NOTE 10 – WARRANTS, COMMON STOCK PUT AGREEMENT AND REGISTRATION RIGHTS AGREEMENT

In connection with the September 3, 2014 related party debt agreement described in Note 8, TCC issued to the lender a warrant to acquire 5,592,105 shares of TCC common stock at a purchase price of $0.76 per share at any time prior to September 6, 2017, which warrant was assumed by the Company in connection with the Merger and is now exercisable into shares of the Company’s common stock. The warrant agreement contains certain anti-dilution provisions.

The Company issued a Series A Warrant (the “First Warrant”) to Capstone Financial Group, Inc. (“Capstone”), effective as of September 30, 2014. Pursuant to the First Warrant, Capstone has the right to purchase up to 52,631,579 shares of common stock at an exercise price of $0.76 per share. The First Warrant is exercisable from October 1, 2014 through October 31, 2017. The First Warrant provides for equitable adjustments in the event of a stock split, stock dividend, reclassification, consolidation or merger. The Company has agreed with Capstone that if the Company issues a security (i) exercisable or exchangeable for or (ii) convertible into shares of common stock at a date after October 1, 2014 and such security provides for anti-dilution protection, the shares of common stock issuable under the First Warrant shall enjoy the same anti-dilution protection as that first issued security.

The Company also issued a Series B Warrant (the “Second Warrant”) to Capstone, effective as of September 30, 2014. Pursuant to the Second Warrant, Capstone has the right to purchase up to 22,368,421 shares of common stock at an exercise price of $0.76 per share. The Second Warrant is exercisable from October 1, 2014 through October 31, 2017 but only to the extent and in the same proportions as exercises by Capstone of the First Warrant. The Second Warrant provides for equitable adjustments in the event of a stock split, stock dividend, reclassification, consolidation or merger. The Company has agreed with Capstone that if the Company issues a security (i) exercisable or exchangeable for or (ii) convertible into shares of common stock at a date after October 1, 2014 and such security provides for anti-dilution protection, the shares of common stock issuable under the Second Warrant shall enjoy the same anti-dilution protection as that first issued security.

The Company and Capstone have entered into a Common Stock Put Agreement, dated as of September 30, 2014, as amended on December 15, 2014 (as so amended, the “Put Agreement”), pursuant to which Capstone indicated its intent to exercise the Series A Warrant over a 36 month term at a monthly rate of no less than 1,461,988 shares of common stock commencing on November 15, 2014 and on a monthly basis thereafter. In the event that Capstone does not exercise the Series A Warrant such that as of February 16, 2015 or any applicable exercise date thereafter, Capstone’s cumulative purchases of common stock pursuant to the Series A Warrant has not been at a rate that is equal to or in excess of the minimum rate, then the Company has the right to notify Capstone of the Company’s exercise of its put rights under the Put Agreement. Upon receipt of such notice, Capstone is required to exercise the Series A Warrant to (i) purchase by a date identified in the notice, such amount of common stock as would, if purchased as of February 16, 2015 or any applicable exercise date, have made Capstone’s purchases of common stock pursuant to the Series A Warrant as of such exercise date equal to the minimum rate, and (ii) purchase by a date that is no later than each subsequent periodic exercise date an amount of common stock such that as of each such periodic exercise date, Capstone’s cumulative purchases of common stock pursuant to the Series A Warrant through that date will have been at a rate that is no less than the minimum rate. Following delivery of the put notice by the Company, Capstone’s failure to make the initial mandatory purchase by the put date is an “Event of Default”. Following the delivery of the put notice by the Company, Capstone’s failure to make when due any periodic mandatory purchase is a breach of the Put Agreement, and if such breach is not timely cured by Capstone, such uncured breach will be deemed an Event of Default. Upon the occurrence of an Event of Default as described above, (i) Capstone’s right to purchase all shares of common stock remaining unpurchased under the Series A Warrant is converted into an obligation, accelerated and immediately due and (ii) the Series B Warrant immediately terminates as to any shares of common stock remaining exercisable under the Series B Warrant. In the event the Company invokes its right pursuant to the put notice to require Capstone to exercise the Series A Warrant, the exercise price per share of common stock thereunder is $0.775 per share. In the event that the Company converts and accelerates Capstone’s obligations to purchase the shares of common stock remaining unexercised under the Series A Warrant, Capstone has the right to surrender issued and outstanding shares of common stock to the Company to be credited towards Capstone’s obligations, with such surrendered shares valued at $0.76 per share of common stock. As of the date of this report, the Company has not received funds related to the Series A Warrant and the Company has not delivered the put notice.

The Company and Capstone entered into a Registration Rights Agreement, dated as of September 30, 2014 (the “Registration Agreement”). Pursuant to the Registration Agreement, Capstone can require the Company to register the shares of common stock acquired upon exercise of the First Warrant and the Second Warrant at such time as the Company is eligible to register securities on a Registration Statement on Form S-3 and thereafter file additional registration statements if requested by Capstone on a quarterly basis. The Registration Agreement contains terms and conditions customary for the grant of registration rights.

Pursuant to the November 13, 2014 note payable to an institutional investor discussed in Note 8, the investor was issued a warrant to acquire 4,091,122 shares of common stock, subject to certain adjustments, at a purchase price of $0.001 in the aggregate, at any time prior to November 13, 2019. In the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and sale of all or substantially all of the Company’s assets or property, the number of shares of common stock issuable pursuant to the warrant shall be increased in the event the Company’s and its Subsidiaries’ (as defined in the warrant agreement) audited Adjusted EBITDA (as defined in the warrant agreement) for the fiscal year ending December 31, 2018 does not equal or exceed $19,250. The Company has granted the investor certain registration rights, commencing October 1, 2015, for the shares of common stock issuable on exercise of the warrant.

A summary of the status of the warrants issued by the Company as of December 31, 2014, and changes during the year then ended is presented below:

			Weighted Average
	Shares		Exercise Price

Outstanding, December 31, 2013		-	$	-

Granted		84,683,227		0.72
Canceled / Expired		-		-
Exercised		-		-

Outstanding, December 31, 2014		84,683,227	$	0.72

The Company estimated the grant date value of the September 3, 2014 warrants using the Black-Scholes pricing model at $1,481 and included that amount in interest expense.

The Company estimated the grant date value of the November 13, 2014 warrants using the Black-Scholes pricing model at $3,109 and included that amount in debt discount.