Note 8 – Debentures

The carrying amount of all outstanding debentures as of March 31, 2019 (unaudited), and December 31, 2018 is as follows:

Payment on all outstanding debentures of $20.2 million at March 31, 2019 is due in 2019. As of March 31, 2019, $2.0 million of the outstanding debentures were not paid as of March 21, 2019, the maturity date. The Company has accrued penalties and interest in connection with this non-payment in the amount of $0.6 million as of March 31, 2019. See Note 19 for a discussion of outstanding debentures that were also not paid on the maturity date, which was September 19, 2019.

Debentures Issued in the Three Months Ended March 31, 2019

The Company issued debentures on February 24, 2019 in the aggregate principal amount of $300,000 and on March 27, 2019 in the aggregate principal amount of $300,000. Both of these debentures were guaranteed by Mr. Diamantis and were originally due on June 3, 2019. As more fully discussed in Note 19, the maturity dates of these debentures were extended to December 31, 2019 and the terms were changed so that commencing on August 17, 2019 the debentures shall bear interest on the outstanding principal amount at a rate of 2.5% per month (increasing to 5% per month on October 12, 2019), payable quarterly beginning on October 1, 2019. All overdue accrued and unpaid interest shall entail a late fee equal to the lesser of 24% per annum or the maximum rate permitted by applicable law.

In addition to the debentures issued in the three months ended March 31, 2019, during the years ending December 31, 2017 and 2018, the Company has entered into convertible debentures, which are more fully described in Note 9 the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K. Certain of these convertible debentures were issued with warrants to purchase shares of the Company’s common stock. Outstanding warrants are more fully discussed in Note 13.

The debentures issued during the three months ended March 31, 2019 and 2018, were issued at discounts of $0.1 million and $0.5 million, respectively, and accordingly, the Company realized a total of $0.5 million and $2.0 million, respectively, in proceeds from the issuances of these debentures. At March 31, 2019, the unamortized discounts were $2.9 million. These discounts represent original issue discounts, the relative fair value of the warrants issued with the debentures and the relative fair value of the beneficial conversion features of the debentures. During the three months ended March 31, 2019 and 2018, the Company recorded approximately $7.5 million and approximately $4.5 million, respectively, of non-cash interest and amortization of debt discount expense primarily in connection with the debentures and warrants.

See Note 13 for summarized information related to warrants issued and the activity during the three months ended March 31, 2019.

See Notes 3, 13 and 19 for a discussion of the dilutive effect of the outstanding debentures and warrants as of March 31, 2019.