CONVERTIBLE NOTES

6 Months Ended

Jun. 30, 2018

NOTE 4 – CONVERTIBLE NOTES

All of our outstanding convertible notes are accounted for using the guidance set forth in the FASB Accounting Standards Codification (ASC) 815 which requires that the Company determine whether the embedded conversion option must be separated and accounted for separately. ASC 470-20, regarding debt with conversion and other options, requires the issuer of a convertible debt instrument that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate.

The 2016 Notes were accounted for partially as liability and equity components of the instrument and partially as a debt host contract with an embedded derivative resulting from the conversion feature. During the year ended December 31, 2017, the embedded derivative was reclassified to additional paid in capital.

Issuance costs regarding the issuance of the 2016 Notes are amortized using the effective interest rate.

During the six months ended June 30, 2018, note holders converted $1.0 million aggregate principal amount of the 2016 Notes into a total of 1,338,707 shares of Common Stock, and cash payments of approximately $11,668, in the aggregate. In addition, in June 2018, the Company exchanged $3.42 million aggregate principal amount of the Company

’

outstanding 4.50% convertible promissory notes due 2018 (the “2013 Notes”) for

2,613,636 shares of Common Stock and approximately $2.2 million in cash

and delivered the necessary funds under the indenture governing the 2013 Notes, which was $2.5 million, to effectively discharge the remaining outstanding 2013 Notes

As of June 30, 2018, a total of $58.1 million aggregate principal amount of the 2016 Notes were outstanding. In addition, as of June 30, 2018, all of the 2013 Notes outstanding have been effectively discharged.