Member] | |||
Class of Stock [Line Items] | |||
Common stock, value, subscriptions | $ 32,200,000 | ||
Obligatory purchased of common stock | $ 1,000,000 |
Series F Preferred Stock (Summary of Conversion Activity of Series F Preferred Stock) (Details) - Series F Preferred Stock [Member] - USD ($) |
3 Months Ended | 24 Months Ended | |||||
---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2017 |
|
Class of Stock [Line Items] | |||||||
Shares converted (in shares) | 107,000 | 20,000 | 175,949 | 1,261,648 | 3,234,000 | 2,168,402 | 6,966,999 |
Stock issued in lieu of cash, value | $ 467 | $ 0 | $ 9,168 | $ 54,096 | $ 66,931 | $ 19,896 | $ 150,558 |
Conversion of shares (in shares) | 172,552,354 | 18,181,818 | 27,276,006 | 81,917,367 | 6,649,741 | 2,183,991 | 308,761,277 |
Series G Preferred Stock (Summary of Conversion of Series G Preferred Stock) (Details) - Series G Preferred Stock [Member] - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Jun. 30, 2017 |
|
Class of Stock [Line Items] | |||||
Shares converted (in shares) | 210 | 526,000 | 372,000 | 892,000 | 1,790,000 |
Stock issued in lieu of cash, value | $ 49,096 | $ 25,970 | $ 37,895 | $ 112,961 | |
Conversion of shares (in shares) | 1,337,776,821 | 327,718,386 | 245,726,283 | 1,911,221,490 |
Series I Preferred Stock and Series I Convertible Notes (Schedule of Conversion Activity of the Exchange Convertible Notes) (Details) - Convertible Debt [Member] - Exchange Convertible Notes [Member] - USD ($) |
3 Months Ended | 15 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Sep. 30, 2017 |
|
Class of Stock [Line Items] | ||||||
Debt conversion, original debt, amount | $ 118,535 | $ 37,535 | $ 70,000 | $ 91,563 | $ 15,000 | $ 332,633 |
Debt conversion, converted instrument, accrued interest | $ 10,268 | $ 0 | $ 0 | $ 0 | $ 0 | $ 10,268 |
Debt conversion, converted instrument, shares issued (in shares) | 306,675,548 | 86,987,428 | 50,503,662 | 13,346,274 | 1,470,588 | 458,983,500 |
Series K Preferred Stock (Summary of Closings and Proceeds Received) (Details) - Series K Preferred Stock [Member] - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 27, 2017 |
Feb. 24, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Class of Stock [Line Items] | ||||||||
Preferred stock, shares issued (in shares) | 4,760 | 4,100 | 150 | 4,760 | 2,810 | 0 | ||
Proceeds from issuance of preferred stock | $ 4,760,000 | $ 4,100,000 | $ 150,000 | $ 9,010,000 | ||||
Private placement [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Preferred stock, shares issued (in shares) | 9,010 | 9,010 | 9,010 | |||||
Proceeds from issuance of preferred stock | $ 15,000,000 | $ 1,000,000 | $ 9,010,000 |
Series K Preferred Stock (Summary of Conversion Activity of Series K Preferred Stock) (Details) - Series K Preferred Stock [Member] - USD ($) |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Sep. 30, 2017 |
Jun. 30, 2017 |
Sep. 30, 2017 |
|
Class of Stock [Line Items] | |||
Shares converted (in shares) | 3,000 | 3,200 | 6,200 |
Stock issued in lieu of cash, value | $ 3,000,000 | $ 3,200,000 | $ 6,200,000 |
Conversion of shares (in shares) | 750,000,000 | 800,000,000 | 1,550,000,000 |
Make-Whole Dividend Liability (Details) - Series A Preferred Stock [Member] - USD ($) |
1 Months Ended | 4 Months Ended | |
---|---|---|---|
Jun. 30, 2013 |
Mar. 31, 2017 |
Jun. 17, 2017 |
|
Class of Stock [Line Items] | |||
Preferred stock, dividend rate | 8.00% | ||
Preferred stock, redemption, term, required make-whole dividend | 4 years | ||
Preferred stock, dividend, make-whole dividend rate to market value | 10.00% | ||
Shares converted (in shares) | 104,785 | ||
Dividends, common stock, paid-in-kind | $ 419,140 | ||
Stock dividends (in shares) | 173,946,250 | ||
Accrued interest and dividends | $ 274,583 |
Stockholders' Equity (Deficit) (Common Stock) (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017
vote
$ / shares
shares
|
Dec. 31, 2016
$ / shares
shares
|
May 26, 2016
$ / shares
|
|
Equity [Abstract] | |||
Common stock, shares authorized (in shares) | 20,000,000,000 | 2,000,000,000 | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Common stock, number of votes per share | vote | 1 | ||
Common stock, shares outstanding (in shares) | 9,606,597,777 | 554,223,320 |
Stockholders' Equity (Deficit) (Warrants) (Details) - USD ($) |
Dec. 15, 2017 |
Aug. 10, 2017 |
Jul. 24, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|---|
Equity [Abstract] | |||||
Class of warrant or right, outstanding (in shares) | 200,000,000 | 250,000,000 | 250,000,000 | 700,000,000 | 0 |
Exercise price of warrants (in dollars per share) | $ 0.0018 | $ 0.003 | $ 0.004 | ||
Class Of warrants and rights, maximum ownership percentage threshold for conversion | 9.99% | 9.99% | 9.99% | ||
Fair value adjustments, stock price (in dollars per share) | $ 0.0008 | $ 0.0015 | $ 0.0007 | ||
Derivative - expected annual volatility | 99.00% | 230.00% | 234.00% | ||
Fair value assumptions, risk free interest rate | 1.48% | 1.22% | 1.23% | ||
Warrants and rights outstanding | $ 10,035 | $ 246,803 | $ 88,937 |
Stockholders' Equity (Deficit) (Summary of Warrant Activity) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017
$ / shares
shares
| |
Warrant Shares [Abstract] | |
Outstanding at December 31, 2016 (in shares) | shares | 0 |
Granted (in shares) | shares | 700,000,000 |
Exercised (in shares) | shares | 0 |
Canceled (in shares) | shares | 0 |
Outstanding at December 31, 2017 (in shares) | shares | 700,000,000 |
Exercisable at December 31, 2017 (in shares) | shares | 700,000,000 |
Warrant Weighted Average Exercise Price | |
Outstanding at December 31, 2016 (in dollars per share) | $ / shares | $ 0.000 |
Granted (in dollars per share) | $ / shares | 0.003 |
Exercised (in dollars per share) | $ / shares | 0.000 |
Canceled (in dollars per share) | $ / shares | 0.000 |
Outstanding at December 31, 2017 (in dollars per share) | $ / shares | 0.003 |
Exercisable at December 31, 2017 (in dollars per share) | $ / shares | $ 0.003 |
Equity Plans and Share-Based Compensation (Share-based compensation cost by line item) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation cost | $ 123,268 | $ 888,348 |
Research and development [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation cost | 18,231 | 181,985 |
Selling, general, administrative [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation cost | $ 105,037 | $ 706,363 |
Equity Plans and Share-Based Compensation (Share-based compensation cost by award type) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation cost | $ 123,268 | $ 888,348 |
Stock Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation cost | 96,939 | 377,653 |
Restricted Stock Units and Awards [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation cost | $ 26,329 | $ 510,695 |
Equity Plans and Share-Based Compensation (Share-based compensation fair value assumptions) (Details) - Stock Options [Member] |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 0.00% | 114.60% |
Risk free interest rate | 0.00% | 1.50% |
Expected dividends | 0.00% | 0.00% |
Expected life (in years) | 0 years | 5 years 10 months |
Equity Plans and Share-Based Compensation (Schedule of restricted stock activity) (Details) - Restricted Stock Units and Awards [Member] - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Shares | ||
Non-vested, beginning balance (in shares) | 60,590 | 20,487 |
Granted (in shares) | 0 | 245,414 |
Vested (in shares) | (59,390) | (176,693) |
Forfeited (in shares) | (1,200) | (28,618) |
Non-vested, ending balance (in shares) | 0 | 60,590 |
Weighted Average Grant Date Fair Value | ||
Non-vested, beginning balance (in dollars per share) | $ 1.84 | $ 5.59 |
Granted (in dollars per share) | 0.00 | 1.97 |
Non-vested, ending balance (in dollars per share) | $ 0.00 | $ 1.84 |
Income Taxes (Deferred Tax Assets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Current: | ||
Accrued Expenses | $ 0 | $ 192 |
Inventory Allowance | 141 | 234 |
Other | 13 | 43 |
Total Current | 154 | 469 |
Non-current: | ||
Stock Based Compensation-Stock Options and Restricted Stock | 1,058 | 1,919 |
Tax effect of NOL carryforward | 67,852 | 79,384 |
Depreciation | 8,748 | 17,406 |
Amortization | (368) | (637) |
Warranty reserve | 14 | 68 |
Total Non-current | 77,304 | 98,140 |
Net deferred tax asset | 77,458 | 98,609 |
Less valuation allowance | (77,458) | (98,609) |
Net deferred tax asset | $ 0 | $ 0 |
Income Taxes (Tax Rate Reconciliation) (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 35.00% | 35.00% |
State statutory rate | 2.80% | 2.60% |
Change in rate | 0.00% | (0.40%) |
Permanent tax differences | (2.30%) | (0.10%) |
Change in fair value of derivatives | 8.40% | 0.90% |
Deemed interest expense on debt discount | (5.50%) | (5.10%) |
Loss on extinguishment of liabilities | (4.90%) | (5.90%) |
Other | (0.90%) | (1.80%) |
Increase in valuation allowance | (32.60%) | (25.60%) |
Effective tax rate | 0.00% | 0.00% |
Income Taxes (Narrative) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 321,066,413 | |
Operating loss carryforwards, limitations on use | 234,024,680 | |
Increase (decrease) in valuation allowance | (21,151,000) | |
Valuation allowance | $ 77,458,000 | $ 98,609,000 |
Commitments and Contingencies (Details) - USD ($) |
1 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Apr. 16, 2014 |
Oct. 21, 2011 |
Dec. 31, 2010 |
Dec. 31, 2017 |
Dec. 31, 2013 |
|
Commitments and Contingencies Disclosure [Abstract] | |||||
Complaint claim amount | $ 3,000,000 | ||||
Attorney's fees and prejudgment interest | $ 1,200,000 | ||||
Litigation settlement, amount awarded to other party | $ 2,000,000 | $ 2,000,000 | |||
Litigation settlement, payment period | 40 months | ||||
Payments for legal settlements | $ 339,481 | ||||
Litigation accrual | $ 1,700,000 |
Retirement Plan (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2006 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Defined Contribution Plan [Line Items] | |||
Employee minimum age | 21 years | ||
Percent of employer contribution | 100.00% | ||
Percent of employee contribution that employer will match | 6.00% | ||
Employer discretionary contribution amount | $ 199,669 | $ 338,230 | |
Employees Hired Before January 1, 2010 [Member] | |||
Defined Contribution Plan [Line Items] | |||
Annual vesting percentage | 100.00% | ||
Employees Hired After January 1, 2010 [Member] | |||
Defined Contribution Plan [Line Items] | |||
Annual vesting percentage | 33.33% | ||
Vesting period | 3 years |
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