8. Subsequent Events

Pending Series E Preferred Stock Financing and Filing for Arbitration

On May 3, 2017, the Company entered into a securities purchase agreement with a purchaser to sell 1,000,000 shares of a new Series E Preferred Stock, par value $0.001 per share, at a purchase price of $20.00 for each preferred share for aggregate gross proceeds of $20,000,000. The securities purchase agreement provides for no conditions precedent to the close and that closing is not to occur later than July 10, 2017. The purchaser did not provide funding to close the transaction on July 10, 2017 as required under the securities purchase agreement and requested an extension of the closing date. In connection with the signing of the securities purchase agreement, an affiliate of the purchaser entered into a financial guarantee to the benefit of the Company that provided for payment of the purchase price in full within 90 days of exercise. The Company exercised this guarantee on July 12, 2017. The guarantor has failed to pay the $20,000,000 within 90 days of notice of the purchaser’s default, as required by the terms of the guaranty.

On November 8, 2017, the Company filed a petition commencing arbitration against the purchaser and guarantor as well as other related individuals. In the petition, the Company asserts, among other things, breach of contract against the purchaser for its failure to close its purchase of Series E Preferred Stock as required by the securities purchase agreement. The Company also asserts a breach of contract claim against the guarantor for its failure to honor its guarantee of the transaction. The petition was filed with Judicial Arbitration and Mediation Services, Inc., ENDISPUTE in Orange County, California, as required by the securities purchase agreement. The Company has engaged its legal counsel in the matter on a contingent-fee basis and intends to purse damages and remedies in connections with these agreements.

Series F Preferred Stock Financing

On November 1, 2017, the Company entered into a Securities Purchase Agreement to sell 2,000 shares of Series F Convertible Preferred Stock to certain accredited investors at a purchase price of $1,000 for each Preferred Share for aggregate gross proceeds of $2,000,000. The Company consummated the issuance and sale of the Preferred Shares on the same day. The Series F Preferred Shares are convertible into shares of the Company’s common stock at a conversion price of $0.15 per share and provide for anti-dilution protection, rights upon various transactions, certain redemption and liquidation preferences and adjustments for any dividends. The Company has agreed to register the underlying shares of Company common stock and as a result of the issuance of the Series F Preferred Shares, the conversion price of outstanding Series B and Series C Preferred Stock was reset to $0.15. The Company intends to use the proceeds of the Financing for general corporate purposes, including, without limitation, to pay down past due obligations and other working capital items.