On November 1, 2011, the Registrant entered in a letter agreement with certain of its holders (the “Holders”) of debentures in the aggregate amount of $1,194,254 (the “Debentures”) whereby the Registrant and the Holders agreed to settle and pay the Debentures (the “Settlement”). The Registrant agreed to issue the Holders an aggregate of 2,000,000 shares of the Registrant’s common stock (the “Shares”), par value $0.001 per share (the “Common Stock”), 1,000,000 of which were deliverable upon execution of the agreement and the balance on December 1, 2011, in exchange for an aggregate amount of $600,000 of the Debentures (the “Exchange Debentures”). In addition, the Holders warrants to purchase an aggregate 459,770 shares of Common Stock at the exercise price of $2.50 per share were re-priced to $0.40 per share with additional anti-dilution provisions. If daily VWAPs of the Shares for each of the 20 Trading Days immediately following the issuance of the Shares divided by 20 is less than $0.30, then, within 3 Trading Days after the end of such 20 Trading Day period, the Company shall issue to the Holders an additional number of shares of Common Stock equal to the difference between (a) the original principal amount of the Exchange Debentures divided by the VWAP Average and (b) the Shares. In terms of the Settlement, the Holders agreed to sell and assign the remaining aggregate amount of $594,253.64 of the Debentures to Isaac Blech, a Director of Premier Alliance Group, Inc. (“Premier”), with whom the Registrant has signed a Letter of Intent to merge with and into. In exchange for Blech’s surrender of such assigned Debentures to the Registrant, the Registrant issued to Blech a demand convertible promissory note in the amount of $594,253.64, convertible into shares of Common Stock at the price of $0.30 per share, subject to adjustment as set forth therein.
Also on November 1, 2011, Blech purchased indebtedness of the Registrant in the aggregate amount of $1,067,122 from certain shareholders and lenders of the Registrant (the “Founders”) which were the holders and/or makers of promissory notes, loans, advances and other indebtedness of the Registrant and/or one of its Affiliates, originally issued to the Founders. Upon the sale and assignment of such indebtedness to Blech from the Founders, the Registrant issued to Blech a demand convertible promissory note in the amount of $1,067,122, convertible into shares of Common Stock at the price of $0.30 per share, subject to adjustment as set forth therein.
Also on November 1, 2011, in consideration for a bridge loan in the amount of $500,000, the Registrant made a Secured Convertible Promissory Note in favor of Premier, in the principal amount of $500,000 (the “Bridge Note”). The Bridge Note is convertible into shares of Common Stock at the rate of 70% of the volume weighted average price for the twenty (20) trading days prior to the date a notice of conversion is given to the Company. The Note is secured by a general security interest in all of the Registrant’s assets.
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