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Saturday, 06/11/2016 1:21:32 PM

Saturday, June 11, 2016 1:21:32 PM

Post# of 119915

Item 1. Legal Proceedings.



On August 14, 2014, the Company agreed to the entry of an Order Instituting Cease and Desist Proceedings Pursuant to Section 21C of the Securities and Exchange Act of 1934 (“Agreed Order”), with the SEC. The agreement with the SEC was subsequently modified on September 17, 2014 and is pending final approval from the SEC. Pursuant to the Agreed Order, the Company acknowledged that it was delinquent in its filing requirements in that it had failed to file its annual report on Form 10-K for the year ended December 31, 2013, its quarterly reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 and a current report on Form 8-K. Moreover, the Company has agreed to pay civil penalties in the total amount of $50,000 as a result of these delinquent filings. The Company is diligently working toward completing and filing its delinquent reports. The penalty of $50,000 was expensed during the third quarter of 2014. On September 23, 2014, the Company deposited $25,000 in an escrow account with its legal counsel. During 2014, $20,000 of these funds was used to partially pay the civil penalties of $50,000 that are due the SEC. During the year ended December 31, 2015, the Company paid $12,000 toward the penalty. The remaining balance due is $18,000.



In January 2016, a judgment in the amount of $72,540 was entered against us in the Supreme Court of the State of New York, County of Suffolk (Index No.: 612058/2015) in favor of Rotenberg, Meril, Solomon, Bertiger & Guttilla, P.C. The judgment stems from accounting services they performed on our behalf in addition to prejudgment interest and costs.



On April 5, 2016 Iliad Research and Trading, L.P. (“Iliad”) made a demand on the Company to issue 64,660,484 shares of the Company’s common stock (the “Delivery Shares”) issuable upon exercise of warrants issued to Iliad on December 2, 2013 (the “Iliad Warrant”) and for damages due to Company’s failure to deliver the Delivery Shares to Iliad pursuant to the terms of the Warrant, late fees in the amount of $2,000.00 per trading day (the greater of $2,000.00 and 2% of the product of the number of Delivery Shares not delivered to Investor (64,660,484) multiplied by the closing sales price of the Common Stock on the last trading day the Company could have delivered the Delivery Shares to Iliad without breaching the terms of the Warrant (which closing sale price was $0.0011 according to Iliad’s demand) have been accruing since April 1, 2016 (the “Late Fees”). The Company has been notified by Apollo that Apollo Capital Corp. believes that it acquired the Warrants when it acquired the Note on December 18, 2015 as discussed in Note 12 to the Company’s financial statements despite Iliad’s demand for issuance of the Delivery Shares. The Company has elected to withhold issuance of the Delivery Shares until the dispute between Iliad and Apollo regarding ownership of the Warrants and the rights to the Delivery Shares has been resolved. The Company is, however, subject to possible late fees and damages as a result of its failure to issue the Delivery Shares to Iliad in the event Iliad is deemed the owner of the Warrant.



We are not presently a party to any other material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.



Item 1A. Risk Factors.



Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of operations. For a discussion of these risks, please refer to the “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, 2015. In connection with its preparation of this quarterly report on Form 10-Q, management has reviewed and considered these risk factors and has determined that there have been no material changes to our risk factors since the date of filing the annual report on Form 10-K for the year ended December 31, 2015.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.



During the three months ended March 31, 2016, $155,127 of debt and accrued interest was converted to 155,126,983 shares of common stock.




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On January 10, 2016, the Company entered into a one-year Consulting and Representation Agreement with an unrelated third party to issue 60,000,000 shares of the Company’s common stock in exchange for services valued at $54,000 based upon the closing price of the Company’s stock on January 10, 2016 of $0.0009 per share.



On February 11, 2015 the Company entered into a one-year Consulting and Representation Agreement with Corporate Ads, LLC to issue 15,000,000 shares of the Company’s common stock plus $10,000 paid in cash in exchange for services. The shares were valued at $43,500 based upon the closing price of the stock on February 11, 2015 of $0.029 per share.



These shares of our common stock were issued in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).



Item 3. Defaults upon Senior Securities.

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