Long-Term Debt and Other Financing Arrangements

The Company’s long-term borrowings consisted of the following (in thousands, except for interest rates):



Description	Interest rate		September 30, 2016			December 31, 2015
Convertible note—Dominion Capital	9.75	%	$	3,650		$	4,000
Unamortized debt discount, costs and fees of issuance—Dominion Capital			(425		)	(1,016		)
Convertible notes—payable to former shareholders of Stanley House	2.00	%	4,656			5,502
Senior secured debt—HSBC Bank PLC	1.10	%	2,602			2,984
Promissory note—payable to former shareholder of TLC	2.63	%	2,750			3,003
Promissory note—Lega Enterprises, LLC (formerly Agel Enterprises, LLC)	5.00	%	841			1,043
Other miscellaneous notes	4.00	%	160			316
Total debt			14,234			15,832
Less current maturities			(9,853		)	(3,048		)
Long-term debt			$	4,381		$	12,784

The schedule of maturities of the Company’s long-term debt as of September 30, 2016 are as follows (in thousands):



2016 (remaining portion)	$	1,754
2017	8,369
2018	2,282
2019	412
2020	423
Thereafter	994
Total long-term debt including current maturities	$	14,234

Convertible Note—Dominion Capital

On November 20, 2015, the Company entered into a Securities Purchase Agreement with Dominion Capital ("Dominion"), pursuant to which the Company issued a $4.0 million senior secured note. The note bears interest at 9.75% per annum, payable monthly. The note's principal is payable in monthly installments of $50,000 starting in March 2016, increasing to $325,000 in January 2017, with a final payment of $2.2 million due in May 2017. The note is convertible at the option of Dominion into shares of our common stock at a conversion price of $3.00 per share and is secured by the assets of the Company and its subsidiaries, subject to existing senior security interests of other lenders. The Company has evaluated the conversion feature and determined that it does not need to be bifurcated from the note and accounted for separately, since it is eligible for the derivative scope exception under ASC 815-10. The Company also determined that there is no beneficial conversion feature since the effective conversion price is higher than the market price of the underlying common stock as of the commitment date.

In connection with this financing, 375,000 shares of our common stock valued at $510,000 were issued and other costs and fees totaling $583,000 were paid. These amounts have been treated as reductions of the proceeds received or issuance costs, and are being amortized over the term of the note using the effective interest method.

The unamortized balance of the debt discount, fees and issuance costs have been offset against the principal amount of the related debt in the condensed consolidated balance sheets.

The Dominion senior secured note contained certain covenants including the covenant requirement for the timely filing of the Company’s filings with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company missed the timely filing requirement with the SEC of its 2015 Form 10-K and received a waiver (the “Form 10-K Waiver”) from Dominion until April 25, 2016. After April 25, 2016, the Form 10-K waiver stayed active provided that the Company issued 50,000 shares for each ten (10) business days until it filed its 2015 Form 10-K in compliance with its requirements under the Exchange Act. The 2015 Form 10-K was filed with the SEC on June 28, 2016, which resulted in the Company issuing a total of 200,000 shares of common stock to Dominion in connection with the Form 10-K Waiver.

A second waiver from Dominion (the “March Form 10-Q Waiver”) was received on May 17, 2016 for the Company’s failure to timely file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (the “March Form 10-Q”). The March Form 10-Q Waiver stayed active provided that the Company issued to Dominion 50,000 shares of the Company’s common stock for each such ten (10) business day period required beyond May 23, 2016,which was the due date of the March Form 10-Q (without regard to whether the Company requires the full ten (10) business day period for any given extension). As a result of the failure to timely file the March Form 10-Q, the Company issued a total of 500,000 shares of its common stock to Dominion in consideration of the March Form 10-Q Waiver.

In connection with the delay in the filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 (the “June Form 10-Q”) with the SEC, the Company obtained from Dominion an irrevocable waiver dated August 22, 2016 (the “Third Waiver”) that the Company’s failure to timely file the June Form 10-Q, as well any failure to timely file the Form 10-Q for the quarter ended September 30, 2016 (the “September Form 10-Q”), would not constitute an event of default under the Note, and that any further notice to Dominion under the Note in respect of the same would not be required, provided that the Company issues to Dominion 50,000 shares of its common stock for each extension period required beyond August 22, 2016 with respect to the June Form 10-Q and beyond November 21, 2016 with respect to the September Form 10-Q (without regard to whether the Company requires the full ten (10) business day period for any given extension). As a result of the failure to timely file its June Form 10-Q, the Company has issued 350,000 shares of its common stock to Dominion in consideration of the August 22, 2016 waiver. To date, the Company has issued 100,000 shares of its common stock for its failure to timely file it September Form 10-Q.

In addition, the Third Waiver also provides that the Company’s failure to comply with any other covenant set forth in Section 14 of the Note would not constitute an event of default under the Note, and that any further notice to Dominion under the Note in respect of the same would not be required; provided that the Company issues to Dominion 100,000 shares of its common stock; provided that such Waiver shall not apply to any compliance failures that occur after January 1, 2017.

In connection with the failure to timely file the 2015 Form 10-K, the March Form 10-Q, June Form 10-Q, and the September Form 10-Q, the Company has issued an aggregate of 1,250,000 shares of its common stock in 2016 to Dominion.

In addition, the Third Waiver amended the amortization of debt. The amended amortization resulted in $550,000 of principal previously scheduled to be paid in 2016, to now be paid in 2017.

The Company has recorded the expense related to the share issuances as a result of late filing as interest expense on the condensed consolidated statement of operations. During the three and nine months ended September 30, 2016, the company has recorded interest expense related to the share issuances to Dominion Capital totaling approximately $657,000 and $859,000.

Convertible Notes—Payable to Former Shareholders of Stanley House

On October 15, 2015, the Company issued two unsecured convertible notes totaling $5.8 million at that time in connection with the acquisition of Betterware, maturing after three years. The notes are denominated in British Pounds Sterling ("GBP") and bear interest at 2% per annum, payable at the time of principal payments. The notes' principal is payable in monthly installments totaling $16,000 for the first six months, followed by monthly installments totaling $32,000 for the next 30 months, with additional payments of $1.6 million due at the end of each annual period following the notes' issuance. The notes may be converted into the Company's common stock at our election based on the value of our shares at the time of payment. The valuation of the notes was considered in connection with the Betterware acquisition, and were determined to have been issued at fair value on the acquisition date. Refer to Note (3), Acquisitions and Other Transactions, for further discussion on the Betterware acquisition.

Senior Secured Debt—HSBC Bank PLC

On March 24, 2015, the Company secured $3.0 million in senior secured debt at that time from HSBC Bank PLC, with a term of two (2) years and an annual interest rate of 0.60% over the Bank of England Base Rate as published from time to time. The loan is cash-secured by approximately $2.9 million. The loan and cash collateral is denominated in British Pounds Sterling. There are no other covenants related to the debt. The loan is now current and is included in 'current portion of long-term debt.' Previously, the collateral for the loan was shown as 'restricted cash' on our condensed consolidated balance sheets and now is included in 'other current assets.'

Promissory Note—Payable to Former Shareholder of TLC

On March 14, 2013, the Company issued a $4.0 million unsecured promissory note in connection with the Purchase Agreement with TLC. The Promissory Note bears interest at 2.63% per annum, has a ten-year maturity, and is payable in equal monthly installments of outstanding principal and interest.

Promissory Note—Lega Enterprises, LLC

On October 22, 2013, the Company issued a $1.7 million Promissory Note to Lega Enterprises, LLC (formerly Agel Enterprises, LLC) in connection with our acquisition of assets from Agel Enterprises, LLC. The promissory note bears interest at 5% per annum, is payable in equal monthly installments of outstanding principal and interest, and matures on October 22, 2018. The note is secured by a lien on the assets of Agel, which is subordinate to the lien from the Dominion debt. Due to our current financial condition, the Company was in arrears of $86,000 on principal and interest payments, as required by the agreement, as of September 30, 2016.

Promissory Note—Other Miscellaneous

On December 4, 2014, the Company issued a $500,000 unsecured promissory note, maturing in May 2017, in connection with a settlement agreement. The promissory note bears interest at 4.0% per annum, and is payable in equal monthly installments of outstanding principal and interest.