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8k out last night

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buckets Member Level  Wednesday, 04/19/06 12:40:21 PM
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8k out last night

http://www.pinksheets.com/quote/print_filings.jsp?url=%2Fredirect.asp%3Ffilename%3D0001144204%252D06...

appears to be more toxic financing.

On April 12, 2006, we entered into a Subscription Agreement with several accredited and/or qualified institutional investors pursuant to which the investors subscribed to purchase an aggregate principal amount of $360,000 in secured convertible promissory notes for aggregate purchase price of $300,000 and 2 Class A common stock purchase warrants for each one dollar of the purchase price of the secured convertible notes ($300,000). We received gross proceeds of $200,000 on April 12, 2006 and we anticipate receiving the remaining $100,000 on or prior to April 30, 2006.

Each investor shall have the right to convert the secured convertible notes after the date of issuance at any time, until paid in full, at the election of the investor into fully paid and nonassessable shares of our common stock. The conversion price per share shall be the lower of (i) $0.07 or (ii) 65% of the average of the three lowest intra-day trading prices for our common stock for the 20 trading days prior to, but not including, the conversion date as reported by Bloomberg, L.P. on any principal market or exchange where our common stock is listed or traded. The conversion price is adjustable in the event of any stock split or reverse stock split, stock dividend, reclassification of common stock, recapitalization, merger or consolidation. In addition, the conversion price of the secured convertible notes will be adjusted in the event that we spin off or otherwise divest ourselves of a material part of our business or operations or dispose all or a portion of our assets. Our obligation to repay all principal, and accrued and unpaid interest under the convertible notes is secured by all of our assets pursuant to a certain Security Agreement dated as of April 12, 2006.

We issued an aggregate of 600,000 Class A common stock purchase warrants to the investors, representing and 2 Class A common stock purchase warrants for each one dollar of the purchase price of the secured convertible notes ($300,000). The Class A warrants are exercisable until five years from the closing date at an exercise price of $0.07 per share. The exercise price of the Class A warrants will be adjusted in the event of any stock split or reverse stock split, stock dividend, reclassification of common stock, recapitalization, merger or consolidation. In addition, the exercise price of the warrants will be adjusted in the event that we spin off or otherwise divest ourselves of a material part of our business or operations or dispose all or a portion of our assets.

We are obligated to file a registration statement registering 150% of the shares of our common stock issuable upon conversion of the secured promissory notes and 100% of the shares issuable upon exercise of the Class A warrants no later than 35 days after the closing date and cause it to be declared effective within 120 days after the closing date. If we do not meet the aforementioned filing and effectiveness deadlines, we shall pay to each investor an amount equal to 2% of the purchase price of the secured convertible notes remaining unconverted and purchase price of the shares of our common stock issued upon conversion of the notes for each 30 days or part thereof of the pendency of such non-registration event.

We claim an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and we took appropriate measures to restrict the transfer of the securities.


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