Convertible Debentures

9 Months Ended

Sep. 30, 2017

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 was 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.

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” and, together with the June 2016 Debenture, the “2016 Debentures”). The November 2016 Debenture was 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.

In connection with the Public Offering, HCI converted approximately $1,937,500 of the 2016 Debentures into 516,667 shares of New Common Stock. The Company recorded a loss of $1,018,475 on the conversion of the 2016 Debentures. The Company repaid the remaining outstanding balance of approximately $1,500,000 using proceedings from the Public Offering.

A summary of the Company’s convertible debentures is as follows:

	September 30, 2017		December 31, 2016
June 2016 Debenture, net of $0 and $670,845 discount	$	-	$	1,829,155
November 2016 Debenture, net of $0 and $320,318 discount		-		617,182

Total debt		-		2,446,337

Less current portion		-		-

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

For the three months ended September 30, 2016, total amortization relating to the discount amounted to $111,808, and is included in interest expense on the accompanying consolidated statements of operations. For the nine months ended September 30, 2017 and 2016, total amortization relating to the discount amounted to $330,388 and $499,773, respectively, and is included in interest expense on the accompanying consolidated statements of operations.