Convertible Debentures

12 Months Ended

Dec. 31, 2018

Convertible Debentures [Abstract]

Convertible Debentures

7. Convertible Debentures

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

In connection with the Public Offering, HCI converted $1,937,500 of the 2016 Debentures into 516,667 shares of post-reverse split common stock. The Company recorded a loss of $1,018,475 on the conversion of the 2016 Debentures for the year ended December 31, 2017. The Company repaid the remaining outstanding balance of $1,500,000 using proceedings from the Public Offering.

For the year ended December 31, 2017, total amortization relating to the discount amounted to $330,388 and is included in interest expense on the accompanying consolidated statement of operations.

In connection with the 2016 Debentures, the Company bifurcated the conversion option from its debt host. The fair value of the conversion option liabilities were determined to be $503,971 at the date of issuance, utilizing a Black-Scholes model. Consequently, the Company recorded a discount of $503,971 on the debentures, which will be amortized over the term of the debenture, using the effective interest method. The fair value of the conversion option liabilities as of December 31, 2017 was $0.