16. SUBSEQUENT EVENTS

Rights Offering and Preferred Units

As of December 31, 2016, the Company had issued 19,050 units, each unit consisting of one share of Series 1 Preferred Stock and one Series 1 warrants to purchase 10 shares of Common Stock at a strike price of $1.35 and a 7-year term. The preferred stock is presented as a liability as it is subject to mandatory redemption on the accompanying consolidated balance sheet as of December 31, 2016 (see Note 12 “Stockholder’s Equity).

Subsequent to December 31, 2016 the Company continued its rights offering through February 10, 2017. The total subscription proceeds received by the Company amounted to $848,826 before payment of the dealer-manager and placement agent fees and other offering expenses and the Company issued a total of 62,875 units representing 62,875 shares of Series 1 Preferred Stock and 62,875 warrants which entitle the holders to purchase 628,750 shares of common stock at a price of $13.50 with a 7-year term.

Receivables Financing Facilities

During February 2017, in consideration for proceeds of $330,000, the Company agreed to remit a total of $412,500 from the merchant accounts of eight of its restaurant locations directly to a lender. The Company agreed to make payments of $1,965 per day for 210 days. The Company has the option to payoff the loan early by remitting a total of $372,900 by the 120^th day.

During March 2017 in consideration for proceeds of $150,000, the Company agreed to remit a total of $205,500 from the merchant accounts of three of its restaurant locations directly to the lender. The Company agreed to make payments of $856.25 per day for 240 days.

The Company granted a security interest in the credit card receivables of the specified restaurants in connection with the Receivables Financing Agreements.

Convertible Note Exchanges

Pursuant to exchange agreements dated and effective March 10, 2017 by and between the Company and four existing note holders, the Company exchanged its 8% convertible notes (see Note 9 - Convertible Debt) in the aggregate principal amount of $725,000, which notes were in default, for new two-year 2% notes, in the aggregate principal amount of $820,107, representing principal and unpaid accrued interest. The original convertible notes were canceled and the new convertible notes may be converted to common stock of the Company, at the option of the holder, at a conversion price of $0.30 per share and may be called by the holder after the one-year anniversary of the exchange date.