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WARRANTS AND EMBEDDED DERIVATIVES

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table summarizes the Company’s liability under warrant and compound embedded derivative agreements as of March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
	Number of					Number of
Description	Shares ⁽²⁾		Liability ⁽²⁾			Shares		Liability

Warrants		350,283,333	$	67,199			305,068,558	$	54,412
Embedded derivatives in convertible debt⁽¹⁾		26,386,904		155			28,068,159		496

Total		376,670,237		67,354			333,136,717		54,908
Less current portion				(67,354	)				(54,908	)

Long-term portion			$	-				$	-

⁽¹⁾

The debt instruments summarized in Note 6(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 March 31, 2016, the Company has 300,000,000 common shares authorized. As of March 31, 2016, there were 75,311,764 common shares issued and outstanding and the Company would need an additional 405,431,803 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 180,743,567 shares to accommodate all such exercise and conversion requests through the remaining unissued common shares. In order to increase the number of shares available to cover the authorized share deficiency, the Company would need either to (i) amend its articles of incorporation to increase the amount of its authorized common shares or (ii) effect a reverse stock split which would decrease the current number of shares issued and outstanding as well as the number of shares issuable upon exercise or conversion of its outstanding stock options, warrants and convertible debt. Either of these corporate actions would require shareholder approval. If the Company is not able to cure the authorized share deficiency by the point when holders of such options, warrants and convertible debt attempt to exercise or convert such securities and the Company no longer has common shares available to fill such exercise or conversion, the Company would be required to settle a portion of its warrant and derivative liabilities in cash which requires that these instruments continue to be classified as liabilities rather than equity instruments. However, as discussed in Note 9, 294,294,399 of the Company’s outstanding warrants are held by Calm Waters which is currently restricted by contractual agreement from owning more than 4.99% of the Company’s common stock through exercise of the warrants, convertible debentures and ownership of the Company’s common stock.

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 March 31, 2016 and December 31, 2015:

					March 31, 2016				December 31, 2015
Year of	Year of	Exercise			Number of		Fair Value		Number of		Fair Value
Issuance	Expiration	Price			Shares		of Liability⁽²⁾		Shares		of Liability⁽²⁾

2015	2022	$	0.45			246,198,582	$	48,272		246,198,582	$	45,718
2016	2023		0.25			45,214,775		10,080		-		-
2015	2020		1.01			14,860,382		1,464		14,860,382		1,491
2014	2019		0.45			10,969,265		1,931		10,969,265		1,887
2014	2019		1.01			13,185,185		1,806		13,185,185		1,859
2015	2020		0.21			5,995,453		1,354		5,995,453		1,270
2014	2019		0.37			6,666,669		1,266		6,666,669		1,171
2015	2020		0.45			3,842,653		566		3,842,653		552
2013	2018		0.75			2,006,667		294		2,006,667		299
2013	2019		0.75			1,000,000		114		1,000,000		114
2014	2019		0.21			248,236		52		248,236		50
2015	2016		0.75			66,667		-		66,667		1
2014	2016		1.49	⁽¹⁾		28,799		-		28,799		-
Totals		$	0.43	⁽¹⁾		350,283,333	$	67,199		305,068,558	$	54,412

	⁽¹⁾	Represents the weighted average exercise price for this group of warrants.
	⁽²⁾	Please refer to note 14 for additional information about methodologies used to determine the fair value of warrants.

The following table summarizes changes in the Company’s outstanding warrants and the related liability for the three months ended March 31, 2016:

	Number of		Warrant
	Warrants		Liability

Balances, beginning of period		305,068,558	$	54,412
Issuance of warrants with January Term Loan		45,214,775		8,571
Periodic fair value adjustments		-		4,216
		-
Balances, end of period		350,283,333	$	67,199

Fair Value of Embedded Derivatives for Convertible Debt

As of March 31, 2016, 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:

	Date of	Principal		Conversion		Shares		Derivative
	Financing	Balance		Price		Issuable		Liability

Senior Secured Notes:
Former 15% Notes	January 2014	$	6,857	$	0.75		9,142,460	$	-
Former 15% Notes	February 2014		12,100		0.75		16,133,333		125
Former 15% Notes	February 2014		500		0.45		1,111,111		30

Total convertible debt		$	19,457				26,386,904	$	155