Convertible Debentures

6 Months Ended

Jun. 30, 2018

6.	Convertible Debentures

On June 30, 2016, and pursuant to the terms of the Company’s plan of reorganization, the Company entered into a Securities Purchase Agreement, dated June 30, 2016, with Hillair Capital Investments L.P. (“HCI”), pursuant to which the Company sold, for a subscription price of $2,000,000, a 12% Original Issue Discount Senior Secured Convertible Debenture to HCI in the principal amount of $2,500,000, with a maturity date of June 30, 2018 (the “Exit Facility”). The Exit Facility was convertible at HCI’s option at any time, in whole or in part, into shares of the Company’s common stock at a ratio of 1 share for every $3.75 of debt.

On November 17, 2016, the Company entered into a Securities Purchase Agreement with HCI, pursuant to which the Company sold, for a subscription price of $750,000, a 12% Original Issue Discount Senior Secured Convertible Debenture to HCI in the amount of $937,500, with a maturity date of June 30, 2018 (the “November 2016 Debenture” and, together with the Exit Facility, the “2016 Debentures”). The November 2016 Debenture was convertible at HCI’s option at any time, in whole or in part, into shares of the Company’s common stock at a ratio of 1 share for every $3.75 of debt.

In connection with the Public Offering, HCI converted approximately $1,937,500 of the 2016 Debentures into 516,667 shares of common stock. The Company recorded a loss of $1,018,475 on the conversion of the 2016 Debentures. The Company repaid the remaining outstanding balance of approximately $1,500,000 using proceedings from the Public Offering.

For the three months ended June 30, 2018 and 2017, total amortization related to the discount amounted to $0 and $165,194, respectively. For the six months ended June 30, 2018 and 2017, total amortization relating to the discount amounted to $0 and $330,388, respectively, and is included in interest expense on the accompanying consolidated statements of operations.