2012 Winter Offering

From June 29, 2012 through July 23, 2012, the Company conducted a private offering (the "Summer 2012 Offering") of up to $2,000,000 aggregate face amount of its convertible notes (the "Summer 2012 Notes"). A total of $568,920 aggregate face amount of the Summer 2012 Notes were sold for an aggregate purchase price of $517,200. While the stated interest rate on the Summer 2012 Notes is 0%. the actual interest rate on the Summer 2012 Notes is 10% per annum. The Summer 2012 Notes mature on the first anniversary of their date of issuance. The Summer 2012 Notes are convertible, at the option of the noteholders into 1,422,300 shares of common stock of the Company (the "Conversion Shares") at an initial conversion price of $0.40 per share (the "Conversion Price").

Each of the investors in the Summer 2012 Offering received, for no additional consideration, a warrant (the "Summer 2012 Warrants"), entitling the holder to purchase a number of shares of the Company's common stock equal to 100% of the number of shares of common stock into which the Summer 2012 Notes are convertible (the "Warrant Shares"). Each Summer 2012 Warrant is exercisable on a cash basis only at an initial price of $0.40 per share, and is exercisable immediately upon issuance and for a period of three (3) years from the date of issuance. Up to 1,422,300 Warrant Shares are initially issuable to date on exercise of the Summer 2012 Warrants.

Increase in Outstanding Shares

During the period from July 1, 2012 through August 6, 2012, the Company issued 444,500 shares of its common stock.  This was comprised of the following:

The Company issued 198,000 shares of its common stock upon conversion of $49,500 of debt to its existing convertible note holders.

The Company issued 246,500 shares of its common stock upon exercise of warrants for aggregate proceeds of $73,950.

Investor Relations Agreements

The Company entered into two separate Independent Contractor Agreements whereby, contractor will provide investor relations and communication services for the Company. The term of the agreement shall be for one year commencing on July 1, 2012 and shall continue from month-to-month thereafter. The Company issued warrants to purchase 1,000,000 shares of restricted common stock at an exercise price of $0.30 per share, vested immediately and shall expire in three years. The warrants were valued at $301,600 based on Black-Scholes-Merton valuation method.