6.	Convertible Debentures

On the Effective Date, and pursuant to the terms of the Plan, SGB entered into the 2016 SPA, pursuant to which SGB 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 “June 2016 Debenture”). The June 2016 Debenture is convertible at HCI’s option at any time in whole or in part into shares of New Common Stock at a ratio of 1 share for every $3.75 of debt. Pursuant to that certain Guarantee Agreement, by SG Building in favor of HCI, SG Building unconditionally guaranteed (the “Guarantee”) the obligations and indebtedness owed to HCI under the June 2016 Debenture and the Guarantee is secured by a first-priority lien and security interest on all of the Guarantor’s assets. The June 2016 Debenture and SG Building’s obligations under the Guarantee are secured by a first-priority lien and security interest on all of the Company’s and SG Building’s assets pursuant to the Security Agreement. At the date of issuance, the fair value of the conversion option liability was determined to be $394,460, which has been recorded as a discount to the debenture. As of March 31, 2017 and December 31, 2016, the fair value of the conversion option liability was determined to be $209,552 and $279,608, respectively.

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 Debenture is convertible at HCI’s option at any time in whole or in part into shares of New Common Stock at a ratio of 1 share for every $3.75 of debt. Pursuant to that certain Subsidiary Guarantee Agreement, effective as of the Effective Date (the “Guarantee Agreement”), by SG Building in favor of HCI, SG Building unconditionally guaranteed (the “Guarantee”) the obligations and indebtedness owed to HCI under the November 2016 Debenture and the Guarantee is secured by a first-priority lien and security interest on all of the Guarantor’s assets. The November 2016 Debenture and SG Building’s obligations under the Guarantee are secured by a first-priority lien and security interest on all of the Company’s and SG Building’s assets pursuant to the Security Agreement. In connection with the issuance of the Debenture, the Company also paid $50,000 for legal fees, which has been recorded as a discount to the debenture, and will be amortized over the term of the debenture, using the effective interest method. At the date of issuance the fair value of the conversion option liability was determined to be $109,511, which has been recorded as a discount to the debenture. As of March 31, 2017 and December 31, 2016, the fair value of the conversion option liability was determined to be $78,582 and $104,853, respectively.

As of the Effective Date, HCI is a preferred stockholder of the Company.

A summary of the Company’s convertible debentures as of March 31, 2017 and December 31, 2016 is as follows:

	2017		2016
June 2016 Debenture, net of $559,037 and $670,845 discount	$	1,940,963	$	1,829,155
November 2016 Debenture, net of $266,932 and $320,318 discount		670,568		617,182

Total debt		2,611,531		2,446,337

Less current portion		-		-

Long-term debt	$	2,611,531	$	2,446,337

For the three months ended March 31, 2017 and 2016, total amortization relating to the discount amounted to $165,194 and $158,560, respectively, and is included in interest expense on the accompanying consolidated statements of operations.