Look at this MASSIVE toxic debt from the last financial. Defaults on loans too! The next financial filed late and due this week will be be worse as they company said they need to take out more loans as they are broke! LOL A/S just raised from 750 million to 10 billion A/S. The company themselves said they minimally will be issuing 5 to 10 billion shares to cover this debt and even more toxic loans are needed. Stay away from this one. You will be buying shares the company is dumping to pay off these loans.
Like I said and the company says, 5 to 10 billion coming in shares to pay off the massive toxic deb, defaults t and loans coming due. And they said they need to take out more toxic loans. ROTFLMAO I prefer facts in the financials. Going to no bid when those shares hit. LOL
LG Capital Funding Convertible Notes
LG Notes 1 and 2
On October 30, 2014, Artec and LG Capital Funding, LLC (" LG Capital ") entered into a Securities Purchase Agreement (the " LG SPA 1 "). Under the LG SPA 1, LG Capital will provide $165,375 in three equal payments of $55,125 and evidenced by a convertible promissory note on each of October 31, 2014, January 29, 2015 and a date to be determined. On October 31, 2014, Artec received $50,000 net of $5,125 ($2,500 legal fees and $2,625 OID) and issued a convertible promissory note (the " LG Note 1 ") in the amount of $55,125. On January 30, 2015, Artec received $50,000 net of $5,125 ($2,500 legal fees and $2,625 OID) and issued a convertible promissory note (the " LG Note 2 ") in the amount of $55,125. The LG Note 1 and LG Note 2 (collectively the " LG Notes ") matured on October 30, 2015 and January 30, 2016, respectively, accrue interest of 8% and are convertible into shares of common stock any time 180 days after the date of each LG Note at a conversion price equal to 65% of the lowest closing bid price as quoted on a national exchange for ten prior trading days including the date on which the Notice of Conversion is received by Artec. In no event shall LG Capital effect a conversion if such conversion results in LG Capital beneficially owning in excess of 9.9% of the outstanding common stock of the Company. Accrued interest shall be paid in shares of common stock at any time at the discretion of LG Capital pursuant to the conversion terms above.
The Company is in default on LG Note 1 and LG Note 2, with a principal balance totaling $80,125 as of April 30, 2016, due to there being an unpaid balance as of the date of maturity. As a result, the interest on LG Note 1 and LG Note 2 increased to 24%.
The debt discounts attributable to the fair value of the beneficial conversion feature, legal fees and OID amounted to $29,681 and $30,252 for LG Note 1 and LG Note 2, respectively, and were accreted over the term of the LG Notes.
During the three months ended April 30, 2016, the Company recognized $4,758 of interest expense. During the three months ended April 30, 2015, the Company recognized $2,151 of interest expense and $14,614 of debt discount accretion.
During the three months ended April 30, 2016, LG Capital converted $3,853 of principal and interest into 39,820,076 shares of common stock.
LG Notes 3 and 4
On March 31, 2016, Artec and LG Capital entered into a Securities Purchase Agreement (the " LG SPA 2 "). Under the LG SPA 2, LG Capital will provide $315,000 in four equal payments of $78,750 and evidenced by a convertible promissory note on each of March 1, 2016 (" LG Note 3 ") and May 9, 2016 (" LG Note 4 ") with the remaining amounts funded as agreed by the parties at a later date. On each of March 15, 2016, and May 4, 2016 Artec received $71,250 net of $7,500 ($3,750 legal fees and $3,750 OID) for total proceeds of $142,500 and issued two convertible promissory notes each in the amount of $78,750 (collectively the " 2016 LG Notes "). The 2016 LG Notes mature in one year, accrue interest of 8% and are convertible into shares of common stock any time at a conversion price equal to 55% of the lowest trading price as quoted on a national exchange for twenty prior trading days including the date on which the Notice of Conversion is received by Artec. In no event shall LG Capital effect a conversion if such conversion results in LG Capital beneficially owning in excess of 9.9% of the outstanding common stock of the Company. Interest shall be paid in cash. The Note may not be prepaid.
The debt discounts attributable to the fair value of the beneficial conversion feature, legal fees and OID amounted to $71,932 and $71,932 for LG Note 3 and LG Note 4, respectively, and are being accreted over the term of the 2016 LG Notes.
During the three months ended April 30, 2016, the Company recognized $1,036 of interest expense and $10,592 of debt discount accretion.
JMJ Financial Convertible Note
On November 12, 2014, Artec and JMJ Financial entered into a $250,000 Convertible Promissory Note (the " JMJ Note "). Under the JMJ Note, JMJ Financial will advance various amounts up to $250,000 in their sole discretion. Each advance matures two years from the date of advance (the " JMJ Maturity Date ") and carries the following terms: (i) no interest for the first 90 days with a one-time 12% charge on the 90 th day outstanding; (ii) each advance may be repaid within 90 days after which Artec may not make further payments prior to the JMJ Note Maturity Date; (iii) each advance includes a 10% original issue discount. JMJ Financial may convert at their discretion any or all of the outstanding principal and interest at any time from the date of each advance into shares of common stock at a conversion price equal to 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will JMJ Financial convert any amount of the JMJ Note into common stock that would result in the JMJ Financial owning more than 4.99% of the common stock outstanding. Artec receved $35,000 pursuant to the JMJ Note (" JMJ Note 1 ") on November 12, 2014 and recorded a debt discount of $25,926 attributable to the fair value of the beneficial conversion feature. Artec received $25,000 pursuant to the JMJ Note (" JMJ Note 2 ") (collectively the " JMJ Notes ") on April 28, 2015 and recorded a debt discount of $18,519 attributable to the fair value of the beneficial conversion feature. The debt discounts are being accreted over the term of the JMJ Notes.
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The Company recognized $0 interest expense and $0 of debt discount accretion during the three months ended April 30, 2016. The Company recognized $4,667 of interest expense and $3,212 of debt discount accretion during the three months ended April 30, 2015.
During the three months ended April 30, 2016, JMJ converted $1,380 of principal and interest into a total of 11,500,000 shares of common stock leaving a balance of $10,274 as of April 30, 2016.
Vista Capital Investments Convertible Note
On December 4, 2014, Artec and Vista Capital Investments, LLC (" Vista ") entered into a Securities Purchase Agreement (the " Vista SPA "), for the sale of a 12% convertible note in the principal amount of $250,000 (which includes a $25,000 original issue discount) (the " Vista Note ") of which Vista funded $35,000 upon closing. Additional consideration, up to the principal amount, is payable to Artec at the discretion of Vista. Artec has no obligation to pay Vista any amounts on the unfunded portion of the Vista Note. The Vista Note bears a one-time interest charge of 12% on the date consideration is received. All interest and principal must be repaid two years from the date consideration is received. The Vista Note is convertible into common stock, at Vista's option, at 60% of the lowest trade occurring during the twenty five (25) consecutive trading days immediately preceding the conversion date. In the event the Company elects to prepay all or any portion of the Vista Note within 90 days of the issuance date, the Company is required to pay to Vista an amount in cash equal to 145% multiplied by the sum of all principal, interest and any other amounts owing. Unless otherwise agreed in writing by both parties, at no time will Vista convert any amount of the Vista Note into common stock that would result in the Vista owning more than 4.99% of the common stock outstanding.
The debt discount attributable to the fair value of the beneficial conversion feature amounted to $38,889 for the Vista Note and is being accreted over the term of the Vista Note.
The Company recognized $10,000 of interest expense related to a default penalty pursuant to section 3(b)(iv) of the Vista Note and recorded $22,534 of debt discount accretion through January 31, 2016. During the three months ended April 30, 2016, the Company recognized $16,355, or the remainder of the unrecognized debt discount accretion as a result of the conversion of $3,175 of debt into 63,500,000 shares of common stock during the three months ended April 30, 2015 leaving a balance of $121.
Typenex Financing
On January 7, 2015, Artec entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC (" Typenex "), for the sale of a 10% convertible note in the principal amount of $225,000 (which includes Typenex legal expenses in the amount of $5,000 and a $20,000 original issue discount) (the " Typenex Note ") of which Typenex funded $75,000 upon closing. We have no obligation to pay Typenex any amounts on the unfunded portion of the Typenex Note. Additionally, Typenex issued to the Company three notes, aggregating $125,000, bearing interest at the rate of 8% per annum with each note maturing seventeen months from January 7, 2015 (the " Typenex Investor Notes "). The Typenex Investor Notes may be prepaid, without penalty, all or portion of the outstanding balance along with accrued but unpaid interest at any time prior to maturity. No cash changed hands in exchange for the Typenex Investor Notes. The purpose of the Typenex Investor Notes is to facilitate the timely sale of common stock in the future should Typenex fund the Typenex Investor Notes.
The Typenex Note bears interest at the rate of 10% per annum. All interest and principal must be repaid on June 7, 2016. As of June 7, 2016, the balance of principal and interest was $79,800 and unpaid which constitutes a default subject to a 15% penalty of the total outstanding balance. The Typenex Note is convertible into common stock, at Typenex's option, at the lesser of (i) $5.00, and (ii) 70% (the "Conversion Factor") of the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable Conversion, provided that if at any time the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding any date of measurement is below $2.50, then in such event the then-current Conversion Factor shall be reduced to 65% for all future Conversions, subject to other reductions set forth in the Typenex Note. In the event the Company elects to prepay all or any portion of the Typenex Note, the Company is required to pay to Typenex an amount in cash equal to 125% multiplied by the sum of all principal, interest and any other amounts owing. The Typenex Note is secured by all of the assets of the Company and includes customary event of default provisions.
Typenex has agreed to restrict its ability to convert the Typenex Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Typenex Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The Typenex Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion within the required timeframes.
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Additionally, the Company granted Typenex six warrants, corresponding to the delivery of six tranches of cash funds, to purchase shares of the Company's common stock, $0.001 par value (the "Common Stock"). The first warrant will entitle the holder to purchase a number of shares equal to $43,750 divided by the Market Price (defined as 70% of the average 3 lowest closing bid prices in the 20 days immediately preceding conversion), as such number may be adjusted from time to time pursuant to the terms of the Typenex Note, and the remaining warrants will entitle the holder to purchase a number of shares equal to $13,750 divided by the Market Price, as such number may be adjusted from time to time pursuant to the terms of the Typenex Note. Each warrant is not exercisable until each corresponding tranche is funded.
The Company first allocated between the Typenex Note and the warrants based upon their relative fair values. The estimated fair value of the warrants issued with the Typenex Note was $43,750. Next, the intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Typenex Note and the total price to convert based on the effective conversion price. The calculated intrinsic value was $66,667. As this amount resulted in a total debt discount that exceeds the loan proceeds, the amount recorded for the beneficial conversion feature was limited to $43,750. The resulting $87,500 discount to the Typenex Note is being accreted over the seventeen month term of the Typenex Note.
During the three months ended April 30, 2016, the Company recognized $44,910 of interest expense, including $41,861 of "add-Backs" to compensate Typenex for the deficit between the amount of the Typenex Note converted and the amount realized from the subsequent sale of the conversion shares, and $15,232 of accretion related to the debt discount. During the three months ended April 30, 2015, the Company recognized $15,063 of accretion related to the debt discount.
During the three months ended April 30, 2016, Typenex converted $15,371 of principal and interest into a total of 138,842,000 shares of common stock.
Vis Vires Group, Inc. Convertible Note
On June 8, 2015, Artec and Vis Vires Group (" Vis Vires ") entered into a Securities Purchase Agreement (the " Vis Vires SPA "), for the sale of an 8% convertible note in the principal amount of $69,000 of which Artec received $61,100 after payment of legal fees (the " Vis Vires Note "). The Vis Vires Note matured on March 10, 2016 and is currently in default. The Vis Vires Note interest rate increased to twenty-two percent (22%) upon maturity. The Vista Note is convertible into common stock, at Vis Vires's option, at 58% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading day period prior to conversion. In no event shall Vis Vires effect a conversion if such conversion results in Vis Vires beneficially owning in excess of 9.99% of the outstanding common stock of the Company. The Note and accrued interest may be prepaid from the date of issuance with the following penalties: (i) within 30 days - 110%; (ii) within 31 - 60 days - 115%; (iii) within 61 - 90 days - 120%; (iv) within 91 - 120 days - 125%; (v) within 121 - 150 days - 130%; and (vi) within 151 - 180 days - 135%. Upon the occurrence of a default as described in the Vis Vires Note, the Company shall pay an amount equal to the greater of (i) 150% of the then outstanding principal and interest, or (ii) the "parity value" of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of common stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article 1 of the Vis Vires Note, treating the trading day immediately preceding the Mandatory Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable conversion price.
The debt discount attributable to the fair value of the beneficial conversion feature amounted to $52,378 for the Vis Vires Note and was accreted over the term of the Vis Vires Note.
The Company is in default on the Vis Vires Note, with a principal balance totaling $69,893 as of April 30, 2016, due to there being an unpaid balance as of the date of maturity on March 10, 2016. As a result, the interest on the Vis Vires Note increased to 22%.
During the three months ended April 30, 2016, the Company recognized $27,129 of interest expense, including $24,593 related to the default penalty, and $7,402 of accretion related to the debt discount.
Search4.com, Inc. Convertible Note
On February 5, 2016, Artec issued to Search4.com a 12% convertible note (the " Search4 Note ") in the principal amount of $100,000 of which Artec received $100,000 of services fully earned on the date of issuance. The Search4 Note matures in 12 months on February 5, 2017. If the Search4 Note is not paid upon maturity, the interest rate shall increase to 16%. The Search4 Note is convertible into common stock, at Search4 's option, at 50% of the lowest bid bid price for our common stock during the 10 trading day period prior to conversion. In no event shall Search4 effect a conversion if such conversion results in Search4 beneficially owning in excess of 9.99%.
The debt discount attributable to the fair value of the beneficial conversion feature amounted to $100,000 for the Search4 Note and is being accreted over the term of the Search4 Note. The Company recognized $2,833 interest expense and $23,015 of debt discount accretion during the three months ended April 30, 2016.
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T McNeil Advisors, LLC Convertible Note
On March 4, 2016, Artec isued to T McNeil Advisors, LLC (" McNeil ") a convertible promissory note (the " McNeil Note ") in the amount of $37,500 in exchange for advisory services. The McNeil Note accrues interest at 8%, matures on in one year on March 4, 2017 and is convertible into shares of common stock any time at a conversion price equal to 55% of the lowest trading price as quoted on a national exchange for the twenty prior trading days including the date on which the Notice of Conversion is received by Artec. In no event shall McNeil effect a conversion if such conversion results in McNeil beneficially owning in excess of 9.9% of the outstanding common stock of the Company. Accrued interest shall be paid in cash only. The McNeil Note may be prepaid with the following penalties: (i) if the McNeil Note is prepaid within 90 days of the issuance date, then 115% of the face amount plus any accrued interest; (ii) if the McNeil Note is prepaid within 91 -180 days of the issuance date, then 135% of the face amount plus any accrued interest. The Note may not be prepaid after the 180th day. Upon an event of default, the interest rate shall increase to 24%.
The debt discount attributable to the fair value of the beneficial conversion feature exceeded the face amount of the McNeil Note and was limited to $37,500, and is being accreted over the term of the McNeil Note.
During the three months ended April 30, 2016, the Company recognized $468 of interest expense and $5,856 of debt discount accretion related to the McNeil Note.
Timothy Honeycutt Convertible Note
In connection with the appointment of Timothy Honeycutt to the Board of Directors, the Company issued to Mr. Honeycutt a convertible promissory note dated April 29, 2016 in the original principal amount of $25,000 (the " Honeycutt Note "), maturing 3 years from the date of issuance, accruing interest at a rate of 12.0% per annum and convertible into shares of common stock of the Company at a 40.0% discount to the market price of those shares with the market price being equal to the closing price 10 days subsequent to the receipt by the Company of Mr. Honeycutt's Notice of Conversion. In no event shall Mr. Honeycutt effect a conversion if such conversion results in Mr. Honeycutt beneficially owning in excess of 4.99% of the outstanding common stock of the Company.
The debt discount attributable to the fair value of the beneficial conversion feature amounted to $16,667 for the Honeycutt Note and is being accreted over the term of the Honeycutt Note.
During the three months ended April 30, 2016, the Company recognized $0 of interest expense and $0 of debt discount accretion related to the Honeycutt Note.
Senior Secured Revolving Credit Facility Agreement
On December 24, 2015, the Company entered into a Senior Secured Revolving Credit Facility Agreement (the "Credit Facility") with TCA for a maximum of $10,000,000. The Credit Facility provides for TCA to make revolving loans to the Company from time to time, until the revolving loan maturity date and in amounts as TCA may determine up to the revolving loan availability. Revolving loans may be repaid and borrowed again up to the revolving loan maturity date unless the revolving loans are terminated or extended. The Company may request that the revolving loan commitment be increased up to $10,000,000 and TCA, in its sole discretion may make available revolving loan commitment increases. As security, the Company issued a continuing and unconditional first priority security interest in all property of the Company.
The Credit Facility provides for the weekly payment of the receipts collection fee, accrued and unpaid interest of all revolving loans and other charges and fees. The receipts collection fee is a surcharge charged to the Company on a monthly basis and, when added together with any monthly interest, shall not exceed 1.417% of the then outstanding principal balance of all loans, per month. The receipts collection fee, interest and other charges are due weekly. Any amount of principal or interest which is not paid when due, whether at stated maturity, by acceleration or otherwise, shall, at TCA's option, bear interest on demand at the default rate of 18%.
The Company is required to direct customers to make payments to a lock box account. Weekly, TCA shall sweep lock box account funds to their account and apply said funds to unpaid fees, accrued interest owed, receipts collection fees and towards building a reserve equal to 20% of the revolving loan commitment which currently stands at $900,000.
Pursuant to the Credit Facility, on December 24, 2015, the Company issued a Senior Secured Revolving Convertible Promissory Note (the "TCA Note") with face amount of $900,000. On December 28, 2015, TCA funded $150,000 of the TCA Note of which the Company received $26,095 net of a $45,000 commitment fee, $6,500 due diligence fee, $50,000 in legal fees, $1,500 asset monitoring fee, $7,500 finder's fee, $2,450 stamp tax, $3,495 escrow fee and $7,460 of miscellaneous filing fees. The TCA Note is due in six months on June 24, 2016 (the "TCA Note Maturity Date"), accrues interest at the rate of 12% per annum and is convertible into shares of common stock in the event of default at 85% of the lowest of the average daily volume weighted average price of the Company's common stock during the five trading days immediately prior to the conversion date. In no event shall TCA effect a conversion if such conversion results in TCA beneficially owning in excess of 4.99% of the outstanding common stock of the Company.
Conversion of the TCA Note and unpaid interest is subject to "make-whole rights" where if upon liquidation by TCA of conversion shares the amount received is less than the conversion amount specified in the relevant conversion notice, the Company shall issue to TCA additional shares of common stock equal to the conversion amount minus the realized amount. If upon sale of the additional shares, the total received by TCA is still less than the conversion amount specified in the relevant conversion notice, the Company shall issue additional shares until the conversion amount has been fully satisfied.
Upon each occurrence of a default or event of default, TCA shall have the right, but not the obligation, to 1) declare its commitments to the Company to be terminated and all obligations to be immediately due and payable; and 2) to cause the Company to pay TCA a penalty in cash in an amount equal to 10% of the amount of the obligations at the time of default. In the event a single default or event of default continues for a period of longer than 30 days, the 10% penalty shall be immediately applied upon expiration of each subsequent 30 day period and shall continue to be applied upon expiration of each subsequent 30 day period until such default is cured to the satisfaction of TCA, in its sole discretion.
In connection with the Credit Facility, the Company issued three convertible promissory notes (the "Fee Notes") each in the amount of $105,000 to TCA as consideration of investment banking and advisory services fully rendered. The Fee Notes mature on June 24, 2016, September 24, 2016 and December 24, 2016, respectively. The Fee Notes 1) bear zero interest unless in default which, then, at the TCAs option shall bear interest at the default rate of 18%; 2) are convertible into shares of common stock in the event of default at 85% of the lowest of the average daily volume weighted average price of the Company's common stock during the five trading days immediately prior to the conversion date. In no event shall TCA effect a conversion if such conversion results in TCA beneficially owning in excess of 4.99% of the outstanding common stock of the Company. As security, the Company issued a continuing and unconditional first priority security interest all property of the Company. Conversion of the Fee Notes and unpaid interest is subject to make-whole rights.
As additional consideration, the Company issued to TCA, 8,130,000 shares in three tranches of 2,710,000 each on December 24, 2015 valued at $9,000.
The debt discounts attributable to the fair value of the beneficial conversion feature contained in the TCA Note and Fee Notes and TCA incurred issuance costs amounted to $8,610 and $123,905, respectively, and are being accreted through the TCA Note Maturity Date and Fee Note maturity dates.
During the three months ended April 30, 2016, the Company recognized $12,320 of interest expense and $69,932 of debt discount accretion related to the TCA Note and Fee Notes.
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Debenture and Fee Debentures
On December 24, 2015, the Company entered into a Securities Purchase Agreement with TCA for the sale of a secured, 18% senior, secured, convertible, redeemable debenture in the principal amount of $100,000. On December 28, 2015, the Company received $74,650 net of a $5,000 commitment fee, $15,000 in legal fees, $5,000 finder's fee and $350 stamp tax and issued a senior, secured, convertible, redeemable debenture (the "Debenture") in the amount of $100,000. The Debenture is due in twelve months on December 24, 2016 (the "Debenture Maturity Date"), accrues interest at the rate of 18% per annum and is convertible into shares of common stock in the event of default at 90% of the lowest of the average daily volume weighted average price of the Company's common stock during the five trading days immediately prior to the conversion date. In no event shall TCA effect a conversion if such conversion results in TCA beneficially owning in excess of 4.99% of the outstanding common stock of the Company. As security, the Company issued a continuing and unconditional first priority security interest in all property of the Company.
The Company may prepay the Debenture without penalty. The Company shall make monthly payments of interest which is calculated on the basis of a 360-day year and accrue daily. Late payments of principal, interest or other charges not received by TCA within five business days of the due date shall be subject to a 5% late fee of the unpaid amount. In the event of default as described in the Debenture, the interest rate shall increase to 22%.
Conversion of the Debenture and unpaid interest is subject to "make-whole rights" where if upon liquidation by TCA of conversion shares the amount received is less than the conversion amount specified in the relevant conversion notice, the Company shall issue to TCA additional shares of common stock equal to the conversion amount minus the realized amount. If upon sale of the additional shares, the total received by TCA is still less than the conversion amount specified in the relevant conversion notice, the Company shall issue additional shares until the conversion amount has been fully satisfied.
In connection with the Debenture, the Company issued three, Senior, Secured, Convertible, Redeemable Debentures (the "Fee Debentures") each in the amount of $33,333 to TCA as consideration of advisory services fully rendered. The Fee Debentures mature on June 24, 2016, September 24, 2016 and December 24, 2016, respectively. The Fee Debentures 1) bear zero interest unless in default which, then, at the TCAs option shall bear interest at the default rate of 22%; 2) are convertible into shares of common stock in the event of default at 90% of the lowest of the average daily volume weighted average price of the Company's common stock during the five trading days immediately prior to the conversion date. In no event shall TCA effect a conversion if such conversion results in TCA beneficially owning in excess of 4.99% of the outstanding common stock of the Company. As security, the Company issued a continuing and unconditional first priority security interest in all property of the Company. Conversion of the Fee Notes and unpaid interest is subject to make-whole rights.
The debt discounts attributable to the fair value of the beneficial conversion feature and TCA incurred issuance costs amounted to $0 and $25,350, respectively, and are being accreted through the Debenture Maturity Date.
During the three months ended April 30, 2016, the Company recognized $4,500 of interest expense and $6,251 of debt discount accretion related to the Debenture.
Committed Equity Facility Agreement
On December 24, 2015, the Company entered into a Committed Equity Facility Agreement (the "Equity Facility") with TCA whereby the Company shall issue and sell ("Advance") to TCA, from time to time, up to $5,000,000 of the Company's common stock. By delivering an Advance notice to TCA, the Company may request up to the Maximum Advance Amount defined as no more than 15% of the average daily volume of shares of common stock traded during the immediately preceding five consecutive trading days. In no event shall the number of shares issuable to TCA cause TCA's beneficial ownership to exceed 4.99% of the then outstanding common stock nor shall the number of shares issuable exceed the Exchange Cap. On each Advance notice date, the Company shall deliver to TCA's brokerage account a number of shares equal to the dollar amount of the Advance divided by the Market Price (defined as the lowest VWAP of the common stock on the applicable Advance notice date multiplied by 200%). If the Advance shares initially delivered to TCA are greater than the number of shares sold, then TCA shall deliver to the Company any excess Advance shares unless the parties agree to apply those shares to the next Advance.
Concurrently, with the Equity Facility, the Company entered into a Registration Rights Agreement of the same date for the resale of shares by TCA. The Registration Rights Agreement requires the Company to file with the SEC a registration statement on Form S-1 for a sufficient number of shares equal to at least three times the number of registerable securities under the Equity Facility no later than 45 days from December 24, 2015 with a declaration of effectiveness required no later than 90 days from December 24, 2015. In the event the registration statement is not declared effective by the SEC 120 days from December 24, 2015, the Company shall be obligated to pay TCA $500 per month until the registration is declared effective.
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