Item 3.02. Unregistered Sales of Equity Securities.
Note Assignment and Reissuance
On January 29, 2013, we entered into an Assignment Agreement with one of our note holders (the “Assignor”) and Magna Group, LLC, (“Magna”), pursuant to which the Assignor assigned to Magna a Convertible Promissory Note dated April 2, 2012 and issued by us in the original principal amount of $50,000. In accordance with the Assignment Agreement, we agreed to issue a new note to Magna.
On January 29, 2013, we entered into a 12% Convertible Promissory Note in the principal amount of $50,000 with Magna (the “Magna Note”). The Magna Note matures on January 29, 2014 and bears interest at a rate of 12% per annum. Magna is entitled, at its option and at any time, to convert all or any portion of the outstanding principal amount and accrued interest into our common stock, subject to a 4.99% conversion limitation, at a conversion price for each share equal to a price which is a 45% discount from the lowest trading price in the five (5) trading days prior to the day that Magna requests conversion, however, in no event shall the conversion price be lower than $0.00005 per share.
The issuance of the Magna Note was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. The shares issuable upon conversion of the Magna Note may be resold pursuant to Rule 144 after a minimum six (6) month holding period.
Note Issuance
On January 29, 2013, we entered into a Securities Purchase Agreement (the “Agreement”) with Hanover Holdings, LLC (“Hanover”) pursuant to which we sold a Convertible Promissory Note in the principal amount of $21,500 (the “Hanover Note”). The Hanover Note matures on September 29, 2013 and bears interest at a rate of 12% per annum. Hanover is entitled, at its option and at any time, to convert all or any portion of the outstanding principal amount and accrued interest into our common stock, subject to a 4.99% conversion limitation, at a conversion price for each share equal to a price which is a 45% discount from the lowest trading price for our common stock during the five (5) trading days prior to the day that Hanover requests conversion, however, in no event will the conversion price be less than $0.00005 per share.
The issuance of the Hanover Note was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. The shares issuable upon conversion of the Hanover Note may be resold pursuant to Rule 144 after a minimum six (6) month holding period.