DEBENTURES PAYABLE

12 Months Ended

Dec. 31, 2021

Debentures Payable

DEBENTURES PAYABLE

NOTE 12 – DEBENTURES PAYABLE

In a series of transactions from the period October 2018 through February 2020, the Company sold an aggregate of $21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated investor pursuant to an amended securities purchase agreement. The following table as of December 31, 2021 summarizes the purchase dates and selected terms of each debenture agreement that comprised the $21M Debentures:

Issue Date	Maturity Date	Initial Principal		Interest Rate	Issue Discount		Warrant Discount		Beneficial Conversion Feature
10/17/18	10/16/20	$	5,000,000	6.0%		1.0%	$	457,966	$	1,554,389
11/07/18	11/06/20		5,000,000	6.0%		1.0%		599,867		4,015,515
05/08/19	05/07/21		5,000,000	6.0%		1.0%		783,701		2,537,235
06/28/19	06/27/21		2,500,000	0.0%		7.0%		145,022		847,745
08/20/19	08/19/21		2,500,000	0.0%		7.0%		219,333		850,489
02/21/20	02/20/21		1,000,000	6.5%		6.5%		28,021		379,183

As of December 31, 2021, the holder of the $21M Debentures (the “Holder”) had converted all of the $21M Debentures into the Company’s common stock at conversion prices equal to 80.0% of a calculated average of the daily volume-weighted price preceding the date of conversion. Specifically, over the life of the $21M Debentures, the Holder converted, in several transactions, an aggregate of $21.0 million of principal and approximately $836,000 of accrued interest into 92,704,035 shares of common stock at conversion prices ranging from $0.11 to $3.06 per share. Of these conversions, (i) during 2020, an aggregate of $9.7 million of principal and approximately $365,000 of accrued interest was converted into 77,766,559 shares of common stock at conversion prices ranging from $0.11 and $0.34 per share, and (ii) during 2021, an aggregate of $1.3 million of principal and approximately $56,000 of accrued interest was converted into 4,610,645 shares of common stock at a conversion price of $0.29 per share.

All of the aforementioned conversions were effected in accordance with the terms of the debenture agreements, and therefore the Company was not required to record a gain or loss on such conversions. The conversions were limited in any given month to certain agreed-upon amounts based on the conversion price, and the Holder was also limited from beneficially owning more than 4.99% of the Company’s outstanding common stock.

In conjunction with the issuance of the $21M Debentures, the Company issued the Holder three-year warrants to purchase an aggregate of 1,354,675 shares of the Company’s common stock at exercise prices ranging from $0.75 to $5.50 per share, of which warrants to purchase 180,000 shares of common stock at an exercise price of $0.75 were issued in 2020. The fair value of the warrants of approximately $2.2 million was recorded as a discount to the carrying amount of the $21M Debentures and are amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures.

Based on the conversion prices of the $21M Debentures in relation to the market value of the Company’s common stock, the $21M Debentures provided the Holder with a beneficial conversion feature, as the embedded conversion option was in-the-money on the commitment date. The aggregate intrinsic value of the beneficial conversion feature of approximately $10.2 million was recorded as a discount to the carrying amount of the $21M Debentures, and amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures.

During 2020, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated $3.2 million; amortization of the warrant discounts approximated $805,000; amortization of original issue discounts approximated $321,000; and interest expense approximated $224,000. At December 31, 2020, the aggregate outstanding principal balance of the $21M Debentures was $1.3 million. Also on such date, the unamortized balances of the beneficial conversion features, the warrant discounts, and original issue discounts were approximately $177,000, $39,000, and $52,000, respectively. Accordingly, at December 31, 2020, the carrying value of the $21M Debentures approximated $1,032,000, all of which was current.

During 2021, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated $177,000; amortization of the warrant discounts approximated $39,000; amortization of original issue discounts approximated $52,000; and interest expense approximated $1,000.