Pursuant to a Securities Purchase Agreement, dated December 4, 2014 by and between the Company and 31 Group, LLC, the 31 Group is committed to purchase from the Company two convertible notes of the Company in the principal amounts of $385,000 and $275,000, for the cash purchase amounts of $350,000 and $250,000, respectively. The $385,000 note was issued on December 4, 2014 and will mature on May 17, 2016. The Company received the funding for the $385,000 note on December 8, 2014. The $275,000 note will be issued upon the fulfillment of certain other conditions that are outside of the 31 Group’s control or that the 31 Group cannot cause not to be satisfied. The notes are convertible 179 days after issuance, in whole or in part, at the investor’s option, into shares of common stock, at a conversion price equal to $0.15 per share. If after 179 days from the execution date of the note, the price of the stock is less than $0.15, the Company will have an additional 30 days to repay the 31 Group LLC. If the notes are not repaid, 31 Group LLC may convert the notes at a conversion rate of the product of (x) the arithmetic average of the lowest three volume weighted average prices of the common stock during the ten consecutive trading days ending and including the trading day immediately preceding the applicable conversion date and (y) 80%. The Company has the right at any time to redeem some or all, of the total outstanding amount then remaining under the convertible notes at a price equal to: (i) 100% if within 60 days of issuance (ii) 115% if between 61 and 149 days of issuance (iii) 120% if 150 days or more after issuance. The Company is also required to reserve 150% of the number of shares of common stock that may be issued in conversion of the remaining outstanding amount commencing with the date that the note becomes convertible.
