I guess I haven't kept on top of things. This is news to me and it's ALMOST unbelievable.
The Company invested the proceeds of its settlement agreement in a variety of securities of other publicly held companies and a little funny money, leaving itself with $12,291 in US Dollars at the end of the quarter.
Then, instead of selling a portion of those investments, they opted to BORROW funds in accordance with the notes reported in your post. The quote describing the notes that you provided from the 10-K DOES NOT include all of the terms of the notes, omitting certain critical information, and the Notes themselves have not been filed.
The two reported notes have the following terms based on the quote: 1. In each case the Company will receive $25,000 which will obligate them to pay $28,000 plus 8% interest in one year from date of issuance.
2. The Notes can be converted at 70% of the Volume Weighted Average Price that is the lowest daily VWAP that occurred within the 15 days prior to the day that notice of the intention to convert was provided to the Company. There is no indication that that conversion cannot occur immediately upon the funds being provided....essentially allowing for the instantaneous purchase of shares at a 30% discount to the lowest average price of the last 15 trading days.
3. "The Back-End Note will not be cash funded and such note, along with the Note Receivable, will be immediately cancelled if the shares do not maintain a minimum trading price during the five days prior to such funding and a certain aggregate dollar trading volume during such period." The information provided DOES NOT INCLUDE the actual minimum trading price and aggregate dollar trading volume to be used. Providing that term without those details renders the information TOTALLY USELESS.
4. Certain actions will be taken "upon an event of default" however a description of the events of default themselves isn't provided so any discussion of those actions is a wasted effort. This is the second term that has been rendered TOTALLY USELESS by the omission of critical information.
5. The first note can be repaid before it is due if the Company is willing to pay either 20% or 33% more than the principal and accrued interest that is due at the time of the prepayment depending on whether they make the prepayment before or after 6 months have passed since the funds were loaned.
I'm sure you recognize this to be just more of the same old shit. In fact the terms are not very different than those encountered during the period in which the Company was blaming Cowan for having to endure such nasty terms. Now, having pocketed $2M and with no one left to blame, this Company is back to borrowing money at VERY expensive rates. To argue that a 9% effective rate isn't that expensive ignores the obvious....GS Capital isn't stupid enough to take a 9% return in a year on their money when they have the option to take shares at a 30%+ discount that they can sell in 6 months. And you can be sure that the events of default create a significant burden on the Company if GS is unable to sell those shares in 6 month...just as they did in 2015.
If we hadn't seen it before I'd say it was unbelievable. Seth Shaw is FEEDING MONEY to a lender like fish to a seal. And this time IT IS TOTALLY UNNECESSARY. Selling $25K worth of one of his boondoggle investments would take a phone call and wouldn't dilute current shareholders at all. I'm really not sure why those shareholders don't seem to care about this stuff. (Just wait and see how, or if, they respond. You posted the quote 3 weeks ago and no one made a peep. https://investorshub.advfn.com/boards/read_msg.aspx?message_id=141896290&txt2find=note)
So-called investors who hold this crap will eventually get what they deserve.
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