Reasons for the Increase to Authorized Common Stock
The Company must increase the authorized shares to fulfill its obligations under the financing agreements to avoid default, resulting liquidated damages and potential loss of Company assets under the security agreements with the investors. Further, the Board of Directors believes it is in the Company’s best interest to have additional shares of common stock authorized for general corporate purposes, including acquisitions, equity financings and grants of stock and stock options. On a fully diluted basis, the Company could be obligated to issue up to 603,873,230 shares of common stock. The Company had 4,024,286,568 shares of common stock issued and outstanding at the Record Date out of 5,000,000,000 shares of common stock authorized. The increase in authorized shares has been determined by the Board of Directors to allow for these obligations and to provide for a sufficient amount of common stock to support its expansion and future financing activities, if any. Other than set forth in the above agreements, there are no present plans for significant future issuances. When the Board of Directors deems it to be in the best interest of the Company and stockholders to issue additional shares of common stock in the future from authorized shares, the Board of Directors will not seek further authorization by vote of the stockholders, unless such authorization is otherwise required by law or regulation
