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WARRANTS AND EMBEDDED DERIVATIVES

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table summarizes the Company’s liability under warrant and compound embedded derivative agreements as of September 30, 2015 and December 31, 2014:

	September 30, 2015				December 31, 2014
	Number of				Number of
Description	Shares ⁽²⁾		Liability ⁽²⁾		Shares		Liability

Warrants		265,068,558	$	48,317		113,520,880	$	123,898
Embedded derivatives in convertible debt⁽¹⁾		38,894,655		1,299		64,575,762		40,091

Total		303,963,213		49,616		178,096,642		163,989
Less current portion				1,299				82,426

Long-term portion			$	48,317			$	81,563

__________________

⁽¹⁾

The debt instruments summarized in Note 7(c) contain features that permit the holders to elect conversion of the debt to shares of the Company’s common stock. The Company bifurcates the conversion features from the related debt instruments and accounts for each component at its estimated fair value with updated valuations performed at the end of each calendar quarter.

⁽²⁾

As of September 30, 2015, the Company has 300,000,000 common shares authorized. As of September 30, 2015, there were 73,149,084 shares issued and outstanding and the Company would need an additional 338,256,528 common shares to accommodate the exercise and conversion of all of the common stock options, warrants, convertible debt, and unvested restricted stock presently outstanding. Accordingly, the Company has an authorized share deficiency of 111,405,612 shares to accommodate all such exercise and conversion requests through the remaining unissued common shares. Accordingly, the Company could be required to settle a portion of its warrants and derivative liabilities in cash which requires that they continue to be classified as liabilities rather than equity instruments.

As discussed in Note 17, in October 2015 the Company issued a warrant for the purchase of 40,000,000 shares of common stock, and repaid convertible debt which eliminated approximately 11,000,000 shares that were potentially needed to accommodate conversions as of September 30, 2015. Accordingly, the Company’s share deficiency was approximately 140 million shares as of October 30, 2015.

Fair Value of Warrant Liability

The following table summarizes the terms and fair value of the Company’s liability related to warrants outstanding as of September 30, 2015:

Year of	Year of	Exercise			Number of		Fair Value
Issuance	Expiration	Price			Shares⁽²⁾		of Liability

2015	2022	$	0.45			206,198,582	$	40,180
2015	2020		1.01			14,860,382		1,761
2014	2019		0.45			10,969,265		1,600
2014	2019		1.01			13,185,185		1,388
2015	2020		0.21			5,995,453		1,331
2014	2019		0.37			6,666,669		1,050
2015	2020		0.45			3,842,653		619
2013	2018		0.75			2,006,667		234
2013	2019		0.75			1,000,000		132
2014	2019		0.21			248,236		20
2015	2016		0.75			66,667		2
2014	2016		1.49	⁽¹⁾		28,799		-

Totals		$	0.51	⁽¹⁾		265,068,558	$	48,317

_____________________

⁽¹⁾

Represents the weighted average exercise price for this group of warrants.

⁽²⁾

As discussed in Note 17, in October 2015 the Company issued an additional 40,000,000 warrants exercisable at $0.45 per share.

The following table summarizes the terms and fair value of the Company’s liability related to warrants outstanding as of December 31, 2014:

Year of	Year of	Exercise			Number of		Fair Value
Issuance	Expiration	Price			Shares		of Liability

2014	2019	$	0.75			73,524,359	$	80,709
2013	2018		0.75			39,934,773		43,174
2014	2019		6.75			7,901		4
2014	2019		10.00			53,847		11
Totals		$	0.75	⁽¹⁾		113,520,880	$	123,898

______________________

⁽¹⁾

Represents the weighted average exercise price for this group of warrants.

The following table summarizes changes in the Company’s outstanding warrants and the related liability for the nine months ended September 30, 2015:

	Number of			Warrant
	Warrants			Liability

Balances, beginning of period		113,520,880		$	123,898
Issuance of warrants:
Term loans		232,519,425			117,497
Stand-alone warrants		28,440,817			34,519
Anti-dilution adjustments ⁽¹⁾		20,038,729			4,511
Modification of warrants:
Cancellations		(138,410,133	)		(168,240	)
Replacements		38,944,789			59,665
Exercise of warrants		(29,985,949	)		(24,634	)
Periodic fair value adjustments		-			(98,899	)

Balances, September 30, 2015		265,068,558		$	48,317

_____________________

⁽¹⁾

Some of the Company’s warrant agreements previously included anti-dilution adjustments whereby the exercise price and number of shares would reset to a lower exercise price and an increased number of shares (a “Reset Event”). Upon a Reset Event, the fair value of the warrant liability was adjusted and a loss was recognized. As of September 30, 2015, the warrant agreements have been amended whereby substantially all such anti-dilution features have been eliminated

Fair Value of Embedded Derivatives for Convertible Debt

As of September 30, 2015, the following table presents the conversion prices, number of shares issuable, and the fair value of the Company’s liability under compound embedded derivative agreements:

	Original	As of September 30, 2015
	Date of	Principal		Net Carrying		Conversion		Shares		Derivative
	Financing	Balance		Value		Price		Issuable		Liability

Senior Secured Notes:
Former 15% Notes	January 2014	$	6,857	$	6,857	$	0.75		9,142,460	$	255
Former 15% Notes	February 2014		12,100		12,100		0.75		16,133,333		597
Former 15% Notes	February 2014		500		500		0.45		1,111,111		54
5% OID Notes:
Original Issuance	December 2014		626		586		0.45		1,390,933		20
Original Issuance	January 2015		877		835		0.21		4,177,110		289
Original Issuance	January 2015		132		127		0.60		219,298		-
Original Issuance	February 2015		197		192		0.60		328,948		-
Exchanged Notes:
2014 Senior Secured Notes	March 2015		1,779		1,465		0.60		2,965,364		-
Exchanged Notes	April 2015		1,455		1,344		0.60		2,426,098		14
Former Demand Note	February 2015		211		201		0.21		1,000,000		70

Total convertible debt		$	24,734	$	24,207				38,894,655	$	1,299